In this week’s episode, we take a look at the controversy over the Open Gaming License for Dungeons & Dragons, and examine the business lessons that offers (along with a business lesson from Taylor Swift) for indie authors.
I just finalized the audiobook of GHOST IN THE FORGE (as excellently narrated by Hollis McCarthy) on Payhip store, and you can get the audiobook for 50% off with this coupon code:
JANFORGE
The coupon code is valid through January 31st, 2023. Get the audiobook of GHOST IN THE FORGE here!:
Hello, everyone. Welcome to Episode 143 of The Pulp Writer Show. My name is Jonathan Moeller. Today is January 12th, 2023, and today we’re discussing one more business lesson from Dungeons and Dragons and a surprising business lesson from Taylor Swift. Before we get into all that, let’s have an update on my current writing projects.
I’m pleased to report that Dragonskull: Talons of the Sorcerer is completely done and is now out at all ebook stores. In fact, as of this recording, it is live everywhere except Kobo, so hopefully should be up on Kobo by the time you listen to this. Now that Dragonskull: Talons of the Sorcerer is finished, my next main project will be the LitRPG book I was talking about. I’m about 15,000 words into it. I want it to be about 80,000 words long, and if all goes well, that’ll come out towards the end of February. After that, I would like March’s book to be the next Dragonskull book, which I am tentatively titling Dragonskull: Wrath of the Warlock, and then after that we’ll have Cloak of Dragonfire. So to that end, I’ve also started working on the outline for Cloak of Dragonfire and Silent Order: Thunder Hand. I’m actually hoping to finish the outline for Cloak of Dragonfire once I finish recording this podcast.
Now let’s do Coupon of the Week. As of January 11th (yesterday), I made more in direct sales via Payhip in 2023 than I did in all of 2022. So it took just 11 days to surpass 2022’s total of direct sales. So I’m going to continue on with Coupon of the Week through 2023. To celebrate that milestone, I just finalized the audiobook of Ghost in the Forge on the Payhip store, as excellently narrated by Hollis McCarthy, and you can get the audiobook for 50% off with this coupon code: JANFORGE. The coupon code is valid through January 31st, 2023 and I will include the link and the coupon code in the show notes for this episode.
00:02:11 Non-Sponsored/Non-Gifted-Product Review of Inkarnate
Before we get into further topics, there’s one thing I want to mention. I have lately been using a web service called Inkarnate to create maps. It looks like it was originally designed for Game Masters or Dungeon Masters who run tabletop RPGs to design maps for their campaigns. But if you use the paid version, it’s free for commercial use, which means I have been playing with it to make maps. I made an updated map of the Kingdom of Owyllain from Sevenfold Sword and I’m working on a map of the Western Empire from the Caina books, since the empire is big enough that it may be easier to split into eastern and western maps, kind of with the real Roman Empire in the 4th century. I don’t enjoy drawing maps, so I should just say that I’ve never enjoyed drawing maps across the 137 books I’ve published, even though really, if you’re writing epic fantasy like I often do, maps are kind of a mandatory requirement. So I will put together maps in GIMP and Photoshop for the my website, but I never enjoyed doing it.
However, I actually enjoy using Inkarnate. For the first time, making a map is kind of fun. I liked it and I’m going to continue using it. It was my first business expense of 2023. It also has a very handy random world map generator, so the next time I have to create a new epic fantasy setting, I think I would use that and then just move things around to my liking and create a totally random world map that will be much easier than the way I used to draw maps by sitting down with pen and paper and drawing the map and then scanning it into my computer and then making a digital file out of it with GIMP or Photoshop.
00:03:53 Reader JD’s Opinion/Comments on Episode 141/Debt
As you can tell from the episode title, One More Business Lesson from Dungeons and Dragons and Taylor Swift, this episode is kind of a follow up from the earlier episode, Episode 141: Six Business Lessons from Dungeons and Dragons. Reader/listener JT had a good comment about that episode. JT says there is a little word that I saw arise, and I was unsurprised. Debt and all of the related words should be treated as profanities. TSR went into debt. Wizards of the Coast was in debt. Hasbro is in debt, and as are a great many, if not all companies. Debt killed Sears, Wards, Kmart, Blockbuster, and hundreds of other companies.
