Paizo Publishing's 10th Anniversary Retrospective—Year 4 (2006)

Battling Headwinds

Thursday, June 28, 2012

This blog entry is the fifth in a series of blogs commemorating Paizo's 10th anniversary.
Click here to read the first installment.

Paizo was optimistic heading into 2006. The previous year, we had worked very hard to build a business that could not only stand on its own, but also be innovative. We weren't out of the woods yet, but we could at least see the edge of the forest drawing ever nearer.

As I mentioned in the 2005 blog, we had decided on a six-point strategy to build a more solid foundation for Paizo. We dubbed 2006 a "retrenching year," since our plan was to continue to build upon the strategy of 2005. Many projects started in 2005 saw their fruition in 2006, and we started projects in 2006 that wouldn't see the light of day until 2007. Here's how we attacked each of our six key strategies in 2006.

• Expand our subscriber base for Dragon and Dungeon while continuing to make those businesses more efficient.

Dragon Magazine had a bit of a retrenching year too, since it was hitting its stride and things were looking good on the subscription and circulation fronts. Both the Demonomicon of Iggwilv and Core Beliefs regular series saw new installments, and the much beloved Campaign Classics themed issue returned with all-new features for every published D&D campaign setting! But the big news was Dragon 344, which celebrated the 30th Anniversary of Dungeons & Dragons. For this special occasion, we asked Gary Gygax to write a new Gord the Rogue short story, Bruce Heard to revive his Voyage of the Princess Ark column, and Ed Greenwood to pen another Wizards Three short story installment.

Dungeon Magazine continued its string of amazing Adventure Path installments, finishing up the Age of Worms in Dungeon 135 with a battle against old Kyuss himself. Then in November, Dungeon 139 launched the Savage Tide Adventure Path with a return to Sasserine, a town first introduced in the Shackled City AP. In that same issue, we added to the infamous Maure Castle with a Rob Kuntz–penned adventure, "The Greater Halls."

The cover for the Savage Tide Adventure Path Player's Guide.

But the biggest news for Dragon and Dungeon came behind the scenes, and was something that the public wouldn't learn about until early 2007. In April, I'd asked Wizards of the Coast for a meeting with the following agenda:

We would like to discuss the long-term relationship with Wizards for Dragon and Dungeon magazines beyond the term of the current contract. Paizo has plans to spend money and resources to build up the magazines, but since these expenditures have a long window of monetary recovery, we are hoping to come to a consensus on how our two companies plan to work together on the magazines past next March.

Our license for publishing Dragon and Dungeon was due to expire in March 2007, and this meeting would be the first step toward negotiating a renewal of that contract. It took a while to find a time that fit everyone's schedule, and we finally had to resort to meeting by phone rather than face-to-face. On May 30, 2006 at 2 pm, I had a conference call with Wizards, and it was during this call that they let me know that they had other plans for Dragon and Dungeon; they wouldn't be renewing the license for the magazines. I personally don't remember much of my reaction, but after the call, I brought Erik in to my office and told him the news, tears streaming down my face. (Read Erik's recollection of this major event below.)

We always knew that this might be a possibility. That was, after all, one of the main reasons we had been building the other parts of our business: so we wouldn't be caught unprepared if the unthinkable were to happen. But I don't think any of us ever really thought that this was much more than a remote possibility. Dragon and Dungeon were finally firing on all cylinders and were enjoying critical acclaim that hadn't been seen in years. So this news struck us to the core. In one meeting, the last large chunk of the company that we started not quite four years before was going away. We were numb. How the heck were we going to cope with this? Frankly, it seemed impossible at the time.

I have to give Wizards of the Coast a lot of praise for how they handled the end of the license. Contractually, they only needed to deliver notice of non-renewal by the end of December 2006; without the extra seven months' notice they chose to give us, I'm not sure that Paizo could have survived. Wizards also granted our request to extend the license through August 2007 so that we could finish up the Savage Tide adventure path. This gave us quite a bit of time to figure out how we were going to cope with the end of the magazines. It would have been very easy for WotC to have handled this in a way which would have effectively left Paizo for dead—all they would have had to do was follow the letter of the contract. Instead, they treated us like the valued partner we had been, giving us the ability to both plan and execute a strategy for survival. For that, I will always be thankful.

