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Transcript of Radio Free Decipher Interview with Warren Holland

Hello everyone. My name is Warren Holland. Thank you for joining me on this special Radio Free Decipher. Usually, my role as CEO of Decipher is a very pleasant experience. This is a wonderful company, with wonderful people, and I love what I do. However, today my job is a little bit tougher... and it involves giving you some sad and unpleasant news about the Star Wars license.

Lucasfilm has decided not to renew Decipher's CCG license past the end of this year and our current manufacturing and sell-off period is through April 30, 2002.

While we have to accept this decision by Lucasfilm, I want to assure everyone that Decipher will not abandon our players, retailers, or distributors. Decipher's business is quite strong at the moment and if it were up to us, we would be making Star Wars cards for the next twenty years.

I also want to let our customers know, that this decision by Lucasfilm does not reflect Decipher's wishes. We understand the depth of love that people have for these games and we will do our part to honor and respect that.

We have some very innovative ideas to discuss with you on how Decipher will continue to provide service and support for these games. You all know Kyle. He has been a Star Wars gamer for many years, and he has agreed to pose questions to me on these issues from a consumer's perspective. I'll give you more details about what we are going to do around this decision as the interview progresses. So, let's get started.

All right, thank you Warren. I think the first question that I have for you which is going to be on a lot of people's minds is, "Why did Lucasfilm decide not to renew the Star Wars CCG license with Decipher?"

Well... let me start by saying that rumors have been floating around about this license for a couple of years, and I guess everyone's going to have to draw their own conclusions on why Lucasfilm ultimately made this decision.

But... I have to be very honest and say that I don't believe this decision is a very wise one on the part of Lucasfilm, and I'm not really telling you anything that I haven't already told them. However, Lucasfilm is the owner of the Star Wars property. And within certain limits, they can do with it as they wish and we all have to accept that. Also, as many of you know, Hasbro is a master toy licensee for Star Wars and George Lucas is a 10% owner of the company. And... It's no secret that Hasbro paid $500 million for the Star War license and it just hasn't performed that well for them. So, I think we had to contend with all of that.

I'm not going to pick on Lucasfilm here, but I will acknowledge that the past few years working with them has been a very frustrating experience for Decipher. There were many things we wanted to do and we were simply not allowed to do them. But through all of this time we've been very loyal to the property even when there were reasons for us to exit. We held the Star Wars license for more than six years, and we successfully produced and marketed some of the most popular trading card games of all time, and I'm very proud of that. So, Lucas was always overjoyed with our products and not one time in six years did I ever hear a complaint from them about the quality of what we created.

I think that prior to the purchase of WotC by Hasbro, the relationship between Decipher and Lucasfilm was great and our Star Wars games had a very bright future. In fact, Lucasfilm was going to expand our licenses. But, a lot of legal issues were raised about the manner in which Lucasfilm handled this license and I've just resolved those issues with them in a settlement in the past few months and I'm not going to be disclosing the terms of that, but it's just kind of opened up our ability to talk about this a little bit more at this time.

Well, then was it a question of money?

No, not really. I know I've heard in the past that there were rumors that Decipher didn't care about the Star Wars license any longer and I should probably put all of those to rest because it's just not true. There were many facts that the public didn't know. We fought very hard for these games. We were very serious about trying to get this license, and in fact, to tell you how dedicated we were, Decipher offered Lucasfilm more money to continue this license than we've ever offered for any license in our history. I'm not going to tell you what the number was because you would fall off your chair, but it was enormous. Let's put it this way... it was more than George Lucas spent to make the original Star Wars movie and it was six times what we paid for Episode I.

Wow...

So to be perfectly honest, we had valid concerns about overpaying for the license but we loved this property; we had invested years of our lives in it. Plus, we wanted to continue to support the games for all of our consumers and all of our players.

Well, then why do you think that they made the switch?

Well... it seems Hasbro used Pokemon as an example and convinced Lucasfilm that they could double the Star Wars sales and build it into this phenomenon and address a younger audience. We told Lucasfilm honestly that that was not going to happen. We had already made Star Wars into one of the most successful trading card games in history. Decipher has the best game designers and artists in the industry and we offered to use those talents for years to come in support of Star Wars and our players, and simply stated, Lucasfilm didn't see the value in that.

