As my fans (all two of you!) may have noticed, I have not been posting or active in a while as I have been recuperating from a lengthy bout of keyboard laryngitis- which is a probably more of a blessing than a curse today. That said, a recent comment made me remember that no matter how many times I post about history or point people to resources or remind them not to play bards, I have to occasionally repeat what I have said before (or say it a different way) because, like Sisyphus, I think that this time I'll get the rock over that hill.
That said, before getting into the meat of the essay and the history, I am again reminded of the previous defense I wrote regarding Gary Gygax. If you read it, you will see that I repeated that I had recently heard a podcast series (h/t Revisionist History) that went deep into Jesse Owens generally, and specifically into the story everyone knows about Jesse Owens and Luz Long. As I noted, the version we all know isn't just a little wrong- it's completely false. I brought it up there to remind people that actual history isn't kind to legends and stories. But there is a more important point to that- when I heard the podcast, and the facts, I didn't want to believe it. It is very hard to reconsider things we were told that we want to believe; it's really hard to do so when we get new facts that contradict those opinions that we hold true or that form core beliefs. Insert confirmation bias or cognitive dissonance or identity consistency or whatever other words or terms you have in your vocabulary and experience, but we all know it ... well, we all know it when we see it in other people, amirite?
Anyway, I spent the entire podcast about Jesse Owens and Luz Long waiting for the other shoe to drop- for the "real facts" to come out. For something (anything!) that would allow the story that I knew to be true to emerge. I did independent research because .... I didn't want to believe that actual facts confirmed by family members of both parties that I was being told for hours. Why? Well, because the story I had been told, that story was a fairly uncomplicated story of heroes and sports idealism and how humanity and compassion can transcend issues of racism and nationalism. That's what I want to believe- but if I had ever examined it critically before, it's almost too convenient, isn't it? It's almost more mythic in scope because it is a perfect story... and that's what it was, a myth. And yet I had such a strong attachment to it, that I kept holding on to it until I could no longer do so.
With that background in mind, I am going to present the brief history of TSR's first failure- how TSR almost collapsed in 1985, how Gygax's hubris led them to that point, and how Lorraine Williams saved the company. The sourcing is mostly from Game Wizards by Jon Peterson. This is a brief overview, and the book has so much more about the history of TSR! Please, if you are a fan of D&D's history, in any way, I recommend purchasing that book. I guarantee you will learn so much, and, yes, be forced to acknowledge that things that you thought you knew may not be accurate.
Three disclaimers before getting into the history and argument:
1. This essay is heavily sourced from Peterson's book. I am not going into the full detail because you should buy a book, not just wait for my essays. Please buy a copy from a local bookseller! If you do no have a local bookseller, the large online presence that I shall not name or link to has copies at 50% off right now. But really, SUPPORT YOUR LOCAL BOOK SELLERS.
If you feel the need to reflexively argue, please do me the courtesy of reviewing pp. 289-311 in the book before your angered blood makes your fingers type. It's 23 pages and covers the issue in detail. The whole book gives the whole history, but please at least read that part first.
2. I will refer to Gary Gygax as "Gygax" and Lorraine Williams as "Lorraine." I apologize for that distinction and using one individual's first name and the other person's last name, but Lorraine and Gygax are much more distinctive names to use.
3. Also, before you think that this is an essay trashing Gygax, please read the link above. It's also not an essay saying Lorraine was amazing. Instead, it is simply about the dynamics of TSR and what happened that led to Gygax's ouster in 1985- because the received history we've had about this is not what actually happened.
1. The Jesse Owens Effect: Why People Aren't Aware of What Happened to TSR
The received wisdom as I (and most older gamers) understood it regarding TSR, and Gygax leaving TSR, is as follows:
The Great God Gygax ran his kingdom of TSR, and all were happy. But one day, Gygax did the unthinkable- he allowed in a non-gamer by the name of Lorraine. And Lorraine did conspire in the darkness with the Brothers Blume and overthrew Gygax from his throne and banished him from his kingdom. It was only too late did Gygax realize that this person he had trusted was actually the Wicked Witch Lorraine, who hated all things good, gamer, and TSR. And thus was the Golden Age of TSR ended.
