transcript july 21, 2008 hsbro earnings conference call and business overview

Zaruthustran

The tingling means it’s working!
So what's the solution, joethelawyer? If you were directing WotC, would you instead focus on customer acquisition (collect as many $90 as you can!)? Or DDI and other ways to derive revenue from existing customers (DDI!)? Or both?

Also, let's not forget that miniatures are one way to get regular income from existing customers. IMHO the miniatures lines have gotten to a very high level of quality. I'm glad they're available and happy to buy them--I no longer have the time to assemble and paint metal minis, and it's convenient to stuff them by the ziplockfull into a backpack.
 

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<Massive Snippage>
thats why i think the gleemax thing is a bad sign. a sign of a sinking ship. once you start hacking away at the main components of the plan, you are just buying time, throwing the heavy weight overboard, but not stopping the sinking of the ship.

if insider does not get up and going soon, and if it doesn't blow people away and get them signed up, i expect that the pen and paper aspect of dnd will no longer be supported within the next business cycle-- 12-18 months. they'ss still keep the brand itself and make money off of the licensing rights, as long as they aren't able to make more money off it it by selling it. i doubt though that paizo or any third party publisher would have enough money to buy the dnd IP though. i predict though that based on the failure of gleemax and every other electronic initiative they take on, that insider will fail and that the dnd brand will make money for hasbro through licensing and a much slimmed down pen and paper publishing schedule.

perhaps karma for closing down the ftp site greyhawk.stanford.edu.

for purposes of projected revenue streams, look at it in terms of software and mmorpg's. the books are the software. the mmorpg is insider. you make your income projections based on both. if only one comes through, and the smaller one at that, your chances of keeping your position as head of wotc is looking slim. think about it this way---how much does the phb, mm and dmg cost? 90 bucks? if they cost that much, wotc will go the way of tsr.

most every person who purchases the three core books are expected to earn wotc $90 plus $120 plus $120 plus $120, assuming 10 bucks a month subscription and someone subscribing to insider for a few years.

now tell me, with those projected numbers in mind, with those budget demands placed upon your company, how much does it matter that you made $90 per customer when you were projected to make $240 the first year, and that you just dumped millions of dollars into a money pit called gleemax which will never be recouped?

puts things in perspective huh?

just my opinion.

joe
But an interesting opinion. If your projections ring true the D&D brand could be up for re-sale at the behest or Hasbro OR WotC could cease to exist and the brands absorbed for profitability and marketing make-overs ~ meaning what can be saved is saved and what isn't is sold off. M:tG is a larger money maker due to the sheer number of products sold and the D&D minis game is as well; the Star Wars line could be mass marketed in mainstream toy stores and D&D becomes an online only brand name taken over by a programming company for distribution ala WoW or some clone like it.

More likely is the shelving of mass market plans, reduction in resources and a return to the niche from whence it came. No more multi-million dollar strategy and planning sessions, promotions and the like and D&D, M:tG and all related products simply become a dust off and roll out kind of product. THIS destroys the market for 3pp and keeps the original untouchable, just like it has for years. No growing of the market, but no major losses either ~ once again happily stagnant.
 

Dedekind

Explorer
thats why i think the gleemax thing is a bad sign. a sign of a sinking ship. once you start hacking away at the main components of the plan, you are just buying time, throwing the heavy weight overboard, but not stopping the sinking of the ship.

(To pick one thing out of your response.)

I disagree with the dire portents you throw out as a result of Gleemax. I think it is a bad sign -- someone, somewhere was too optimistic. However, Gleemax wasn't meant to be much of a revenue generator was it? Nothing I have seen indicates it was put up for direct revenue. Like OGL, the revenue effects should have been secondary.

In fact, if WotC was going to cut just one thing, Gleemax should be it. It doesn't generate much revenue, it doesn't tie directly to the new edition and it wasn't getting a lot of community support.

Also, if WotC only generates $70 million in sales a year, than my D&D sales estimate is way too high. I think I put WotC at $90-120 million a year of which I thought a 1/3 was D&D. If that's the case, then D&D only gets about $20-25 million. Which makes the success of DDI even more important (see my prior guesstimate of $7 million as target DDI sales).

Regardless, considering the complete lack of a direct competitor of similar size, I have no idea why no one can give a firm sales number for D&D.
 


Dannyalcatraz

Schmoderator
Staff member
if insider does not get up and going soon, and if it doesn't blow people away and get them signed up, i expect that the pen and paper aspect of dnd will no longer be supported within the next business cycle-- 12-18 months. they'ss still keep the brand itself and make money off of the licensing rights, as long as they aren't able to make more money off it it by selling it. i doubt though that paizo or any third party publisher would have enough money to buy the dnd IP though. i predict though that based on the failure of gleemax and every other electronic initiative they take on, that insider will fail and that the dnd brand will make money for hasbro through licensing and a much slimmed down pen and paper publishing schedule.

