The D&D Business Model

[Anson Caralya]

I’ve read through the rampant 4E rumors and they have me worried. I don’t want to see support for 3.x dropped in favor of a card- and miniature-collectible game labeled D&D, especially if that new game isn’t an RPG. It’s almost inconceivable to me that such changes could happen… until I indulge my worst corporate-viewpoint fears (having been part of a few big corporations in my time). Then I wonder if it isn’t just natural that we find ourselves here. What in D&D generates a growing revenue stream? Generally speaking, doesn’t each new rulebook appeal to a slightly narrower segment? Looking at Amazon book sales ranks, the 3.5 PHB is #1,731 after 3 years on the market, while Fiendish Codex I, launched 2 months ago, is #3,045. I’m not picking on FCI, just illustrating that it appears tough to grow through new rulebooks. Look at Complete Psionic – after 4 months, it’s #16,183. (Again, not picking on anyone’s work – I think Bruce is great, and other than the PHB I’ve randomly chosen titles here.) What do we have besides rulebooks? The modules (sign of my age) are similar -- Fantastic Locations: Dragondown Grotto, on the market 2 months, is #10,685. How about miniatures? Well, War of the Dragon Queen is #789 (and it does appear to be from the same books list, oddly enough). D&D Icons: Gargantuan Black Dragon is #416. D&D Icons: Colossal Red Dragon – not yet released – is #5,024 at a $48 price point. Setting aside my emotional investment, I can see where those figures might direct my investment budget. And the PHB sales numbers make a periodic rules reboot awfully attractive.

So what’s wrong with my thesis? What am I missing? Are Amazon sales ranks not indicative of total sales? Are margins on books much better than those on miniatures? I’d really like to be proved wrong, wildly wrong, completely offbase, just howling mad on this one. I’m very happy with the existing RPG known as D&D, even moved by it to the point of writing for Dungeon, and I don’t want to see it disappear.

If you, as a fan of the game, were also an owner – the Greenbay Packers model (Greenbay Grognards?) – what would you do? If D&D had to be run as a business, with an attractive enough return to secure funding, what business model would you propose?

 

[EricNoah]

I’ve read through the rampant 4E rumors and they have me worried.

Please be sure to read the latter parts of the current 4E thread, starting around post #416 or so.

 

[Anson Caralya]

Yup, in the time it took me to write my post, the original changed quite a bit. Still, my question is: If you're a fan of the current game, what business model do you think would keep it successful (i.e. growing profitably) in this current incarnation?

 

[EricNoah]

Ok, some initial musings...

RPGs and D&D are a niche. They aren't and, in my opinion, never will be mainstream to the degree a Monopoly or a Tetris is.

So you have a relatively small base of consumers. You can try to expand that base (a task which I think will only get harder as the years go by), or you can know that base well and cater to what it wants (and maybe get it to want other things).

That base also seems to have quite a bit of disposable income, so much so that money is often not an obstical when it comes to participating in this hobby.

So what you need to do is produce things that basically everyone in that base will want, and you need to produce them regularly, and they need to seem "different yet the same." The best thing you can do is come up with something relatively cheap to develop and produce, then find ways to encourage multiple purchases. In a sense, this is the genius of the plastic minis. The randomization means you'll never really have exactly what you want, but it might be close enough, plus there's the gambler's instict that maybe next time you'll get it, and you can trade for a specific one if you have the gumption.

On top of that, you can create a simple game to use the minis, and even make the randomization kind of a factor in the game, and thus you have the minis game as a kind of separate thing from the RPG. Maybe someone who doesn't play RPGs will buy and play the minis game.

I'll come back to this when I've let this percolate some more... I do have some thoughts about the customer that can be satisfied with the core rules and never buy another thing from WotC for the rest of his life. Should WotC go after him? Is a new edition the only thing that will snag him into purchasing again? Should WotC even worry about that kind of consumer? Not sure...

 

[mmadsen]

What in D&D generates a growing revenue stream?

As you point out, each new product reaches a slightly narrower segment of the already small market -- but what makes this particularly bad is that books have high fixed costs. It's those last few units that are all profit, not the first thousand.