00:04:55 Jonathan’s Reply to Reader JD’s Comments
In the indie author world, there is a time and place for debt. Like sometimes you might have no choice but to get a car loan or a small business loan or a mortgage, but those are all the fairly well regulated and can be managed, though it is still of course best to avoid those if possible. For indie authors, it’s really a good idea to avoid going into debt for your expenses. It’s better off to bootstrap as you go. You know spending like $250 or $300 and putting it on your credit card to pay for a cover is one thing. Spending like $5,000 on Facebook ads and putting it on your credit card if you are not sure you’re going to get it back is something else entirely. If you’re starting out as an indie publisher or writer, it is a very good idea to avoid debt in general.
00:05:43 Main Topic: Business Lesson from Dungeons and Dragons and Possibly Taylor Swift
Now, the idea for the main topic of this episode was inspired by reader Michael, who said about my podcast and post about Six Business Lessons from Dungeons and Dragons: Thanks, Jonathan. That’s a very interesting post on the subject, dear to my heart, having played D&D for many decades. It’s also quite topical given the current heated debates on the future of Dungeons and Dragons and whether Wizards of the Coast is about to revoke or cancel the Open Game License, which was such a big contributor to the Renaissance and the game’s popularity after the TSR buyout. Now, I had heard rumors about this stuff with the Open Game License on Twitter, but I hadn’t paid very close attention to it because as I mentioned the previous episode, I haven’t played a tabletop RPG game this century. However, it seemed like an interesting question, so I looked into it in a bit and it’s really interesting looking at this legal battle from an outside perspective because it demonstrates a valuable business lesson for both indie authors and any business in general.
So what’s going on and why am I talking about this? Basically, when Wizards of the Coast bought Dungeons and Dragons, they came out with the Open Game License, which lets third party publishers create adventures and settings that work with Dungeons and Dragons. Many disinterested observers agree that this is one of the key reasons for the overall success of Dungeons and Dragons, the vibrancy of the third-party ecosystem around it. It’s similar to the reason DOS and later Windows 95 beat up their rivals in the ‘90s. Microsoft was very friendly to third party developers writing software for its platform, and even to this day, Windows is still much more of an open ecosystem than iOS. You might remember that famous viral video of Steve Ballmer standing on a stage, shouting “Developers, developers, developers!” at the top of his lungs, and he got made fun of for that. But he had the last laugh because he became a billionaire and the reason he became a billionaire was because Microsoft made Windows into a relatively open platform for application developers, which made Windows more popular than many of its rivals.
But back to Dungeons and Dragons. Later, Hasbro bought Wizards of the Coast, and Hasbro had a suboptimal year in 2022, and really needs more revenue. So Hasbro was planning to put out a far more restrictive version of the Open Game License to bring in more Dungeons and Dragons money, and hopefully collect royalties from third party publishers. To return to that Microsoft example, it would be as if Microsoft somebody demanded of royalty from every developer who has ever sold or written software for the Windows platform. As you could expect, much outrage has ensued. The ongoing public relations disaster for Dungeons and Dragons as a brand has been fascinating to watch. The Electronic Freedom Foundation has even weighed in, saying that it might threaten the legal foundation for open source/free software, which would really annoy a lot of rich and powerful organizations, since most of the Internet runs on open source/free software.
So this whole thing will probably end up in court with a bunch of lawsuits, but this demonstrates a potential danger for indie authors, which is why I’m talking about it and indeed, business people in general, and that danger: beware rent seeking behavior. Or, to put it another way, if you are charging money for something, it is absolutely imperative that you provide value for that money, otherwise your customers will swiftly turn on you.
First, we should define our terms. What is rent seeking behavior? The Wikipedia definition is pretty good and it says, “rent seeking is the act of growing one’s existing wealth by manipulating the social or political environment without creating new wealth.” I’d also add manipulating the legal environment to that list. Basically this is a way of making money without making new products or building new things or actually doing something but finding ways to charge people for things without actually doing things.
The Hasbro/Dungeons and Dragons controversy is a fairly good example of rent seeking. Rather than trying to make money by creating new products, Hasbro is attempting to find a new source of revenue by imposing royalty costs on third party publishers. Now why is rent seeking bad? Well, if you’re the one collecting the rents, it’s actually a pretty good deal. For everyone else, it’s less than optimal. If you’re making new products and you have to pay a high royalty or rent to do so, that drastically reduces the incentive to make these products and in the end, rent seeking can destroy the individual or company collecting the rent. Freed from the need to work to generate revenue, the rent collector tends to become fat and lazy, indeed ossified, making it vulnerable to the more nimble and hungrier competitors.