To a modern reader, this might sound like an exaggeration ... but to the extent it is, it's not much of one. You have to remember that Gygax's ouster occurred in 1985 ... there wasn't an internet (ahem, for all practical purposes) and people didn't obsessively follow the business machinations of companies that created products and media that they were interested in. So for the vast majority of D&D players, they only knew the following:
1. Gygax was, for all practical purposes, D&D. He was the person that created D&D. He was the name on almost all the books and a lot of the modules. Also the creator of the campaign world. And the authoritative voice in Dragon Magazine.
2. Suddenly, Gygax disappeared from TSR. His company. The D&D company.
3. After Gyax left, the "golden age" of TSR ended, and we went from amazing products to lesser products ... the hardcovers went from the DMG to the Wilderness Survival Guide, the modules from Tomb of Horrors and Ravenloft and the GDQ Series to ... WG7 (there really, really were not a lot of AD&D modules from Gygax until 2e, btw).
Now, from a modern perspective, we know that a lot of this isn't exactly true (for example, Gygax wasn't the only creator of D&D, and he had his name on books he didn't write), but it is what people thought. This narrative took hold for a more important reason, however- Gygax, after being ousted from TSR, was a regular at conventions and gave a lot of press. He told his side of the story ... sometimes various versions ... to sympathetic ears. Lorraine, and others, never did. Until recently, there has never been a full accounting of what led to his ouster. Because of that reason, a lot of people have invested in a simplistic version of a story that boils down to "Good gamer and creator of D&D is ousted by evil conniving person who snatched the company from him." Why? Well, there's a lot of reasons for that- in the most optimistic version, I think it's because it's both simple, and allows people to imagine how awesome things could have been*- the untaken road is always more interesting. There are darker reasons as well, maybe, dealing with the insular nature of our hobby. But this is an account of the historical facts- make of them what you will.
*As always, it is necessary to point out that a lot of what people love about D&D, from Forgotten Realms (and other campaign settings) to more player-focused options came about after Gygax's departure.
2. Setting the Stage- Some of the Historical Events that Led to Gygax's Ouster
There are a few basic principles that you have to understand in order to understand what led to Gygax's eventual ouster. The first is that TSR was a company that was set up as a hobbyist venture with the best of intentions, and then experienced explosive growth. The second is that Gygax was an incredibly bad businessman, but his ego did not let him recognize this. Third, wealth can change people, and by the '80s it did quite a number Gygax. Fourth, and finally, explosive growth covers up a lot of problems, but those problems appear with a vengeance when the money spigot is turned off. But one factor that you will see intertwined in all of those issues is the one of .... royalties.
Let's start at the beginning. TSR wasn't originally about D&D. It was supposed to be a company to publish all sorts of war-games. The authors of the rules for a game would receive a royalty on each copy of the rules sold- say, 20% of the sales price (original LLB royalty) or 10% of the cover price (amended LBB royalty). I am about to obscure a LOT OF NUANCE, but as the 1970s went on, Arneson sued TSR over those royalties, Gygax and the Blumes converted royalty contracts into shares of TSR, and then TSR had their employees sign agreements stating that they didn't get royalties, and to induce them into signing the contracts, Gygax signed one as well using the legal theory that if he was only doing it to fool the other employees, it didn't really count.
Ahem. Despite the agreement, Gygax and TSR (because Gygax and the Blumes controlled TSR) continued to pay Gygax royalties. And this wasn't an issue, because thanks to growth, first in the hobby, and then the explosive growth from the Egbert controversy, TSR was able to spend profligately. I am not going to break down each year (buy the dang book), but here's two years:
In 1976, TSR had 5 employees and $60k in revenue.
In 1983, TSR had 400 employees and $26.7million in revenue.
