Not sure this is the best thread for this, but it was the best I could find in paging through pages of topics. And I didn't think it deserved it's own thread, but was relevant to people's interests here.

This is from Jon Peterson, who said, "A look under the hood at the model of TSR's financials that underpins my new book "Game Wizards"":



And here is a link to his full article on this image.

Okay, I grant finances and accounting are not my schtick.

But if I'm reading this right, their revenue was skyrocketing but their profits were flat and eventually dropping underwater.

I would presume this means their costs were spiking hard. What the heck was going on in there?

How is it that there is such a difference between revenue and profits?

Were there massive lawsuits here we don't know about?

You always expect large differences between revenue and profits. A modern mature stable blue-chip company might have a 20% profit margin, so revenue is going to be 5-6x profits; here it looks like they have 5-15% while growing like crazy and *not* having professional management. (Successful software companies can be > 20%, which is part of why the stock market loves them. Monopolies also tend to have larger profit margins.)

Quote from: GriswaldTerrastone on September 16, 2021, 03:18:04 PM
How is it that there is such a difference between revenue and profits?

Were there massive lawsuits here we don't know about?

Obviously I'm just speculating here -

Could be a combination of the following:

Revenue was high because the consumers of D&D product itself didn't grow while their product did. This was a known thing where all the various lines of D&D were effectively in competition with one another. Only a small percentage of their customers bought everything.

So they were putting out more product - yes popularity was growing, but Greyhawk, Forgotten Realms, Dragonlance, Al-Qadim, Kara-Tur, Maztica, Spelljammer, Mystara, Ravenloft, etc were all lines that not everyone bought outside of a small but signifincant percentage of people (GM's). Therefore higher production costs and flat profits.


Obviously this is a simplistic answer that is purposely ignoring all the mismanagement and internal drama that certainly had a huge impact on that graph.

Quote from: tenbones on September 16, 2021, 03:36:02 PM
So they were putting out more product - yes popularity was growing, but Greyhawk, Forgotten Realms, Dragonlance, Al-Qadim, Kara-Tur, Maztica, Spelljammer, Mystara, Ravenloft, etc were all lines that not everyone bought outside of a small but signifincant percentage of people (GM's). Therefore higher production costs and flat profits.

If I'm not mistaken, before 1984 it was just Greyhawk, Forgotten Realms, Mystara, and Ravenloft, next — Dragonlance in 1984.

I'd rather suspect mismanagement and over-diversification of business:

Quote
1983 * TSR Hobbies seeks diversification and acquires or starts several new business ventures: a needlecraft business, miniatures manufacturing, toy and gift ventures, and an Entertainment division pursuing motion picture and television opportunities.

https://web.archive.org/web/20000818164322/http://www.wizards.com/dnd/DnDArchives_History.asp

I found this to be an interesting internal document on the top 45 D&D adventure modules for 1983:

Quote from: Naburimannu on September 16, 2021, 03:21:19 PM
You always expect large differences between revenue and profits. A modern mature stable blue-chip company might have a 20% profit margin, so revenue is going to be 5-6x profits; here it looks like they have 5-15% while growing like crazy and *not* having professional management. (Successful software companies can be > 20%, which is part of why the stock market loves them. Monopolies also tend to have larger profit margins.)

Well, yes, of course- the difference between gross and net- but look at that chart, and the numbers- the difference is HUGE. It is also interesting to note that where the revenue line peaks it almost corresponds to the nadir of the profit, so if it was simply a matter of, say, net profit of 30% of the gross then the lines should more or less correspond, barring anything significant (lawsuits, jump in price of say ink and paper, overpaying CEOs, etc.). That chart just doesn't seem to add up somehow.

I noticed words like "incident" and "sues."

Interesting. That's roughly what I'd heard, but I thought that D&D peaked a little earlier - around 1981 or 1982 instead of 1984.

Quote from: tenbones on September 16, 2021, 03:36:02 PM
Revenue was high because the consumers of D&D product itself didn't grow while their product did. This was a known thing where all the various lines of D&D were effectively in competition with one another. Only a small percentage of their customers bought everything.

So they were putting out more product - yes popularity was growing, but Greyhawk, Forgotten Realms, Dragonlance, Al-Qadim, Kara-Tur, Maztica, Spelljammer, Mystara, Ravenloft, etc were all lines that not everyone bought outside of a small but signifincant percentage of people (GM's). Therefore higher production costs and flat profits.

