There’s been a lot of discussion lately about a rumored new Magic product titled Magic Digital Next. I don’t think anyone has written anything comprehensive on it yet, so today I’m going to try to summarize everything that is known about what this new digital Magic platform might be.
The majority of the sources I’m going to reference are from the shareholders meeting and other Hasbro financial documents. I’m going to link to the individual presentations as I go along, but you can find all of the publicly available information on their Investor Page. In some cases I’m also going to be linking to a few documents on the investment website, Seeking Alpha, that has additional written transcripts of the question and answer segments that follow these shareholders meetings.
So to start out, let’s go back a few years.
2013/2014 Hasbro Earnings Reports
I went back a few years in the earnings reports, and these two years were the first to contain references to investment in Magic’s digital offerings. Approximately the same phrase is repeated in both documents, but it is most simply stated by Hasbro CEO Brian Goldner on page 9 of the 2014 PDF:
"Over the past few years, we have invested in building our gaming capabilities across analog and digital platforms, including new gaming experiences across our portfolio and investments in the digital platform for Magic: the Gathering."
It’s significant that the Hasbro CEO is specifically calling out investments in Magic’s digital platform here because it means that the company actually did spend the money. Remember that these meetings are held for investors and shareholders who have questions about what Hasbro is spending money on. It’s not made clear at this point what those investments are specifically for, but I think the statements Hasbro makes 4 days later at the 2015 Toy Fair actually give us a better idea.
2015 Toy Fair Investor Update
On page 11 of the Toy Fair transcript, Hasbro CEO Brian Goldner says:
"The third reason we are confident is over the course of the last three years we have made significant investments to upgrade our digital offerings. This year with our Duels of the Planeswalkers which as you recall is our entry-level digital platform, we're going to switch from a yearly release cadence to a quarterly release cadence which will put it in sync with our paper sets and create even more integration between digital and analog play. And for Magic Online, which is one of our biggest long-term growth opportunities, we are doubling our efforts to improve and expand this experience."
Here Hasbro is specifically stating that Duels is Magic’s entry level offering. It’s also noteworthy that in February of 2015, the CEO is stating that MTGO is one of the biggest long-term growth opportunities for the brand. I think it’s likely that some part of the investments made "over the course of the last three years" were likely put toward rolling out Magic Online version 4, as well as the latest version of Magic Duels. Remember that this presentation would have come a few months before the release of the new Duels model that updates instead of releasing a different game each year. Some amount of the investment may have also been for IT or infrastructure.
Later, on page 36 of the transcript, Brian Goldner talks about investing in MTGO:
"We think making investments in things like Magic: The Gathering particularly in MTGO, or Magic: The Gathering Online, is a great use of our investment money as it is a brand that has tremendous potential as you saw. Unmet potential yet as you saw and clearly very high operating margins for the company. So we think that is a great use of our investments in cash."
This presentation took place on February 13, 2015 and the Hasbro CEO is still talking about investing in both Magic Online and Duels. There hasn’t been a mention of Magic Digital Next yet at this point. The high operating margins he talks about here are also significant because it indicates that MTGO is generating a large amount of revenue relative to what WOTC is spending on it.
Spring 2015 Hasbro Hiring
At the beginning of 2015, Worth Wollpert states that WOTC is intending to almost double MTGO’s resources by the end of the year. He also links to their Careers page that has dozens of new Magic Digital job postings. What’s significant about this is that not only is WOTC looking to hire a ton of new employees, but a lot of the programming job openings require knowledge of Unity, a platform not used by Magic Online, but instead used by mobile games and rivals such as Hearthstone. It’s worth noting that Unity became mainstream after MTGOv4 was already multiple years into development so speculation begins to swirl that WOTC is already working on a successor to version 4. At this point, version 4 had been out for about 7 months and was still experiencing crippling memory leak problems.
