MTG Lawsuit #2, Chris Cocks and the Parachute Strategy

Hey ,

In a surprise twist of the ongoing story of Hasbro and Wizards of the Coast being sued, more information has emerged.

According to yet another lawsuit, separate from the one shareholders are currently bringing against Hasbro, this one filed by a couple of Florida pension funds, the complaints of virtually every Magic player about overprinting sets were true.

Allegedly (we'll hear that word a lot), Chris Cocks and Cynthia Williams, the former Presidents of Wizards of the Coast over the past few years had an explicit strategy of printing Magic sets specifically to shore up revenue gaps in Hasbro's yearly performance. That's one of the same arguments being made by the complainants in the other lawsuit, the difference is that this one is also being supported by three former employees of Wizards of the Coast with direct involvement in the operation.

Dozens of sets were allegedly whipped together over the last few years in order to make up for the mistakes of the parent company Hasbro when other product lines failed to perform. Everything from Baldur's Gate, Commander Legends, multiple Masters sets, to Secret Lairs and Magic's disastrous 30th Anniversary set, were created solely at the direction of higher ups at the parent company Hasbro. Reprints were viewed as an easy, low cost way to bring a product to market quickly and generate millions of dollars in revenue during a down quarter.

What is the core issue?

The main complaint of Magic players and collectors over the last decade has been the general overproduction of sets and cards compared to the Magic of the past. Instead of three to four sets a year, we're now seeing dozens a year when you include main releases as well as Secret Lair drops and supplementary sets like Universes Beyond.

This cadence prevents the average player from being able to engage in the hobby in the same way they've been able to in the past. The average player/collector is unable to keep up with the sheer volume of cards being released. Combine that with scarcity of product, and Magic increasingly feels out of reach for many of its most dedicated players.

In the normal world of collectibles, that wouldn't be a deal breaker on its own.

I see the problem as two-fold.

The first is the sheer scale.

The average MTG player/collector only has so much money in their budget to spend on their hobby, and for most people they already had to choose what products to buy and how much they could afford if they wanted to play a format like Standard or Modern. Budgets don't magically expand just because there are now 7 main set releases instead of 4, plus special supplementary sets and limited release Secret Lairs, so the game feels even more difficult to keep up with.

The second is we've been deceived.

Wizards has been telling its customers for years that Magic is growing. It's bigger than ever. That the volume of releases is because the market demands it. There are more players hungry for cards than there were in years past, and they are merely providing the players with what they want. In a sense that's true.

Every time someone would say Magic is being overprinted, but not in terms of supply for any particular set, in terms of not even letting the Prerelease of the current set breathe before hyping up the next one, they were told that it's not really a problem.

Much like GDP, as long the numbers are going up on earnings graph, everything is great.

Players knew there was a problem, and Wizards convinced enough people that everything was fine as long as numbers went up and to the right.

What's the problem with Wotc printing more and making more money?

Whether we like it or not, Magic cards have a value on the secondary market and are often considered an investment. This has been part of the game since its inception. It's intrinsic to the collectible nature of the game.

Many multi-million dollar businesses are built on the fact that Magic cards have a secondary market value.

As an isolated strategy, printing more cards and more sets, with increasing numbers of variants, and foil treatments, and serializations, and other gimmicks, will generate more sales and revenue.

And revenue is necessary for Wizards and Hasbro to survive as companies capable of producing a game as generally great and beloved as Magic: the Gathering.

But there's nuance in the current strategy that is being trampled on.

Reputation and good will are resources that Wizards of the Coast has built up over multiple decades. Promises, both explicit and implied, have been made to back that up and maintain confidence of their customers. Things like never reprinting cards on the Reserve List and Universes Beyond products not being included in the Standard environment. Most of those promises have been broken in some way.

In the process of parachuting high secondary market value cards into the release schedule, solely to generate revenue, and not to make the quality of the game better, consumes those resources. Players and collectors will tolerate a certain amount of this, but there's a limit.

Card stock quality can drop for one set and it's a blip on the radar. Too many sets in a row and collectors will stop buying new product because it won't hold value over time.

Game quality can drop because of bad set design. A couple bad set releases would make Standard boring and uninteresting, several in a row and players will start looking to other options to fill their desire for an engaging fun game and move on.

It's probably not a coincidence that the last five years has seen the emergence and growth of several competitor TCG's rising up to challenge to main three, at the same time as the overall quality and player satisfaction in Magic has declined.

One issue is an isolated incident. Two issues in a row and it's a concern. Three in a row and it's not just an issue, it's a trend.

These lawsuits are based in the fact that Wizards has burned up a lot of its accumulated reputation and good will capital, and sacrificed having a quality product in many ways in order to make Hasbro's quarterly earning reports not look so bad, while also telling shareholders and collectors that everything is great. That they definitely weren't doing that.

And now former Wizards executives are coming out to support that claim.

Going forward

I don't have high expectations for the conclusion of these lawsuits. I'm pretty jaded that way. But I see them as a good direction.

Even if they don't pan out, the increased scrutiny and hopefully, accountability, on people making decisions at Wizards, Hasbro, and other hobby companies that are also paying close attention to what happens, will dissuade executives from making short term decisions based solely on driving a profit today at the sacrifice of long term health tomorrow.

How Hasbro and the defendants respond will tell us quite a bit, but if this proceeds to a jury trial, we are going to see some fireworks as more facts get revealed. Either way, I think/hope lawsuits like this one will put some pressure on Wizards to make long term thinking more of a priority.

What do you think about the lawsuits? Are these positive changes? Do you prefer the current set release schedule?

Let me know your thoughts!