So what does this mean then?

Well... for one thing it means we will not be making any new cards for these games. For another, it means that now there will now be a fourth Star Wars trading card game to come to market. A game that will be totally incompatible with any of our existing games. It also comes at a very weak time for the Star Wars license, so the logic of this move kind of escapes me.

I know, you know, we all know our customers feel an enormous amount of ownership for these games. And in fact, we've cherished that loyalty for years. I have been preaching this to Lucasfilm for years and unfortunately it's a very hard concept for them to grasp, so all our arguments have kind of fallen on deaf ears.

But Decipher's message to everyone in all of this is going to be... We would have never made this decision on our own but we are going to do everything we can to support the established base of Star Wars players for as long at they want to play the games.

OK, Warren. Well, as you know, rumors have been circulating for months that Decipher was not going to be doing the Star Wars license in the future. It's been on our bulletin boards and all over the place and many players have contacted the company or posted messages on our web site asking if the rumors were true. How long have you known that Decipher would not be granted the Star Wars license and why did we wait until now to make the announcement?

I certainly realize that the rumors have been out there, but quite simply I have not been in a position to address them. As I mentioned in your first question, there were many serious legal questions that arose from Lucasfilm's handling of the license. The simply reality is we told Lucasfilm, and we have repeated this mantra for two years now, that moving this license would be disrespectful to their and our customers who have invested one quarter of a billion dollars into our Star Wars games.

So quite honestly, while we had indications of this for some time, we kept thinking that Lucasfilm would come to their senses. We had a lot of people inside Lucas tell us rumors to that effect but they just never came about. We didn't want to do anything during this battle that would kill the games for our players should we prevail... even in the last minute. Making announcements before we could solidify a plan to help players continue the game would have just caused this premature cardiac arrest of the games. So, I set Decipher's interest kind of secondary to that. I admit that I had this kind of constant precarious task of battling the objectives of players, and our employees, and retailers, and distributors, and even Lucasfilm... all while facing this license uncertainty. So, at great expense we kind of cautiously continued development on the brands that we were even uncertain about. Yet at all times in this process we always believed that we were the best company for this license. No question about it.

So I can assure you that our goals have always been to keep the games alive and to provide as many cards to players as possible given the balance of what we had to deal with at the time. There's been a lot of hard work on the Star Wars license in this past year by Decipherians under very tough conditions. And frankly, the financial rewards have been zero. We paid millions of dollars for the rights to produce these games through 12/31/01 and yet we still have a lot of development work that we've done that is just simply going to be trashed.

Another thing is I'm a firm believer in that it's not over until the fat lady sings... but now it appears that the opera has started, so now's the time. We're announcing the fate of the game when we feel we have the best opportunity to protect the players' and retailers' investments and give the games life for as long as we can as best as we can.

It's not always practical in the middle of all of these things to tell people everything. Still, I assure you that we've always had the player's interest in mind, and we've had contingency plans to support players and other consumers should the worst happen and we are going to implement those and support these games in a big way.

Well, Warren, players are no doubt going to want to know why Decipher continued to release Star Wars expansion sets after the company thought there was a possibility Lucasfilm would make this decision. You know we did a lot of Star Wars this past year in 2001. What can you say about the perception that Decipher was trying to make as much money as possible before the license expired?

Well... it certainly wasn't an issue of making money because we haven't made any money on Star Wars in some time.

Did you ever see the movie Galaxy Quest? Well, there's a line in there, y'know - "Never give up. Never surrender." Well, that's kind of what Decipher has been doing. Not giving up and not surrendering.

I know people have wondered about our Star Wars product mix for the past few years, because so have we. Internally we've struggled with those issues. But I can tell you for the most part that what consumers have seen was not really Decipher's first choice in what we wanted to make. I certainly want us to sell cards, but it was very clear before we ever entered this year that putting out a lot of different items in a short period time was not going to maximize our sales. It was clearly going to cannibalize our own work on expansion sets, and each new expansion set would simply take sales away from the previous one because all these time periods are compressed. And the result is that retailers are simply going to order less product, and we knew that. However, one of the shining benefits of this path is that we have a lot of cards that we produced that are now on the marketplace for players to enjoy for years to come instead of all of that sitting on the development shelf.