If D&D had to be run as a business, with an attractive enough return to secure funding, what business model would you propose?

I would print only those books that could sell at high volume, and I'd leave the rest to third parties. That is, I'd stick to the original 3E strategy.

 

[mmadsen]

In a sense, this is the genius of the plastic minis. The randomization means you'll never really have exactly what you want, but it might be close enough, plus there's the gambler's instict that maybe next time you'll get it, and you can trade for a specific one if you have the gumption.

Actually, the true genius of randomized products is less obvious: you only have to distribute one SKU (stock keeping unit). Maintaining an inventory of hundreds of unique items means you never have the unique item the customer is looking for -- or you're carrying way too much inventory.

 

[EricNoah]

Ah, an excellent point.

I think the randomization is the thing that gets the RPG players riled up. When WotC is selling you something but you don't know exactly what you're getting until after you've paid for it, that's not the basis for a great relationship. It works for the minis game, but not so well for the RPG-only people.

 

[Vigilance]

What in D&D generates a growing revenue stream? Generally speaking, doesn’t each new rulebook appeal to a slightly narrower segment?

What generates continuing revenue, until someone comes up with a better business model is the Three R's: revise, reset resell.

Not what you want to hear but keep in mind almost every major RPG company with a long history of sustained profitability uses some form of this business model: Steve Jackson Games, Hero Games, Wizards of the Coast, White Wolf.

As to your second question, yes! Every book in an RPG line *does* appeal to a narrower market segment. Which is why you need to revise, reset and resell to wipe the slate clean and start over.

RPG companies didn't come up with the 3R's because their owners hate gaming or hate gamers. They came up with it to stop the disturbing trend of an RPG company making a very successful game and then going out of business.

Chuck

 

[reanjr]

It works for the minis game, but not so well for the RPG-only people.

Well that's for sure.

I think one thing that could be done even for the current edition (and I may have mentioned this on the thread) is to release more of the rules to the SRD, but leave the content to be closed. In theory, this would draw more people to see and understand the rules and give you a single point to look for when it comes to the "RAW". Meanwhile, it entices and advertises for the books that are on the market.

Example from Tome of Magic: (which I don't have so I know little about the rules except what I read in Dragon). Put the rules for Pact magic in the SRD, but not any of the Aspects. For players who only purchase the core books, they are likely to try it out because it's free. If they really like the concept and want to use Pact magic, they can come up with their own Aspects or they can see that it is a cool thing they'd like in their game, so they can purchase Tome of Magic. Of course, this realies on Wizards consistently coming up with good material or people will just take the free stuff and come up with their own.

Another one I am not too sure of the feasibility on: Omnibus editions of all the books. Print smaller runs of a book and when it's out, print the new one with errata. I think plenty of people would be willing to pay a reasonable amount for an erratad copy of the PHB (not the $70 they are asking for the collector's edition, though). It could bring repeat business to the core books. It is doubtful that many people would buy it every time, but it may nudge them into giving away or selling cheap that old, battered copy of the PHB for a shiny new erratad version, effectively gaining a prospective new player AND a repeat buyer.

Role-based books. Some people like Yugoloths. Some like Baatezu. Some like Demons. Very few people actually have all of these monsters because they are scattered across a dozen different books, many of which would not be considered monster books. When wizards is pretty sure they're done publishing Yugoloths for instance (in my opinion, after seeing MMIV, I should hope so), they should publich them all in one book. Then the yugo fans who are missing a couple can pick this up and use it in their new planar campaigns. And it is all updated with the latest rules changes, stat blocks, etc.

They should not try to trick people into buying things, but present them on their own terms. MMIV is a great example. Many people find advanced creatures useful, and that's great. But it's not a Monster Manual. It should have been a book specifically focused on advanced creatures easily dropped in alongside their weaker cousins. And it should have been advertised as such. [DMG II is another good example of trying to trick consumers. All the early art shots of it had it in Player-Material-Brown. My guess is it was always intended to come out like (I'm speculating of course) but that complaints urged them to make it DM-Material-Blue. It still bears a Player-Material-Brown binding.]

