You must realize that the bulk of the creative Minnesota people were working for TSR in 1976: Arneson (D&D, Adventures in Fantasy, First Fantasy Campaign...), Megarry (Guerrilla War, Dungeon!, Pentastar...)and Carr (Don't Give Up The Ship, Fight in The Skies, 24 Hours of Le Mans...); the only people not represented were the David Wesely (Strategos N, Braunstein, Source of the Nile, Valley Forge...), Ross Maker (Source of the Nile), The Snider Brothers (Richard: Adventures in Fantasy, Mutant...John: Star Probe and Star Empires) and Professor Barker (Empire of the Petal Throne). Did I forget anyone? (Duane Jenkins with his Western RPG??).
[...]
We embraced the downstairs work as we realized the company would flounder if it wasn't done. Terry Kuntz got the Dungeon Hobby shop in order and it was contributing to the cash flow of the operation as well. Unfortunately (or fortunately from a TSR perspective) Arneson was an excellent shipping clerk and shipping hummed. As the inflationary growth spurt started to set in, Arneson's contribution to the company as a shipping clerk became more and more important. Arneson, of course, felt this was a demotion of a sort and began to rail against the role he had slipped into. When he tried to assert his creative input, it was rejected (almost out of hand). He had been hired to be a designer; that he stormed out after being rejected as such, is not surprising.
[...]
Tim's dealings with Arneson were jaded with by the experiences we had together in 1976 at TSR Headquarters. From Tim's point of view, Arneson and most of the Minnesota contingent were not very productive on the creative front. The Arneson Basement crowd ended up that year doing a lot of nuts and bolts running the "downstairs" part of the business. It was the time of the 2nd stage of a business [...] Tim was really stretching himself to create a successful magazine and, IMHO, felt that the other "creative" staff was not pulling their weight. You must realize that the bulk of the creative Minnesota people were working for TSR in 1976: Arneson, Megarry and Carr; the only people not represented were the Snider Brothers and Professor Barker. That we produced not one item (other than the Blackmoor supplement) must have seemed to him we lacked the creative spark. Tim was part of the "upstairs" and wouldn't necessarily have appreciated what was happening to the company in the late Fall 1976.