Also, the threat from Lucasfilm that the license may go to Hasbro meant that we had millions of dollars in inventory at risk. So, we chose to continue development and add as many new cards into the environment as we possibly could, and to keep in mind, always to keep in mind that the rug might be pulled out from under us.

I mentioned a moment ago that what people saw from Decipher in the past year was not really our first choice for products. And I kind of think I owe it to everyone to let you know really what our first choices were. So again, this is not to pick on Lucasfilm, but they simply didn't understand this industry and there were hidden realities that our customers never knew that we struggled with at the time.

So, on the web page with this Radio Free Decipher interview, I'm going to post some direct quotes from one of the many presentations that I made personally to Lucasfilm executives 18 months to two years ago. I think when people see this information, at least you will get a sense of where Decipher's heart was; what we wanted to do for customers in the areas of marketing and public relations, and digital cards, and Star Wars CCG 2nd Edition and more. So, if it were up to us, Star Wars digital cards would have launched, Star Wars 2nd Edition would have launched in 2001, and a lot of very interesting marketing programs would have been implemented. The truth is, Lucas simply didn't approve these programs and there was nothing we could do about it. I don't think Lucas Licensing is evil (well, although sometimes in my dreams I kind of think that they're evil), but that's beside the point. I don't really think they're evil, I just think they've made some bad business decisions and I've been very open with them about that.

Some players may wonder, Warren, if Decipher lost interest in producing the Star Wars games. Did Decipher ever stop actively pursuing the license renewal even after the poor reviews of the Episode I, or was it The Lord of the Rings license, the fact that we acquired that?

No. Actually we never lost interest in the license at all. Our dedication was certainly tested at times when the Episode I reviews came out and from an inside perspective, in the business environment, the Star Wars brand was damaged a little bit through all of that. But we were very loyal to Lucasfilm and to our customers. During all this time Lucas and Episode I kind of had a lot of licensees that were put out of business because of Star Wars, and Decipher never stopped supporting these games even in any of those bad times. In fact, even during that time we almost purchased the Star Wars fan club at one point.

So, Star Wars has been a very great success for us and there was a tremendous community who supported these games and we valued that. And that reason alone was enough for us to fight for this license.

So, I have to admit that we're very, very openly excited about what's happening with Lord of the Rings, but the truth is we would be thrilled to be working on both of these properties right now (along with Star Trek and other things that we have coming). Y'know, licenses have ups and downs, and we have been very dedicated to following this license through all of those times. So this is really, totally a Lucasfilm decision. It's not Decipher's decision.

Well, some players have speculated that Decipher cancelled DecipherCon because of the Star Wars license or for financial reasons. Can you address that?

Oh sure, that's actually a pretty easy thing for me to address. It certainly wasn't financial, because when I made the decision, I expected that we would lose money, and we did. So that kind of came about. But I certainly understand the question and the emotions, but... no. My DecipherCon decision was exactly as advertised. The Star Wars license was never a factor. And in fact, DecipherCon was this opportunity to celebrate Star Wars and more and I didn't really relish losing that opportunity. I know some people didn't agree with the decision, but the bottom line is it just came from my heart. It's as simple as that.

Warren, can you tell us whether or not doing the Star Wars license will drastically affect Decipher's future stability?

Well... keep in mind that this is a battle that started two years ago for us, so we've had a lot of time, we took a lot of steps to maintain Decipher's place in this industry. So, while it's a very sad thing for us emotionally, financially we've prepared and we were prepared for the license to go either way. For example, in January we purchased Fantastic Media and moved into the fan club business with Star Trek and Lord of the Rings. Last March we hired the staff of Last Unicorn Games and added roleplaying games for both Star Trek and Lord of the Rings. We've added digital cards. We now publish three magazines. We have a growing online store business with the Fan Club operations, and that part of the business will grow even more in the next year or so. And we also have unannounced projects that are in the works.