For example, Quark Express used to be the dominant program for desktop publishing in the 2000s, but then Adobe InDesign came along and sort of ate Quark’s lunch. Microsoft stopped improving Internet Explorer after 2004 or so, and since you’re probably not reading this on Internet Explorer, look how that turned out. Hasbro is hardly the only company to fall prey to this malady.
When you get a critical mass of MBAs and corporate lawyers in the same building together, their shift in focus tends to go from “making products to satisfy our customers” to “forcibly extracting as much money from our customers as possible.” The metaphor of the goose that lays the golden eggs is a bit of a cliché, but it comes to mind. Imagine you have a goose that lays one golden egg every fiscal quarter but if you kill the goose and open it up, you can get three eggs immediately. Killing the goose to get the three eggs inside of it seems foolish when you could get four eggs a year, but from the perspective of a high-ranking MBA, killing the goose to get those three eggs means that the stock price goes higher this quarter. When the eggs run out, that’s somebody else’s problem, and hopefully you’ll have leveraged that raised stock price into a higher paying job somewhere else by then.
So here are just a few examples of the many other instances of rent seeking behavior we’ve seen in recent years. Keurig, the company that makes the one serve coffee brewers, was massively successful. In an odd parallel to the Hasbro situation, the Keurig machine was successful enough that it spawned a wide third-party ecosystem of coffee pods and various accessories. The Keurig company decided they wanted that market all to itself, so the Keurig 2.0 Brewers, introduced in 2014, were designed to only work with authorized coffee pods sold by Keurig or by third party licensors who had coughed up a hefty license fee. It also blocked reusable K cups that people use to make their own coffee with the devices. As you might expect, a massive backlash ensued, accompanied by many lawsuits and Keurig had to back down.
Cricut is a company that makes cutting plotters that print out designs and vinyl and leather or so forth, and you can use it for various crafty style projects. For most of the company’s history, you didn’t need to use a subscription plan to use the Cricut device. In 2021, the company decided to make the subscription plan mandatory, meaning that the Cricut devices would not work without it. A massive uproar ensued and Cricut had to back down.
John Deere, which makes agricultural machinery in 2016 decided that only authorized John Deere technicians would be allowed to work on John Deere vehicles and machines. Since many farmers are located along long way from a John Deere dealership, this did not go down terribly well. Imagine, for example, a combine harvester breaking down during harvest time when inclement weather threatens. Without timely repair, tens of thousands of tons of crops could be swiftly lost, which would be a ruinous financial blow to many farmers. In fact, just in January of 2023, a few days before I started recording this, John Deere backed down somewhat, though more cynical observers noted that the company might be trying to get ahead of various right to repair bills brewing at the US federal level and in the legislatures of several U.S. states.
In another example, Microsoft itself fell prey to this malady with the original version of the Xbox One game console, which had more restrictive DRM to prevent the sharing of game discs and to drive digital sales. By now we should be familiar with the pattern. A massive uproar ensued. Microsoft had to back down and Sony’s PlayStation console is able to thoroughly beat the Xbox for that round of video game console wars. Amusingly, as of 2023, something like 80 to 90% of all game sales, depending on the source, are digital downloads as of this year. If Microsoft had just exercised a little patience, it would have gotten exactly what it wanted without the bad PR.
So those are just some examples from the top of my head while I was typing out this post. No doubt you can think of several more that you have encountered in your day-to-day life or in your career fields where you have had to deal with a company trying to engage in this kind of rent seeking behavior. There are also a couple of examples that are borderline. Are software subscriptions rent seeking? Well, I think it depends on the software and your need for it. Again, it boils down to if the company is providing value for the price or not. If the software receives regular updates and also provides useful features like cloud integration or online backups, that kind of thing, that’s one thing. Microsoft has gotten pretty clever with subscription models. Something like Office 365 or Xbox Game Pass is generally for most people a good value for the money because you get the nifty side features and the software is updated pretty regularly. By contrast, if the software hasn’t been updated in years and stops working if the subscription stops, that’s something else entirely.
Apple occasionally gets accused of rent seeking with the App Store and the thirty percent cut it takes some digital sales through the App Store, but as often happens, Apple went about it cleverly. It’s a matter of setting expectations. From almost the beginning of the App Store, Apple took a thirty percent cut of the sale, and it’s stuck pretty consistently to that for almost 15 years now. There is a big difference between setting expectations from the very beginning versus somebody yanking out the carpet from beneath people (like the examples with Keurig and Cricut and John Deere above). Apple has gotten sued a lot over this policy, but it hasn’t gone away. It’s never received the public outrage over the other examples I mentioned, probably because the average person doesn’t care all that much if Spotify and Epic lose thirty percent of their digital sales to Apple for iPhone and iPad users.
