Saturday, August 23, 2014

Do-or-die for 5e D&D: third party publishers

Here's the summary of a long post.

If D&D doesn't allow third party publishing, it forces the 3rd party publishers to compete with D&D, using the Pathfinder system. Or whatever, but mainly Pathfinder. They have the choice of recruiting a mass of competitive allies, or throwing all that capital and creativity onto Paizo's side of the scale. It's an existential decision. Not this year certainly, but as early as next year I think the absence or presence of third party publishers will begin determining the ultimate survival of D&D in the face of Pathfinder.

Whether it's public relations to call it a "license," or whether something titled "license" was put in there with the operative legal documents, what WotC has done with Kobold Press and presumably again with Sasquatch, isn't what I'd call a license in terms of putting the benefits of third-party creativity into the system.

I don't fault them for that; they had to have an adventure to go out with the core books, and they no doubt had (and probably still have) internal wars over exactly the same question here on this thread -- is a real license a good idea for WotC or is it a bad one, and even if it's a good one then some poor lawyer has to write the thing with multiple people telling him/her how to word it. (I'm a lawyer, my heart bleeds for that person)

But the arrangement with Kobold is more like hiring a production company at best.
(1) Surely no one thinks Kobold wasn't given parameters for content (betcha it had to have at least one dragon, no dead kids, etc.). Granted, some content ratings, though, can definitely still be "like a license," (see Paizo's nipple restriction) but the amount of restriction and guidance is obviously quite major in this case.
(2) Surely no one thinks Wolfgang Bauer was required to invest his own money at a measurable scale relative to the project for an investor's share? That's in the nature of a license.
(3) Surely no one thinks that there wasn't a set range for the page count.

See, here's the thing. Licenses can take many forms, and have many layers of complexity, including all manner of restrictions, but AT HEART a license is something that allows a third party to be an independent business using the licensed material. Not necessarily a successful one, not necessarily one that supports a family, but one where the significant decisions, most of the risk, and most of the gain, are undertaken by the licensee. Here, WotC is undertaking all the risk, and capturing most of the upside. That's not a license agreement, it's hiring a group of excellent authors who have a company. Which, again, was a good call. I don't fault that decision for even a moment in terms of where WotC stood on its production schedule, its work load and personnel coverage, the evolving state of the rules, and the legal/marketing interface on the question of how open to be with the rules. I would have done the same thing at that point in time. Remember, it takes a LONG time to produce a book like Tyranny of Dragons, and you have to manage lots of moving pieces. WotC effectively hired Kobold to handle as many of those moving pieces as possible within the context of a flagship product. Wolfgang Bauer was a brilliant choice for it. But that's (a) not really a license in any meaningful sense of the word, and (b) not something that grants the benefits of a robust licensing system -- or the downside either, and some downside does exist.

The question of true licensing is this: WotC is trying to catch up with a well-funded, popular competitor that has a well-established brand name, in almost exactly the same competitive space. WotC has a more widely recognized brand name, but it's an older brand name with fewer loyal, die-hard customers than Paizo has. The different aspects of those brand names are important to the way the competition is going to roll out. WotC is starting from behind, but has to work slightly less hard per new customer, and slightly less hard to shift a customer from the Paizo circle in the Venn diagram to the WotC circle. On the other hand, Paizo has WotC under siege. All Paizo has to do is hold onto enough customers that WotC doesn't meet the expectations of the Magic the Gathering return on investment for long enough that WotC decides not to keep funding new books for D&D. Paizo can last much longer because of that existing base of loyal customers. WotC can generate phenomenal return on investment with the core books, but has to sustain a cash flow stream. Paizo already has, and will undoubtedly retain, enough cash flow to continue publishing Pathfinder under their existing model. D&D will, without question, grab enough fans to stay in business if those fans keep playing and buy more books. But they have to hold that ground.

That's a summary of the competitive space, and I think it's accurate. D&D probably got the one, big, expenditure authorization. Core books. After that, have production houses produce smaller books that will also sell to players (campaigns, adventurer sourcebooks. Look at the production schedule and whether full-time WotC employees are doing the writing: I rest my case).

Where do third party publishers fit in here? It all has to do with the popularity of one system or the other. D&D is fighting to survive in that competitive space long enough to gain customer loyalty for those player-targeted books (and the ability to license pinball machines, shirts, computer games, movies, happy-meal toys, etc). They have to stay in the game.

