Scott Thorne, a retailer, comments on recent events

[El Mahdi]

...I'm referring to "looting" and "scavenging". These words have very negative connotations and are not really appropriate descriptors.

A more apt analogy is to describe the OGL like...

I like to describe what Paizo has done as rennovating a rundown neighborhood into a thriving and revitalized community...a community possibly even more healthy than it was at it's previous peak.

They have done something quite astounding and eminently praiseworthy, so I agree..."scavenging" and "looting" seem disparaging in any context, but even more so when compared with what Paizo has accomplished.

Now I, on the other hand, shamelessly loot and scavenge the hell out of Pathfinder...

 

[Steel_Wind]

From the long-term business perspective of WotC, I think it's abundantly clear that the OGL was a mistake.

But for all that, it was only a minor mistake that had other fringe benefits. It proved to be a real inconvenience in terms of marketing at a retail level. The flood of poor, substandard products in the marketplace hurt the overall brand and WotC knew that had hurt retailers. WotC was concerned about the effect those substandard products had on the overall D&D brand image, too. They wanted to fix it - and it wasn't wrong for WotC to want to do that.

Still, from WotC's perspective, the negatives of the OGL were minor only; they were not a major disaster. Unless WotC did something stupid, that negative wouldn't mature and crystallize into a major disaster, either.

But, as it turns out -- WotC DID do something stupid.

As long as WotC kept up with the OGL with each new edition of the game, that minor mistake would not lead to a disaster or somebody using the OGL to essentially use WotC's core IP, rebrand it, and sell it in effective competition with D&D itself.

Anybody could TRY and do it. But do it effectively? Very, very hard. Impossibly hard, really. Unless WotC made it possible through their own errors. Turns out - WotC made it possible.

I submit three things allowed a minor mistake to crystallize into a MAJOR mistake.

1) The Ticking Time Bomb: The OGL was a time bomb, but one that would never go off as long as you kept hitting the refresh button. WotC chose NOT to hit the refresh button and tried to retrofit a cancel button onto the OGL with the GSL instead.

There was no cancel button on the OGL, by design. They tried to add one. That was a non-starter and it was rejected because the underlying GSL was not in the commercial interests of the perpetual licensees.



2) Different Opinion on Length of Business Cycle: The OGL is incompatible with WotC's preferred length of the Business Cycle of its D&D product line. Even if the OGL couldn't be cancelled, it could be ignored as long as it was continued and re-implemented with the next edition of the game.

When WotC tried to escape that effect, nobody else would sign on. This STILL would not have resulted in competition against their own IP, except for one thing: WotC wanted to revise/reset/resell the game too soon after the last version of the game was released. The value-in-use to the customer of the last version of the game was too high at the time 4E was released.

This created a market opportunity that a well-positioned competitor could use to their advantage.

3) You Can't License The Goodwill of an Entire Brand:
WotC should NEVER have spun off their own periodicals division (now Paizo) and allowed it to communicate monthly with their core customers while Wotc remained largely silent in communicating with those same customers. When WotC allowed that to happen, it transferred the goodwill and legitimacy as "official guardians of the game" from WotC to Paizo -- PERMANENTLY.

WotC believed it was just licensing this goodwill and at the end of the license, they would get it back. That was a FOOLISH business decision. The real world does not work that way.

If you are a big company, sometimes you start to believe your own balance sheet is REAL. You start to think that the product you make is a trademark, IP, and a brand which has very little to do with the people who actually create your products -- or who buys them. There is truth in this view -- but only to a point.

Because ANY certified business valuator will tell you that you CAN'T RELIABLY VALUE THE GOODWILL OF AN ENTIRE BRAND AFTER IT IS LICENSED.

You can SELL IT, but it is very difficult to value it after you license it.

When you sell an asset -- it's gone. When you license it for a fee, you are planning on a reversion of that goodwill at the end of the license. So the terms of the deal call for the goodwill to come back to the licensor at the end of the license.

A certified business valuator will tell you that is an inherently risky bet to expect that you will get back the same goodwill attached to an entire brand if you license it. You might get that goodwill back -- and you might not, too. All you can value is the short-term revenue stream of that license. Trying to value the goodwill of an entire brand as a capital asset AFTER you license it is almost impossible.