The news caused us to kick our plans for other product lines into a higher gear. In fact, before even two hours had elapsed, we'd already scheduled an offsite meeting at my house. We knew that the key to our survival beyond Dragon and Dungeon hinged upon our mastery of creating adventures, particularly Adventure Paths. So we started to plan for what would end up being one of the most shocking announcements in the history or RPG gaming... but that tale will have to wait until the 2007 blog!

One decision we had made earlier in the year ended up helping us quite a bit in this transition. As I mentioned in a previous blog, sending renewal notices for subscriptions is a very expensive task that eats up a lot of a sub's profits, so we were trying to encourage more and more folks to manage their subscriptions on paizo.com. In April, we had unveiled month-to-month subscriptions, which allowed subscribers to be charged for an issue each month instead of prepaying for an entire year—to our knowledge, this was virtually unprecedented in the magazine industry. Sending magazines until the subscriber told us to stop meant that we didn't have to send renewal notices, and that was helping our bottom line. We had no idea at the time, of course, but this system would be our salvation the following year—it meant that there were were a lot fewer people we'd have to refund subscription money to when the magazines ended. For the first part of 2006, month-to-month subs were offered in addition to the usual 1-, 2-, and 3-year subscriptions; soon after we learned that the magazines were ending, we discontinued the long-term subs and added a new six-month sub.

There were also some major personnel changes for the two magazines. With the departure of Keith Strohm early in the year, Erik Mona was promoted to Publisher. Erik and I have been working together since the late 1990s, and have developed a very similar mindset when it comes to the business end of things: perfect for somebody overseeing the entire publishing arm of Paizo. In June, we promoted James Jacobs to Editor-in-Chief of Dungeon Magazine, filling the spot Erik vacated. Erik remained the Editor-in-Chief of Dragon Magazine until it's end.

The final Dungeons & Dragons book published by Paizo, The Art of Dragon Magazine Hardcover.

• Expand our license for Dragon and Dungeon to create official non-magazine Dungeons & Dragons products—especially those we could base on in-demand but out-of-print material from the magazines.

Following up on the success of the Shackled City hardcover in 2005, we managed to publish two more D&D products before our license expired. The first was Monster Ecologies, a compilation of the very popular article series from Dragon Magazine that found its genesis all the way back in Dragon 72 in 1983! We compiled the best of these articles and updated them for D&D 3.5. The final D&D book we published was the Art of Dragon hardcover, released on the last day of 2006! Dragon had launched the careers of many of the most famous fantasy artists, and this book was a celebration of that artwork. We spent hours poring through old magazines and looking through boxes of old transparencies from TSR, culling the best and putting them into a book beautifully designed by Sean Glenn. All in all, a fitting end to our licensed D&D book line.

• Create generic gaming accessories that would appeal to our RPG customers.

At the end of 2005, we had just launched the GameMastery Map Pack line. 2006 saw five more packs: Graveyard, Countryside, Fortress, Haunted Mansion, and Dungeon Chambers.

In March, we launched the GameMastery Item Card line with Item Pack One. Item Cards were designed to provide GMs with beautiful full-color cards to represent the loot they give out in games. Players could then use the cards to keep track of their inventory rather than scribbling things on their character sheet. Later in the year, we released two expansions in booster pack form. Hero's Hoard and Relics of War turned out to be very divisive, with many customers complaining about the randomization and collectibility of the cards, including special foils. Paizo had gone with the booster format in response to some discussions with our distributors, but it almost killed the Item Card line. (In 2007, we went back to the non-random deck format that continues today; there have been 19 total releases in this line so far.)

In December, we also released the GameMastery Campaign Workbook, a pocket-sized journal for GMs to record a wide variety of information for their campaigns. Unfortunately, the glue used to bind the book was faulty, and we had to to initiate Paizo's first (and so far, only) major product return program, exchanging glue-bound copies with new spiral-bound copies early the following year.