I agree. Plus, TSR put out a ton of different products in the early 1980s - not just different D&D lines but also Top Secret (1980), Crimefighters (1981), Dawn Patrol (1982), Gangbusters (1982) and Star Frontiers (1982). Then in 1984 they released Indiana Jones and Marvel Superheroes - both of which were presumably quite expensive in licensing as well as production costs.

My impression is that based on the explosive growth that they were seeing in 1979 and 1980, they thought that RPGs would go fully mainstream and they hired a bunch of people and produced a lot of products to try to capitalize on that. However, that investment didn't pay out.

Quote from: GriswaldTerrastone on September 16, 2021, 03:18:04 PM
How is it that there is such a difference between revenue and profits?

Were there massive lawsuits here we don't know about?

Part of it might also be the salaries the TSR executives paid themselves...

I'm fairly sure the Blumes weren't exactly short changing themselves when you consider just what Gary Gygax was getting at the time in royalties...

On ENWorld Rob Kuntz mentioned as an aside one of the royalty checks Gygax was getting every three months...
https://www.enworld.org/threads/arneson-vs-gygax-lawsuit.300535/page-2#post-8275257
"Listen, Gary once showed me a royalty check (in 1980) for three months (six figures, nearly $300,000) while he was drawing a six figure salary on top of it. Arneson was making MORE than he was in royalties. "

Holy What the actual Fuck Batman!

300K every three months in 1980's dollars! Adjusted for inflation it is about $900,000 in 2021 money.

Every three months... On top of his yearly six figure salary.

Now that's how you make a living writing RPGs!

I don't think WOTC sends out a single royalty check...

But I wonder if they pay out on the sales of the old TSR PDFs...?

It's still utterly ridiculous how both Gygax and Arneson essentially died broke.

Amazing how some people just can't handle money.

Quote from: Jaeger on September 16, 2021, 07:48:30 PM

Quote from: GriswaldTerrastone on September 16, 2021, 03:18:04 PM
How is it that there is such a difference between revenue and profits?

Were there massive lawsuits here we don't know about?

Part of it might also be the salaries the TSR executives paid themselves...

I'm fairly sure the Blumes weren't exactly short changing themselves when you consider just what Gary Gygax was getting at the time in royalties...

On ENWorld Rob Kuntz mentioned as an aside one of the royalty checks Gygax was getting every three months...
https://www.enworld.org/threads/arneson-vs-gygax-lawsuit.300535/page-2#post-8275257
"Listen, Gary once showed me a royalty check (in 1980) for three months (six figures, nearly $300,000) while he was drawing a six figure salary on top of it. Arneson was making MORE than he was in royalties. "

Holy What the actual Fuck Batman!

300K every three months in 1980's dollars! Adjusted for inflation it is about $900,000 in 2021 money.

Every three months... On top of his yearly six figure salary.

Now that's how you make a living writing RPGs!

I don't think WOTC sends out a single royalty check...

But I wonder if they pay out on the sales of the old TSR PDFs...?

It's still utterly ridiculous how both Gygax and Arneson essentially died broke.

Amazing how some people just can't handle money.

When you start making that kind of money, you almost HAVE to hire some sort of financial advisor. Way too many people are barely competent at balancing a checkbook, let alone managing those funds.

Do biographies of Gygax offer any clue as to what happened with his money?

Quote from: Yeti Spaghetti on September 17, 2021, 08:13:20 PM
Do biographies of Gygax offer any clue as to what happened with his money?

I suspect just normal RPG expenses like Hookers and Blow.

Quote from: Shasarak on September 17, 2021, 08:23:42 PM

Quote from: Yeti Spaghetti on September 17, 2021, 08:13:20 PM
Do biographies of Gygax offer any clue as to what happened with his money?

I suspect just normal RPG expenses like Hookers and Blow.

Whew... That's sure reassuring to hear those are normal expenses.

Boy howdy.

Quote from: Mithgarthr on September 17, 2021, 08:26:59 PM

Quote from: Shasarak on September 17, 2021, 08:23:42 PM

Quote from: Yeti Spaghetti on September 17, 2021, 08:13:20 PM
Do biographies of Gygax offer any clue as to what happened with his money?

I suspect just normal RPG expenses like Hookers and Blow.

Whew... That's sure reassuring to hear those are normal expenses.

Boy howdy.

I guess I forgot the small print (while trying to sell your movie in  Hollywood)