I'm not so sure they have that short a leash. It depends upon somthing I don't know that there has been any direct market research upon- namely, how much of D&D related products value is predicated upon the underlying P&P game.

That is to say, if support for P&P D&D folds, what is the likelyhood that it will drag related products like DDM, computerized versions of the game, and so forth, down with it?

And then there is the question of the 3rd party publishers. They're not simply going to fold up their tents. A folding of "D&D Actual" could lead to Paizo or some other company's explosion with their FRPG products. OTOH, the mere existence of quality FRPGs might keep D&D related products viable despite the absence of "D&D Actual."
 

evilref

Explorer
i agree. with my corporate background as an upper level sales exec in NYC, and also as an attorney, i can tell you that all that the quote above is dead on. every year each division gets a sales goal and has to set a plan in place to achieve that goal.

<snip>

puts things in perspective huh?

just my opinion.

joe

This is all entirely unsupported guesswork. And calling the closing of gleemax a coverup is ludicrous.

The DDI doesn't=Gleemax, just as Magic online isn't Gleemax. Gleemax wasn't a money maker, it was an attempt at a social hub that might then drive sales by site visits, but in and of itself it was a loss leader.

Moreover, to suggest that the RPG side of Wizards won't be supported in 12-18 months is again ludicrous. WotC isn't Vivendi Activision, and Hasbro doesn't dictate individual product lines to WotC. If it's meeting its bottom line (which the sales of 4e would certainly suggest) then it's succesful.


Ohh And Dedekind, from WotC accountants and brand managers through to managers at companies such as Diamond there are plenty of people who could give a firm estimate on D&D sales. They're just bound by NDAs not to. There is no current reporting system for rpg sales in the industry and short of every individual company releasing their figures it's not going to happen.
 


Imaro

Legend
Where do people keep getting this idea that Gleemax wasn't suppose to make money? It was suppose to (just like DDI) have both free content and premium content. I actually believe that the original plan for Gleemax was that it was suppose to have a wider appeal and thus generate greater revenue than DDI, this is supported by the fact that it was implemented first and has had the most work done on it.

I also think that ultimately it ended up costing too much and not getting or being able to get to the point where it would generate revenue fast enough to justify it's cost. What I'm wondering is if DDI will be any different?
 

joethelawyer

Banned
Banned
So what's the solution, joethelawyer? If you were directing WotC, would you instead focus on customer acquisition (collect as many $90 as you can!)? Or DDI and other ways to derive revenue from existing customers (DDI!)? Or both?

Also, let's not forget that miniatures are one way to get regular income from existing customers. IMHO the miniatures lines have gotten to a very high level of quality. I'm glad they're available and happy to buy them--I no longer have the time to assemble and paint metal minis, and it's convenient to stuff them by the ziplockfull into a backpack.

What would I do? beats the hell out of me. :)

there is so much that we don't know.

1. we don't know what they were goaled to bring in.
2. we don't know how that goal was broken out by product line
3. we don't now the past several years' successes or failures of wotc---by the numbers. not by the spin they put out to their customers.
4. we don't now the interpersonal relationships between management of wotc and higher management of hasbro. in my experience that's often the most important factor on whether a product line or an employee is given a second chance, or more time to pull off the goal.
5. we don't know the timeframe given to wotc for success for each of the various product lines.
6. we dont know how far behind they are on insider.
7. we don't know how much they dumped into gleemax and how much return they expected to get from it.
8. we don't know when the first iteration of insider is due out.
9. we dont have any intelligence on the market conditions, competitors, nor any past history of those factors.


most of the options a person could take to make 4e and insider happen are dependent on the unknowns above, as well as many other factors.

it all depends in general on the amount of time wotc has to make this happen, the amount of power they have to pull off their goals (money, no higher level interference, etc), and the raw force of will/power/ability of the person heading up wotc. whether they are a steve jobs/bill gates/andrew carnegie/donald trump type person, or just a regular corporate hack.

one thing i know for sure. whatever decision is made by wotc will be made STRICTLY on the basis of the bottom line and in the interests of covering their asses, not love of the game.

and that's a shame.

joe
 



Henry

Autoexreginated
if insider does not get up and going soon, and if it doesn't blow people away and get them signed up, i expect that the pen and paper aspect of dnd will no longer be supported within the next business cycle-- 12-18 months.

In which case, thank God for the OGL, I say. :) From what I'm seeing, and based on comments from Ryan Dancey eight years ago, it's working exactly as he intended. I also really have to question any supposition of third-party publishers as direct competition for D&D, because of its position in the market; any sales to third party companies on board with the OGL will usually be in addition to D&D purchases, not instead of them, with the D&D purchases taking precedence. The number of people using d20 games who AREN'T also making D&D purchases is really pretty small by comparison. On the other hand, when D&D is sufficiently different from the rules as open sourced, THEN is when you start to see them functioning as competing systems - and if they do drop the ball, then someone else likely becomes leader of the niche, as White Wolf did in the 1990's.

