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D&D (2024) RPG Evolution: The Fox in the Henhouse

Alta Fox Capital's blueprint for WOTC has turned out to be prescient.

Before WOTC began rolling out its monetization plans for D&D, Hasbro was under fire for not doing enough. Alta Fox Capital's blueprint has turned out to be prescient.


Who's Alta Fox?​

Alta Fox Capital is an activist investor firm which owns 2.5% of Hasbro stock. Activist investors are typically specialized hedge funds that buy a significant minority stake in publicly traded companies to change how it's run. Unlike traditional takeovers from private equity firms, activist investors use the media and proxy contests to force change within a company. As you can imagine, activist investors are often a company's worst nightmare.

For a long time, Hasbro's financial performance flew under the radar of investor scrutiny. That all changed when Alta Fox took an interest in Hasbro, and specifically in Wizards of the Coast. They launched their plan with a web site, Free the Wizards, which has since been archived. In retrospect, it's clear that Alta Fox's activism had an outsized influence on the Wizards of the Coast we know today.

The Case to Repair Hasbro​

Alta Fox argued that Hasbro's Board of Directors needed a shakeup:
Despite phenomenal growth in Hasbro’s Wizards of the Coast (“Wizards”) division over the last five years, the Company’s stock price has significantly underperformed the broader market and its own benchmark over every relevant timeframe. We attribute this underperformance to the Board’s exceptionally poor capital allocation and deficient investor disclosure and communication.
Alta Fox pointed out that none of the Board members had purchased shares of Hasbro over the last decade and received generous payouts (paid an average of $350,000 annually, higher than Apple) despite underperforming. According to Alta Fox, Hasbro's Brand Blueprint strategy was failing because it lacked financial discipline, an inability to sell successful branded video games, poor cost control (compared to Mattel), and underinvestment in its "crown jewel" intellectual properties like Magic: The Gathering and Dungeons & Dragons.

To fix this, Alta Fox recommended four nominees to the board: Marcelo Fischer of IDT Corporation (a cloud communications and financial services company); Jon Finkel, Managing Partner and Co-Chief Investment Officer at Landscape Capital Management and a former professional Magic player; Rani Hublou a marketing exec and Principal at Incline Strategies; and Carolyn Johnson, Chief Transformation Officer of American International Group, Inc. This dream team, Alta Fox argued, would shake things up.

Moreover, Alta Fox wanted Wizards of the Coast to be spun off. According to Alta Fox, Hasbro's Brand Blueprint strategy was a "cash cow" in which WOTC gave money to its parent company with little in return. They speculated that D&D and M:TG made up 90% of WOTC's 2021 sales. It quoted Cocks as saying that there was an 8x to 10x audience potential in bringing tabletop brands to the digital side of the business. Of the five reinvestment opportunities, Alta Fox's fifth recommendation was:
a one-stop-shop digital subscription & pay-as-you-go offering for a true-to-physical D&D experience (similar to how Arena is a true-to-physical MTG experience).
It all came to a head with an election contest by shareholders on Alta Fox's recommendations. Alta Fox lost the vote, and that should have been the end of it. But the efforts to revitalize Hasbro and WOTC in particular would be tremendously influential on the way the company is operating today.

Hasbro Takes Notice​

Although Hasbro rejected Alta Fox's proposals, its next actions were aligned with their suggestions. Hasbro brought on two new board members, Elizabeth Hamren and Blake Jorgensen. Both were executives with experience in gaming, technology, operations, and capital allocation: Hamren was chief operating officer at Discord Inc and worked on Xbox products, while Jorgensen previously served as chief financial officer for Electronic Arts.

That wasn't the only change. Directors were asked to purchase shares on the open market, just as Alta Fox had recommended. More to the point, the Brand Blueprint strategy that Alta Fox loathed got a revamp as Brand Blueprint 2.0. That was a four quadrant strategy in which Hasbro focused on a core group of eight to ten brands, including Dungeons & Dragons. The goal was to create $250 to $300 million savings annually over the next three years.

Cocks and Williams Lay It All Out​

In a USB Fireside Chat, Chris Cocks and new WOTC CEO Cynthia Williams shared their perspective on D&D's future:
You'll see us leaning heavily into the expansion of D&D through D&D Beyond, the acquisition that we did that closed this past May ... We have about 13 million customers, registered users, there that we will continue to serve by giving them more ways to express their fandom.
When Williams mentioned that the "D&D brand is undermonetized," it sounded a lot like the same claim made by Alta Fox. She pointed out that dungeon masters only made up 20% of the customer base, with an untapped player base that could be unlocked as "recurrent spenders," with more than 70% of digital gaming profits coming from post-sale. The D&D monetization strategy, according to Cocks, would be Hasbro's prime opportunity to implement Brand Blueprint 2.0.

We're now seeing that strategy in action. Although Alta Fox didn't get its board members listed, it seems it still got its way.

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Michael Tresca

Michael Tresca

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Thank you for posting this article. It is important to understand that the internal conversations within the company are not as unified as many have assumed. There are wotc employees who didn't want any of this, because they understand the community, but had no choice because of corporate control.

If wotc had been split off into another company, this (the OGL fiasco) may have never come to pass.
There is always a choice (however uncomfortable such may be).

Art Waring

My guess is Alta Fox, and any board members they had gotten if their push had succeeded, would have negotiated transferring their stakes over to any WotC shares spun off of the split and tried to ride that up while reducing their risk from Hasbro's inevitable floundering. But that might just be me being cynical.
Yeah that is certainly one possibility. Hasbro did seem to have the most to lose from the split.


"She pointed out that dungeon masters only made up 20% of the customer base, with an untapped player base that could be unlocked as "recurrent spenders," with more than 70% of digital gaming profits coming from post-sale."

This is a particularly important point. Subscriptions and microtransactions have been all the rage in software for some time now so this is the goal: make D&D more like a software product, more like a videogame, so that more of the player base is spending money.

The actual tabletop side is trickier here as what do you consider the "sale"? Just a PHB? Miniatures and various knick-knacks aimed at the players is already a thing so presumably that's not the main focus.

The approach that best enables this model is a subscription to enable online play so they can sell you minis/tokens and cosmetics at the very least and possibly rules packages as well - so, they go buy D&D Beyond and have a jump start on this right away. If this is the plan I would think that "letting the DM share all of his books with the players" angle they have could change pretty drastically - down the road at least. The rollout of the new edition sounds like the perfect opportunity to revise the subscription plans, even if they leave the 5E options alone as a separate program.


As someone whose company is getting twisted into a pretzel for the sake of investors, even though it's harming the long-term value of the core company, this all sounds spot-on to me.
I don't know if this is what's going on at your company, but it's amazing how much the system is configured to get publicly traded corporations to twist themselves in knots and make short term decisions on behalf of people who want to sell their ownership stake in a company. Especially when those folks are not even the initial investors but people who bought shares on the "aftermarket". The incentives feel all wrong.

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