Though this doesn't adhere to the "generic" part of the goal, we released a line of unpainted metal miniatures for Monte Cook's Ptolus campaign. Erik has a longstanding friendship with Monte, having played in his Ptolus campaign for years. When Monte came by the office to show off some of the incredible artwork going into his magnum opus, we just had to jump in and make miniatures for it! We had already started making metal minis as part of the Compleat Encounter line, so it was fairly easy to get the Ptolus line going. We made twenty miniatures over the next year or so, and when we started to create our own campaign setting in 2007, Monte allowed us to add the figures from this line to the minis we already had from the Compleat Encounter line, creating the Pathfinder Chronicles Miniatures line. (Two of the Ptolus miniatures were deemed too different to be included in our setting: the Arcane Pistoleer and the Leonine Warrior.)

• Expand Paizo into areas of gaming outside of RPGs that would spread our risk around.

The first Titanic product, Kill Doctor Lucky.

As I mentioned in the 2005 blog, we'd started Titanic Games, a sister company to Paizo, partly as a means to publish some of the more successful Cheapass Games in high-quality editions. The first product from Titanic was the Kill Doctor Lucky Deluxe Edition, released in October 2006. With a full-color fold-out board of the Lucky mansion and painted wooden tokens to represent the characters, it was an instant success, and continues to sell well for us; it's now in its third printing! We also started work on a couple other Titanic games that would appear in 2007.

• Use our strong position in the distribution chain to help other publishers get their products into game stores, taking a bit off the top for our efforts.

We were fortunate to add several wonderful sales partners to our roster in 2006, companies which we are still representing into the distribution trade today!

In January, we added Cheapass Games to our distribution efforts—a logical move due to the formation of Titanic Games. Instantly, Paizo's catalog grew by more than 75 products.

We also joined up with Dead Gentlemen Productions, the folks who created the critically acclaimed movie The Gamers. As big fans of their movie, we were super excited to help get the DVD into game stores around the world.

We'd met Steel Sqwire at Gen Con that year, and we loved their Flip-Mats and their wire area-of-effect templates. We started off simply distributing their products, but we eventually added them to our own GameMastery line; to date, we've released 44 different Flip-Mats.

Paizo's 2006 Gen Con crew. We shared our booth with Looney Labs; they're the folks in the white lab coats.

At the end of the year, we also started selling an accessory from Open Mind Games that also ended up becoming a GameMastery staple: the Combat Pad, which revolutionized tracking initiative with an innovative write-on/wipe-off magnet system.

• Increase paizo.com sales by expanding the scope of products available on the website through partnerships with other publishers, who would in turn bring in new customers for us.

The paizo.com online store had a number of huge milestones in 2006, the biggest of which was the addition of the old TSR PDFs. Because of our connection with WotC through Dragon and Dungeon, Wizards was very open to letting us sell the whole catalog of PDFs. This created a lot of buzz among our community, and the cash flow was very welcome.

Our new web store manager, Phil Lacefield, Jr scored us another D&D coup—Milton Bradley's Dungeons & Dragons Fantasy Adventure Board Game and its two expansions, Eternal Winter and Forbidden Forest! This board game wasn't generally available in the United States, but Phil found a source in the UK that let us bring these cool D&D collectibles to folks here in the US.

Products like these helped paizo.com sales nearly double in 2006. This led to myself, Vic Wertz, and Jeff Alvarez augmenting the warehouse crew as they fulfilled orders, especially during the Christmas season.

At Gen Con, Paizo raked in 4 golds and a silver at the ENnie Awards:

• Best Cartography: Silver Medal for The Shackled City Adventure Path
• Best Adventure: Gold Medal for The Shackled City Adventure Path
• Best Campaign Setting/Setting Supplement: Gold Medal for The Shackled City Adventure Path
• Best Supplement: Gold Medal for Dragon Compendium, Vol. I
• Best Free Product/Web Supplement: Gold Medal for Age of Worms Overload

Lisa, James, Erik and Jason at the 2006 ENnies.

Sarah Robinson snaps a photo of Wes reacting to his White Elephant gift at the Paizo holiday party. Web Store Manager Phil Lacefield Jr. Jr. Jr. throws a... um, let's go with "Vulcan gang sign."

With all of the successes that we had in 2006, it should have been a year of rejoicing; Jeff, Erik, Vic and myself had been keeping the cancellation of Dragon and Dungeon to ourselves as the four of us planned out how Paizo would survive this turn of events. Eventually, we could keep silent no longer and we brought the rest of the employees up to speed. One of our biggest fears was that we were going to lose a bunch of employees as they headed out to look for more stable employment, but we needn't have worried: not a single employee left the company once the cat was out of the bag, a true testament to the loyalty and dedication of our staff.

