When Random House Sued TSR For $9.5M

Benjamin Riggs is continuing to talk about his research into the history of TSR. He recounts here a tale of TSR's accounting practices which contributed to their eventual demise.

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In April of 1996, Random House sued TSR for lack of payment on an $9.5 million loan.

You may ask yourself how TSR came to owe its distributor such a large sum of money. The answer lies in the 1979 distribution agreement between Random House and TSR, in which Random House became TSR's exclusive avenue into the book trade. In that agreement, signed by Gygax himself, Random House agreed to advance TSR 27.3% of the retail value of their product upon receipt. Random House could also return the product to TSR for a refund. All this meant that TSR could produce cash by shipping to Random House instead of waiting for actual customers to purchase their products.

The arrangement seems bizarre, but Jim Fallone, a TSR alum familiar with the agreement, said there may be an excellent reason for it. TSR's books were beautiful, and therefore expensive. Also, TSR had a back catalog that sold well. Sometimes, TSR faced a choice between printing new material, and reprinting old material that sold well, but might take time to make a return on printing costs. The Random House agreement was a way around this problem. TSR could print and ship new copies of the Player's Handbook knowing that they would get paid for it soon, and then also afford to print new material.

According to Fallone, the math on all this works out fine, so long as no more than 20% of TSR's products are returned. But in the 90's, TSR's many forays into creating new game worlds increased their levels of returns to more like 30%. At the same time, TSR began overprinting products. DragonStrike, for example, was a hit game that was driven into the red by overprinting. The game sold 100,000 copies, and had reorders for 50,000 more. Management, however, decided to print 150,000 copies of the game, which never sold.

Also, TSR began to use Random House to generate ready cash. Fallone said that TSR began to “abuse the loan aspect of the contract by shipping product to Random House that there is no actual sales demand for just to generate the advance payment in order to cover printing debts then you pour gasoline on the fire."
These practices helped cause TSR's near bankruptcy in 1997.

Thanks to historian Michael Calleia for providing me with a copy of the 1996 lawsuit and 1979 contract.

If you're interested, I talk to TSR alums Jim Lowder and John Rateliff here about the contract. "A 1979 contract between Random House and TSR would take 18 years to kill the company that started the role-playing game hobby. Thanks to historian Micheal Calleia, Ben has a copy of that very contract, and discusses how it led TSR to near bankruptcy in 1997 with TSR alums James Lowder, Chaosium’s executive editor, and John Rateliff, an internationally renowned Tolkien scholar."
 
Last edited:
Russ Morrissey

Comments

Parmandur

Legend
Except that you can't seem to provide anything definitive to back up that statement, whereas there's an insider (current, not former) saying the opposite.
Looking into Lowder, he doesn't seem to have been directly involved with D&D for ~25 years, and was never a WotC employee. Not a current insider.

Mearls spoke on the topic on some point, feel free to listen to the Happy Fun Hour archives.
 

Alzrius

The EN World kitten
Looking into Lowder, he doesn't seem to have been directly involved with D&D for ~25 years, and was never a WotC employee. Not a current insider.
It looks like I need to remind you again that you don't need to work for a company to be an insider. You just need to have access to reliable information that the general public doesn't. Given how small the tabletop RPG industry is, it's not at all unbelievable that Lowder knows people who have the inside track on how the decision was made...or are you calling him a liar? If you're not, then why do you think he said what he did in the link I provided?

Either way, he's pretty clearly an insider. And a current one, to boot! :p

Mearls spoke on the topic on some point, feel free to listen to the Happy Fun Hour archives.
So you can't confirm exactly where he supposedly said this?
 

Parmandur

Legend
It looks like I need to remind you again that you don't need to work for a company to be an insider. You just need to have access to reliable information that the general public doesn't. Given how small the tabletop RPG industry is, it's not at all unbelievable that Lowder knows people who have the inside track on how the decision was made...or are you calling him a liar? If you're not, then why do you think he said what he did in the link I provided?

Either way, he's pretty clearly an insider. And a current one, to boot! :p



So you can't confirm exactly where he supposedly said this?
In 2018 at some point: take my word for it, or look it up, at your discretion.

The link you provided doesn't have nitty-gritty as to why the novels were stopped, and I am not sure Lowder was being careful about distinguishing Hasbro corporate from WotC (who are, after all, still Hasbro). At any rate, we have years of evidence that show that WotC is left to their own devices as a whole, and a plausible reason provided for their own decision here.
 