2015 Investor Day
This presentation was the first reference to Magic Digital Next. The day after this presentation was posted, the story was picked up by a few gaming websites, but it wasn’t actually widely shared on Reddit and other sites until a few months later. This presentation is also the original source of this widely circulated slide:
On page 6 of the transcript Brian Goldner says:
"Perhaps our biggest opportunity to keep expanding Magic is to improve the digital Magic ecosystem. We know Magic players want to play in person at events and also play similar level competitions online. Right now we have digital offerings at both end of the knowledge and engagement spectrum. Magic Online is for the highest level players, and we have Duels as an entry experience. The greatest opportunity for Magic is to create a new digital experience, leveraging contemporary technology to create a seamless digital experience that meets all the players' needs from new players to pro players. This is what we are investing in, and we have a team in place to deliver the first new Magic Digital Next product in the next few years. In the meantime, we will optimize the Duels and Magic: The Gathering Online experiences to continue driving the overall Magic business."
So, for starters, let’s look at the title "Magic Digital Next." Magic Digital has always been the name of the department inside WOTC that contains Magic Online. If you look at the bottom of any MTGO article on the mothership from the past few years, you can see that the article is organized under "Magic Digital." One possibility is that Magic Digital Next is an internal codename for their next big product. The other possibility is that Magic Digital Next was the codename for what would later be announced as the Digital Games Studio. The Hasbro CEO using the phrase "first new product" certainly makes it sound like that may be the case.
The presentation graphic and transcript also make it sound like the new Magic Digital Next product is intended to be a combination of Duels and MTGO. The last sentence may set off alarm bells for anyone that owns collections in MTGO or Duels, but remember that this presentation is being given to investors so when he talks about "the mean time," he is reassuring them that the company will still have a product to sell until this new game is ready for release.
2015 Hasbro Earnings Report
"As we outlined in previous calls and in our November investor day, we continue to make strategic investments in our business. This includes investing in the digital platform for Magic: The Gathering. This is a multiyear investment program which we believe will expand the potential market for Magic over the long term."
The Hasbro CEO continues to remind investors that they are currently in the middle of a multi-year investment into Magic’s Digital products. Though the public just found out about Magic Digital Next 2 months before this, these financial documents reference the investment as far back as 2014.
"And some of the investments that we are making as Brian just mentioned in things like Magic: The Gathering Online, investment in our development process which we expect will lead to future savings in the cost of sales line a couple of years out, and we’ve got the higher level of depreciation coming through. We expect to see those coming through the P&L for the next ’16 and ’17 and starting to decline in ’18. And we’ll begin to see revenue from some of these activities like Magic Online beginning in 2017. So it’s a little bit of a balance, but we expect to see some of those expenses begin to decline by 2018…"
Meanwhile, the Hasbro CFO remind investors that they are investing a lot of money into Magic Digital up until 2018, but that they will begin to see revenue from it beginning in 2017. It’s also noteworthy here that she says revenue from Magic Online specifically instead of Magic Digital Next. This is another indication that MTGO and Magic Digital Next may continue as separate products. It’s noteworthy that they are anticipating the expenses will begin to decline in 2018 because that likely means that they expect the product to be released no later than that year. A 2018 release date is also in line with Brian Goldner’s projection of "in the next few years" from the 2015 Investor Day.
In response to a question about Magic’s performance, Brian Goldner, the CEO says:
"As Deb said, we would expect to see some revenues from the new Magic Next platform in 2017."
Now the Hasbro CEO and CFO used both Magic Online and Magic Digital Next to refer to the same new product. Does that mean they are one in the same? Or is this a case of management accidentally using the wrong word for a title they might not be intimately familiar with? It’s also especially noteworthy that the CEO seems to think that they will see new revenue from the game in 2017, meaning that it would have to be publicly accessible by then.
On April 11, 2016 Hasbro announced that WOTC President Greg Leeds was resigning after 8 years in the position. Greg was also a huge driving force behind Duels of the Planeswalkers. His replacement Chris Cocks is noteworthy because of his previous experience in both gaming and digital technology having worked at Microsoft. Consistent with their investor meetings, Magic Digital had also been hiring a lot of new staff over the course of the year. For the next several months, there is no new information as people begin to speculate more about what Magic Digital Next may be.
