Why Did the Original Maker of Dungeons and Dragons Games Go Bankrupt?

This isn't going to be a popular answer, but the bankruptcy of TSR was largely due to the man who created it: Gary Gygax himself. Gygax, a talented designer, often lacked the business acumen required to run a successful company like TSR. His inability to secure financing, work effectively with colleagues, and retain key employees, coupled with his tyrannical and unfriendly management style, contributed to the company's downfall.

Fatal Flaws of Gary Gygax

There were several significant flaws in Gygax's management of TSR. The first and most critical was his conflict with Dave Arneson. Arneson was just as instrumental in the creation of DD as Gygax. He was essentially the "Jack Kirby" to Gygax's "Stan Lee" in the DD universe.

The Controversy with Dave Arneson

At the beginning of TSR, Arneson was appointed Director of Research and later became the head of the Shipping Department during their growth phase. However, a dispute over time off led to his demotion from Director of Research but he retained the Shipping Department role. Imagine your good friend and co-creator of a game telling you that you no longer have any creative say in its design while you are forced to manage a crucial aspect of the growing company.

A Descent into Legal Strife

After the fall of Arneson from Director of Research, he left and sued TSR for royalties in 1981 and 1984. His lawsuit nearly led to the bankruptcy of the company, but the capstone of Gygax's mismanagement came when he attempted to buy up enough shares to control 51.1% of all stock, combining it with his son's holdings. This action created conflict with the board of directors, particularly the Blume brothers, who were investors and writers at TSR. Ultimately, Gygax's aggressive and often tyrannical behavior alienated almost everyone in the company.

Following his numerous enemies in the company, Gygax was ousted by Lorraine Williams with the help of the Blume brothers. Despite Williams' controversial reputation, her actions saved the company from financial ruin and obscurity. However, by 1997, the margins of Dungeons and Dragons were too high to maintain, and TSR was once again insolvent.

It was at this point that Wizards of the Coast purchased TSR and created the 3rd edition of DD. Even today, Dungeons and Dragons barely makes a profit through its standard game model, leading Hasbro/Wizards of the Coast to attempt to aggressively monetize it with open game licenses and an upcoming OneDnD initiative.

Conclusion

While Gary Gygax was undoubtedly a visionary who created DD, he was ill-suited to run the business side of the company. This oversight led to the eventual downfall of TSR, paving the way for Wizards of the Coast to revitalize the DD brand.