A discussion of hybrid open source and proprietary licensing models.

[Marshall Van Alstyne <marshall AT MIT.EDU>]

At 01:44 PM 9/2/2004, Rob Myers wrote:
> Wizards of the Coast (WotC), a
> division of Hasbro, were responsible for the Pokemon card game craze.
> They used some of the money from this to buy the ailing Dungeons and
> Dragons (D&D) Role-Playing Game (RPG) from its bankrupt owners. RPGs,
> of which D&D is the first and most successful, are a global
> multi-million-dollar market. But by the end of the 1990s this market was
> shrinking fast. WotC had to have a sound business plan to justify
> aquiring D&D.
...

> The modular copyleft license is the
> Open Gaming License ("OGL"). It is similar in principle to the
> LGPL. It can be applied to some of a work without affecting the parts
> identified as "Product Identity" by the contributor. So a game
> based on (for example) "The Matrix" could Open its rules and
> other materials without having to Open any of the core IP of the
> "The Matrix" brand, which would be marked as Product Identity.
> The OGL is not a Free license, and that places a limit on not only how
> much brand value can be lost, but also on how much can be created and
> returned. It is not a Free license because of its modularity and its
> termination clauses based on mis-use of Product Identity. But it is still
> the oldest and most successful example of a *hybrid* Open Content
> license.


This is very interesting.  I found a list of compatible gaming
licenses from Wizards of the Coast at
http://www.opengamingfoundation.org/licenses.html
 
Then, there is also a useful FAQ on the license at
http://www.wizards.com/default.asp?x=d20/oglfaq/20040123f



> The brand license is the d20
> License. The d20 license allows any company to use the "d20"
> logo on their role playing games and supplements that use the d20 rules
> system if they meet various conditions

...

> The d20 license is not any sort of
> Free or Copyright license. It is a value exchange or barter license: you
> give WotC some advertising, you give the community some content, and you
> get to use WotC's brand in return.

Very intriguing example of quid pro quo.  I suspect that this can be
leveraged in other ways.

The interview with Dancy (VP of WoTC) also points out that it's possible
to sell your own product based on the D20, without paying royalties to
WoTC.  They really rely on network effects to boost sales of their
core products.  <More to say on this in a moment...> 


> The d20 and OGL licenses have
> created an explosion in third-party content and driven WotC's sales. The
> (now ex-)WotC exec responsible for the OGL, Ryan Dancey, claims it was
> written in part to protect D&D for the community from events like its
> previous owners bankruptcy. But it was also written to boost WotC's
> profits, working with the d20 license to make as much of the Role Playing
> Game industry as possible a network driving sales of the core D&D
> rulebook, the Player's handbook (PHB).
>
> The OGL has succeeded admirably in both its community and commercial
> aims. It is possibly a useful model for computer game modding or for
> opening other systems where brand and content want to co-exist and drive
> each others value.

Rob, this is the best example of a hybrid license I've seen.  Let me
pull out two additional points from Dancey's interview and from the FAQ
useful for modeling and also for fairness.

1 - Dancy offers a first rate example of the network effects issue that
we should seek to model.  Quoting Skaff Elias, a sharp guy inside
WoTC:

"All marketing and sales activity in a hobby gaming
genre eventually contributes to the overall success of the market share
leader in that genre." 

In other words, the more money other companies spend on their games, the
more D&D sales are eventually made. Now, there are clearly
issues of efficiency -- not every dollar input to the market results in a
dollar output in D&D sales; and there is a substantial time
lag between input and output; and a certain amount of people are diverted
from D&D to other games never to return. However, we believe
very strongly that the net effect of the competition in the RPG genre is
positive for D&D. 

To parameterize this, we can examine (i) the level of network
effects that grow a market versus (ii) the lag times after which
complementary investments have an effect and (iii) the extent to which
competition complements or substitutes for existing sales.

2 - The next section is a direct quote from the Open Gaming FAQ put out
by WoTC.  It notes that in practice WoTC could sell 3rd party open
content and remarks on the fairness of this effect.  Actually, there
should be an economic way to achieve the right result.

Begin quote: ------------------

Q: Does this mean that someone could take Open Game Content I wrote
and distributed for free, and then put it in a product and sell that
product to someone else?

A: Yes.

Q: To be clear: Does this mean that Wizards of the Coast could take
Open Game Content I wrote and distributed for free, put it into a
Dungeons & Dragons product and make money off it?

A: Yes.

Q: And they wouldn't have to ask my permission or pay me a
royalty?

A: No, they would not.

Q: Isn't that pretty unfair?

A: If you don't like the terms of the Open Game License, don't
publish Open Game Content. Since the terms of the License are public
knowledge, and they apply to everyone equally, including commercial
publishers like Wizards of the Coast, your decision to use the Open Game
License means that you consent to abide by its terms freely and without
coercion. That's about as fair as anything ever gets.

End quote: ------------------

WoTC may have a stronger argument than they actually make.  With the
right licensing terms, it should be possible to achieve fairness as
well.  If the licensing terms commit (i) the standards or platform
author (i.e. the 1st developer of Open Game Content) to leave that code
as Open Content into perpetuity and (ii) users can gain access to both
original and subsequent open content from numerous alternative sources,
then in economic terms, WoTC can't really charge for the value of 3rd
party contributions.  This means a user has a choice not to pay for
that specific content simply by going elsewhere.  What WoTC can
charge for is convenience of bundling disparate parts together and for
compatibility assurance.  They can also charge for indispensable
parts of a program that are required to run the entire program.

Despite the fact that the original owner could potentially the copyright
later, OGL actually does give a perpetual right to use Open Content in
clause 4 and the right to use the existing license if it's later changed
(in clause 9).  So WoTC has actually gone a long way toward
undercutting their own ability to charge for 3rd party open content,
which of course is fair.