By the end of the year, our plans were in full swing, and I sent a long email to our lawyer asking him to look into trademark registration for something called "Pathfinder." But that's a story for next year...

Employees who started in 2006 (in order of hiring date):
Phil Lacefield Jr, Web Store Manager
Michelle Barrett, Special Project Coordinator

Employees who left in 2006 (in order of their end date):
Rob Head
Keith Strohm

Lisa Stevens
CEO

Paizo 2006: Behind the Closed Door

As summer 2006 approached, I had plenty of reason to be optimistic about the future. Paizo had (barely) survived the loss of Star Wars Insider, Amazing Stories, and Undefeated magazines, but things on the Dungeons & Dragons front were considerably sunnier, or at least I thought so at the time. For much of the previous year, then-publisher Keith Strohm had been warning me that the tea leaves suggested we might soon become "the Dragon and Dungeon company," and while that represented a significant reduction in the company's original scope, it did put the focus purely on magazines that were under my personal control, and I felt confident that the teams working with me on those magazines could handle a little adversity. We'd just completed a creative relaunch and visual re-design of both magazines that was generating significant good will with an approving audience, and I had big plans for the two magazines I had read for virtually my entire life. To make things even more interesting, Keith left the company to pursue a new relationship in Chicago, and I was promoted from editor-in-chief to publisher of the whole company. I was eager to apply the same improvement standards that we brought to the magazines to the entire company. Our relationship with Wizards of the Coast was going strong, and I was ready to make "the Dragon and Dungeon" company a creative and financial success.

Sure, we were approaching the end of the Dragon and Dungeon licenses, too, but with the popular relaunches behind us, subscriptions on the rise, and powerful wind in our sails from the Shackled City and Age of Worms Adventure Paths, there seemed little reason for concern. In the five years since we'd started the company, every single issue of both magazines had sailed through approval meetings with our pals at Wizards of the Coast (in all that time, the only final layout item they ever rejected was a single panel in a cartoon strip), most of whom were former colleagues and personal friends. Heck, several of them used to work in the periodicals department that eventually became Paizo, or had left Paizo to rejoin the mothership, so going over there for business meetings always seemed like a bit of a reunion. I was riding high in the early couple of months of my publisher-hood, and although Paizo faced some clear challenges, I had big plans for the future.

Unfortunately, Wizards of the Coast had big plans for the future as well, and they didn't involve working with Paizo Publishing. In fact, they didn't involve printed magazines at all. Much to my surprise, our 2006 year of "retrenchment" and building on past successes was about to become the most stressful year in the company's history, and one of the biggest turning points for my own career.

A ratty old collection of Dragon magazines stuffed in the back of a comic longbox I received as a gift as a grade-schooler cemented my love of D&D and inspired me to a lifelong dream of editing Dragon magazine one day. From that point in about third grade, virtually every academic and professional decision I made was aimed at learning the necessary skills and making the right contacts to one day put me in the editor-and-chief seat at Dragon magazine. My heroes were people like Kim Mohan and Roger E. Moore, and I watched the careers of folks like Wolfgang Baur and Dave Gross, studying them for patterns and paths others had taken to the position I so desired. By 2006 I'd finally clawed my way into that role, the culmination of more than 20 years of hard work and concentrated effort. I had finally arrived, and my preference was to remain editor of Dragon as long as humanly possible. I wanted it to be my career. I wanted to leave a lasting mark on the magazine that had been such an important part of my life. For someone who had lived so much of that life dedicated to a plan designed to get me to exactly where I was, I hadn't really planned much about what might happen after Dragon magazine.

That seemed like a solid strategy until the day in late spring when Lisa Stevens called me into her office to discuss a phone call she'd just had with the higher-ups at Wizards of the Coast. As soon as I saw the tears streaking down her face, I suspected that the call had not gone quite as expected. Lisa was in shock. Not only would Wizards not be renewing our license to create Dragon and Dungeon magazines, but they were going to cease publishing the magazines entirely. There was some vague chat about Wizards wanting to start a kind of online subscription program tied to their upcoming edition (something they'd been very cagey about, and about which we'd only heard the barest of rumors by this point), but the upshot was that in just a few months, the magazines as printed products would be dead and buried.

