Wizards of the Coast Releases SRD Under Creative Commons License (CC-BY-4.0)

I'm not sure that's true. The actual bottleneck with these games is not money but time and interest: you have to have a group of people who all like the same game, and you have to be able to get the group together regularly to play it. There are plenty of people who are interested, but I suspect that the vast majority of them are already players of whatever game they favor (if they haven't switched to something like World of Warcraft--see below), so I don't know that there's a lot of untapped market share.

As for getting the group together to play, when all of the players are teenagers in school or college, that's relatively easy. It gets a lot harder when people are adults and have to work, pay mortgages, deal with various curve balls that adult life always throws at you, etc. And if you know you're not going to be able to devote the time to it that you used to as a kid when you learned the games (I started playing D&D in eighth grade, and spent far more hours playing it between then and graduating from high school than I have in all the years since--and my 40 year high school reunion is this year), it gets a lot harder to justify spending money on game materials.

Another factor is the availability of online games like World of Warcraft, which I mentioned above. These games solve the time and interest problem in a way that can't help scaling much better than in person tabletop play: you can play from your computer at home and there are always other people online playing. There are also limitations, of course: for example, you can't make up your own adventures and you can't have house rules, which were both features of every D&D campaign I have ever encountered. But it's another factor that I think tends to limit the size of the available market for games like D&D.

All of the above factors seem to me to indicate that there is a natural limit to the size of the market for games like the ones WoTC is producing, and the actual active market is close to that limiting size. If that's true, then the option of trying to make more money by scaling instead of markup simply isn't available to them.

DMs are higher information consumers than players.

I think this is a very important point to recognize. The proper market unit for a game like D&D is the play group, led by the DM, not the individual player.

I’ve been following the OGL since its release back when I was a a broke HS kid obsessed with the idea of Free Software. I even had a (very) short conversation with Richard Stallman about it “it’s good enough for a game.” I didn’t agree.

This is great, and, completely expected if you know anything about the people involved.

Being able to publish anything you want and still make use of the SRD is a great thing for D&D.. But I still kinda hoped they’d blow it up so we’d get a bloom of new systems. Whatever, at least publishers are more likely to move away from OGL-like licenses and over to CC now.

D&D is a strong franchise, but the merchandise and rulesets are hardly necessary to play the game.

To play RPGs, even practically-D&D-in-all-but-name, all you need is dice and paper.

Nerds are wont to roll their own.

I may not be a regular guest feature in the HBR, but it seems like common sense even to me that this is a strategically, financially dangerous path to take given their customer base.