To underscore how explosive the growth was, from 1979-82 alone, revenue went from ~$2m to over $20m.
...but Gygax and the Blumes? They were terrible at business (there are too many stories to recount). Which is not that big of a deal when you are basically printing money. Unfortunately, by the end of 1984, D&D hit a nasty of trifecta of problems. First, they had been spending money (and increasing staffing) based on projections that assumed this continued growth. Second, a lot of their product that they had sold in the last few years (such as rule books, etc.) didn't require people to keep buying it - those DMGs, for example, are made of sturdy material. Finally, the combination of the end of the D&D fad and the headwinds of the Satanic panic had taken hold, reducing demand. Yes, the slowdown affected all game companies, but TSR was especially badly hit given how much they were spending.
And what was Gygax up to when TSR had entered these perilous times? Well, this was during his Hollywood time. What he was doing personally isn't really relevant, but he was spending a lot of TSR's money doing it. A lot of it. And sending a lot of indignant memos back to Geneva complaining as well.
Then again, we did get the Saturday morning cartoon!
3. Showdown at Sheridan Springs- Doc Holliday Couldn't Save Gygax
So that is a very brief bit of background. Seriously, please read some of the detailed history! Now, let's get into exactly how Gygax got ousted. As 1984 was coming to an end, the financial distress of the company and the issues it was having with bank loans (specifically, one with American National Bank) was becoming evident. It is a truism that as the end draws nigh, stock matters less than debt, if you catch my drift.
In December of 1984, Kevin Blume (of the Brothers Blume) was ousted as the CEO of TSR and replaced with Richard Koenings. Given the level of debt, outside capital would be required to right the ship and escape the debt trap that TSR was in. Either a sale or an angel investment of some type was required, along with significant restructuring. And that's how TSR entered 1985- with a new CEO picked by the Board of Directors (and American National Bank) and badly in need of capital.
Initially, there was an exploration from a consortium called the Foreman group in 1985. But after due diligence, the Foreman group lowered their offer because they had a much lower estimation of the financial worth of TSR (lowering the stock price from $2500 to $300). Gygax then exercised options that gave him a majority that allowed him to veto the Foreman offer and caused him to be named president and CEO of TSR on March 29, 1985.
At this point, Gygax's exercise of share options to be able to get just enough control seems like a good idea, with one major caveat- seizing control of the direction of the Titanic after if hits an iceberg doesn't change history. The ship is still sinking. TSR still had the same debt problems as before, and Gygax still needed to restructure the company and deal with the debt. He reached out to one of his Hollywood friends, Flint Dillie, who relayed to his sister, Lorraine, that Gygax needed investors. Long story short, Lorraine was brought into TSR on April 1, 1985. While she was brought on as an employee, Gygax paid her mainly in stock (and stock options). ... This becomes important later .... Why? Because he needed capital. But she was always brought on for the investment and expertise, and part of the initial agreement was to be immediately placed on the Board of Directors.
Now, remember how I stated that Gygax was terrible at business? Well, yeah. It wasn't exactly a secret. As soon as he became CEO, TSR's primary creditor cut the line of credit. Because they thought Gygax was terrible. How do we know this? Because they said it in a letter. No, they didn't actually say "Gygax sucks," but they did as close as possible in bank language (stating that since he had majority control, the bank did not believe there was an ability to control expenditures and pay them back because they probably couldn't hold on to the collateral). When Gygax asked them for even a small amount of credit, they told him to take a hike.
So that's the situation. Now, imagine you're on the Board of Directors and it is April of 1985. The company is circling the drain. Gygax has brought in one investor (Lorraine) and it is not close to sufficient for the company. The Blumes are the other major shareholders and want to be paid. And most importantly, you have a debt situation that is both unsustainable and your creditors refuse to work with you because they think your CEO is a moron.
But there was at least one path, for Gygax. Just buy the Blumes out! And that's what he did. He met them, and he offered to buy out their shares with his personal money, and they accepted his offer! So all is good, right?