But hopefully, Insider will do well for them, because despite the delays in the other parts, they have the Dungeon and Dragon Online mags looking very nice -- nice enough for me to pay money for them when they go subscription, quite frankly. For 4E players, there's some really good content in those magazines.
 


Mistwell

Crusty Old Meatwad (he/him)
to respond to my own post, i thought it was interesting that they only mentioned wotc in passing. this is 2 months after 4e released. this was a huge meeting with all the big wall street firms. this is where you toot your own horn loudly. if 4e really did well they would have been talking about it here.

I disagree. When I've worked on these types of meetings, we wouldn't bother mentioning a segment as small as D&D, even if it did really well. If we did mention it, stockholders would assume we were trying to distract from something much bigger that had not gone well. It would just be inviting that question...how much $, and when the answer was "a really small amount relative to net revenues" people would at best wonder why we were wasting their time, and at worse assume very cynical reasons for that time wasting.

Unless it's going to make a blip on the bottom line, either now or in the following year, or it justifies a noticeable expense, or you badly DO need to distract from something, you don't mention it.
 

Mistwell

Crusty Old Meatwad (he/him)
again, these meetings are where you toot your horn and make small achievements seem bigger than they are to impress financial analysts at the big wall street firms.

Only at a relatively crappy company Joe, that's having bad times. If you make small things look big, most of the time in my experience it comes back at you worse than any gains you can make that way.

Do you have a specific example in your experience that runs contrary to what I just said?
 

Miyaa

First Post
Interestingly, the Hasbro stock (which is more or less an indication of how people would bet on it to ride well, like in a horse race) is up 21.55% in the past year (as of July 29, 2008), and 54.38% in the Year to Date analysis. It hasn't done this well since, well, 1999. They also have a new CEO who just started a less than two months ago (May 22nd).

Now, what does this, along with the rest of the thread have to do with Wizards? Well, I would contend as long as profits overall are fairly good and the stock price is high enough for Hasbro to buy back some of the stock, Wizard can continue to try to find some way towards a sustainable profitability goal. However, given that the global economic conditions aren't good right now (as indicated in the conference call transcripts), that could all change rapidly. So I would be (if I was running WotC) in a "Be Quick, but Don't Hurry" mode.

I'm also kicking myself for selling the stock earlier in the year.
 

Mistwell

Crusty Old Meatwad (he/him)
Along a similar vein, Wizards of the Coast was conspicuously absent from San Diego Comic Con this year. A person at the Hasbro booth said they were gearing up for Gencon. I have been attending SDCC since about 1991 and I can't remember D&D not being there.

I noticed that too, and looked into it a bit. The answer I got (not from them) was that because floor space did not grow, but interest in floor space did from a variety of entertainment sources, WOTC (along with many other booths) were forced to make a decision on trimming their square footage and how they would use with that reduced space. D&D was a natural cut for them. Even Hasbro built UP more than out this year, if you noticed.

I wouldn't read too much into it.
 

Mistwell

Crusty Old Meatwad (he/him)
Between the two cons, Comicon or GenCon, GenCon is just the larger of the two in terms of D&D and role-play, regardless of the actual media coverage or attendance - playing to a bunch of comic collectors isn't necessarily playing to a group of gaming geeks and vice versa.

Boy do I wish Comic Con was a bunch of comic collectors! ;)
 


manhammer

Explorer
Boy do I wish Comic Con was a bunch of comic collectors! ;)

Here here. As a comic collector I was going to add that less then 50% of SDCC is now comic books and some would argue less than that.

It has become a huge move, video game, toy and kitsch event. While it is still fun, I always come away shell shocked.

While some of the comments about a lack of time to prepare may very well be true, I was still saddened/surprised with no WOTC/D&D.

Joe read the situation as I did, and he has a much more impressive pedigree.

However, I don't see this as the death of D&D but very possibly ANOTHER change in ownership.

In regards to the solution to the problem, I think (and again I'm a graphic designer not a lawyer or business man) the solution is not to be owned by a large company. D&D was a labor of love and predictions about online revenue and miniature sales seem to have very little to do with creating something "of quality".

I think this is why we see the cycle of great books at the start of a D&D cycle and then pure drek by the end of one. The business model says "where is my new revenue" and the creatives who were so excited at the beginning know they have to push product in order to keep the job they love. So they make what they can (sometimes it's bad) and in the end, end up hating their job and moving on.

I am dying to know what Ryan Dancey said 8 years ago, my hunch is it has something to do with the OGL and giving D&D to the people. Maybe we need to take it away from WOTC.

Oh and just for some geekcred gamer since 1985.
 

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