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As a retailer in the hobby industry for the last six years I believe I can speak with some authority about Wizards of the Coast. First of all, give all the credit in the world to Wizards for fetching such a lofty sum from a company (Hasbro)that obviously doesn't understand the market they've bought into.

Let me elaborate.

For every success Wizards has had since its inception, there have been numerous failures. Magic the Gathering was a phenomenal success story that helped the company cover up its glaring mistakes. The Pokemon card game now catching all the hype is certainly a cash cow for some months to come. This is all wonderful news for the company over the next year or so, but let me enlighten you with some scary facts.

1. Magic the Gathering is but a mere shadow of its former self. Prior to the Pokemon craze Wizards was laying people off because demand for Magic had tapered off so dramatically. In fact, production had to be cancelled recently for an upcoming expansion to the game (Unglued 2) because demand had ebbed so dramatically. I can tell you as a retailer, that Magic sells about 1/50 of what it used to, this is not an exaggeration.

2. Wizards bought a troubled TSR a couple of years ago. Why were they troubled? Because their products weren't selling in enough volume. Why? The reasons are many: The internet has monopolized people's time so that they have less time to pursue book-based adventuring. Second, computer games provide a level of automation and interaction that book-based gaming can't touch (except by the best dungeon masters and players). The price of the materials has increased dramatically in the past 5 years so that now the typical gamer can't afford to play. Don't even think for a second that the much-hyped 3rd edition of Dungeons and Dragons (to be released next year) will automatically appeal to the typical gamer. Gamers are a stubborn lot and will not want to scrap the hundreds of dollars they've invested in building a library of "obsolete" books just to spend hundreds more dollars to buy the latest edition of something.

3. The Pokemon craze started in Japan, and Wizards had nothing to do with creating its success. They simply copied the Japanese version of the game and have the rights to produce it in this country. From experience I can tell you (and it should be obvious) that this is a product with a finite life span. This year the craze is Pokemon. Next year it may be something completely different. Anybody remember Mighty Morphin Power Rangers? Suffice to say, Wizards will experience enormous short-term profits with this product, but don't count on the frenetic buying to continue for more than another year or so.

4. The GameKeeper chain purchased by Wizards several months ago has been one of the worst blunders yet by Wizards. GK had been losing money hand over fist until Wizards stepped in and bought them. Granted, a couple of weeks of Pokemon sales and the chain was purchased. Sounds good, right? Wrong! For the short term it's a wonderful venue to bring the coveted Pokemon cards to the market (since they keep all the profits and cut out the middle man), but after Pokemon is gone, what then? They're left with a chain of stores that can't compete on price with Toys R Us, can't compete on convenience with E-toys, and doesn't have the diversity to compete with either one.

5. Did anybody hear about all the Wizards products that have failed? They purchased Ars Magica (a fantasy game similar to Dungeons and Dragons) several years ago only to cancel the game months later. Then they produced Robo-Rally. Anybody outside of the gaming industry ever hear of that winner? What about Earthquake or Great Dalmuti? Didn't think so.

6. Card games are NOT a new up and coming fad. They've been around since Magic the Gathering became popularized in 1994. There have been dozens if not hundreds of card games produced since then, and most have failed. Most of the valuable fantasy properties have already been turned into a card game. For example, Star Wars, Star Trek, Star Trek TNG, Star Trek DS9, X-Files, Middle Earth, Dungeons and Dragons (Spellfire), Babylon 5, just to name a few. Even Wizards had its share of fly-by-night games: Net Runner, Battletech, Rage, Jyhad (Vampire), and others.

Wizards ultimately benefited from two products. Magic the Gathering and Pokemon. Magic is dying and Pokemon will die. Does this sound like a company that is worth $325 Million dollars to you?

This purchase only benefits the shareholders of privately-held Wizards. Hasbro, on the other hand, they're overpaying for a company that is at the peak of its earnings potential.


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