Mmmmm.... not exactly. Because for various reasons, Gygax chose ... not to honor that. And, later, to deny that he bought those shares. Anyway, 1985 continued on. The Blumes continued to wait for their money - and occasionally send letters saying, in effect, "Yo! Remember when you asked us to sell to you, and we said yes? And we agreed on the price and everything? Hello? Is this typewriter working?" Gygax delegated work to other people and continued spending profligately (funnest fact! Gygax attempted to have TSR continue to pay for a new lease for his Hollywood party ranch ... in June of 1985). He spent almost no time actually doing any creative or corporate work for TSR. He did, however, send correspondence to the Blumes using his grandiloquent language to say that sure, maybe there was an offer made, or something, but they could screw themselves. He did this at the end of August, 1985, after GenCon.
Why does all of this matter? Because people forget this timeline, and it matters! TSR was in trouble at the end of 1984, and the trouble was so bad that the Blumes were ousted by the end of the year. There was an offer to buy TSR, and Gygax seized control in March 1985. But from that point on, he repeatedly showed everyone exactly why he could not continue in his role. He refused to make any hard restructuring decisions, leaving it to others. He continued to try to spend as much money as possible on himself. The creditors refused to work with him because he spent extravagantly and was profoundly unserious and unaware of the financials. And to top it all off, he nixed one deal and didn't get any other major outside investment other than Lorraine- and then completely alienated the Blumes by first making a firm offer to buy their shares, then ignoring them for more than four months, and then telling them to go eff themselves.
I am not going into all the financial issues or the final board meetings (again, read the book!). I am just going to say this- the only person surprised by Gygax's ouster was Gygax. If Gygax had not been ousted, the company would have failed. TSR could not continue with a CEO that creditors would not work with, and who had no desire to actually be the CEO, but only to spend the money as if he was one. I will, however, note this- unsurprisingly, Gygax sued to overturn what happened. And he lost, decisively. On everything. He had been offered a generous settlement, and he refused that. The primary issue (if you want to get legalistic!) is that Gygax was trying to make a hyper-technical argument that he didn't get notice of the Blumes selling their shares- and the Court found, quite rightly, that not only did Gygax get the actual required notice that the Blumes were trying to sell their shares, the Blumes tried over and over and over again and Gygax ignored them and lied.
Pro tip- the definition of chutzpah is to kill both your parents and to beg for mercy from the court because you're an orphan. Well, High Gygaxian Chutzpah is to say that someone didn't give you the opportunity to buy their shares, when they had been trying to for a year, and also you had an agreement to buy them and then you broke it and called them lying liars. Most importantly, the Court found that Gygax lied in his testimony, because it noted that Gygax's position that he had not agreed to buy the stock on April 16, 1985, was contradicted by multiple other people who reported that both the Blumes and Gygax had told them about the agreement at the time. Ouch.
4. Conclusion
No matter how many times the actual history is written, I find it disheartening that people continue to repeat the received wisdom about what happened with TSR. No one is perfect- a hero at one time and from one perspective is a villain at another time and from another perspective. There is certainly no question that from Gygax's perspective, Lorraine is the villain of his ouster. But based on historical facts? The villain of Gygax's ouster (to the extent that there are villains) is Gygax. He did everything possible to run the company into the ground. He lied to people constantly, and lied under oath in a failed lawsuit. His pride refused to allow him to take a settlement that would have allowed him to continue to receive royalties he had no entitlement to- royalties he had contracted away in order to hoodwink others into signing away their rights. And when Lorraine restored the company to financial health - enough to bring in Forgotten Realms, and 2e, and all of that (yeah, there's the Gygaxian ending for her as well... something something Batman quote, I guess?), he then tirelessly told people about how he was wronged. Not great, Bob!
However, this story has already been told. In a podcast. And in a book you should have read already. So I will let Jon Peterson have the closing quote:
Gygax, ultimately, turned out to be a man who had a disinterest, sometimes bordering on contempt, for running a business- but who could not bring himself to relinquish the business either.
