D&D 4E WotC, DDI, 4E, and Hasbro: Some History

After Vince Calouri was pushed out of Wizards of the Coast he was replaced by Chuck Heubner. Chuck basically had to manage Wizards on the downslope from the Pokemon salad days. Hasbro has been through many boom & bust cycles in the toy business and they have a standard response when it happens: cut headcount and reduce overhead. Since Wizards was de facto the only part of the business that had not been rolled up into Hasbro proper it was not insulated by the successes of other things at Hasbro like GI Joe or Transformers.

While this was happening there was a big internal fight for control over the CCG business within Hasbro. Brian Goldner who was at the time the head of the Boys Toys (i.e. half the company) division of Hasbro thought that the company was missing a huge window of opportunity to follow up Pokemon with a series of mass-market CCGs linked to Hasbro's core brands GI Joe and Transformers. These battles resulted in things being escalated all the way to the C-Suite and the Hasbro Board, where Brian lost the fight and Wizards retained the exclusive ability within Hasbro to make CCGs. The downside for Wizards is that they were forced to do things with the Duelmaster brand that they did not want to do, and it never got the traction in the US that Wizards thought it could achieve. (In Japan, by contrast, it became a huge best-seller).

Chuck left after two years and Loren Greenwood, who had been the long time VP of Sales, replaced him in 2004. He was also a visible proponent of the idea that Wizards, and not Boys Toys, should set Hasbro's CCG strategy. Thus when Brian was named COO of the whole company in 2006 and CEO in 2008, Loren had a big problem on his hands. Loren guided the company through the post 3.5e crash of the TRPG market, the loss of the Pokemon franchise, and the unwinding of the Wizards retail strategy. All of this was pretty bitter fruit for hm since he'd been instrumental in building up much of what had to then be torn down. The combination of all these things led to Loren's exit and his replacement by Greg Leeds, who is the current CEO of Wizards.

Sometime around 2005ish, Hasbro made an internal decision to divide its businesses into two categories. Core brands, which had more than $50 million in annual sales, and had a growth path towards $100 million annual sales, and Non-Core brands, which didn't.

Under Goldner, the Core Brands would be the tentpoles of the company. They would be exploited across a range of media with an eye towards major motion pictures, following the path Transformers had blazed. Goldner saw what happened to Marvel when they re-oriented their company from a publisher of comic books to a brand building factory (their market capitalization increased by something like 2 billion dollars). He wanted to replicate that at Hasbro.

Core Brands would get the financing they requested for development of their businesses (within reason). Non-Core brands would not. They would be allowed to rise & fall with the overall toy market on their own merits without a lot of marketing or development support. In fact, many Non-Core brands would simply be mothballed - allowed to go dormant for some number of years until the company was ready to take them down off the shelf and try to revive them for a new generation of kids.

At the point of the original Hasbro/Wizards merger a fateful decision was made that laid the groundwork for what happened once Greg took over. Instead of focusing Hasbro on the idea that Wizards of the Coast was a single brand, each of the lines of business in Wizards got broken out and reported to Hasbro as a separate entity. This was driven in large part by the fact that the acquisition agreement specified a substantial post-acquisition purchase price adjustment for Wizards' shareholders on the basis of the sales of non-Magic CCGs (i.e. Pokemon).

This came back to haunt Wizards when Hasbro's new Core/Non-Core strategy came into focus. Instead of being able to say "We're a $100+ million brand, keep funding us as we desire", each of the business units inside Wizards had to make that case separately. So the first thing that happened was the contraction you saw when Wizards dropped new game development and became the "D&D and Magic" company. Magic has no problem hitting the "Core" brand bar, but D&D does. It's really a $25-30 million business, especially since Wizards isn't given credit for the licensing revenue of the D&D computer games.

It would have been very easy for Goldner et al to tell Wizards "you're done with D&D, put it on a shelf and we'll bring it back 10 years from now as a multi-media property managed from Rhode Island". There's no way that the D&D business circa 2006 could have supported the kind of staff and overhead that it was used to. Best case would have been a very small staff dedicated to just managing the brand and maybe handling some freelance pool doing minimal adventure content. So this was an existential issue (like "do we exist or not") for the part of Wizards that was connected to D&D. That's something between 50 and 75 people.

