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

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 They launched their plan with a web site, Free the Wizards, which has since been archived.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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I'd pay zero amount of money for anything like that. Not only do I not want any of that, I do not want to enable the maniac psychopaths who are currently in charge. I will happily pay a monthly contribution to anyone who goes up against them in a lawsuit over the OGL though. Somewhere around $50/month for that.
Okay, I understand that. My point was this: If, for example, Paizo or Chaosium were to offer a subscription-based service that gave you access to all of their released gaming material, including incorporated new errata, what would your price point be? I think there's a space for something like that

Okay, I understand that. My point was this: If, for example, Paizo or Chaosium were to offer a subscription-based service that gave you access to all of their released gaming material, including incorporated new errata, what would your price point be? I think there's a space for something like that
Still zero. Why would I rent anything that I can afford to buy? If said material was only available for renting, I'd be looking at alternatives. Why would I encourage predatory, rent-seeking behavior like that?

Isn't that your players letting you off easy? ;-)

RIFTS!?!? Many people would rather play Dangerous Journeys than ever touch anything ever again made by Palladium... If WotC/Hasbro is now toxic, Palladium is at the level of radiation miasma. I have one word for you: Robotech!

I would have fed you to the Dread Gazebo! ;-)
lol thats true, I just picked a game at random... insert TORG, or Vampire or FATE

Good points! Regarding the "make more books" path to monetization: to do that, WOTC would have to hire and contract a lot more people to make those books, and I have trouble imagining them being prepared to make that investment. I'd like to think I'm wrong.
I'm not saying that is the way they are going. However to monetize digital requires investment too.
In general (and I am always surprised how many people in big business don't even know this) most ways (not all) to increase revenue and as such profit is to invest more money into it.

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