Or, to paraphrase Gordon Sumner, if you love the corporate entity that publishes the products you made, set it free.
That said, before getting into the meat of the essay and the history, I am again reminded of the previous defense I wrote regarding Gary Gygax. If you read it, you will see that I repeated that I had recently heard a podcast series (h/t Revisionist History) that went deep into Jesse Owens generally, and specifically into the story everyone knows about Jesse Owens and Luz Long. As I noted, the version we all know isn't just a little wrong- it's completely false. I brought it up there to remind people that actual history isn't kind to legends and stories. But there is a more important point to that- when I heard the podcast, and the facts, I didn't want to believe it. It is very hard to reconsider things we were told that we want to believe; it's really hard to do so when we get new facts that contradict those opinions that we hold true or that form core beliefs. Insert confirmation bias or cognitive dissonance or identity consistency or whatever other words or terms you have in your vocabulary and experience, but we all know it ... well, we all know it when we see it in other people, amirite?
Anyway, I spent the entire podcast about Jesse Owens and Luz Long waiting for the other shoe to drop- for the "real facts" to come out. For something (anything!) that would allow the story that I knew to be true to emerge. I did independent research because .... I didn't want to believe that actual facts confirmed by family members of both parties that I was being told for hours. Why? Well, because the story I had been told, that story was a fairly uncomplicated story of heroes and sports idealism and how humanity and compassion can transcend issues of racism and nationalism. That's what I want to believe- but if I had ever examined it critically before, it's almost too convenient, isn't it? It's almost more mythic in scope because it is a perfect story... and that's what it was, a myth. And yet I had such a strong attachment to it, that I kept holding on to it until I could no longer do so.
With that background in mind, I am going to present the brief history of TSR's first failure- how TSR almost collapsed in 1985, how Gygax's hubris led them to that point, and how Lorraine Williams saved the company. The sourcing is mostly from Game Wizards by Jon Peterson. This is a brief overview, and the book has so much more about the history of TSR! Please, if you are a fan of D&D's history, in any way, I recommend purchasing that book. I guarantee you will learn so much, and, yes, be forced to acknowledge that things that you thought you knew may not be accurate.
Three disclaimers before getting into the history and argument:
1. This essay is heavily sourced from Peterson's book. I am not going into the full detail because you should buy a book, not just wait for my essays. Please buy a copy from a local bookseller! If you do no have a local bookseller, the large online presence that I shall not name or link to has copies at 50% off right now. But really, SUPPORT YOUR LOCAL BOOK SELLERS.
If you feel the need to reflexively argue, please do me the courtesy of reviewing pp. 289-311 in the book before your angered blood makes your fingers type. It's 23 pages and covers the issue in detail. The whole book gives the whole history, but please at least read that part first.
2. I will refer to Gary Gygax as "Gygax" and Lorraine Williams as "Lorraine." I apologize for that distinction and using one individual's first name and the other person's last name, but Lorraine and Gygax are much more distinctive names to use.
3. Also, before you think that this is an essay trashing Gygax, please read the link above. It's also not an essay saying Lorraine was amazing. Instead, it is simply about the dynamics of TSR and what happened that led to Gygax's ouster in 1985- because the received history we've had about this is not what actually happened.
1. The Jesse Owens Effect: Why People Aren't Aware of What Happened to TSR
The received wisdom as I (and most older gamers) understood it regarding TSR, and Gygax leaving TSR, is as follows:
The Great God Gygax ran his kingdom of TSR, and all were happy. But one day, Gygax did the unthinkable- he allowed in a non-gamer by the name of Lorraine. And Lorraine did conspire in the darkness with the Brothers Blume and overthrew Gygax from his throne and banished him from his kingdom. It was only too late did Gygax realize that this person he had trusted was actually the Wicked Witch Lorraine, who hated all things good, gamer, and TSR. And thus was the Golden Age of TSR ended.
