Hasbro delays new Dungeons & Dragons licensing rules

Dungeons & Dragons fans are ready to play for the initiative against Hasbro after the company tried to rewrite the two-decade-old open game license to boost revenue.

However, on Friday, the Rhode Island-based game maker delayed updating its license terms to address concerns from the D&D community, which generally saw the proposed changes as overreaching and unfair to third-party content creators.

Hasbro still wants to create a new open game license, but said it will not include a royalty structure or give itself access to intellectual property created by third-party content creators.

CNBC obtained a copy of Hasbro’s amended license agreement – revealing the 1.1 game license and FAQ section for OGL 2.0. According to the document, Hasbro is seeking to require publishers and content creators to report financial data directly to the company’s Wizards of the Coast division, which includes D&D. At a certain threshold, the amended agreement will force independent creators to pay significant costs.

The first agreement, OGL 1.1, contained a clause that would give Wizards access to new and original content created by third-party publishers. However, this was withdrawn in OGL 2.0.

D&D fans put together a petition called #OpenDND, signed by nearly 67,000 people, and began canceling subscriptions to Wizard’s online toolkit, D&DBeyond, to protest the license change.

Hasbro says the two OGL documents are drafts, and the company definitely plans to make changes to the text. In a statement on Friday, Hasbro said it still plans to revisit the OGL, but the final version will not contain a royalty structure or license return provisions.

The third-party publisher told CNBC that Hasbro representatives approached high-profile independent content creators late last year to offer them a “sweetheart deal” if they signed before the new licensing agreement was released to the public. Documents seen by CNBC show lower royalty rates than those included in the proposed OGL 1.1. A representative from Hasbro did not immediately respond to CNBC’s request for comment on the matter.

Leaders in the Dungeons & Dragons community greeted the news of the suspension with cautious optimism.

“At first blush, it seems we won,” said Mike Holik, editor-in-chief of Mage Hand Press. “However, until we can confirm the terms of the license, specifically related to software such as [virtual table tops]it’s unclear if this is a smokescreen or a real commitment to the community and creators.”

The effort to license new games comes as Wizards of the Coast looks to capitalize on the rise in popularity of Dungeons & Dragons. The almost 50-year-old game has had a renaissance over the last decade, the result of a combination of a new edition of its rules, which has been easier to play and more accessible to new players, as well as an increase in live streams. campaign on Twitch and YouTube. It is also the main component of It’s Netflix blockbuster series “Stranger Things.”

In addition, increases in videoconferencing programs, such as Zoom, Microsoft Teams and Discord, have allowed players to get together almost without the need for physical meetings.

“I think D&D is approaching a very important inflection point in its life cycle,” said Eric Handler, MKM Partners media and entertainment analyst.

The license change comes ahead of the release of “Dungeons & Dragons: Honor Among Thieves,” a movie starring Chris Pine, as well as a new deal with Paramount+ to stream D&D television shows. Additionally, “True Blood” actor Joe Manganiello is set to direct a documentary about the game with Kyle Newman that will be released in 2024 for the game’s 50th anniversary.

“D&D has never been more popular, and we have fantastic fans and engagement,” Wizards of the Coast President Cynthia Williams told investors in December during a UBS virtual fireside chat. “But the brand is really under-monetized.”

Wizards, which also owns the fantasy card game Magic: The Gathering, will top $1.2 billion in 2021, about 20% of Hasbro’s total revenue for the year. Hasbro has reported that the division generated about $986 million in the first nine months of 2022. The company is expected to post fourth-quarter results next month.

Williams notes that the majority of purchases related to Dungeons & Dragons come from dungeon masters, the game’s administrators who create settlements and challenges that players face, even though those players make up only 20% of the overall user base. Many of these purchases are in the form of sourcebooks and campaign modules used to run or improve long-standing campaigns.

Wizards hopes to use its recently acquired D&D Beyond, a digital tool and game companion for the fifth edition of Dungeons & Dragons that Hasbro acquired last year for $146.3 million, to generate more cash. It is also planning to launch an online tabletop space for players to use for virtual games and is in the process of updating and developing game rules.

This investment in digital is a strategy that Williams says will allow Wizards of the Coast to “unleash the kind of recurring spending that you see in digital games”.

Reworking Hasbro’s open game license isn’t an unexpected move for the business, MKM’s Handler said.

“It’s not doing anything that other big companies aren’t doing to protect their intellectual property,” he said.

