I had previously heard that it was a failure to listen to its customer base and now it's confirmed: http://insaneangel.com/insaneangel/RPG/Stuff/Dancey.html
I think some of this report was reprinted elsewhere as certainly aspects read familiarly. In any case, an interesting read.
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Much of this is covered (again by Ryan Dancy) in the book "30 Years of Adventure: A Celebration of Dungeons & Dragons", which is a fascinating read.
The demise of TSR was a combination of things - failure to listen to its customer base, and some spectacularly bad business agreements. Returns of unsold product from distributors really crippled them.
I'll bring it by the next time we meet up. I think you'll enjoy it.
Ah, that must have been one of the places I read it because I already have '30 Years...'. Too old...memory weak...
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