To a modern reader, this might sound like an exaggeration ... but to the extent it is, it's not much of one. You have to remember that Gygax's ouster occurred in 1985 ... there wasn't an internet (ahem, for all practical purposes) and people didn't obsessively follow the business machinations of companies that created products and media that they were interested in. So for the vast majority of D&D players, they only knew the following:
1. Gygax was, for all practical purposes, D&D. He was the person that created D&D. He was the name on almost all the books and a lot of the modules. Also the creator of the campaign world. And the authoritative voice in Dragon Magazine.
2. Suddenly, Gygax disappeared from TSR. His company. The D&D company.
3. After Gyax left, the "golden age" of TSR ended, and we went from amazing products to lesser products ... the hardcovers went from the DMG to the Wilderness Survival Guide, the modules from Tomb of Horrors and Ravenloft and the GDQ Series to ... WG7 (there really, really were not a lot of AD&D modules from Gygax until 2e, btw).
Now, from a modern perspective, we know that a lot of this isn't exactly true (for example, Gygax wasn't the only creator of D&D, and he had his name on books he didn't write), but it is what people thought. This narrative took hold for a more important reason, however- Gygax, after being ousted from TSR, was a regular at conventions and gave a lot of press. He told his side of the story ... sometimes various versions ... to sympathetic ears. Lorraine, and others, never did. Until recently, there has never been a full accounting of what led to his ouster. Because of that reason, a lot of people have invested in a simplistic version of a story that boils down to "Good gamer and creator of D&D is ousted by evil conniving person who snatched the company from him." Why? Well, there's a lot of reasons for that- in the most optimistic version, I think it's because it's both simple, and allows people to imagine how awesome things could have been*- the untaken road is always more interesting. There are darker reasons as well, maybe, dealing with the insular nature of our hobby. But this is an account of the historical facts- make of them what you will.
*As always, it is necessary to point out that a lot of what people love about D&D, from Forgotten Realms (and other campaign settings) to more player-focused options came about after Gygax's departure.
2. Setting the Stage- Some of the Historical Events that Led to Gygax's Ouster
There are a few basic principles that you have to understand in order to understand what led to Gygax's eventual ouster. The first is that TSR was a company that was set up as a hobbyist venture with the best of intentions, and then experienced explosive growth. The second is that Gygax was an incredibly bad businessman, but his ego did not let him recognize this. Third, wealth can change people, and by the '80s it did quite a number Gygax. Fourth, and finally, explosive growth covers up a lot of problems, but those problems appear with a vengeance when the money spigot is turned off. But one factor that you will see intertwined in all of those issues is the one of .... royalties.
Let's start at the beginning. TSR wasn't originally about D&D. It was supposed to be a company to publish all sorts of war-games. The authors of the rules for a game would receive a royalty on each copy of the rules sold- say, 20% of the sales price (original LLB royalty) or 10% of the cover price (amended LBB royalty). I am about to obscure a LOT OF NUANCE, but as the 1970s went on, Arneson sued TSR over those royalties, Gygax and the Blumes converted royalty contracts into shares of TSR, and then TSR had their employees sign agreements stating that they didn't get royalties, and to induce them into signing the contracts, Gygax signed one as well using the legal theory that if he was only doing it to fool the other employees, it didn't really count.
Ahem. Despite the agreement, Gygax and TSR (because Gygax and the Blumes controlled TSR) continued to pay Gygax royalties. And this wasn't an issue, because thanks to growth, first in the hobby, and then the explosive growth from the Egbert controversy, TSR was able to spend profligately. I am not going to break down each year (buy the dang book), but here's two years:
In 1976, TSR had 5 employees and $60k in revenue.
In 1983, TSR had 400 employees and $26.7million in revenue.
To underscore how explosive the growth was, from 1979-82 alone, revenue went from ~$2m to over $20m.
