Whither the Ultimatum?

[kitsune9]

Just some idle speculation. I'm just having difficulty with the idea of "$50 million or mothballs" and the new edition.

Actually, this is a very realistic practice in Western corporations. I'm a financial analyst and I put together budgets, projections, and conduct cost-analysis.

Every business operation in which a business decision is made carries an opportunity cost. Basically, the business manager has to decide, "If I do X, then what is my opportunity cost for not doing Y?" While this may seem like kind of a dumb question, it's one that is constantly being asked and people like me has to create a number of scenarios.

The second part of the business decision is the required rate of return. Business managers in order to keep stockholders happy have to maximize returns on their stock performance for their level of risk. For example if you own Stock A and it's return is 1% that has medium risk or a 1 year CD and it's return is 1% that has safe risk, which would you choose? The CD of course. So Stock A not only needs to turn a profit, but they have to beat comparable investments as well. The required rate of return must be higher than the cost of capital for the company along with any comparable investments (most companies set this at the Treasury rate yields since that is technically the most safest rate you can get).

So getting back to Hasbro in which the company deals in billions of revenue. The setting of a $50 mm to $100 mm is more than likely because each product stream needs to 1. be able to exceed their required rate of return and needs to be at least this high in order to contribute toward the net profit, 2. exceed the opportunity cost.

So, the point is that I'm stating whether or not 4e turned or did not turn a profit or whether it reached that mark or not, or what the future of D&D will be. What I'm showing is that it is a very valid and reasonable business decision to have a business manager say, "$50 mm or mothballs" because of these factors and other similar circumstances involved.

When I dealt with clinical trials, pharmaceautical companies base their decision drug decisions and opportunity costs in the hundreds of millions range. A drug that will bring in $100 mm of profit to a big pharma like Pfizer won't even get made. Hasbro faces similar decisions with their product lines.

Happy gaming!

 

[Viktyr Gehrig]

D&D 4E must have made a profit on what it put out, otherwise only a foolish company would attempt to sink money into boat that's gone more than half-under.

There's a difference between "profitable" and "successful", from Hasbro's perspective. Hasbro owns WotC, but they don't manage it-- think of it like owning a stock. You've got a certain amount of money invested in it, and you cash your dividend checks like clockwork, but you don't go to the shareholder meetings and you certainly don't spend your own money on promoting its products. You own your little stock and you sit on it and you don't even think about it unless it's in the news, so you really don't care what's going on over there as long as your dividend check keeps showing up and your stock price doesn't tank.

That's "profitable". Saying a stock is "profitable" is like when your mother says her friend's daughter is "nice". A profitable stock is like the date you take for coffee because it's cheap and you're less likely to fall asleep; everything is profitable when you sit on it long enough.

"Successful" is a whole different story. Successful is when your little stock is in the news talking about the killer app that's going to make it explode-- that $50 million brand that's going to be worth $100 million in a couple years, the promise of double-digit growth for years to come. That's the brand you put more money into, the news that makes you start reading your prospectuses and attending your shareholder meetings and putting more of your own money into it.

That's what the D&D Brand Team promised Hasbro with 4e and what they failed to deliver-- for various reasons-- and what 5e is their "second last chance" to make good on before Hasbro says "I like you as a friend" and tries to set WotC up with his loser cousin.

 

[Griego]

I think everyone can agree that 4e was an attempt to push D&D to the next level of profitability, if not fully into the mainstream. Despite having some really good innovations, it failed to capture that mainstream audience and alienated a lot of its core in the process. It was just too different a game. So WotC, realizing that every edition of D&D alienated some small bit of its core audience, decides the next best thing is to try to win back those Pathfinder converts as well as picking up older grognards that were left by the wayside with the publication of 3e, 2e, and maybe even 1e AD&D. Maybe their thought is that if they can't convert the WoW audience, getting every grognard out there to play their game again would be the next best thing. And who knows? That market might be huge. 5e could bigger than 3e.

As far as who owns the D&D IP, it's Hasbro. They bought WotC, right? If they wanted to mothball D&D tomorrow it would be done, no questions asked. If anybody from WotC resisted, well, a few people from HR and a couple security guards would take care of that right quick, I imagine. And there would be nothing anyone at WotC could do about it. But Hasbro won't mothball D&D. I think it makes too much money, even 4e, with the potential to make a lot more, as explained above. And it's a classic brand with a lot of recognition outside our little community. Otherwise all those mainstream news outlets wouldn't have bothered with coverage when WotC made their announcement.

 

[wedgeski]

A profit, certainly. 50 - 100 million? Not likely.

Rather than expanding the market with 4e WotC instead split the market. Not good, not good at all.

Which, ironically, occured partly (mostly?) because of a certain Mr. Ryan Dancey's actions at the start of the 3E era.

I'm really dubious about any OGL-like licensing agreement coming out of WotC for 5E. I mean, surely any meeting in which the idea is proposed will come to a grinding halt by the simple action of slamming a Pathfinder core rulebook on the table. "We made that mistake once, fellas. We're damn well not doing it again."

I think we *will* get a GSL-like license, but I hope it will be released a lot earlier than it was for 4E and at least find some traction that way. We have interesting times ahead.

 

[Umbran]

Core brands made more than $50 million annually and had a growth path towards $100 million; Non-Core brands did not. Core brands would get financing help from Hasbro, Non-Core brands would not, and might even be mothballed.

All of what follows is my humble opinion...

That's *might* be mothballed. There is a long, long stretch between might be, and will be.

I don't doubt Mr. Dancy's report. But I still have to wonder.

Having D&D be a Hasbro Core brand is probably not a reasonable expectation. You might, on release of a new edition, get a one year surge selling $50 rulebooks to one million gamers, but not each and every year. I've never seen anyone suggest the market was large enough to support that kind of revenue.