Now, if Apple decided to go from like 30 to 50% suddenly, or if it had started at 5% and then shot up to 30%, that will be something else entirely, but we’ll see if various lawsuits and potential antitrust actions force Apple to change its App Store rules or not, because in combination with some of the right to repair bills I talked about earlier, there’s also increasing movements and sort of scrutiny on various online App Store practices, which may force online companies to change their business, or they might change themselves to try and get ahead of potential regulation.
Now to venture a personal opinion. If I were king for a day and like the Law of the Medes and the Persians in the Book of Esther in the Bible, my edicts could not be repealed, I would decree that anyone serving in the leadership of a large enough company would first have to spend 7 years working in a non-management position within that company, preferably in a job where you had to deliver concrete results. Granted, that wouldn’t completely weed out the foolish, but it would definitely reduce the sort of outside hire CEO who is golfing buddies with the board and has no knowledge of the company that he or she is leading. You know the kind of CEO who is just there to loot the company and get a golden parachute. A lot of the mistakes that we saw above and with the rent seeking in general come from that sort of CEO. But we’ve been talking about million and billion dollar companies.
What does this have to do with indie authors (to return to the whole point of this podcast)? Indie authors can engage in rent seeking behavior themselves, and I think the biggest example has been the various trademark controversies. A few indie authors have tried to trademark common words that they use in their book titles, and this almost always ends badly. I’m not a lawyer, but based on the posts of actual lawyers who have written about this, this seems to be a borderline use of trademark law.
The most prominent example was from a few years ago when an indie romance author trademarked the word cocky and then went off after other romance authors who had used the word cocky in their title. The author in question claimed that she had done it so her readers would not be confused, which honestly makes one wonder about her opinion of her readers’ intelligence. But by now we should be familiar with the pattern. Massive outrage forced the author to back down. The so-called Cocky Gate (cute name) was the biggest example of this, but there have been a few others in other genres.
So what can we as indie authors and business people learn in general from this? I think the lesson is that it’s better to seek to add value rather than to extract rents. When your customers or your readers spend money on your books or your products, they feel they are receiving value instead of that you are trying to price gouge them. Granted, adding value is more work than seeking rents. You have to develop new products or write new more books and then sell them to your customers. I’ve personally tried to do this in a variety of ways: giving free ebooks to people who subscribe to my newsletter, giving free short stories away when I publish a book, keeping free ebooks on all the major retailers, and regularly doing $0.99 sales on box sets. I do admit I’ve had to raise prices due to inflation over the last few years, but unfortunately that’s true of nearly everything and I’ve been able to offset that by offering regular coupons through my new Payhip store, which I mentioned earlier in the show.
When I was talking about this episode, someone suggested musical artist Taylor Swift as an example of someone who understands the importance of adding value rather than extracting rents. Granted, I think the only time I have ever actually listened to Taylor Swift’s music is when someone happens to be playing it at the gym. I’m afraid I’m just not in the target demographic. But I looked into it a little and it seems that Swift or someone that her team really does have a good sense for business. In 2019, an investor with the perhaps somewhat regrettable nickname of Scooter bought the master recordings of Swift’s first six albums as part of an acquisition. Swift responded by recording new versions of her old albums, virtually degrading the value of the old albums. It’s a very clever structure. You can listen to her music very cheaply on Spotify or the other streaming sites, but devoted listeners can also buy premium CDs or vinyl recordings, along with other merchandise, all of it conveniently available on Swift’s own store. That’s a good example of adding value and it also demonstrates the extremely high value of owning one’s own intellectual property, as I mentioned in the Six Business Lessons from Dungeons and Dragons episode.
To sum up, whenever possible, I think it’s better to try and add value than to extract rents. Taylor Swift provides a better example of adding value to her customers instead of the rent seeking behavior shown by Hasbro, Keurig, Cricut, John Deere, Scooter, and various other companies mentioned above, which I admit is not a sentence I ever thought I would say. But the evidence supports that conclusion.
So that’s it for this week. I hope that was an interesting discussion of the various intellectual property and rent seeking behaviors we’re discussing. Thanks for listening to The Pulp Writer Show. I hope you found the show useful. If you enjoyed the podcast, please leave a review on your podcasting platform of choice. Stay safe and stay healthy and see you all next week.
