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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...

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

delericho

Legend
This has been the strategy used by TSR and WotC since D&D's inception. Do you honestly believe that 1e didn't have a board of directors saying, "We must earn X amount of money in Y amount of time,"?

Actually, yes.

TSR was a pretty badly run business, running into serious problems on at least two occasions. The first of these was the mid-80s, due to some truly mind-bogglingly bad acquisitions. The result of that was the rushed production of some products, notably "Unearthed Arcana". The second time, of course, was the tail end of 2nd Edition, and we all know how that turned out.

Basically, the guys at TSR were pretty good at that 'game' stuff, but they sucked at the 'business' side.

So, yeah, there's a distinct possibility that there wasn't anyone doing the "$X by date Y" calculation. Not that that's a good thing, of course.

It seems to me that people operate on this romantic notion that D&D existed in a vacuum, untouched by corporate realities until the big, bad, meanie-heads at Hasbro summoned the Dark Forces of Accounting & Liability to destroy the dreams and ambitions of True Geeks everywhere.

For me, the problem is not that Hasbro have somehow set out to kill D&D. Of course they haven't - they just don't care.

But the problem is that Hasbro have certain requirements of their brands (the $50M number), or they're just not worth their while. And they essentially never release IP once they own it, even though the only reason they own D&D is that WotC owned it (basically, "buy two CCGs, and get an RPG free!").

The problem is that D&D can't make those numbers. And so, sooner or later, it's going to get killed. Not because it's not profitable, and not because it's a bad product, but because the giant just doesn't care.

The 4e designers talked about "fixing the math". Sadly, it looks like the math had a big brother, and doesn't believe in level-appropriate challenges.
 

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What I find really weird about this plan is that if I was in charge of making my game into a U$50M brand, I wouldn't start by alienating a huge part of my current market share through a new edition dramatically different from the one being played at the time. A new edition? Sure, you have to sell core books and maybe grab those who lost their faith in the game, but I wouldn't trade the safety of a revised game for the uncertainty of one built from the ground with other premises. If Paizo did show us something, is that there was still some good money to be made with 3E D&D.
 

Ahnehnois

First Post
Do you honestly believe that 1e didn't have a board of directors saying, "We must earn X amount of money in Y amount of time,"?
My feeling is that whatever business goals they had were set by company insiders and were reasonable, as opposed to being imposed by an external force that isn't especially interested in D&D. There's a difference.

It's also important that those goals be used for post hoc analysis, not to drive everyday work. Some retail outlets set hard quotas for individual sales and fire low performers. Others pay by comission. Others track individual sales, and give bonuses to high performers but don't penalize the low ones except maybe for extra training.

Having worked under various conditions like that, I know that performance depends on how much the workers care about it. In some businesses, no one cares and you have to pay them by performance to incentivize them to work. In other businesses, people do care, and that kind of pay structure or hard goal creates unwarranted stress and pressure and reduces performance.

D&D is one of the latter. People in rpgs are usually pretty passionate about them.
delericho said:
TSR was a pretty badly run business, running into serious problems on at least two occasions. The first of these was the mid-80s, due to some truly mind-bogglingly bad acquisitions. The result of that was the rushed production of some products, notably "Unearthed Arcana". The second time, of course, was the tail end of 2nd Edition, and we all know how that turned out.

Basically, the guys at TSR were pretty good at that 'game' stuff, but they sucked at the 'business' side.

So, yeah, there's a distinct possibility that there wasn't anyone doing the " by date Y" calculation. Not that that's a good thing, of course.
That's true. Wizards, on the other hand, was arguably very good at the business stuff-for a while.

D&D was ALWAYS a business. And the facts of the matter are that D&D has NEVER been bigger than it is RIGHT NOW. Whether that translates into financial success is another matter entirely. I know that doesn't fit with the dreamy unreality of Real Roleplayers, but at some point everyone has to join the real world.
Even big business can still be conducted well or conducted poorly. Good business involves setting realistic goals based on previous experience and creating high-quality work to meet them, as opposed to setting unrealistic goals and trying to find any means necessary to achieve them.