So, if sale of the game itself was not going to get near that mark, it is a hard, hard sell to think that tools to go along with that game would do the trick. An MMO might do it, but those are risky - they cost a lot to make, and with so many around, the competition is pretty fierce. Movies are one-shot boosts, but not sustainable.

I could imagine having such a pitch to Hasbro result in, "You guys are profitable, and have enough good ideas that we won't mothball you," but I expect actually getting the execs to think it'd be a core brand would be similar to selling them a bridge.

I expect mothballing is for things that perform at a loss, or just barely in profit, and D&D is probably doing a chunk better than that.

 

[Steel_Wind]

If you can't get 1 million people subscribing to a DDI for $5 a month, you're "doing it wrong". If you "do it right", that revenue is therefore doable. Hell, you might just as easily achieve it with 500,000 paying $10 each a month, too.

What "it" might be, is of course a very, very different matter.

I don't take issue with the fact that this number in terms of revenue is a difficult target to meet. It may well be that it is not likely achievable, but I do take issue with the suggestion that it isn't achievable at all. I think it is. Hard? No doubt. Extremely hard? Perhaps so, too. But impossible? Impossible is a very big word.

The problem with a swing for the fences approach is that you not only stand upon the shoulders of the giants who came before you when you are at bat, -- you do so while those giants stand in the craters of the mistakes that people before you made as well.

Tall shoulders sure, but some mighty deep craters left in the past 12 years too. I wouldn't bet on it either -- but it's not impossible.

 

[Umbran]

If you can't get 1 million people subscribing to a DDI for $5 a month, you're "doing it wrong". If you "do it right", that revenue is therefore doable. Hell, you might just as easily achieve it with 500,000 paying $10 each a month, too.

What "it" might be, is of course a very, very different matter.

That's terribly glib. You've swept all the details under the rug (the Rug of "It"), and implied that this should be somehow easy, when how easy it is lies in those details.

One million is not a small number of people. We are talking about a market in which a product that sells 10,000 copies is often considered successful - and that's a one-time expense, not a monthly subscription.

Best guesses (from this thread) suggests that at its height, Dragon Magazine had a circulation of a bit under 120,000 a month. That's down near 10% of what you suggest should be easy.

So, color me skeptical. Certainly color me unconvinced by your assertion.

 

[Alzrius]

Another possibility might be the return of the D&D video game license from Atari. Might not revenue from the license push D&D over the $50 million barrier? Could this be why 4e was announced at a convention, but 5e was announced with a full out marketing blitz, including NYT, CNN, and Time?

I thought I recalled Mr. Dancey saying that the money made from licensed products, such as the D&D video games, didn't get counted towards this $50 million cut-off for some reason.

 

[Steel_Wind]

That's terribly glib. You've swept all the details under the rug (the Rug of "It"), and implied that this should be somehow easy, when how easy it is lies in those details.

Glib? Mea Culpa.

Though to be fair, if I am saying in the next paragraph, explicitly, that it's hard to do, I don't think I'm to be fairly hoisted on any "impliedly easy" petard.

Best guesses (from this thread) suggests that at its height, Dragon Magazine had a circulation of a bit under 120,000 a month. That's down near 10% of what you suggest should be easy.

So, color me skeptical. Certainly color me unconvinced by your assertion.

Dragon's circulation is not the issue. I think you want to look at Ryan Dancey's assertions that WotC was selling HUNDREDS OF THOUSANDS of COPIES of the Core rulebooks *in the first MONTHS* when 3.0 was released. (300,000 PHBs alone in the first 30 days)

Those are the numbers of what a home run looks like.

Moreover, Mike Mearls in this post says

"How would you categorize D&D 3e's sales in that light? The numbers I have unearthed put the 3e PHB at between 700,000 and 800,000 books sold. You can tack on about 300,000 to 400,000 DMGs, and 200,000 to 300,000 MMs. My impression is that 3.5 has done very well for WotC, though I haven't yet tried to wrangle any information about it. I've seen sales numbers for d20 books released in the past year that the big SF publishers would be happy to see for a hardcover release."

So let's not talk about Dragon circulation numbers in 1983-85 as a high water mark. That is clearly understating the size of the market, based on the above figures.

Now to be fair, is that likely for a revamped DDI service?? No and HELL no. But is it possible? I'd think you'd have to admit that in light of the foregoing data that the answer is probably a qualified Yes.

I don't disagree with you that that is not a bet I want to take nor am I giving odds on it. But is it possible? Yes, I think it is.

 

[Umbran]

I don't think I'm to be fairly hoisted on any "impliedly easy" petard.

Just telling you how you came across to me, dude.

Dragon's circulation is not the issue.

Dragon circulation's the closes analog to a DDI subscription we have.

I think you want to look at Ryan Dancey's assertions that WotC was selling HUNDREDS OF THOUSANDS of COPIES of the Core rulebooks *in the first MONTHS* when 3.0 was released. (300,000 PHBs alone in the first 30 days)

Those are the numbers of what a home run looks like.

Apples and oranges. PHB's are one-time buys, often one time for the entire life of the player. Subscriptions are not, and so are different beasts. I would expect high sales in the first months, and then a really fast drop-off as the market saturated.

That is clearly understating the size of the market, based on the above figures.

Sales of core books only give you an idea of where the upper end of the market is likely to be - I wouldn't expect them to sell more subscriptions than they sell PHBs, for example.

But, that in no way says that everyone who buys a PHB is going to want a subscription to ongoing content. That's why I looked at the 1980s sale of Dragon for some insight - when the game was at its highest, the circulation of Dragon still wasn't all that impressive, the penetration into the gamer population not very deep.

So, why do you think they can get far deeper penetration with a subscription now than they could then?