D&D General Not the Wicked Witch: Revisiting the Legacy of Lorraine Williams

[PHATsakk43]

@JLowder thanks for the reply.

If no one else thanks you for Jergal, well, thanks.

 

[JLowder]

As someone who has been following discussions on the topic for near 30 years now, but doesn't have any first-hand insight, I often see people say "TSR went under because of X." There's the book returns thing, which as far as I can tell was the actual killing blow. There's the stuff you write about here, which I think can be simplified to "burning bridges with creatives." There's the stuff Ryan Dancey has written about, which can be boiled down to "too much stuff", "too many settings", and "no market research" (which I'd argue are related issues, but not precisely the same).

So as far as I can tell, there was no one thing that killed TSR. It was a large number of poor decisions that, in aggregate, did it in. The book returns may have been the final blow, but if TSR had been in better shape they could have weathered that (or possibly not gotten in that position in the first place).

Right. The context for the book returns matter a lot. They are not the cause of the failure. The returns are a result of the core business failures.

For folks who don't know:

TSR had a deal with Random House going back to Gary's days. Random House distributed TSR products to the book trade—most importantly book chains and the mall bookstores that loved D&D and especially TSR's fiction releases. As they 80s wore on, that channel became very lucrative for TSR and for their distributor to that channel, Random House.

Book channel sales are typically fully returnable. The publisher sends a book to a Barnes & Noble store. The book does not sell. The store returns the book, either the whole book or just the cover to show the book cannot be resold, and gets credit or money for the return. (TSR's books and games were returned whole because of the way they were sold.) That's a standard part of the book channel. It makes book channel sales riskier for a publisher than, say, selling your stuff to a game store, where the items are not returnable. The store orders it. The store is stuck with it until it sells.

Random House was TSR's exclusive rep for the book trade channels. When one of those mall stores wanted a copy of The Crystal Shard they ordered it through Random House.

The unusual part of the TSR deal with Random House was that RH paid TSR, essentially, on ship, not when the book sold through to the store. Initially, this was to help TSR pay for print runs for products Random House pretty much knew they were going to sell. They paid when TSR shipped the books because they assumed those would sell out quickly and TSR would need the fast cash to go back to print quickly for more copies of a book or would need to print new products that would also sell out. It was a cash flow thing. RH was willing to risk the early payment so TSR would have the cash flow to get more products into print, so RH could provide them to the book trade and make a lot of money themselves as a distributor. Everyone won. For a while.

Over time, TSR started manipulating the deal. They overprinted some products or added more products to the schedule to get more money faster. The overprinted products and the extra products added to the schedule were not selling out from Random House, though, and were building up in the warehouses. This increased TSR's cash flow, but, remember, all that product is returnable. If it gets returned, you have to pay back the money paid on ship. The more product you build up in the warehouses, the greater your risk.

Eventually, Random House did return a bunch of product and then ask for the money to be paid back to cover those returns. Ben Riggs talks about how much that was in Slaying the Dragon. It was a lot. Tens of millions.

Where the context matters here is that Random House did not return all the products because they didn't think they would sell. They sent everything back, flushed every TSR product out of their warehouses, because TSR ended their distribution deal with RH. RH couldn't sell that product even if they wanted to. They were no longer TSR's distributor of record.

The TSR fiction in particular was still selling pretty well through Random House. It's a mistake to assume the returned fiction was returned because it was not selling or would not have sold. Yes, RH returned a lot of fiction; no shock, as they were selling to the book trade. Yes, TSR was overprinting some titles and the books were not going back to print for new runs as quickly by 1994 as they were in even 1990. But fiction has a longer shelf life than games. Many of those fiction books RH flushed from their warehouses would have sold, had they been given time. If TSR had not ended the distribution deal.

To me, the underlying causes for TSR's collapse are really:

• Longterm manipulation of the Random House distribution agreement to use RH as a source of cash flow (especially by adding titles to the schedule and overprinting—especially when staff were telling management not to assume, say, every Realms novel would sell as well as NYT bestseller Waterdeep had. Management ignored the warnings.);
• Flooding the hobby market with too many products (especially those intended to take up shelf space and, supposedly, stop hobby retailers supporting rivals like White Wolf or WotC by tying up the store's money for new products. Marvel tried this in the 90s, too, and failed just as badly.);
• Not showing enough patience with new lines or setting, so that retailers and customers lost faith in the lines seeing longterm support (the desperate-for-a-hit death spiral.);
• Ending the RH distribution deal without a plan or the resources to deal with contractually obligated returns.