Alzrius

The EN World kitten
In 2018 at some point: take my word for it, or look it up, at your discretion.
I'd prefer that you demonstrate something to back your word up, but it's understandable if you can't.

The link you provided doesn't have nitty-gritty as to why the novels were stopped, and I am not sure Lowder was being careful about distinguishing Hasbro corporate from WotC (who are, after all, still Hasbro).
No, it looks both nitty and gritty. Lowder gave several paragraphs on the situation, flat-out saying that it was because the novels generated a profit, it just wasn't enough of one. Likewise, while he talks about some of the issues surrounding novel publishing, it's telling that near the end he unambiguously says "Overall, Hasbro was never fully on board being a fiction publisher, as that requires staff and expertise they normally would not have." Not WotC. Hasbro.

At any rate, we have years of evidence that show that WotC is left to their own devices as a whole, and a plausible reason provided for their own decision here.
Just because Hasbro has taken a light hand for other things doesn't isn't indicative of whether or not they stepped in on this issue. But we do have a plausible reason for Hasbro's decision here, one given to us by someone who's in a position to know, and whose take on the issue can be sourced.
 

Zardnaar

Hero
Remember: you don't need to still be working somewhere to be an insider. ;)



Can you provide a source or citation for this? I did for Lowder's quote, so hopefully you can here. (That and you have to wonder how much a current employee is going to say "it was out of our hands completely, we received a directive and had to comply.")

Of course, the fact remains that other publishers aren't queuing up to go that route, so if that was their decision then you'd be inclined to wonder why they haven't reversed course given that it hasn't worked. Not to mention the fact that they quite clearly did have the expertise for publishing novels, since their novel division was quite profitable and regularly turned out bestsellers (e.g. the Dragonlance books, the Drizzt novels, etc.).
There novel division was a big thing- 20 odd years ago.

Dragonlance died a miserable death long ago in terms of new novels being viable. I'm guessing the Spellplague finished off what was left of the Realms in terms of new novels with the exception of Drizzt.

Combined with that whole online thing and ebooks etc.
 

MockingBird

Explorer
I read 5E was planned before 4E even came out but how well did 4E sell? I didnt care for it and switched to PF shortly after it came out but there was some interesting fluff in some of it. I liked the points of light concept.
Wait...are we just gonna gloss over this one? It may be common knowledge, I dunno, but this is the first I'm seeing this. Is this true? I cant wrap my mind around this but I can see how it makes sense.
 

MockingBird

Explorer
No 5E came up 2010, Mearls was the one who said 4E was a dead duck think about 5E.

5E design started 2011.
Wow, never knew this. Very interesting. But wait, when did 4e launch? The other guy said 5e was a thing before 4e. Imagine what 5e would be now if it had launched instead of 4e. This is blowing my mind right now.
 

Hussar

Legend
True, but the targets were not the problem.
Well.... kinda sorta. Remember, the target at the time was to make D&D one of the ((Forgetting the actual term)) top shelf IP's. Which meant that the target was 50 million dollars, or more. Considering, at the time, the entire RPG industry was somewhere in the 25-30 million dollar range, that's a pretty tall order.

Here, make a game that is going to double the entire size of the market!

Which, when you start looking at the design decisions of 4e, it starts to make sense when you see it through the lens that they were banking on having massive influxes of new gamers, with supposedly a very strong online VTT presence. They were supposed to have an X-box launch for a VTT but a murder suicide nixed that plan. Gleemax and the character builder and all the online presence of 4e was supposed to support this massive growth of the hobby.

Unfortunately, that never materialized. Heck, it would take 5e, which, really, didn't have any set targets, to start approaching that 50 million mark. And, even then, it's taken about 4 or 5 years to get there. Fantastic job, but, let's be honest, would you have predicted that 5e would triple the RPG market by 5 years after it's launch?
 

Rob Kuntz

Adventurer
WOTC does what it does best and that's to build up brand recognition and then license and do merchandise deals on the back end. This allows greater return on profit by having less up front investment footprint like TSR (in part) succumbed to.
 

Zardnaar

Hero
WOTC does what it does best and that's to build up brand recognition and then license and do merchandise deals on the back end. This allows greater return on profit by having less up front investment footprint like TSR (in part) succumbed to.
This WotC knows what they're doing for the most part.

It's kinda funny they're almost doing a 1E schedule for hardcovers.

Downside is less variety in the adventures at least first party.
 