Under the current open license, Hasbro allows third-party creators to use the game’s mechanics, dice rolling system and framework for combat, and develop their own settings, monsters and magical items at no cost. Companies such as Paizo, Kobold Press, Hit Point Press and The Griffon’s Saddlebag, among others, have carved a niche in the market for selling companion books to D&D players.

These creators cannot use Wizards’ intellectual property — characters, settings or plot — but can publish new material that uses the same mechanics without paying the company for the rights to use it. This is an advantage for the company because it does not have to create new rules and will not be involved in a copyright battle with Hasbro.

With the OGL update, Hasbro is initially looking to charge those sellers if they make too much money from their products in a calendar year.

Those who make more than $50,000 must report their profits and products, and must earn a creator product badge for their work. Those above $750,000 will get a 20% fee for every dollar over that amount, according to OGL 2.0. In OGL 1.1, the fee is scheduled to be 25%.

“Now, what’s unusual about this agreement is that the amount it’s talking about is revenue, meaning gross revenue, not net revenue,” said Noah Downs, a partner at the Premack Rogers law firm and an intellectual property attorney. This means that content creators will be charged based on the amount they generate, not their profit.

The Dungeons & Dragons community disagrees because most third-party creators in the space use crowdfunding websites to encourage support for projects and raise capital to produce them. The site has a fee – about 7% for Kickstarter, 8% for Patreon and 20% for Roll20 – that must be paid in addition to the licensing fee for Wizards of the Coast if the crowdfunding project exceeds $750,000.

“So every Kickstarter campaign is a coin flip,” Holik said. “If you do it well, everything falls apart around you.”

Holik started #OpenDnD, a website to bring D&D fans together and fight against Hasbro’s changes to open licensing. Downs is Holik’s attorney and is also the legal and media representative for the campaign.

The petition aims to get Hasbro to withdraw the proposed new open license and educate the greater Dungeons & Dragons community about what the new OGL means not only for third-party publishers, but for fans of the game.

Prior to Hasbro’s OGL suspension, both Downs and Holik told CNBC that by taxing third-party content creators and seizing intellectual property, Hasbro and Wizards would harm the Dungeons & Dragons community.

“It’s weird what the Wizards are doing,” Holik said. “Either they don’t understand the market they’re in, which is self-inflicted, or they’re deliberately testing the salt of the earth and getting rid of third-party boards.”

There are many concerns that the community will be divided if the publisher is forced to move away from Dungeons & Dragons game mechanics to develop their own game system.

Holik also fears that the clamp on licensing will affect the type of content available to the D&D community, including products for the LGBTQ community and people of color. Much of the content produced through these third-party publishers is often more diverse and tends not to focus on cisgender white male heroes.

In 2020, Wizards of the Coast addressed some of these issues by changing the heritage definition of certain races, including orcs and drow, which had previously been reminiscent of real-world ethnic groups and portrayed negatively in D&D literature.

The company transformed the group in several campaigns to make it a more morally and culturally complex society. Additionally, Wizards has updated older modules.

“One of the explicit design goals of D&D 5th edition is to depict humanity in all its beautiful diversity by depicting characters representing a variety of ethnicities, gender identities, sexual orientations and beliefs,” the company said at the time. “We want everyone to feel comfortable at the gaming table and see a positive reflection of themselves in our products.”

Hasbro still intends to create a new OGL to prevent D&D content from being used in “hateful and discriminatory products” and prevent people from using D&D in blockchain and NFT games.

“This license return language is intended to protect us and our partners from creators who falsely claim that we stole their work simply because of an accidental similarity,” Hasbro wrote in a statement to D&DBeyond. “As we continue to invest in the games we love and move forward with our partnerships in film, television, and digital games, the risks are simply too great to ignore.”

The company says the new OGL will contain provisions to address this risk, but will do so without a license return clause.

“Your ideas and imagination make this game special, and you own it,” Hasbro wrote.

While backtracking may quell immediate concerns about the D&D license, Holik noted that fans were put off by the company’s actions that are currently driving a wedge between Wizards and the community.

“Wizards of the Coast has lost confidence in days, and the public will approach their every move with skepticism from here on out,” he said Friday.

Additionally, he notes that the company’s attempt to replace OGL shows that it doesn’t recognize that the real product in D&D is the story.

“And if you try to take people’s stories from them, they will fight you,” he said earlier. “And that’s what the Wizards found.”