The flood of returns from Random House, and the resulting debt bomb, were a result of these bad decisions and practices. I would add in things like the mistreatment of creators, staff, and business partners—even the disdainful way TSR treated the rest of the tabletop publishing community and fans—as additional contributing factors, bad actions that exacerbated the big four failures.

 

[Alzrius]

@JLowder Thanks for adding so much fascinating insight! I wanted to ask that, as far as the underlying causes for TSR's collapse goes, do you think that factoring (which Riggs mentioned in his book, where TSR would go to (I believe it was) a bank and make a deal to turn over a year's profits as they earned them in exchange for something like 87% of those projected profits up front, but which locked TSR into the product outline they presented to the bank as part of the agreement) played a role?

As I recall, Riggs mentioned that was also an issue, with regard to how, for instance, they had to keep selling the AD&D 2E Core Rules CD-ROM through Babbage's stores, even when those stores were closing (and so sold all of their inventory for pennies on the dollar).

 

[Staffan]

Over time, TSR started manipulating the deal. They overprinted some products or added more products to the schedule to get more money faster. The overprinted products and the extra products added to the schedule were not selling out from Random House, though, and were building up in the warehouses. This increased TSR's cash flow, but, remember, all that product is returnable. If it gets returned, you have to pay back the money paid on ship. The more product you build up in the warehouses, the greater your risk.

Eventually, Random House did return a bunch of product and then ask for the money to be paid back to cover those returns. Ben Riggs talks about how much that was in Slaying the Dragon. It was a lot. Tens of millions.

Where the context matters here is that Random House did not return all the products because they didn't think they would sell. They sent everything back, flushed every TSR product out of their warehouses, because TSR ended their distribution deal with RH. RH couldn't sell that product even if they wanted to. They were no longer TSR's distributor of record.

Huh. I was under the impression that there was a previous "death spiral" of sorts with returned fiction. The way I understood it was that Random House started returning books, and were originally repaid with "store credit" (return a thousand books, get a thousand other books). And eventually that got untenable and Random House wanted to get paid for the returns in actual money. I think I got that from some other TSR alumnus (possibly Sean Reynolds who used to be pretty active online), but it's possible they don't have the same insight you do.

 

[Hussar]

From what i heard on rpg.net ages ago, I was under the impression that for SJG it's sales of Munchkin that pay the bills, and the RPG game line is strictly a hobby-scale operation by comparison. But I don't know to what extent that's still true.



Yeah, White Wolf's death was (if not entirely, then certainly majority) self-inflicted. While there was a lot of editorial and strategic choices that contributed to it (WoD2.0 and the OWoD metaplot-heaviness among them), at the end of the day, they decided to sell themselves to a booming video game company because they figured that as part of a larger organisation they 'd be better able to survive heavy weather, only to be all [surprised Pikachu face] when the first storm rolled in and the corporate beancounters casually threw them overboard. They did have long-term challenges in that their core product lines like VtM were so tightly coupled to a very specific 90s zeitgeist and even in the mid-2000s were starting to look a little dated, but that was the decision that ended them. Ironic given the editorial/political/economic stance of basically every single one of their products re big corporations, of course.

I mean, let's be honest here. Virtually no company has succeeded on solely RPG products. TSR made a very large amount of it's money on the novel lines. WotC is fueled by Magic money and D&D was, until quite recently, an afterthought. GW is very much not an "RPG" company. So on and so forth.

"Pure" RPG companies are pretty small potatoes.

 

[JLowder]

@JLowder Thanks for adding so much fascinating insight! I wanted to ask that, as far as the underlying causes for TSR's collapse goes, do you think that factoring (which Riggs mentioned in his book, where TSR would go to (I believe it was) a bank and make a deal to turn over a year's profits as they earned them in exchange for something like 87% of those projected profits up front, but which locked TSR into the product outline they presented to the bank as part of the agreement) played a role?