...but Gygax and the Blumes? They were terrible at business (there are too many stories to recount). Which is not that big of a deal when you are basically printing money. Unfortunately, by the end of 1984, D&D hit a nasty of trifecta of problems. First, they had been spending money (and increasing staffing) based on projections that assumed this continued growth. Second, a lot of their product that they had sold in the last few years (such as rule books, etc.) didn't require people to keep buying it - those DMGs, for example, are made of sturdy material. Finally, the combination of the end of the D&D fad and the headwinds of the Satanic panic had taken hold, reducing demand. Yes, the slowdown affected all game companies, but TSR was especially badly hit given how much they were spending.
And what was Gygax up to when TSR had entered these perilous times? Well, this was during his Hollywood time. What he was doing personally isn't really relevant, but he was spending a lot of TSR's money doing it. A lot of it. And sending a lot of indignant memos back to Geneva complaining as well.
Then again, we did get the Saturday morning cartoon!
3. Showdown at Sheridan Springs- Doc Holliday Couldn't Save Gygax
So that is a very brief bit of background. Seriously, please read some of the detailed history! Now, let's get into exactly how Gygax got ousted. As 1984 was coming to an end, the financial distress of the company and the issues it was having with bank loans (specifically, one with American National Bank) was becoming evident. It is a truism that as the end draws nigh, stock matters less than debt, if you catch my drift.
In December of 1984, Kevin Blume (of the Brothers Blume) was ousted as the CEO of TSR and replaced with Richard Koenings. Given the level of debt, outside capital would be required to right the ship and escape the debt trap that TSR was in. Either a sale or an angel investment of some type was required, along with significant restructuring. And that's how TSR entered 1985- with a new CEO picked by the Board of Directors (and American National Bank) and badly in need of capital.
Initially, there was an exploration from a consortium called the Foreman group in 1985. But after due diligence, the Foreman group lowered their offer because they had a much lower estimation of the financial worth of TSR (lowering the stock price from $2500 to $300). Gygax then exercised options that gave him a majority that allowed him to veto the Foreman offer and caused him to be named president and CEO of TSR on March 29, 1985.
At this point, Gygax's exercise of share options to be able to get just enough control seems like a good idea, with one major caveat- seizing control of the direction of the Titanic after if hits an iceberg doesn't change history. The ship is still sinking. TSR still had the same debt problems as before, and Gygax still needed to restructure the company and deal with the debt. He reached out to one of his Hollywood friends, Flint Dillie, who relayed to his sister, Lorraine, that Gygax needed investors. Long story short, Lorraine was brought into TSR on April 1, 1985. While she was brought on as an employee, Gygax paid her mainly in stock (and stock options). ... This becomes important later .... Why? Because he needed capital. But she was always brought on for the investment and expertise, and part of the initial agreement was to be immediately placed on the Board of Directors.
Now, remember how I stated that Gygax was terrible at business? Well, yeah. It wasn't exactly a secret. As soon as he became CEO, TSR's primary creditor cut the line of credit. Because they thought Gygax was terrible. How do we know this? Because they said it in a letter. No, they didn't actually say "Gygax sucks," but they did as close as possible in bank language (stating that since he had majority control, the bank did not believe there was an ability to control expenditures and pay them back because they probably couldn't hold on to the collateral). When Gygax asked them for even a small amount of credit, they told him to take a hike.
So that's the situation. Now, imagine you're on the Board of Directors and it is April of 1985. The company is circling the drain. Gygax has brought in one investor (Lorraine) and it is not close to sufficient for the company. The Blumes are the other major shareholders and want to be paid. And most importantly, you have a debt situation that is both unsustainable and your creditors refuse to work with you because they think your CEO is a moron.
But there was at least one path, for Gygax. Just buy the Blumes out! And that's what he did. He met them, and he offered to buy out their shares with his personal money, and they accepted his offer! So all is good, right?