So, we've more than made up for the Star Wars business financially. In fact, to kind of give you a brief example of that, our first expansion set for Lord of the Rings (which has now been out for a little less that two months) has already passed the sales levels of any of the Star Wars CCG expansion sets we've done in the past four years. So I assure you we're here to stay in a very, very big way.

Warren, I know that you've addressed this briefly earlier in the interview, but I'm going to state the question anyway. Will any new Star Wars trading card game product produced by any other companies be compatible with Decipher's Star Wars game?

No, unfortunately they won't. All of the Decipher game mechanics and innovations are the property of Decipher, and any new Star Wars trading card games produced by Hasbro will not be compatible with any of our previous product. Lucasfilm did have a contractual right in our license agreement to license that gameplay from us by paying royalties to Decipher, but they chose not to do that.

Warren, you've mentioned a few times in the interview already that we have a lot of plans in the future of Star Wars. Can you tell us what our plans are for the continuation of the Star Wars CCG communities?

Oh, absolutely. If there's a bright moment to this interview, this is kind of the bright moment to the interview. We are very dedicated to our players, and retailers and the distributors. And after April 30th, Decipher will be a private citizen in the Star Wars community. As such, we'll do everything we can to continue these games for as long as the community wants to play them.

There are three primary external groups that we plan to support, all of which have supported Star Wars games, y'know, with their hearts and their wallets for years. Those would be players/collectors (as a group), retailers (as a group), and distributors. We plan to honor and assist all of these groups free of charge. So, for example, some of the things that we're going to do is that we're going to continue our tournament prize support system. We're going to continue the player ranking systems. We're going to continue the message boards and other selected web services that we provide. We're going to hold unofficial world championships for Star Wars CCG and YJ and Jedi Knights at DecipherCon in the future. We're going to try to keep all the volunteer corps for these games and more. And in fact, to tell you one of the most innovative things that we plan to do, I kind of need to tell you a story of something that we were not allowed to do first to kind of lay the groundwork for that.

Recently we had this wonderful concept for a last product that we were internally calling Reflections: Virtual Gold, and Lucasfilm had approved us doing this last product. It was to be a celebration of Star Wars and it contained new gameplay, and many gifts for players and collectors. For example, the set contained about 300 new cards yet it was designed to be very easy to collect. And each booster pack contained a couple of foil cards, one of which was, in celebration, featured the signatures of key Decipher team members over the years who brought you this wonderful product. However, the most exciting feature of Reflections Gold was a new concept called virtual cards. That was the controversial part of this for Lucas. About a third of the cards in the game were of this type and our art department had already completed work on them. Basically virtual cards work like this: Each card was numbered and named, and it had all of the relevant statistics that you would expect on a card, except for one thing. The gametext area was blank, except for a movie logo. There were logo cards for each of the four existing Star Wars films and they were packed in these unique displays so that if you wanted the Star Wars cards, you could buy the Star Wars display. And if you wanted the Empire Strikes Back cards, you could buy that display. It was very consumer friendly and very easy to collect, and all those displays were all self contained. The concept was however, that the game text on these cards didn't go on the cards at all. It went on a web page that was to be totally administered by a players' committee. So in effect, every four to six months the players' committee could change the gametext on these virtual cards. Thereby providing the equivalent of a new virtual expansion set. And we had proposed that all of these virtual cards be tournament legal.

I repeatedly pitched this concept to Lucasfilm, and unfortunately they turned it down – both the virtual cards and some of the other interesting things we wanted to do in terms of gifts for the players. So while Decipher can't do this last product in the way that we really wanted to do it, we will nonetheless support these games as a private citizen going forward in a lot of ways.

So, for example Decipher will be announcing the formation of a non-profit players' group called, "The Players' Committee for Star Wars CCGs." This committee will just be a small body of fans consisting of some of the best players and playtesters in the world. The player's committee will be totally made up of volunteers. However, Decipher will provide the committee with a lot of support: email services, some office space, computer facilities, listserv facilities, web support, technical assistance, and things like that. And we'll do all of this free of charge.

