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 They launched their plan with a web site, Free the Wizards, which has since been archived.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.

 

[Vaalingrade]

Just want to highlight the whole 'walled garden' approach.

IF a company you buy things from starts saying 'walled garden'... run. The point of the walled garden isn't just to keep you in the ecosystem buying just from them, it's to make switching to another brand punitive as everything you ever spent previously becomes sunk costs.

And when they have a ton of people on the hook, locked in lest they have to buy all new stuff instead of just the one new thing, they can start dialing down on the quality. Because what're you going to do? just flush money down the drain?

 

[GMforPowergamers]

IF a company you buy things from starts saying 'walled garden'... run. The point of the walled garden isn't just to keep you in the ecosystem buying just from them, it's to make switching to another brand punitive as everything you ever spent previously becomes sunk costs.

isn't that already an issue with D&D?

You pitch a new Rifts campaign and half to 3/4 your players tell you they don't want to learn a new system.

 

[Bayushi_seikuro]

I wonder, as a hypothetical, what would the community's price point be if under this monetization scheme, Wizards said - "For X dollars a month, you can total access to the core books online. For Y a month, this tier of books. Don't want to pay for a whole tier just to get access to Eberron? Ok, five dollars." I am sure that there are plenty of people who may look at that as 'good' - people like me who don't have convienent access to a in person group, or don't have a FLGS nearby and/or don't want to just play Adventurer's League. I'm sure I have a price point in mind that, especially if it functions well with DDB and a VTT, I'd pay

 

[Aspirinsmurf]

I wonder, as a hypothetical, what would the community's price point be if under this monetization scheme, Wizards said - "For X dollars a month, you can total access to the core books online. For Y a month, this tier of books. Don't want to pay for a whole tier just to get access to Eberron? Ok, five dollars." I am sure that there are plenty of people who may look at that as 'good' - people like me who don't have convienent access to a in person group, or don't have a FLGS nearby and/or don't want to just play Adventurer's League. I'm sure I have a price point in mind that, especially if it functions well with DDB and a VTT, I'd pay

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.

 

[Minigiant]

isn't that already an issue with D&D?

You pitch a new Rifts campaign and half to 3/4 your players tell you they don't want to learn a new system.

It is. Isn't it.

One of the biggest problem with TTRPGs is that there are few honest reviews of TTRPGs in the most visible places. You often get extremely biased overly positive review from a fans of the game thrown at you on YT, Tik Tok or some other social media.

Then like you said, you have to learn the rules and go through 3 sessions to see if you like the rules or not. Big ask unless you hate D&D or are going to a whole new genre.

 

[Vaalingrade]

isn't that already an issue with D&D?

You pitch a new Rifts campaign and half to 3/4 your players tell you they don't want to learn a new system.

Right now, switching to Rifts doesn't mean you lose access to D&D.

 

[CapnZapp]

She pointed out that dungeon masters only made up 20% of the customer base, with...

Yeah, EVERYBODY should be the dungeon master.

(Or, at least, spend like a dungeon master.)

Sheesh. Makes you wonder: has she ever played D&D even once?

It's getting more and more apparent that these people aren't interested in table-top roleplaying games. They need D&D to be as profitable as video games or they lose their jobs.

Okay then, so we'll simply stop playing D&D and move over to another game system that just so happens to have dungeons and dragons in it.

 

[Cergorach]

You pitch a new Rifts campaign and half to 3/4 your players tell you they don't want to learn a new system.

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! ;-)

 

[ART!]

Monetize is to make revenue. Successful monetization turns into profit.

So as much as microtransactions are A WAY to monetize, so too are selling products.

Being undermonetized CAN mean "we need to produce more items and sell them"

Being undermonetized CAN mean there are entire options on items you don't sell... you may not even NEED to sell them but license out the sales.

If someone looks at D&D and says "We could have a cartoon, a toy line, and kids T shirts, but we don't" that could mean D&D is UNDER monetized.

If someone looks at the books sold in 3.5 (2 a month) the ones sold in 4e (1 a month) and then looks at each individual book now selling more copies then most or even all the 3.5 and 4 books, they could say "We should put out more source books, because we are leaving money on the table and all these 3pp are taking it up, D&D is undermonitized"

if only 20% of teh player base is buying books, but that 20% half of them are buying 3pp books on top of wotc D&D books then there is more money sitting there not grabbed up yet.

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.

 

[mamba]

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.

they hired 300+ people for the VTT, imagine how many books that would translate to