Alzrius

The EN World kitten
There novel division was a big thing- 20 odd years ago.
It was pretty big right up until it was shut down. Remember, there had been a brand new series of releases for old settings prior to that, such as the new Ravenloft novels Heavens Bones (by Samantha Henderson) and Mithras Court (by David Page) in 2008, along with reprints of older works such as Death of a Darklord (by Laurel K. Hamilton). New Dark Sun novels (Jeff Mariotte's City Under the Sand, Keith R. A. DeCandido's Under the Crimson Sun, and Robert J. Schwalb's Death Mark) came out in 2010 and 2011. They were winding things up before the abrupt shutdown, rather than slowing down.

Dragonlance died a miserable death long ago in terms of new novels being viable. I'm guessing the Spellplague finished off what was left of the Realms in terms of new novels with the exception of Drizzt.
Dragonlance novels were making the New York Times Bestseller list as late as the "War of Souls" trilogy in 2002, which was considered to have "revitalized the setting" according to their Wikipedia article, which was probably why Weis and Hickman were writing subsequent books such as the "Lost Chronicles" trilogy. Likewise, Ed Greenwood's Forgotten Realms novels (mostly about Elminster) were still going strong, as were Erin M. Evans "Brimstone Angels" books, Paul S. Kemp's Erevis Cale novels, etc., all of which had post-Spellplague material.

Combined with that whole online thing and ebooks etc.
If you're implying that print is dead, well, I think you better check again. ;)
 

Zardnaar

Hero
2002 was almost 20 years ago lol. 17 being technical. 3E was really the last hurrah.

I tried the new DL novels couldn't get into it.
 

Alzrius

The EN World kitten
2002 was almost 20 years ago lol. 17 being technical. 3E was really the last hurrah.
That was just what made the NYT Bestseller list (that a casual search turned up); things can be profitable without hitting that particular highwater mark. In other words, you seem to have missed the rest of my post, listing "hurrahs" well into the 4E period.

I tried the new DL novels couldn't get into it.
Well, I tried the new DL novels, and got into them.
 

Zardnaar

Hero
That was just what made the NYT Bestseller list (that a casual search turned up); things can be profitable without hitting that particular highwater mark. In other words, you seem to have missed the rest of my post, listing "hurrahs" well into the 4E period.



Well, I tried the new DL novels, and got into them.
Main point us the novel line has been in decline for a long time. Very noticeable in the last 10 years, very noticeable from the mid 90s before that where the fantasy section was full of FR and DL novels.

I remember shopping trips in 94-96 where people would give me money to buy them (we lived in a small town then).

We even had some in hardcover.
 

Alzrius

The EN World kitten
Main point us the novel line has been in decline for a long time.
Except that it hadn't been, as I just demonstrated.

Very noticeable in the last 10 years, very noticeable from the mid 90s before that where the fantasy section was full of FR and DL novels.
Not really, no. Right up until the plug was pulled, you'd find D&D fiction occupying a significant chunk of the fantasy section in any bookstore.
 

R_J_K75

Explorer
Wow, never knew this. Very interesting. But wait, when did 4e launch? The other guy said 5e was a thing before 4e. Imagine what 5e would be now if it had launched instead of 4e. This is blowing my mind right now.
Honestly I couldnt even begin to remember where I read this or who said it so its possible Im misquoting or misremebering. But I remember thinking at the time I read it that it was a pretty dirty move as they planned on eventually releasing 5E before they even released 4E. 5E wasnt designed before 4E but 4E was always meant to have a finite product life cycle, IIRC, 5 years. Struck me as odd when I read it. In retrospect it reminds me of Coca-Cola releasing New Coke in 1985, where its often been speculated that they did it on purpose knowing itd fail just to make tons more money a few months later with Coke Classic. Again I could be wrong.
 

Parmandur

Legend
Honestly I couldnt even begin to remember where I read this or who said it so its possible Im misquoting or misremebering. But I remember thinking at the time I read it that it was a pretty dirty move as they planned on eventually releasing 5E before they even released 4E. 5E wasnt designed before 4E but 4E was always meant to have a finite product life cycle, IIRC, 5 years. Struck me as odd when I read it. In retrospect it reminds me of Coca-Cola releasing New Coke in 1985, where its often been speculated that they did it on purpose knowing itd fail just to make tons more money a few months later with Coke Classic. Again I could be wrong.
That is inaccurate. You might be thinking of 3.5, which was already planned when 3E was released.
 

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