On January 6, 2016 Marc Racine, the Director of Magic Digital, announces on LinkedIn that it was his last working at Wizards of the Coast after 10 years. A week later, Worth Wollpert announces that it’s his last day working at Wizards as well. The same day a press release from new Hasbro President Chris Cocks begins to circulate online:
"We recently created the Digital Games Studio, a group of all-stars led by industry veteran Jeffrey Steefel. Jeffrey's team includes experienced Wizards game designers and industry talent from Dire Wolf Digital, Valve Corporation, Cryptic Studios, Warner Bros. Interactive Entertainment, Activision, BioWare, and many others."
A lot of people seemed to think that this meant that Wizards of the Coast had started poaching experienced game designers from other game studios, but I think that they’re just listing some of the prior experience these employees have. Then came the line that really got people talking:
"The Magic Online team is now included in this group, as well as digital art and game design. They're all thinking about how players might tap mana and prepare spells in the future, and I can't wait for you to see what they're working on."
A lot of players read into this to draw the conclusion that Magic is going to be played differently on the next digital platform. They suggested that Wizards is jealous of the money that Blizzard is making with Hearthstone and has been working to simplify the game in order to attract more players for a new "freemium" model.
I don’t think that’s what this means though. I think that the phrase "tap mana" is supposed to refer to MTG, while the phrase "prepare spells" is supposed to refer to Dungeons and Dragons. Those two brands are the largest brands under the Wizards of the Coast banner and the new president is trying to use game language to talk about them. Is it possible that WOTC is trying to make a Hearthstone-style replacement for Duels? It’s possible, but I wouldn’t draw that conclusion from this press release.
A couple weeks later Elaine Chase, the vice president of Magic Brand, tweeted this in response to questions about no mention of Magic Digital Next in the MTGO update article:
We expect to keep MTGO running for the foreseeable future and have no current plans to decommission it or stop content releases. #WOTCstaff
— Elaine Chase (@ElaineChase) January 31, 2017
Some people cheered this as a confirmation that Magic Online is going nowhere and that their collections are safe. Other people claimed that this was vague legal lingo intended to protect WOTC while calming players in the short-term. I think that it suggests one of two possibilities. Either Magic Digital Next is really a new MTGO client that includes a Duels-style New Player area. Or Magic Digital Next is a multi-platform replacement for Duels and that MTGO will continue to exist as the more competitive program. I think that the fact that she specifically mentions content releases suggests to me that Magic Online and the current collections aren’t going anywhere.
In the State of Magic Online, Jeffrey Steefel, the vice president of the newly created Digital Games Studio says:
"Magic Online is the heart of digital gaming for Magic, and I’m thrilled to have this amazing team as a critical part of the studio, and this community as founding members of what I’m confident will be an ever-growing audience for Magic digital gaming."
This certainly does not make it sound like he thinks Magic Online is going anywhere anytime soon.
2016 Hasbro Earnings Report
Hasbro management continues to mention the investments they’re making in Magic, but there are two noteworthy comments from the Q&A segment that stand out:
"As far as 2017 goes, we think as we looked at and continue to make those investments, because again what we always stress is, it's really for the long-term sustainable profitable growth of Hasbro that we will still have some investments, particularly in 2017, on Magic: The Gathering to get Magic Digital Next up and running and some other investments that we'll continue to make in the business."
"So, we really do look at the way we invest in our business to set us up for the future, most notably in Magic: The Gathering. For example, we have Magic Digital Next, which has been an investment for a number of years and will continue to be a bit of investment this year because, of course, late this year, you'll start to see some of the evidence of what the team has been working on as they begin to put that platform out into the market."
Both of these statements seem to indicate that Magic Digital Next will be initially released, or at least revealed to the public, toward the end of 2017. The phrase "put that platform out into the market" leads me to believe that the plan is to begin to roll out the public Beta in late 2017. This also lines up with what Deb said a year earlier when she stated that they expected to see revenue from these Magic Online investments starting in 2017.