That ends up being a lot like overprinting some products or adding products to the schedule to game the RH deal—get money on ship faster and hope the sell-through covers you . . . eventually. It's all founded upon the hope there will be a wild upswing that covers the advance and then some. The fiction program had provided that amazing upswing three times in a decade—in 1982 with the EQ books, in 1984 with the Dragonlance novels, and then again in 1988 with the fiction program kicking into high gear and generating four sold years of dozens of bestsellers a year. The same with the Realms taking off as a game line the way it did after 1987. Starting in 94 or 95 the company seemed to be repeatedly making large bets that kind of lightning would strike again. It did not.

 

[JLowder]

Huh. I was under the impression that there was a previous "death spiral" of sorts with returned fiction. The way I understood it was that Random House started returning books, and were originally repaid with "store credit" (return a thousand books, get a thousand other books). And eventually that got untenable and Random House wanted to get paid for the returns in actual money. I think I got that from some other TSR alumnus (possibly Sean Reynolds who used to be pretty active online), but it's possible they don't have the same insight you do.

That's tended to be overstated, in my experience, but there were some specific problems. The company definitely published too many hardcovers, for example, and they got hit with returns on a couple of those, so much so they ended up remaindering the Buck Rogers hardcover in large numbers. (Remaindering is selling dead stock—dead beause it hasn't sold as expected or because a license to publish the material ends—in bulk at a huge loss, for pennies on the dollar, to recover something/anything for the printed product.) You can still run across dusty copies of that Buck hardcover and a couple other TSR hardcovers in low-turnover deep discount stores now and then. The problem there was overestimating demand for hardcovers for some of the titles/lines but also a function of how long bookstores are/were willing to keep hardcovers around as "new releases" versus paperbacks.

Some of the other fiction lines they started after 1993 weren't getting nearly the numbers the Realms and Dragonlance books were getting, for example, so some returns there would be expected if they were overprinting wildly. But by 1995, their cash flow issues were bad enough they would be unlikely to overprint by insanely high numbers. TSR was carrying so much printer debt they couldn't splurge, especially after they lost the building to the print buyer and were locked in to the printer deals dictated by their new landlord.

The Book Department also let some of the backlist books go out of print after 1994. That was actually a good move for any series releasing a lot of new books every year. You sell out of a print run and decide not to reprint the book. Then you tell bookstores it is out of print and they have a set window of time to return unsold stock if they want. (With series, you can then wait a few years and release a new edition/new printing of the out-of-print book, if demand supports that. In the meantime, stores don't feel like they have to carry so many books in a line.) So there might have been some returns from TSR doing that, but not all that many. The titles declared OOP tended to be books that had sold out at both the TSR level and were largely gone from the RH warehouse pipeline, so you would only be looking at some store returns there. Maybe there were a couple titles B&N or Borders had over-ordered in large numbers, but they tended to be pretty smart about ordering and did not sit on stock they could not sell forever.

At the time TSR stopped paying royalties, which was a couple years before the company was sold, they owed a lot of money to the fiction authors. A lot. Had there been overwhelming waves of returns prior to ending the deal with Random House, they would not have owed royalties like that. Under the TSR contracts, returns are always debited from money owed from sales. But in the end they owed me five figures, even factoring in final returns from Random House. They owed TSR authors with more books in print well into six figures, even factioring in RH returns. The fiction was selling steadily. Not at the rates it was selling in the early 1990s, but steadily.

So there would have been some fiction returns in the middle 90s, but not anything like what happened with the RH returns after the deal was ended.

That book trade death spiral you describe is real, though. It can wipe out companies. The deadliest version is the publisher breaks into the book trade (at last!), has a large number of copies of Title A ordered, and then a large number of Title A returned. They have to either pay back money or the distributor wants credit. So, showing the math: The bookstores initially ordered 10,000 Title A, return 8,000 books. You can pay back the money for the 8,000 returned Title A or you can send them 8,000 copies of your next book, Title B, provided they even want it. But you have to print 8,000 copies of Title B to send them, and that's expensive when, looking at the numbers, you are thinking you are going to sell 2,000 copies, like you did with Title A. You send 8,000, get 6,500 back. Rinse, repeat with new Title C. Meanwhile, you are still operating off the payment for the initial 10K in sales and accumulating printer bills for far more than 10K copies when you factor in Title B (8,000 copies printed), Title C (6,500 copies printed), etc.

