After the phenomenal success of open source software development in the 1990s, someone at Wizards of the Coast decided to try to follow this model for their roleplaying game, Dungeons & Dragons, purchased in 1997 when they acquired TSR. Specifically, they decided to publish a cut-down set of rules called the SRD, which represented the core of what it takes to publish a Dungeons & Dragons-compatible game. The idea at the time, which worked well, was to encourage what marketing people call an "ecosystem" of publishers who made everything from full roleplaying game systems to source books for D&D.
All of this made sense, but Wizards had opened the genie's bottle, and there was no putting it back. As long as they continued to encourage their new ecosystem, they were assured of their place as king of the mountain. However, in 2008, they announced that they would end support for D&D version 3.5 and begin publishing version 4.0. This new version would not be available to third party publishers for creating their own games, at least not at first (they have since published a new, more restrictive set of rules called the GSL).
At the same time, a small publisher named Paizo had been licensed the rights to publish Dragon and Dungeon magazines. These two magazines were in decline at the time, but Paizo manged gain the enthusiasm of the roleplaying community by dipping into the well of nostalgia that many players had for the game. The printed updates to classic adventures in Dungeon and breathed new life into old stapes of Dragon such as the "Ecology of the..." series. They also fanned the flame of the original Dungeons & Dragons setting: Greyhawk. Their most impressive accomplishment was the enthusiasm generated by their "Adventure Paths." These 12-issue serial adventures were published in Dungeon magazine and the first was then collected as a hardcover book. Overall Paizo did quite a bit of cheerleading for Wizards and in 2007 they received their reward: notice that their licenses to all Dungeons & Dragons products were being revoked so that Wizards could develop a stand-alone Web site to replace the print magazines in coordination with the launch of the 4.0 edition.
Of course, the consensus at the time was that Paizo was doomed, but Wizards' Open Gaming License for the 3.5 edition was their way out. They immediately converted all existing Dungeon and Dragon subscribers over to new products based on the Open Gaming License. In less time than most publishers take to decide to take on a project, Paizo had their own campaign setting for D&D 3.5, published under the OGL along with a new adventure path, Rise of the Runelords. However, the OGL also allowed for full 3.5-compatible systems, and that was Paizo's next step. Over the course of the next two adventure paths that they published, Paizo continued to work on their variant system: the Pathfinder RPG.
Today, with several adventure paths published under their new system and a constant stream of supplement books published for their world of Golarion, one has to wonder if Wizards of the Coast is feeling burned. The popularity of the Pathfinder RPG hasn't reached the level of D&D, but it continues to build a dedicated base of adherents and is frequently referred to as "D&D 3.75."
So should Wizards not have created their "ecosystem?" Of course they should, it was a shot in the arm to what many declared a dead product. What they should not have done is assume that because they wanted to move on with a new edition that the industry would either follow or contentedly watch their businesses crumble. Wizards should have built support for 4.0 among their publishers and then eased into it without yanking the rug out from under Paizo. This would have resulted, at the very least, in reducing the number of long-term players that walked away from their version of the game.