The way I recall it, TSR folded partly because they produced boxed sets that were so expensive to produce each was sold at loss - the more they sold, the worse the economy was.
I heard that was "Encyclopedia Magica". However I'm sure I
also heard that this was actually an urban legend, and not actually true. Though I can't find a cite for that, of course.
(Although it is true that while the Pathfinder Beginner Box cuts margins right to the bone, it is deliberately
not sold at a loss. And, for much the same reason, I'm pretty sure the 5e Starter Set won't be sold at a loss.)
Ryan Dancey and Lisa Stevens have written at some length about the demise of TSR. One of the best accounts I've found is in the 25th Anniversary box. Basically, though, they had some really bad business practices (warehousing lots of old, and worthless, products; constantly doing Buck Rogers games that nobody was interested in; and the big one was competing with themselves with five or more heavily supported settings when most people use no published setting at all and
very few people use more than one), coupled with two pretty huge disasters hitting at once (the market dropping out of Dragon Dice just after they'd massively invested; and their novel publisher returning huge amounts of unsold stock at just the wrong moment).
It's probably overly simplistic to point at a single thing and say that that was
the reason TSR died. It was always pretty badly run. But while the boxed sets may well have played a part in it, I don't think that means that the
boxed set in and of itself is a problem - you just have to get the right product at the right price.
