Exiled News

Tabletop, Board Game, and Video Game News

Former Wizards of the Coast VP thinks he knows why OGL 1.1 is coming

Former VP in charge of Dungeons & Dragons at Wizards of the Coast was asked why he thinks Wizard’s are doing what they are doing with the OGL 1.1.
In a livestream, Ryan Dancey, one of the architects of the original OGL had this to say:

“Okay, so, let’s talk about Hasbro and Hasbro’s valuation. Hasbro’s a publicly traded company in the fortune 500, which means that all their financials are public. You can go online and you can read their financial statements and their annual and quarterly filings about how they make money and what their costs are and all the things about their business. And they are required by law, and by the SEC which monitors them, to make full and truthful disclosures of all that information. And they have, and I would never want to suggest that Hasbro, or anybody at Hasbro, has done anything illegal. In my opinion they have not. What they have done, is not talk about Wizards of the Coast for 20 years.

So, I used to listen to the Hasbro earnings calls where reporters with access would be allowed to ask questions of the Hasbro executive team. Those calls were always about G.I. Joe, and Transformers, and My Little Pony, and whatever the movie of the year was that Hasbro was trying to do. After awhile it morphed into questions about what’s Hasbro’s strategy about buying these digital platform companies and entertainment businesses. Lots of questions about lots of parts of the Hasbro conglomerate. What they never asked about is “where the money came from”.

So, I know, personally and anecdotally, that a significant percentage of all of Hasbro’s profits come from Wizards of the Coast, and by significantly I mean maybe half. You would think “where does half the profit come from?” is something that analysts and stockholders would be deeply interested in, but because Hasbro just doesn’t talk about it, for 2 decades basically nobody really understood that. And they would instead be curious about what the new GI Joe release was, or what Michael Bay was going to do in the next Transformers movie.

A couple years ago, a hedge fund dug into that data and that hedge fund came out the other side and said “Holy crap, everything you think you know about Hasbro is wrong”. They published a very detailed PowerPoint pack called “Free the Wizards”, and the argument in Free the Wizards was that if Hasbro spun Wizards of the Coast out into a standalone, publicly traded company, the value of that company would be equal to the value of Hasbro. Which means that currently, Hasbro is worth nothing. That the total value of every single thing inside Hasbro, except Wizards of the Coast, is zero.

Let that sink in.

That’s probably not true, what would actually happen if you spun Wizards of the Coast out into a standalone company is that Wizards would immediately be valuable, probably as valuable as Hasbro, and Hasbro would not be worth nothing. Hasbro would probably be worth what it is now, probably a little bit less, but some number within striking distance of it’s current value. So Hasbro’s shareholders, who would be the recipients of the new shares in the spun-out Wizards of the Coast, would double their money; or increase their value by a substantial margin. Right? Huge amounts of money would be effectively created out of thin air, by making visible the fact that Wizards of the Coast is such an incredibly valuable and profit-generating enterprise.

Well, ever since “Free the Wizards” was published, now people on analyst conference calls are asking Hasbro a lot of questions about Wizards of the Coast. And they want to know things like “How much of the profit at the company is being generated by games like Magic: The Gathering and Dungeons and Dragons?” Now that those questions are being asked, the answers to those questions affect Hasbro’s stock price. So they are now, by the ironclad logic of the stock market, they have to show shareholders that they are increasing the profits from Wizards of the Coast. They cannot escape the logic that if the company, Hasbro, if their profitability is based on Wizards, that in order to increase profitability they have to make more money from Wizards of the Coast. Which is why you have things like senior Wizards of the Coast executives saying on the record “We think Dungeons & Dragons is under-monetized”.

Under-monetized just means “We would like to make more money from Dungeons & Dragons” and they’re going to try to find more ways to do that. Well, are they going to sell a lot more books? Boy, that’s a hard argument to make isn’t it? Is there really that many more Dungeons & Dragons books you can sell? Are they going to innovate a whole new platform? Are they going to go back into novels and start publishing million-seller, Harry Potter-level novels? Boy that’s hard to imagine isn’t it? I don’t see that happening.

What are they going to do to show that they’re growing the D&D business? The only answer that any rationale person is going to accept is “digital”. They’re going to show the world that they’re going to make a play in digital, which is gonna somehow, magically through the magic of digital, make a huge new revenue stream and massive new profits, from digital. So, obviously, there’s people inside the company who have a lot of pressure on them right now. Say, “Figure that out. Make as much money from digital as you can. Make our strategy look real, to shareholders.”

Well, what’s one thing that you can do? You can take steps to try to force people onto your digital platform, and that’s what [OGL] 1.1 looks like. And that’s why it’s happening now, because now is when that pressure is being put on those people.”

It is worth noting that nothing has been confirmed yet, and everything we know about the OGL 1.1 is based on rumours and leaks.

Leave a Reply