Sometime around 2006, the D&D team made a big presentation to the Hasbro senior management on how they could take D&D up to the $50 million level and potentially keep growing it. The core of that plan was a synergistic relationship between the tabletop game and what came to be known as DDI. At the time Hasbro didn't have the rights to do an MMO for D&D, so DDI was the next best thing. The Wizards team produced figures showing that there were millions of people playing D&D and that if they could move a moderate fraction of those people to DDI, they would achieve their revenue goals. Then DDI could be expanded over time and if/when Hasbro recovered the video gaming rights, it could be used as a platform to launch a true D&D MMO, which could take them over $100 million/year.

The DDI pitch was that the 4th Edition would be designed so that it would work best when played with DDI. DDI had a big VTT component of its design that would be the driver of this move to get folks to hybridize their tabletop game with digital tools. Unfortunately, a tragedy struck the DDI team and it never really recovered. The VTT wasn't ready when 4e launched, and the explicit link between 4e and DDI that had been proposed to Hasbro's execs never materialized. The team did a yoeman's effort to make 4e work anyway while the VTT evolved, but they simply couldn't hit the numbers they'd promised selling books alone. The marketplace backlash to 4e didn't help either.

Greg wasn't in the hot seat long enough to really take the blame for the 4e/DDI plan, and Wizards just hired a new exec to be in charge of Sales & Marketing, and Bill Slavicsek who headed RPG R&D left last summer, so the team that committed those numbers to Hasbro are gone. The team that's there now probably doesn't have a blank sheet of paper and an open checkbook, but they also don't have to answer to Hasbro for the promises of the prior regime.

As to their next move? Only time will tell.
 
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Ryan S. Dancey

Ryan S. Dancey

OGL Architect

Ahnehnois

First Post
The more I read, the more I'm glad WotC's 4e business plan didn't work.

I've seen it again and again in many different fields. Any time some unconnected higher authority says "you must make X dollars in Y amount of time" (or "you must sell X amount of product", "you must arrest X amount of people", "you must see X number of patients", or anything else that leads to money) poor quality work is produced and failure follows. Moreover, the original goal (making a lot of money) isn't achieved because of that failure. This just doesn't work.

What works is "I'll put out quality work, conduct business in a rational, efficient manner, and live a happy and full life". People pay for quality, and they like their business to be done the right way. Especially in the entertainment industry.

Excuse me, I think I have a star in my eye.
 

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xechnao

First Post
By what Ryan is saying it seems more difficult to see a 5e happen. If it does happen, it would rather mean that 4e's failure was not such a dramatic one.
 

OpsKT

Explorer
By what Ryan is saying it seems more difficult to see a 5e happen. If it does happen, it would rather mean that 4e's failure was not such a dramatic one.
But then what is the point of hiring back Monte Cook and all the polls in his articles? If not for 5th edition, are we looking at some kind of repacking of 4e/Essentials into one (not confusing and divisive) line? Or maybe a revision of the GSL to allow more 3rd party involvement in 4e, which could revitalize the line?
 

tuxgeo

Adventurer
By what Ryan is saying it seems more difficult to see a 5e happen. If it does happen, it would rather mean that 4e's failure was not such a dramatic one.

Consider together two separate comments:
(1) The thing that Ryan said about WotC's having to pitch a potential 4E to Hasbro in 2006 in order to even get a chance to create 4E; and
(2) The thing that Mike Mearls said about the immense workload and headcount that would be required to create another new edition.

If we combine those two comments together, we get something like this:
(myself said:
"Not a snowball's chance in H-E-double-toothpicks of a 5E anytime soon."
 

I am not so sure...