So it is an inherently risky business proposition to do it. Smart companies don't do it. WotC wasn't smart. When they spun off their own periodicals division AFTER they created the OGL? They effectively licensed the entire D&D brand to another company in the minds of the customer.

DUMB move.

Putting those three mistakes together

When the last version of the game still had significant legs in the minds of customers? That's when the time bomb that was the OGL crystallized, went active, and allowed Paizo to use it to compete effectively with WotC.

Paizo was perfectly positioned to do it, because they had the goodwill of customers and legitimacy as "real owners of D&D" because WotC allowed them to acquire it with every column and article which appeared in those magazines over the course of five years. That was a serious mistake, imo. Closing the periodicals department at WotC and spinning it off was exactly the sort of short-sighted business decision that poor key business people make.

End Result: From the perspective of WotC's commercial interests, the OGL was a mistake. But it need not have been a significant mistake that cost it a lot of money. That effect was lurking, but only WotC's own subsequent business decisions could set it off.

Turns out, they did set it off. When WotC tried to escape the OGL with the GSL, -- while trying to force a radically new edition of the game on customers so soon after the last one was released -- they set off the bomb.

It is hard to have sympathy for WotC in these circumstances. They are entirely the architects of their own misfortune in this matter. If they could have a mulligan over the whole GSL and roll-out of the 4E rules? They'd take that mulligan in a heartbeat.

But that isn't the way the world works. You live or die by your choices. Right now, D&D is dying by them. There may be a way out of this for WotC and the D&D Brand in the long-term, but I'm not sure what that is right now.

 

[Wicht]

I don't know. I think the OGL has, in a way, hurt WotC but it didn't have to.

Firstly, a minor nitpick counter argument. I would disagree that it was a minor mistake to issue the OGL, at least on the part of the creator of the OGL. As envisioned, the OGL did exactly what it was intended to do. Part of the intent was to free the actual product (D&D) from the possibility of a change in company ownership leading to the death of the product in its current form (i.e. rebranding it as a boardgame, a card game, etc. and allowing the RPG aspect to die). That is, it was supposed to allow for exactly what Paizo did. While this is not necessarily good for WotC/Hasbro, it was part of the publicly stated reason for the license and therefore cannot properly called a mistake.

But, if WotC has used the OGL in a manner similar to how Paizo is using it, I think WotC would be enjoying phenomenal success with it. The glut of bad product (a phenomena I think personally to be overstated) would have (and did) correct itself after a period of time. It was merely a moment in the history of the brand that needed to be weathered. If WotC had weathered that problem and began incorporating the good 3pp material in their books, they would have benefitted from the license. That is, it was only a minor problem because they chose to view it that way when all along they should have sought to use it in a way beneficial to themselves.

 

[Alzrius]

I agree with most of what Wicht and Steel_Wind said.

Personally, I don't think that the OGL was ever a mistake for anyone. As Wicht noted, WotC flat-out stated that they wanted people to use it to make the sort of products that they didn't care to focus on (such as adventures), and that's exactly what a lot of people did.

Now, WotC certainly didn't foresee a lot of the other ramifications of the OGL that came into being. Remember that FAQ on their site dismissively saying "Can someone reprint the entire OGL as a sort of PHB? Sure, if you think you could make money off of it." But this was still in their enlightened self-interest; even if you were playing an OGL game that was d20-based (and thus didn't need so much as the PHB) you were still far and away closer to D&D than if you were playing another table-top game - in fact, odds were good you'd started with D&D anyway.

I also agree that the so-called "glut" of products is overstated. Yes, there were a lot of d20 products, and some of them weren't good, but that's the case in any instance where there are multiple companies producing the same type of material - some will be better than others.

The "glut" largely happened after v.3.5 was released, which created massive stores of v.3.0 products that were suddenly valueless in the minds of the consumers (and thus retailers), which seriously shook consumer confidence in the game as a whole - it's no coincidence that right after v.3.5 came out was when we started seeing a lot of threads here on EN World about what Fourth Edition would be like.

Beyond that though, I think that Steel_Wind's three points are correct. The OGL wasn't a mistake for WotC, but they managed to make it work against them by 1) Licensing the goodwill of D&D out to Paizo, 2) Releasing Fourth Edition much too soon, and 3) Trying to kill the OGL with the GSL.

