In 2007, the crowd in an Indiana Convention Center auditorium went wild as representatives from Wizards Of The Coast announced that the tabletop-game publisher would be releasing the fourth edition of Dungeons & Dragons. Primed by staffers tossing out swag, attendees of the annual Gen Con gaming convention cheered as designers promised improvements that would balance character classes and make it easier to design opponents. Wizards also previewed a system that would bring the original role-playing game into the digital era by letting you create and track your characters, monsters, and dungeons using a computer program instead of a pencil and paper.
When the initial high gave way to reality, though, the game didn’t live up to the buzz. Wizards was hoping to expand Dungeons & Dragons’ player base by stripping away a lot of the complexity of creating and playing characters, but the rules overhaul meant that the game wasn’t compatible with any D&D books that had come before it. Rather than sorcerers casting spells while fighters made an increasing number of attacks with their weapons, the game gave each class a series of powers similar to what you might find in a video game. While they did produce an excellent online system for making monsters and characters, the mapmaker that was previewed at Gen Con never materialized. Wizards later released an even further stripped-down D&D Essentials line, which didn’t help the growing sentiment that Wizards had lost touch with its base.
Six years later, D&D’s space at Gen Con was relegated to a small section in a hall mostly used for collectible card game tournaments and people playing board games late into the night. Convention attendees came by to take pictures with a giant statue of the spider goddess Lolth, browse the sparse collection of apparel and miniatures, and playtest D&D Next, the replacement for 4th Edition that has been in development since January 2012.
If you wanted to know the reason for D&D’s reduced presence, you could look to the convention’s list of sponsors, which included both Wizards Of The Coast and a new addition, Paizo Publishing. Paizo got its start in the early 2000s publishing supplemental content for D&D through a license from Wizards. That license ended the year 4th Edition was announced. Paizo moved on by creating Pathfinder, a game that essentially updated the ruleset of Dungeons & Dragons version 3.5. Paizo was banking on the hunch that there were plenty of players who would rather carry on the existing D&D legacy than start over with the incompatible 4th Edition. With the tagline “3.5 Thrives,” the new game system debuted in 2009. While Paizo couldn’t use the gods, characters, or monsters that Wizards Of The Coast had trademarked, the upstart publisher could use its backward-compatible ruleset to reach D&D players disenchanted with 4th Edition.
Paizo’s hunch turned out to be right. In 2011, the consulting firm ICV2 reported that Pathfinder’s sales eclipsed those of Dungeons & Dragons. Pathfinder has remained the tabletop RPG sales leader since then. This year, Paizo had a prime space in Gen Con’s vendor hall, and the booth’s lines were so long that employees had to carry signs to show people where the lines ended. A huge room was devoted to Pathfinder games, and the company used the event to announce a massive slate of new products in development.
Wizards realizes that it made a huge mistake with 4th Edition, so like many declining empires, Wizards has taken to reliving its glory days. While publication of new 4th Edition material has all but halted, Wizards has been bringing back classic 1st and 2nd Edition adventures, and it has released fancy collections of existing content, like a book with Dungeons & Dragons’ most popular magic items. A bundled version of the D&D-inspired video game Baldur’s Gate II is due out in November.
Wizards Of The Coast made the mistake of thinking it was so far at the top of its industry that it couldn’t be seriously challenged. The company thought it could count on loyal fans of D&D version 3.5 to shelve all their old, well-loved books and buy whatever Wizards put out next. When you assume you have a captive market, it can prove very costly if you turn out to be wrong.
Netflix displayed the same hubris in 2011 when it raised the rate of its DVD rental plans and started charging a separate fee for its streaming service. People cancelled their subscriptions in droves, looking to competitors like Amazon that were starting to make inroads into the market. But Netflix managed to recover from its self-inflicted wound by changing the game—the company focused on its streaming service, most notably by developing a slate of Netflix-exclusive TV shows. The service might cost more, but it has become the only place to see some great shows. That lured back subscribers and even pulled in new ones.
Netflix made its comeback by changing the market, and Wizards could do the same thing. The publisher is cautiously looking to the future by bringing in players to test the next edition of D&D. But the real game-changer would be for Wizards to increase its digital presence, letting you design dungeons and characters not just with a pen and paper or even a laptop but with your smartphone and tablet. And on a more practical level, a concerted digital push would make D&D’s rules more easily accessible for players who don’t want to lug around heavy books.
Unfortunately, Wizards is also trailing Paizo on the technology front. While the makers of D&D have promised to release more of their books in a digital format, buyers of Paizo books can have a PDF emailed to them on the spot when they purchase from Paizo’s website.
Paizo had to face a different problem in its rise to prominence: the network effect. Both D&D and Pathfinder have worked hard to create communities around their game, and like any social network, the more people there are in the group, the more powerful it becomes. It’s why Google+ has struggled to gain ground against Facebook. If everyone you know is already on Facebook, it’s a hard sell to get them to join another service, even if it might be “better.”
But Wizards knowingly threw away its network-effect advantage by asking D&D’s community to try a new game. Suddenly, the new edition of Dungeons & Dragons suffered from the same disadvantage of any other game: It wasn’t compatible with the reams of existing Dungeons & Dragons books. Paizo not only exploited this misstep, it also worked to form a robust community of its own by organizing games and maintaining highly active forums online. Now the tables have turned: The more the Pathfinder network grows, the harder it will be for D&D to reclaim players.
Paizo is also working to ensure that another upstart can’t come along and knock Paizo off its perch just like Paizo did to Wizards Of The Coast. The Pathfinder publisher makes it easy for third party publishers to work with them and build on their framework, rather than encouraging game makers to strike out on their own. This in turn produces benefits for players who want more content to complement the newest Pathfinder book. Paizo is trying to increase their appeal not by simplifying the rules but by adding more ways to play, mixing traditional sword-and-sorcery fare with sci-fi fantasy and Lovecraftian horror. D&D has created many powerful monsters over the years, but Pathfinder may be the first one that can’t be defeated.