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How Gygax Lost Control of TSR and D&D
An anonymous reader writes "Sunday was the birthday of the late great Gary Gygax, co-creator of Dungeons & Dragons and Futurama guest star. With the fifth edition of D&D soon to come out at Gen Con this year, Jon Peterson, author of Playing at the World, has released a new piece to answer a historical question: how was it, back in 1985, that Gary was ousted from TSR and control of D&D was taken away from him? Drawn from board meeting minutes, stock certificates, letters, and other first-hand sources, it's not a quick read or a very cheery one, but it shows how the greatest success of hobby games of the 1980s fell apart and marginalized its most famous designer."
He lost a Will save.
After Gygax's treatment of Arneson and the way he attempted to attack other games in the roleplaying hobby, I find it hard to feel much sympathy for him.
I can surmise that immediately after being ousted from Dungeons & Dragons, he immediately got laid.
This should serve as a cautionary tail of what can happen when you go into business with friends and or relatives. As soon as big money starts being made...unfortunately the greedy side of human nature tends to rear it's ugly head.
The Blume family also exercised options -- which means creating new shares at a price agreed previously.
They needed money to do this, and conveniently Williams' downpayment for their other shares was exactly the same amount.
This is pretty standard: a company will often reserve X amount of notional 'shares' to be issued as options, and the existing investors are aware that their own holding will be diluted when these options are exercised. Until the options are exercised, however, they do not actually exist as shares. *
* There are various caveats on all of this, as shares may be held in treasury by the company, converted from one type to another and various other things in order to avoid tax / split control differently to the profits.
Why the hell didn't they hire a competent CFO???
It's a good question and more common than you might think. Part of the problem is that bringing in competent outsiders can be uncomfortable for company founders. Gygax clearly had a problem with involving anyone who was not a wargamer but the people who are competent at finance don't overlap heavily with people who are gamers. Plus when things are going well it is easy to think that you can handle it. After all, it's gone well this far right?
One of the big challenges in growing a company is that the skill sets for founding a company and the skill sets for running it when it gets larger overlap far less than most people think. For every Steve Jobs or Jeff Bezos there are thousands of people who simply cannot make the transition from small company founder to big company manager. The founders of Google were actually smart enough to bring in some outside management relatively early because they knew they didn't really have the skillset at the time to manage a company with a stratospheric growth rate. It would be like hiring a guy who has never managed a network larger than 10 computers to suddenly take charge of Amazon's data warehouses. The skills needed are just on a completely different level.
TSR loaned SPI money. SPI defaulted n the loan. TSR got SPI.
SPI would have died completely had they not gotten the loan in the first place. TSR was the only group that would lend them money to even try.
TSR could have refused to give them the loan, and then just bought all there stuff during bankruptcy. They would have gotten it cheap because no one else wanted it.
Yeah, you're not the only old person here.
The Kruger Dunning explains most post on
TSR, a small company dealing in the fringe hobby of "war gaming" got hugely popular at the beginning of 1980's thanks to an unexpected publicity from a hoax that got propagated by the national media.
The company owners and executives, Gygax and the Bloom brothers were no skilled businessmen and they projected this sudden jump in the company's revenue into the next years, expecting it to grow tenfold in a year. They went on a hiring and acquisition spree accordingly.
As the miraculous growth didn't come, TSR ran into financial problems, running on a $750k deficit by the mid 80's
The Bloom brothers tried to get a big outside investment to get the company out of the red numbers but Gygax opposed - he didn't want non-gamers to control the company. To this effect he executed an ancient option he got when the company was formed, gained a (very narrow) majority of the company's shares and thus the power to strip the Bloom brothers of their executive positions and void the investment by the outsiders.
In response the Blooms wanted to execute the option of selling all their shares back to the company for a large (but not outlandish) sum of some $500K but TSR could not afford it.
Half a year later the Blooms executed the same option Gygax did before to gain a slight majority in the company and sold all of their shares to Lorraine Williams for a third of the price per share, making her the largest and a majority shareholder.
One day later Gygax was stripped of all his executive positions in the company
He fought the decision in court, but really had no case and eventually sold off his shares in order to finance his new business.
How Gygax lost his copyright to D&D and Grayhawk the article does not say
All in all a really boring story