And I was the one who would get to shovel the grave dirt onto their corpses.

Not exactly the role I had been prepping for since third grade. While Lisa's tears showed her human concern for the business we had built and the employees she referred to as family, I wasn't quite ready to think about any of those big-picture concerns, yet. I was still fixated on the massive sense of rejection I felt from folks who had been my coworkers at Wizards, and whom I still considered close friends. I was worried about my own career, and about the fate of two pillars of D&D that had helped support the brand (and my own gaming hobby) for decades. I couldn't even contemplate a world without Dragon and Dungeon magazines, even as I had just been told that world was coming. Soon.

I don't remember a lot of the details about that conversation in Lisa's office. I do remember numbly wandering out of the building to take a quick walk to gather my thoughts. It was a gorgeous day, and I'd lately been in the habit of taking a half-mile walk on my lunch hour, so my slipping out must not have seemed odd to my co-workers, who had no idea what had just transpired. I walked down Richards Road to an old abandoned residential hospital that had a nice lawn behind it facing a gorgeous wall of trees. I sat down on that lawn for a half-hour, going through the ramifications of the day's news, and building a huge list of questions and next-steps in my head.

What will happen to Paizo?
Will the members of the editorial staff land on their feet if the company collapses?
How do we let them know? When?
How in the world am I going to explain this to the readers?
How can we end Dungeon magazine in the middle of the Savage Tide Adventure Path?
Will the prisoners who send me mail every week blame me for canceling the magazines?
Where do we go from here?

In the days and weeks to come, a lot of those answers grew more and more clear. Paizo would go on. Once we came up with the idea behind a "monthly Adventure Path book" (not yet called Pathfinder), the management team resolved to chart a path to the company's survival that kept every employee intact. We'd already experienced a bunch of layoffs, and to transition the company into its new form in 2007, we'd need all hands on deck. To their credit, Wizards of the Coast graciously extended our license by a few months so we could bring the Savage Tide Adventure Path to its proper conclusion, and even though it's fair to say things between the two companies were very awkward for a while, everyone still remained friendly and cordial. I wrote a cover-my-ass editorial directly to the prisoners, laying out their importance to the magazine, lest I incur some unfortunate vendetta.

Telling the editorial staff was the most difficult part of the transition for me. It took us several weeks, perhaps even months, before we had our business plan for what would come next, and in that time we decided not to tell the editorial staff about the potentially fatal blow to the company (holding that secret for so long was probably the most soul-warping experience of my life). We were worried that once the staff knew the end was in sight, they might abandon ship for a more stable career somewhere else (perhaps even at Wizards of the Coast). And we needed the staff focused on the magazines if we were going to bring the Paizo Era to a close with the style and care that we knew these magazines required.

So it was with a lot of trepidation that I walked into the "editorial pit" and closed the door behind me. That door had only closed once before, when I had to tell the staff about the loss of Amazing Stories and Undefeated several months earlier, and all knew it was a grim omen. Everyone gathered around the editors' cubes, and I dropped the bomb as gently as I could. They had concerns and questions of their own, it's fair to say, and everyone in that room could probably write an essay as long as this one to explain what was going through their own minds upon hearing the news.

I know what was going through my mind. "You guys are the best. The magazines are better now than they've ever been. And we're about to make something even better together, to chart a new future for the company where we will be masters of our own destiny. But you've got to stay at Paizo for us to pull it off. Please don't leave. Please don't leave. Please don't leave."

Six years later, it seems almost silly that I was so concerned. The vast majority of the folks in that room still work at Paizo today. James Jacobs, Jason Bulmahn, Wesley Schneider, James Sutter, Sarah Robinson. That's basically my editorial management team these days at Paizo, and they were all there that day, all scared out of their minds, but all ready for what was right around the corner.

These folks are among my best friends, and among the strongest employees Paizo has ever had. Yes, I was worried about a life without Dragon and Dungeon magazines, but I was even more worried about a Paizo without these pivotal employees.

They all stuck around, and they've all made innumerable contributions to Paizo Publishing and the project that would eventually become Pathfinder. I tend to think of that day "behind the closed door" as a real bonding moment for the staff, and the first day of the new Paizo Publishing.

Erik Mona
Publisher