It's possible Random House started using some of the TSR returns to replace money they would have paid out for new orders. Sean could have been referencing that. It would make sense, given TSR's shaky finances and, if that happened, it would have factored into the overall negative math for the company. But I strongly suspect would not have been decisive. From what I saw with my books and from what I know from talking with other fiction authors from the 80s and 90s, the sales were still net positive. WotC paid out a lot of TSR royalty money owed to fiction authors after they bought the company. (Huge credit and thanks to Peter Adkison for doing so.)

If you want a clearer example of the perils of returnability in the book trade, when TSR got so far into debt they stopped printing, the mall stores and book chains ordered heavily from other TTRPG companies for product to fill the now-empty D&D shelf space. And when WotC bought TSR and the product began to flow again, the chains shipped a huge amount of that non-TSR product back in order to clear space for D&D and related fiction. They were not really looking for stock to replace the returns, either, just money back. That effectively wiped out the terrific fiction line at White Wolf and nearly sank the company altogether.

 

[Mannahnin]

First off, many thanks for these wonderful comments and insights. I've been hoping for more of your perspective and firsthand info in these discussions.

One question on this bit, though:

TSR also pressured licensees to license Buck along with properties they wanted to license; I saw that firsthand, too, in some of the meetings with Mike Gold and others from DC when they visited Sheridan Springs Road. DC refusing to do a licensed Buck comic after a relentless hard sell from TSR was the root cause of the break with them. This cost TSR years of substantial and largely passive income, as well as a licensing deal that was growing the D&D brands in the wider pop culture. The license was also on the verge of expanding into at least three additional regular comics, including Ravenloft and Greyhawk.

It's been my understanding (from Slaying the Dragon and indications elsewhere) that the key cause of the breach was the TSR West "comic book modules" being functionally a direct competitor and thus a violation of the contract between TSR and DC. When you say that Buck Rogers was the root cause, was it because DC refused to do Buck Rogers and the comic book "modules" were, first and foremost, an attempt by TSR to publish Buck Rogers comics themselves?

For some reason I had it in my head as a broader issue with TSR West trying to compete in that space, but this piece by Riggs (sourcing Jeff Grubb specifically) does pin it directly on BR.

 

[JLowder]

It's been my understanding (from Slaying the Dragon and indications elsewhere) that the key cause of the breach was the TSR West "comic book modules" being functionally a direct competitor and thus a violation of the contract between TSR and DC. When you say that Buck Rogers was the root cause, was it because DC refused to do Buck Rogers and the comic book "modules" were, first and foremost, an attempt by TSR to publish Buck Rogers comics themselves?

At base, TSR/Lorraine wanted DC to publish Buck Rogers comics. DC was not interested. TSR pushed—and pushed hard—for a time, for DC to add Buck to the license, even as DC was publishing the other TSR comics. Those comics were selling really well.

When it became clear DC was not going to publish Buck comics, TSR created TSR West to publish the "comic modules"—first and foremost Buck Rogers. TSR West had other things in the works (like the planned R.I.P. horror RPG) and made a lot of noise about competing in the comics space with DC, as reported in Slaying the Dragon, but the reason they were formed was Buck, to do Buck comics.

Though I never saw the agreement itself, I was told by TSR middle management at one point DC had an exclusive license for TSR-related comics. DC saw the comic modules are a direct violation of the license; I was told that by someone at DC. (I was part of the TSR licensing review team for the comics, wrote some text pages and a story for the TSR Worlds annual, and was lined up to be the writer for a planned Ravenloft series from DC.) TSR tried to claim they were not comics because they also had game material in them. DC ended the relationship with TSR shortly after the launch of the comic modules, winding up the series that were ongoing and killing plans for at least three new series, including Ravenloft and Greyhawk.

The Buck Rogers IP was the root cause of the break.