Imo
When we talk about the RPG industry, we're really talking about three industries (D&D, d20, non-d20) that exist under the umbrella of a larger marketplace that includes TCGs, CMGs, metal miniatures, boardgames, and geek culture items (stuffed Cthulhu dolls, t-shirts, etc.)
Part of the problem in getting any broad picture or one sentence summaries of how things are going is that all of these industries can shoot off in different directions at the same time.
D&D is doing fine. I can't even begin to get into details here, since I hear stuff around the office that is confidential. Basically, if we pay a firm to do market research we can't just go around reporting their results. That's money we've invested in acquiring data that we use to form D&D's strategy. But what I can say is that D&D is trucking along fine.
I think the big problems lie in the d20 and non-d20 segments. The current distribution and retail system is poorly suited for RPGs. Since 1993, the hobby game distributors and stores have enjoyed a steady stream of high sales, fad products: Magic, the TCG explosion, Pokemon, Heroclix, D&D 3e and d20, Yu-Gi-Oh. All of these games were cash cows. The distributors simply shifted fad products from publishers to retailers and soaked up the profits. The retailers put the latest fad on the shelf, and gamers bought it in droves.
Those days are over. Yu-Gi-Oh is no longer a fad, and nothing has arisen to take its place. I think this is why RPGs are feeling the pinch: the distributors simply don't want to deal with them anymore. RPGs have lots of different titles, making them hard to track, and they don't move as many raw numbers as a CCG or TCG. Even boardgames have a leg up on RPGs, as most games cost around $50. With money tight, RPGs are the first ones to go.
To really sell RPGs, you have to have some level of expertise in them. If you don't understand the RPG market and keep track of what's hot, it's a mindfield. How many times have you seen a game store with an entire shelf of dead Fast Forward d20 products? A game store owner would have to be a reasonably sophistacted D&D player to understand that FF product was terrible. He'd also have to do a fair amount of work to track his inventory to the level that he can see that FF titles didn't sell.
The typical well-stocked RPG section has maybe a dozen game lines, if not more, with dozens of titles for each. Compared that to the TCG section. A store might carry 6 or 7 different games, each with the current base set, and maybe three or four expansion sets currently in stock. Same thing from CMGs; you have far fewer lines, and each line consists of far fewer products.
(To put it another way, the D&D minis line has generated 7 products over the past three years: Harbinger, Dragoneye, Archfiends, Giants of Legend, Aberrations, Deathknell, and Angelfire. Compare that the number of D&D books released since then - there's about 30 titles. For collectable minis games, there's HeroClix and D&D. For RPGs, a store might carry D&D, WoD, GURPS, Hero, Warhammer FRP, d20 stuff, Conan, AU, IH, BR, TW, BC, and tons of others. For both distributors and retailers, RPGs are *much* harder to track and handle than other types of games.)
RPGs also suffer in that they're much harder to demo than a minis or card game, they lack the cool, compelling "toy" factor you get with minis and boardgames, and they don't lend themselves to tournaments as easily as other games.
We also have seen a big die off in game retailers, probably attributable to the evaporation of an easy money maker a la Pokemon. That puts a huge dent into the number of stores ordering RPGs, and thus cuts down sales.
The hobby game market as a whole has also seen a downturn. Again, I think this is attributable to the shrinking pool of retailers.
I think we're seeing more and more D&D sales pushed into bookstores such as Barnes & Noble and Borders. In the past few years, D&D has made its way on to a lot more B&N shelves. I've also seen several stores with rotating, stand up displays filled with D&D books. If you think about it, D&D makes huge sense for these places. A single D&D book goes for about $30, and you can fit the entire line in one, maybe two shelves. On a shelf inch/dollar basis, that's a lot of cash value stuck in a relatively small area. Best of all for a bookstore, if you establish a good presence, you can generate a lot of return sales as gamers start shopping at a bookstore rather than a game store.
In terms of infrastructure, the book trade is designed to handle RPGs - look at how many new books come out each week. Tracking all those titles is a lot easier for a national chain than for a single, small business.
GenCon sales were also strong this year, and the show's attendance went up. I think this is evidence that we're looking at problems with distributors and retailers, rather than a drop in demand for games.
For RPGs, and D&D in particular, I think a lot of that demand is now being met by chain bookstores. This is why I never paid any attention to Ken Hite's analysis. The data was terrible, and it did nothing to account for book stores. I think access to the book trade is the key line between success and failure in today's RPG market.