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

Klaus

First Post
I think you need to brush up on your corporate history; TSR was a complete mess of individuals vying for personal power in order to take advantage of a hot property. Few, if any, had any passion for the game at all.
Jim Starlin wrote on his blog about a meeting he had back in his Marvel days with the TSR folks, Gygax included, and was surprised by how passionate the TSR folk were about D&D. Specially when compared to their equivalents in Marvel, who never read comic books. Starlin had long talks with Gygax that day, after the meeting (which, alas, never materialized into Marvel D&D comics).

Of course, this was back in the day when Gary was still at TSR.
 

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xechnao

First Post
WotC: Hi.

Developer: Hi.

WotC: We want X, Y & Z for A dollars to be delivered by B time. Can you do it?

Developer: Of course we can! GIMME GIMME GIMME! Yay! We're rich! Whooo!

WotC: Umm... B time has arrived... err... where's our stuff?

Developer: Erm... we spent all that money you gave us on whores and ale... they're very time-consuming activities!

Could it be that the original company representative takes his share of whores and ale, especially if he can find a way to hide it and blame the money loss somewhere else?
It is conspiracy-theorizing but are there any solid control mechanisms that something like this does not happen?
I am wondering this, since there should be controlling mechanisms of the developer's progress first place and it seems that there weren't any. Or is it not like that?

I mean, don't they exist some progress controlling methods regarding the development of software, especially for projects like that? What is usually happening in practice? It is this matter that puzzles me the most, yet this is not my field of knowledge, at all.
 

Andalusian

First Post
Jim Starlin wrote on his blog about a meeting he had back in his Marvel days with the TSR folks, Gygax included, and was surprised by how passionate the TSR folk were about D&D. Specially when compared to their equivalents in Marvel, who never read comic books. Starlin had long talks with Gygax that day, after the meeting (which, alas, never materialized into Marvel D&D comics).
Actually, wasn't that Jim Shooter's blog, rather than Starlin? I remember reading something like that not too long ago.

Jim Shooter: Items of Interest – And Gary Gygax
 

Kzach

Banned
Banned
Jim Starlin wrote on his blog about a meeting he had back in his Marvel days with the TSR folks, Gygax included, and was surprised by how passionate the TSR folk were about D&D. Specially when compared to their equivalents in Marvel, who never read comic books. Starlin had long talks with Gygax that day, after the meeting (which, alas, never materialized into Marvel D&D comics).

Of course, this was back in the day when Gary was still at TSR.

TSR, Inc. - Wikipedia, the free encyclopedia
 

Alphastream

Adventurer
Hasbro didn't buy D&D. They bought WotC. And they bought WotC for Magic and Pokemon.

According to Peter Adkison, this is not true. The value of the license was a big part of the decision. There was a podcast in late 2011 where Peter shared his asking the Hasbro CEO for confirmation and the CEO confirming.
 


Alphastream

Adventurer
Hasbro buying D&D was the worst thing that could ever happen to it, IMO.

Doubtful. D&D has been through all sorts of incredible dire straits as well as successes, and the two are usually linked. For example, novels have at various times been financial successes or the near-ruin of the company. I can't recommend reading Designers & Dragons enough for a perspective on how all RPG companies survive challenges.

And while EN World can be pretty unfriendly to 4E, keep in mind there are at least as many happy 4E players as there are of 3E. We can easily forget how many gamers are just having fun rolling dice without any edition wars participation.

Hasbro comes with incredible resources. They allow for fantastic artwork, for big budgets that allow for experiments like DDI, for the best staff, for the best freelancers, for product lines that try out new concepts, etc. By all accounts Wizards calls its own shots and runs its own game, but has to account for its budget. That's positive. Part of the problem with TSR was that it could operate terribly and not have the necessary financial review. It is true of most failures at RPG companies, where you can go from being a darling of the RPG industry and then closed doors in a year. We should all be thankful for Magic the Gathering being part of Wizards. In a similar way, there are many positives to being part of Hasbro.
 