For me, the problem is not that Hasbro have somehow set out to kill D&D. Of course they haven't - they just don't care.
And this is what I was getting it. TSR cared about D&D both because the people did and because it was how they made money. They may not have always been competent, but they cared. Wizards cared. Paizo cared. Hasbro doesn't. Thus the effects of Hasbro are striking.
 
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delericho

Legend
What I find really weird about this plan is that if I was in charge of making my game into a U$50M brand, I wouldn't start by alienating a huge part of my current market share through a new edition dramatically different from the one being played at the time.

I would most certainly have gone for a significantly different new edition. I applauded their decision to take the game apart, fix what was broken, and then build up from a new foundation. Despite not liking the 4e that we have, I still believe that that was the right way to go.

But I sure as hell would have marketed it very differently. (I also wouldn't have pulled the magazine license in-house, and would have worked very hard to keep Paizo, in particular, on-side. Plus, I wouldn't have walked away from the OGL.) IMO, it was that marketing, plus the ready availability of an alternative, that did most of the work of alienating people.

That's true. Wizards, on the other hand, was arguably very good at the business stuff-for a while.

They probably still are. Remove that absurd $50M requirement, and I bet D&D under Wizards would thrive. But working under that requirement is killing them.
 


Ahnehnois

First Post
They probably still are. Remove that absurd $50M requirement, and I bet D&D under Wizards would thrive. But working under that requirement is killing them.
That may be true, though I think Mr. Dancey has a good point about the rise of MMO's, which have also created a serious external problem for WotC.
 

Gaming Tonic

First Post
I believe u DB, and here's why:

even 'stickers' u could bake in the oven, what were those things called? Pretty much everything that could have the D&d name on it back then did, and it sold like hotcakes!

Shrinky Dinks I believe. The 80's were great for D&D branding. Seems like a missed opportunity perhaps for a toy company. Maybe we will see a bit of that kind of marketing going forward.
 

That may be true, though I think Mr. Dancey has a good point about the rise of MMO's, which have also created a serious external problem for WotC.

As a WoW player myself, I'm inclined to disagree. From the point of view of roleplayers willing to bring new blood to the hobby, MMOs can be seen either as enemies or allies, and everybody seems to be seeing them as enemies nowadays, which I believe is a terrible mistake.

Take WoW for an example, with its 10.3 million subscribers. That is just a lot of people learning about and playing a fantasy game. From my own experience, people don't stop playing D&D because there is WoW (I do know some who play WoW for their fantasy gaming fix because there's no D&D group available, but that's a different thing), but they do start playing D&D because their friends on WoW are doing it.

If I was working on the industry, I wouldn't be losing my sleep thinking of ways to take people from MMOs to TRPG, but in ways to make MMO players who are also TRPG players assume the acquisition, because they have everything in hand to make the difference.

Cheers,
 

Ahnehnois

First Post
As a WoW player myself, I'm inclined to disagree. From the point of view of roleplayers willing to bring new blood to the hobby, MMOs can be seen either as enemies or allies, and everybody seems to be seeing them as enemies nowadays, which I believe is a terrible mistake.

Take WoW for an example, with its 10.3 million subscribers. That is just a lot of people learning about and playing a fantasy game. From my own experience, people don't stop playing D&D because there is WoW (I do know some who play WoW for their fantasy gaming fix because there's no D&D group available, but that's a different thing), but they do start playing D&D because their friends on WoW are doing it.

If I was working on the industry, I wouldn't be losing my sleep thinking of ways to take people from MMOs to TRPG, but in ways to make MMO players who are also TRPG players assume the acquisition, because they have everything in hand to make the difference.
That would be the synergy I alluded to in one of the other threads on this topic. I agree that MMOs and TRPGs could have a positive relationship, but that doesn't seem to be the goal of WotC (at least, not unless it's their MMO).
 


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