Those things empowered (and indeed, somewhat forced) Paizo to step up and become the "alternative D&D" in the tabletop RPG market. What happened was the natural consequence of WotC's mishandling of the OGL - it wasn't a mistake for them; they just changed their business practice to where they wouldn't let it work for them anymore, instead making it a detriment.

 

[carmachu]

I agree with Bryon here. If the digital tools get really good, WotC may see a bump in subscribers, but those subscribers are going to be from those who already play 4E. The largest untapped customer base is those who don't play 4E, and nothing short of the return of out-of-print materials and support on DDI for all editions, is ever going to win them over. It may never happen, and that's unfortunate as WotC is the only company able to do this, but it's the only way to get them as customers.

You don't get Pepsi and RC fans to spend money in your store by only selling Coke.

The better be out of this world. Because right now, I know several folks that play 4e and that are incredibly unhappy with the new character builder, and want the old one back.

Its not looking good.

 

[El Mahdi]

I agree with everything Wicht and Alzrius said, and almost everything Steel_Wind said, except I don't believe that D&D is dying. They've definitely suffered some setbacks and damage to the brand (most of it self-inflicted), but I don't think it's dying. I think they've pulled back on things that aren't proving profitable, and concentrating on things that do, which is what a business should do. The impact those decisions may have on retailers definitely sucks, but I don't think it will be fatal for them either. But, I do think that D&D's physical presence is going to be much smaller in the future, while their digital presence should expand (as long as they don't screw that up too)...

 

[TheFindus]

I think that your choice of wording is not really appropriate. I'm referring to "looting" and "scavenging". These words have very negative connotations and are not really appropriate descriptors.

A more apt analogy is ...

I do not want there to be a misunderstanding. "Looting" in my post referred to what I am doing as a DM with products I buy. I will not use the entire piece, but use what I need. I consider this an easy way to find the stuff to play and prepare for sessions. I do not think that there are many DMs that don't do this.

I used the word "scavenge" to emphazise that in my opinion it was a bad business decision by WotC to have the OGL in the form it is today when they published 4E. And that is entirely WotC's fault. Although I like 4E much much better than 3E - which is a matter of taste - the way WotC handled many things did just not go well. They screwed up a lot of times. And that is the reason we see a lot of threads in all different kinds of forums about the "death spiral", the "end" of WotC. Well, lots of death there anyway.
And I thought it fitting to picture the carcass of WotC failed business decisions lying somewhere in the RPG savanna, being fed on by, well, scavenger birds. It is not the birds fault. And these birds will stay alive and healthy. Which is a good thing. I did not intend to use the word in an offensive way. And it well within anybodies right to find my description lacking of aptitude.
Just wanted to make that clear.

 

[Wicht]

I used the word "scavenge" to emphazise that in my opinion it was a bad business decision by WotC to have the OGL in the form it is today when they published 4E.

You are wording this funny. I just want to make sure that you understand there is no way that WotC could have done anything to change the OGL as it is irrevocably open. WotC can never turn it off or do anything to scale it back. They can issue a new OGL but the license itself gives permission to use whichever version of the license you want to use, so in a very practical sense, the only thing WotC could do to make changes to it is make it even more open, which might be tricky in and of itself.

Now if you mean it was a bad idea to publish 4e as they did within a reality that includes the irrevocable OGL, then I would agree with you.

 

[TheFindus]

I submit three things allowed a minor mistake to crystallize into a MAJOR mistake.

1) The Ticking Time Bomb: The OGL was a time bomb, but one that would never go off as long as you kept hitting the refresh button. WotC chose NOT to hit the refresh button and tried to retrofit a cancel button onto the OGL with the GSL instead.

There was no cancel button on the OGL, by design. They tried to add one. That was a non-starter and it was rejected because the underlying GSL was not in the commercial interests of the perpetual licensees.

Your post included a lot of things in a context I had not thought about before. And I mostly agree with you.

However, I think that Paizo would have gone with Pathfinder or some OGL-version of the game regardless of a new OGL for 4E. When they announced Pathfinder, they said that they had been working on this since 2007, way before 4E was announced.
I think because of the different design ideas in 4E, they assumed there would be a good business opportunity to start out on their own, without having to depend on another company's business decision. The OGL was their chance, and they took it.
They assumed - and rightfully so - that a lot of people would not like the new game design.