Mmmmm.... not exactly. Because for various reasons, Gygax chose ... not to honor that. And, later, to deny that he bought those shares. Anyway, 1985 continued on. The Blumes continued to wait for their money - and occasionally send letters saying, in effect, "Yo! Remember when you asked us to sell to you, and we said yes? And we agreed on the price and everything? Hello? Is this typewriter working?" Gygax delegated work to other people and continued spending profligately (funnest fact! Gygax attempted to have TSR continue to pay for a new lease for his Hollywood party ranch ... in June of 1985). He spent almost no time actually doing any creative or corporate work for TSR. He did, however, send correspondence to the Blumes using his grandiloquent language to say that sure, maybe there was an offer made, or something, but they could screw themselves. He did this at the end of August, 1985, after GenCon.
Why does all of this matter? Because people forget this timeline, and it matters! TSR was in trouble at the end of 1984, and the trouble was so bad that the Blumes were ousted by the end of the year. There was an offer to buy TSR, and Gygax seized control in March 1985. But from that point on, he repeatedly showed everyone exactly why he could not continue in his role. He refused to make any hard restructuring decisions, leaving it to others. He continued to try to spend as much money as possible on himself. The creditors refused to work with him because he spent extravagantly and was profoundly unserious and unaware of the financials. And to top it all off, he nixed one deal and didn't get any other major outside investment other than Lorraine- and then completely alienated the Blumes by first making a firm offer to buy their shares, then ignoring them for more than four months, and then telling them to go eff themselves.
I am not going into all the financial issues or the final board meetings (again, read the book!). I am just going to say this- the only person surprised by Gygax's ouster was Gygax. If Gygax had not been ousted, the company would have failed. TSR could not continue with a CEO that creditors would not work with, and who had no desire to actually be the CEO, but only to spend the money as if he was one. I will, however, note this- unsurprisingly, Gygax sued to overturn what happened. And he lost, decisively. On everything. He had been offered a generous settlement, and he refused that. The primary issue (if you want to get legalistic!) is that Gygax was trying to make a hyper-technical argument that he didn't get notice of the Blumes selling their shares- and the Court found, quite rightly, that not only did Gygax get the actual required notice that the Blumes were trying to sell their shares, the Blumes tried over and over and over again and Gygax ignored them and lied.
Pro tip- the definition of chutzpah is to kill both your parents and to beg for mercy from the court because you're an orphan. Well, High Gygaxian Chutzpah is to say that someone didn't give you the opportunity to buy their shares, when they had been trying to for a year, and also you had an agreement to buy them and then you broke it and called them lying liars. Most importantly, the Court found that Gygax lied in his testimony, because it noted that Gygax's position that he had not agreed to buy the stock on April 16, 1985, was contradicted by multiple other people who reported that both the Blumes and Gygax had told them about the agreement at the time. Ouch.
4. Conclusion
No matter how many times the actual history is written, I find it disheartening that people continue to repeat the received wisdom about what happened with TSR. No one is perfect- a hero at one time and from one perspective is a villain at another time and from another perspective. There is certainly no question that from Gygax's perspective, Lorraine is the villain of his ouster. But based on historical facts? The villain of Gygax's ouster (to the extent that there are villains) is Gygax. He did everything possible to run the company into the ground. He lied to people constantly, and lied under oath in a failed lawsuit. His pride refused to allow him to take a settlement that would have allowed him to continue to receive royalties he had no entitlement to- royalties he had contracted away in order to hoodwink others into signing away their rights. And when Lorraine restored the company to financial health - enough to bring in Forgotten Realms, and 2e, and all of that (yeah, there's the Gygaxian ending for her as well... something something Batman quote, I guess?), he then tirelessly told people about how he was wronged. Not great, Bob!
However, this story has already been told. In a podcast. And in a book you should have read already. So I will let Jon Peterson have the closing quote:
Gygax, ultimately, turned out to be a man who had a disinterest, sometimes bordering on contempt, for running a business- but who could not bring himself to relinquish the business either.
Or, to paraphrase Gordon Sumner, if you love the corporate entity that publishes the products you made, set it free.