You can't. Cannot. Stay in the game against Paizo with limited funding and a single WotC-supervised line of products. Not even if you are casting a wide net on your product definition such as "Forgotten Realms," or "Greyhawk," or "Spelljammer." That's been tried. The older ones of us remember how successful D&D can be if it runs many campaigns, player-targeted books, and attempt to control outside publishing. That was late-TSR business planning, and it ran TSR out of business. It didn't kill the brand name, but that's because there was no established competitor of any size.

In this case, there's Paizo. Phenomenal customer service, fanatic customer loyalty, stable game system rules (I think WotC's D&D rules are pretty stable and spiffy, too, but I'm profiling Paizo, not comparing), well funded, and with owners that won't cancel the game over a couple of bad fiscal quarters in a row.

One of the ways Paizo got so powerful as a competitor? Third parties publishing "alternate visions" of Pathfinder. Publishing little things to spice up a non-standard game. Publishing robot-power-pirate-dinosaur adventures for the 25 gaming groups that needed exactly that module on exactly that release date. All those people who might have drifted to D&D or Savage Worlds, or Swords & Wizardry, or gone back to First Edition D&D ... they stayed with Pathfinder because of the 3d party publishers. And then maybe a week, maybe a month, maybe six months later, they bought another Pathfinder book from Paizo. Or they bought another robot-power-pirate-dinosaur adventure in the Paizo store, giving Paizo a percentage.

WotC benefits LESS from third party publishers than Paizo, because they don't (and won't) have a store like Paizo does, where they get cash flow direct from the third party publishers. Let me tell you, Paizo got a measurable chunk of change by selling Frog God Games' Rappan Athuk. WotC wouldn't get that cash flow stream. But having the third party publishers prevents this scenario: "Hey, let's play Rappan Athuk. Oh, it's for Pathfinder not D&D. Oh well, drag out the Pathfinder books again, we'll play D&D again later, maybe." Because remember, D&D needs that cash flow stream now, not later. They need: "Hey, let's play Rappan Athuk. There's a 5th edition version [not yet, fans, this is an example]. But I need a DM screen. No problem, I'll get one this afternoon over at the game store [where, additionally to the DM screen, there are other WotC products next to it on the shelf]."

There's no question that in the above example, some WotC product (say, Tyranny of Dragons) got left on the shelf, and all WotC sold was a DM screen (and maybe a related impulse buy). But the relevant comparison ISN'T less vs more, which many commenters seem to think. The relevant comparison is an existential one: it's selling NOTHING vs selling something. Selling "something" to those who would otherwise play the competing game because of third party publishers keeps the lights on at D&D headquarters.

D&D alone can muster up a nice, robust product line that will sell to people who like the common denominator. Mike Mearles has done a good job of hitting a broad common denominator. He's in there swinging. He built an awesome battleship out of what looked like a sunken wreck.

The competing product line, though, is a freaking juggernaut. Paizo is at the center like an aircraft carrier, delivering wave after wave of common denominator product. What's different is the vast armada of third party publishers meeting every need of the Pathfinder player, from alternate minis, to little status tokens, to specialized adventures, to variant character classes, to whatever imaginable whim that player might have. If they play Pathfinder. Instead of D&D.

The summary is this:

Without those 3rd party publishers, WotC has no way to capture the marginal customer. The people who simply can't live with the concept of a world without [your favorite Pathfinder 3pp product]." Single product line relying on multiple official campaigns and policing 3pp production didn't fly in 1998. And now, in 2014, Paizo is out there. Paizo is lean, mean, and popular. If D&D wants to beat the empire, it needs a plucky rebel alliance. They need to start assembling that rebel alliance, fast. And that doesn't mean hiring companies to produce company-approved material using WotC capital and Hasbro's corporate bonds. That's the TSR model circa 1998. I'm assuming that this is just because the rest of the WotC business model hasn't rolled out yet. But the clock is ticking. OGL-based material won't continue to flow from 3rd party publishers without a license to use the copyrighted terms in the rules (not necessarily the trademark, and not an SRD). Without at least that level of open license, D&D won't have the staying power, and Paizo just has to wait. The third party publishers will do all the competing that Paizo needs done.

If D&D doesn't allow third party publishing, it forces the 3rd party publishers to compete with D&D, using the Pathfinder system. Or whatever, but mainly Pathfinder. They have the choice of recruiting a mass of competitive allies, or throwing all that capital and creativity onto Paizo's side of the scale. It's an existential decision. Not this year certainly, but as early as next year I think the absence or presence of third party publishers will begin determining the ultimate survival of D&D in the face of Pathfinder.