OpsKT

Explorer
Is there any rational reason why we should care about that? If Coke starts selling licorice water in their Coke cans, my nostalgia for what Coke used to taste like isn't going to make me keep buying the brand because otherwise there will be "NO COKE SODA".

As pointed out in between here and your original post, because it is the gateway brand/drug. Most everyone that plays RPGs starts out with (and has first heard of D&D), and it will still be that way for a long time. It might be in the next 20 years that Pathfinder takes that place* but for now that gateway king is D&D. Therefore, for the good of the hobby even if you've moved on to other games, you need it to be healthy.

Hasbro didn't buy D&D. They bought WotC. And they bought WotC for Magic and Pokemon.

Except...

According to Peter Adkison, this is not true. The value of the license was a big part of the decision. There was a podcast in late 2011 where Peter shared his asking the Hasbro CEO for confirmation and the CEO confirming.

... I am not the only one that knows this, so we can assume I'm not crazy. D&D was indeed another license whose value was being considered during the acquisition, and I guaran-dang-tee that the sales records for every novel with Drizzit was looked at as more valuable than one setting book of the one RPG game line he was born in.

For quick example, according to Amazon, right NOW the D&D v3.5 Player's Handbook is rank #40,909. Just The Crystal Shard, the first book that had Drizzit in it, is #77,644. That book however is one of about, what, 50+ novels, all that have been best sellers? And that book is the oldest and first (and that specific one I used, a reprint). The newer they get, the higher the rank goes, like Homeland at #64,568, with the exception of post Spellpague stuff even though that sells well still (it just give correlation that the gamers hate the change, but not the novel-only readers).

Now, v3.5 didn't exist when Hasbro bought WotC. Amazon did not exist when AD&D 2nd Edition was the game either, but they still have an estimated sales rank. #146,985.

But the fact remains, that for every 1 D&D book sold, there are about 5 more D&D related novels sold, many to non gamers. That was the sales volume that Hasbro was looking at when they were considering the D&D part of buying WotC. Therefore, my theory stands. Hasbro did not buy the D&D brand for the RPG, they bought it for Drizzit.



* I wonder how much Pathfinder would be helped with another movie with a young, up and coming Tom Hanks like star being lost in the sewers of a University playing Pathfinder? Or, a concerned parent group, though BAP doesn't have the same ring as BADD...
 
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Alphastream

Adventurer
I wonder where these money ended.

Can someone that has experience with this kind of business present us with a plausible scenario?

Sure, here's an example from the TSR days. TSR decides to get into the Choose-Your-Own-Adventure business, based on the success of others. They jump in with a mad plan to be #1 in the area and make tons of money. They do, initially, then suddenly realize this was a fad. They have tons of novels and are looking at millions in losses. That's an example of a really solid idea, but failure to read the market and monitor it continually.

Another example is creating deep setting material for Forgotten Realms. You see the initial success, so you start planning out how to cover the rest of the world. Far too late you realize sales are dropping with every release, and now you tons of unsold inventory and need to suddenly change your strategy.

You come up with the idea of creating a deep immersion RPG experience using audio CDs. You record and package audio tracks to go with a new adventure format. Because you did not have the right accountability and financial checks in place, only after these are released do you realize you are losing a lot of money even when these sell... and they aren't selling very well.

There are tons of examples like this during the TSR days. We can move forward to the modern era with Gleemax, DDI, and many other decisions.

It is widely held that both the Red Box and Pathfinder intro set are sold below their cost, on purpose. is this good? It depends on who you ask. Some hold that attracting new players is vital. Others say they learn just fine with core rule books.

We can look at the decision to start a Pathfinder MMO as a separate entity, but with Paizo money, staff, and resources rather than licensing to a different company. For just $100,000 you too can be part of this. Genius or folly? Only time will tell.
 

xechnao

First Post
Yeah, but one can see how these money were used to fuel the production pipeline. Books and audio CDs are tangible, as are their production methods and its costs.

Still what we are talking about here is development of digital tools. Costs can vary so much. Is there some method to control the costs and the progress of the process? The production value of the effort and the actual costs of your investment?
 
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