The players' committee will be the community's voice in determining the future of the game, proposing ways that players can get the most out of their investment. They'll also serve as overseers of the future rules support and the FAQs for the game. So, at the end of April we'll turn over all the functions and support materials to this group including tournament prize support, and the web pages, and the world championship duties, etc. We'll also donate cards to this group so that they can carry out these duties. They'll always have all of the reference material that they need. And then part of the responsibilities of the members of this players' committee will be to oversee a kind of different implementation of the virtual cards concept that I talked about. So, instead of cards that Decipher envisioned for this last product, the committee could select a group of cards from the existing universe of Star Wars cards and post replacement text on the web for those. These cards would then become tournament legal and at some point soon, Decipher will announce the details regarding the member selection for the "players' committee". As well as the details of which cards are selected to be included in the "virtual card" pool after the committee is selected some time in January. At that point, the committee will become self-governing by the players. So the game really will be in the hands of the players.

Giving the game back to the players. That's great.

So to speak, yes. Also I mentioned that Decipher had about 200 cards developed, actually 300 cards - about 100 of those were the virtual cards that we're not going to be releasing now. And although Lucasfilm will have to approve this, it's our desire to provide these cards to our players free on the web in a PDF document so that players can print them out at their leisure and actually even use them in tournaments. Certainly we think it's better that these cards kind of get out in that form instead of just kind of rotting on the development shelf.

If any of the people listening want to volunteer to be a part of this "Players' Committee," you'll find an email address to do so on the same pages where you find this Radio Free Decipher interview.

That's not, y'know a lot of those things are player focused, but we also have a lot of programs that are directed towards retailers and distributors so that they can actively keep their communities alive.

Dean from our Sales group and Monica from our Marketing group will be working on a lot of programs right after the holidays, but for example, one of the things that we're going to do with retailers and distributors is offer a sales incentive program for end-customers. The way that'll work is that we will distribute certificates to all these retailers or any retailer that wants them. And any customer who buys a box of Star Wars product will get a free box directly from Decipher just for the shipping and handling charges. So this provides an opportunity for the retailers to support the game but not also be in a place where they have to discount a lot of their margins.

Also, we are going to continue the tournament support for retailers. It's not just a consumer thing, it also impacts the retailers. And in some cases we'll be increasing our prize support to help the retailers keep their player communities alive. We're even discussing a program of some limited stock balancing within the Star Wars line to distributors and the possibility of offering some extended terms to help distributors and retailers carry this product and to keep their Star Wars customers happy.

So, y'know, over the past six years we've been gratified and humbled by the popularity of these games and the overwhelming commitment of the players to Decipher. While we'll no longer be able to produce new cards, we intend to do the best we can to enable the Star Wars CCG community to continue playing these games for as long as they're interested in playing them.

Warren, my last question really isn't a question. It's more of how has this impacted you, and what are your personal feelings over this announcement?

Well, as you can imagine, the announcement is quite sad and disappointing, and I think especially this is going to be a sad thing for our players and that's something we have to contend with. A lot of us have given six years of our life to Star Wars. However, I'm a firm believer that the universe has a way of unfolding as it should. Who knows, if Lucasfilm hadn't started this path, y'know, with us a couple of years ago, we might not have gone after the Lord of the Rings license, so things have a way of working out. But I can tell you that without a doubt we will miss making these cards for our players. It's been a labor of love for a very, very, very long time.

Absolutely.

And, y'know, I think Lucas made what we think is a very poor decision, but we are all grownups here. We can take it. I know people will be very sad, and we'll be right there with them. But, as I've mentioned we have plans to vigorously support Star Wars as a private citizen in the future and we will not abandon our players or other supporters.

So, over the next four months we will continue to ship Star Wars CCG, Young Jedi, and Jedi Knights into the marketplace. So get out there, it could be your last chance to get these games that you love sooooooo much. By the end of April, we intend to turn almost everything over to the players' committee, as I mentioned. And we'll support their activities as best we can. Decipher will offer resources and technical support free of charge to continue the game playing experience for everyone who has invested in these games.

So, I guess I want to close by saying I'd like to thank all of our players, collectors, retailers, distributors all over the world. I know this is sad news for many of you. Still, we very much enjoy having you in the Decipher family and we're here for you.

All right, thank you, Warren.

Thank you, Kyle.

 

December 28, 2001

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