Which brings us to the present.
On Friday, February 17, Hasbro is scheduled to give an investor update at Toy Fair. The CEO said that they would go into more detail about their upcoming products, but there’s no guarantee that they talk about Magic Digital Next. That’s the next time the public is likely to hear something, though.
So what do we know?
No too much definitively, but we do know this:
- WOTC has been spending a lot more money on Magic Digital since 2013.
- MTGO has very high profit margins and management believes investing in the platform is a good idea.
- Hasbro believes Duels and MTGO each only appeal to certain segments of the MTG player base and are eager to develop a “seamless digital experience that meets all the players' needs from new players to pro players.”
- Hasbro expects expense levels for Magic Digital to be higher than usual until 2018.
- Hasbro expects to see revenue from this new platform by the end of 2017.
Is Magic still going to have multiple digital offerings at once?
So these are the possibilities of what could happen:
- Magic Digital Next exists alongside MTGO and Duels.
- Magic Digital Next replaces Duels and MTGO.
- Magic Digital Next replaces just Duels.
- Magic Digital Next replaces just MTGO.
It seems very unlikely to me that WOTC would continue to update 3 separate digital platforms for MTG so I think the first option is pretty unlikely. Based on management statements about MTGO, it also seems unlikely that it replaces just that. I think that this new digital Magic platform, whatever it may be, is either going to replace Duels, or both Duels and MTGO.
So is Magic Digital Next going to be like Hearthstone?
A lot of people have been suggesting that WOTC is planning on simplifying the game in order to better use a freemium model, but I don’t think that’s the case. Instead I am expecting that they are planning on just completely overhauling the new player experience as part of a new MTGO client. The thing is that in order to make the same amount of money from a freemium model as they currently do, they would need to attract a much larger audience since their average revenue-per-user would go down dramatically. I just don’t see that being likely, especially when MTGO has historically had problems with supporting more players than expected.
Is my Duels/MTGO collection safe?
I don’t think the Magic Online business model is going anywhere, which is good news for people that currently own collections and bad news for people who are hoping that WOTC moves to a free-to-play model. I think that not because WOTC is necessarily sympathetic towards players who currently have large collections, but because it would likely be a bad business decision for them. There is precedent for Magic Online collections transferring between every past Magic Online client, and I think that will be the case with Magic Digital Next too. Duels, on the other hand, has had no such precedent and I would think is unlikely to transfer collections to whatever this new platform is.
So when do you think this thing is coming out?
Based on the most recent Hasbro management statements, I think it’s likely that we’ll get an official announcement later this year and possibly even the start of a public Beta. I think the plan is then to fully release the new client in either 2018 or 2019. The year 2018 jumps out as appealing to me though since it would coincide with Magic’s 25th anniversary. You might think Hasbro doesn’t care about something like that, but the 40th Anniversary of Star Wars is this year and the Hasbro Executives spent a lot of time in the most recent shareholders meeting talking about how they were using milestone that to drive sales.
If it’s coming that soon, then why haven’t they publicly announced it yet?
I think the reason is pretty simple. I don’t think the new client is ready to be shown yet and WOTC is trying to avoid announcing anything until they’re completely ready. The reason it’s been discussed so much in the shareholders meetings is because the Hasbro board has to explain what they are spending so much money on. As much as you’ve heard about "Magic Digital Next," there has been no official WOTC public statement that it even exists, only references from shareholders meetings as this article should show. It’s worth remembering that MTGO has had a history of announcing ambitious release dates and missing those dates. That being said, E3 is coming up in June and PAX is in the fall. If WOTC has a new digital client to announce this year, those two expos seem like good places to do so.
Based on the publicly available information, I believe that Magic Digital Next is the code name for a new MTGOv5 client that is intended to replace both Magic Duels and MTGOv4. I think that existing Magic Online collections will transfer over, but Duels collections likely will not. Instead of designing a whole new Duels client, I believe it’s likely that WOTC instead created a brand new online tutorial and new player experience that exists within the larger platform of a new Magic Online client.