It seems like the philosophy has changed a bit since 2006... Totally different times nowadays... With pathfinder beeing such a success, and tools for 4e getting finished, if they are doing it intelligently enough, maybe a 5th edition is not that far out of sight.
Thing is:
with D&D insider, you could easily make all editions available and receive revenue for it. The market is big enough. If you don´t rely on book sales and offer enough, people happlily pay for the subscription.
If they would just make 3rd edition material available through DDI, they may even get some Pathfinder people back.
Maybe I am naive, but a more open approach once proved VERY successful... It should be possible to reproduce the success...
 

LightPhoenix

First Post
-Create an MMO and/or console games - I STILL play D&D Heroes and Baldur's Gate Dark Alliance. And I would pay big money for a 4e based FF Tactics style game that let me use my 4e PCs. Especially, if it was co-op and could also act as a surrogate VTT by turning off some of the AI, and letting a DM build encounters, set terrain and monsters.

Easy problem first - Hasbro does not own the rights to make any D&D games, regardless of edition; AFAIK they still belong to Atari. They were sold off (via Hasbro Interactive) around the time Neverwinter Nights was made. So any further issues are a moot point - Hasbro can not make a D&D game.

However, assuming Hasbro could reacquire the rights, a D&D video game would still face several challenges. Video game development costs money, and that expenditure is counted against income. So, for a game to move forward, the risk of the game failing would have to be relatively small, especially if the D&D brand is in such dire straits. MMOs in the current game climate are quite risky to finance, and a D&D MMO already failed once. So the likelihood of Hasbro giving the okay to one is next to none.

Similarly, the market for RPGs these days does not really have a cost-benefit ratio that would allow for Hasbro to develop another Baldur's Gate. To head off the obvious comparison, Skyrim did have a phenomenal release. However, Skyrim also had several points in its favor that a new RPG would not have, not the least of which is Bethesda's wealth of development time and talent, as well as their stability as a company.

Now, that's not to say nothing could be done, but I think an MMO is too risky and a traditional RPG just won't pull the profit needed. However, it's possible that something along the lines of Magic Online could work with a little tweaking. A micro-transaction model where you buy modules to play with people online might work. It's risky, but WotC has direct experience via Magic: Online.

-And here is the big one: partner with Cartoon Network or Nickelodeon and make an Avatar TLA style kids show set in Eberron or the Realms. Lots of exploration of lost ruins, action, derring-do, and cool colorful characters and modern high quality animation ala Young Justice, or Avatar. Give a deep story so it can appeal to adults too. This could do huge things for the brand.
You mean like what was announced at DDXP 2008 and subsequently never materialized? There's a reason it never did - historically, non-book D&D media just doesn't do well enough to justify the cost. Again, it's not impossible, but try convincing investors to put forth a bunch of money on a brand that hasn't done well outside of its niche.
 


William Ronald

Explorer
I am not sure what all this means for WotC and a 5th Edition game. I could see a push to keep 4E as is and Hasbro decide to reevaluate it. Or I could see a company like Hasbro wanting to give a name brand a chance to become a major brand in their company.

One thing that I am certain of is that our hobby will continue -- regardless of what goes on at any single company.

Morrus, thanks for compiling some of Ryan Dancey's remarks. It is fascinating.
 


darjr

I crit!
I think Hasbro did reacquire the rights to D&D video games.

This seems to clarify, a bit, the relationship between Hasbro and WotC, Hasbro isn't totally controlling, but important decisions need approval. I realize things change all the time and so will this relationship.

It also seems to add some explanation to the move to online tools vs tools users could walk away with. I wonder if, in part, essentials was an effort toward improving subscription rates. A sweeping change and/or addition to the rules not supported in the old tools in order to drive people to a subscription? It seems that DDI is much more of a prominent and important piece that needs to succeed than I had realized. I very much like the direction of the Essentials rules.

And the pressure, to support that level of revenue and grow it way beyond that. That seems like a lot.

Gah, and the tragedy, I always assumed it couldn't but have had a huge impact on such a small group of folks. Terrible.

The numbers of DDI subscribers (66k?), it's the number of people in the DDI group on the forums. I tested it at a couple of points, as a DDI subscriber and forumite I was in that group, and out of the group once my DDI account expired. As a DDI subscriber and not a forumite I wasn't in that DDI group. That was when the numbers were 30-50k.
 
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