Going along with that, I think trying to make all books important to every player is just going to alienate players - in the long run - from purchasing any products. A big hoopla was made about the four major market segments of the RPG industry (Tactical <-> Strategic and whatnot). Since it is known that people fall into those marketing segments, why try to cram material targeting all four segments into a single book? After a couple of years, everyone begins to think to themselves, "god, I wish they'd just publish a book like ____ and stop burdening me with info I don't need and will never use". I think this is what causes people to buy ever fewer supplements. There is no good reason why a good idea that comes out a year after 3ed sells five times as well as something that comes out five years later. The number of players of RPGs doesn't change dramatically over time (from what I've heard from market research, though I cannot cite a reference), and one should always have the same audience to try and impress.

Inspiring content to rules ratio is absurdly low. I challenge anyone to pick up any D&D book for 3e and compare it to the Dark Matter campaign setting and see which one sparks the most ideas for a GM. Wolfgang Baur and Monte Cook did a phenomenal job on that book. One can actually pick it up and read it for fun, not reference. Yet it serves its function as a game just as well.

Which leads me to another complaint. Empowering the player is all well and good, but it's better to inspire a DM to create good adventures/campaigns, giving your game a good name. An inspired DM can run a fun game with or without dice, rules, or anything else. A group of empowered players just have problems keeping campaigns together or finding a DM who could make a game fun for more than an hour or two. This cause a hemorrhage of players who try out crappy games and never come back. Better to make a good DM. He'll bring players to your company like mice to cheese without you having to lift a finger to target them. DM's should not have tools to drop in this or that feat, but to drop in this or that method of running combat or skill system to support a theme he is interested in. Publish more books with more ideas, and he'll want to try running them all.

I'm sure if I spent more time thinking about it, I could come up with more things, but I think most integral is the breakdown of communication from Consumer->Designer. Early on (pre-3e during playtesting) Wizards cared what players had to say. As time went on, and a few books didn't sell as well as they'd hoped, they seemed to lose interest in what people had to say.

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Addendum:
Alot of my ideas above may sound antithesis to publishing companies' knowledge of how their industry is run. Large print runs (or even better, an exact count print run that you know will completely sell out in a short time) are the modus operandi. Redoing layout for an errata change costs money. Printing a small run costs money. Keeping shelves stocked while something waits to sell out costs money. My response? Grow up and learn how technology works and how it can give you a business model that actually serves customers instead of Conglomo, Inc., your parent company.

Addendum II:
I think it is entirely within reach for a publishing company to allow users to choose what rules they want in their PHB from a list and have that book shipped to them if they so wished it. RPGs are far from a ubiquitous pastime; efforts should be made to create more buyers with slightly more expensive focused products rather than everyman products that only your current fans will ever have an interest in.

 

[Anson Caralya]

Empowering the player is all well and good, but it's better to inspire a DM to create good adventures/campaigns, giving your game a good name. An inspired DM can run a fun game with or without dice, rules, or anything else. A group of empowered players just have problems keeping campaigns together or finding a DM who could make a game fun for more than an hour or two. This cause a hemorrhage of players who try out crappy games and never come back. Better to make a good DM. He'll bring players to your company like mice to cheese without you having to lift a finger to target them. DM's should not have tools to drop in this or that feat, but to drop in this or that method of running combat or skill system to support a theme he is interested in. Publish more books with more ideas, and he'll want to try running them all.

Targeting the DM is an interesting idea in changing the business model, although the books of ideas I think would face the same increasingly small segment problem. Is there something beyond books that would help produce good DMs, and help good DMs fine-tune their skills? Or help players recognize good DMs to avoid the false starts? Wildly extrapolating your idea, if you subsidized the training and licensing of good DMs, would you reap the rewards in fanatical player/consumers? If you as a player knew that a 5-star DM had space at his table and was kicking-off a nautical campaign, would you rush out to buy Stormwrack? Could the DM be your passive sales field force? Selling to the DM might get you 20% of your market (I'm guessing less), but selling to motivated players... And yes, I realize that all of this is quite out there, just looking for possible alternatives.