2) Different Opinion on Length of Business Cycle: The OGL is incompatible with WotC's preferred length of the Business Cycle of its D&D product line. Even if the OGL couldn't be cancelled, it could be ignored as long as it was continued and re-implemented with the next edition of the game.

When WotC tried to escape that effect, nobody else would sign on. This STILL would not have resulted in competition against their own IP, except for one thing: WotC wanted to revise/reset/resell the game too soon after the last version of the game was released. The value-in-use to the customer of the last version of the game was too high at the time 4E was released.

This created a market opportunity that a well-positioned competitor could use to their advantage.

All I can say is that I was ready for a new game. I loved Book of Nine Swords and the fact that all the classes in this book could do something every encounter. I had played high-level campaigns and dreaded the fact that spellcasters had to sift through tons and tons of spells, leaving the non-spellcasters waiting. Most of the arguments for 4E ring true with my experience of 3.x. I know that this is a matter of taste and cannot be argued over. But after 10 years of 3rd edition, the people I know were ready for something new. Some play Warhammer now, most of them 4E.
So I think that WotC would have had a good chance of winning a lot more people over to 4E if they reacted differently. I do not think that the time factor made a difference.

3) You Can't License The Goodwill of an Entire Brand:
WotC should NEVER have spun off their own periodicals division (now Paizo) and allowed it to communicate monthly with their core customers while Wotc remained largely silent in communicating with those same customers. When WotC allowed that to happen, it transferred the goodwill and legitimacy as "official guardians of the game" from WotC to Paizo -- PERMANENTLY.

WotC believed it was just licensing this goodwill and at the end of the license, they would get it back. That was a FOOLISH business decision. The real world does not work that way.

If you are a big company, sometimes you start to believe your own balance sheet is REAL. You start to think that the product you make is a trademark, IP, and a brand which has very little to do with the people who actually create your products -- or who buys them. There is truth in this view -- but only to a point.

Because ANY certified business valuator will tell you that you CAN'T RELIABLY VALUE THE GOODWILL OF AN ENTIRE BRAND AFTER IT IS LICENSED.

You can SELL IT, but it is very difficult to value it after you license it.

When you sell an asset -- it's gone. When you license it for a fee, you are planning on a reversion of that goodwill at the end of the license. So the terms of the deal call for the goodwill to come back to the licensor at the end of the license.

A certified business valuator will tell you that is an inherently risky bet to expect that you will get back the same goodwill attached to an entire brand if you license it. You might get that goodwill back -- and you might not, too. All you can value is the short-term revenue stream of that license. Trying to value the goodwill of an entire brand as a capital asset AFTER you license it is almost impossible.

So it is an inherently risky business proposition to do it. Smart companies don't do it. WotC wasn't smart. When they spun off their own periodicals division AFTER they created the OGL? They effectively licensed the entire D&D brand to another company in the minds of the customer.

DUMB move.

That is so true. And you put into words what I for the longest time could not wrap my head around. I kept asking myself: why do they neglect the magazines? Why is there no real effort? The 4E AP was suboptimal, lacking the quality of, say, Age of Wyrms. They do not offer enough campaign material for the campaign books they publish. There is almost no story arc for Eberron, Dark Sun for 4E while, in my opinion, there should be something like this in every Dungeon magazine.

If they want to take what you call "goodwill" back, they need to up the quality of the magazines. And I have no clue why they outsourced them to begin with.
But you are right: this made Paizo very strong. It was the end of WotC as the sole "DnD" company. Now there are two.

 

[TheFindus]

You are wording this funny. I just want to make sure that you understand there is no way that WotC could have done anything to change the OGL as it is irrevocably open. WotC can never turn it off or do anything to scale it back. They can issue a new OGL but the license itself gives permission to use whichever version of the license you want to use, so in a very practical sense, the only thing WotC could do to make changes to it is make it even more open, which might be tricky in and of itself.

Now if you mean it was a bad idea to publish 4e as they did within a reality that includes the irrevocable OGL, then I would agree with you.

Oh, I agree completely. I understand the legal nature of the OGL. What I am saying is, that they should have thought about the effect of the OGL when they created it (1999?) and should have asked the question: What will happen if we release a new version of the game? Will that enable other companies to seriously compete with us? And they either did not do that at all or they thought that everything would be fine for them. Which it is not. This is their own fault.