In 1982, the 30,000 subscribers of Strategy & Tactics, SPI's flagship magazine, were the most avid wargame enthusiasts on the globe. More than 50% of them, per SPI's own feedback, owned 100 or more wargames; most of them bought a dozen or more games every year, not counting the games they received as subscribers to the magazine. SPI estimated that perhaps 250,000 people, in the whole of North America, had ever bought a wargame; and the 30,000 subscribers to S&T bought an enormously disproportionate number of the games sold.
They were the hard core, the fundament upon which the whole wargame industry was built.
So naturally, when TSR took over SPI, the first thing it did was give the finger to S&T's subscribers. The first thing it did was say to the best customers of its new subsidiary, "Go take a hike; we don't want your custom; your concerns mean nothing to us."
You see, almost every magazine in the country can declare bankruptcy tomorrow, if it wants to, because every magazine in the country has enormous liabilities: the obligation to provide issues to its subscribers. The subscription money came in long ago, and has been spent, and that liability remains. Magazines continue, and make money, because they sell advertising, and expect their subscribers to resubscribe. But SPI had no money -- and S&T had 30,000 subscribers. Over a thousand were life-time subscribers, owed issues in perpetuity in exchange for no further income.
TSR didn't want the liability. Fulfilling S&T's existing subscriptions would have cost it money.
So, TSR decided, it would not honor any subscriptions.
TSR had taken over SPI's assets, but not its liabilities, so they claimed; therefore, they had no obligation to S&T's subscribers.
Gosh. Guess what happened? Few of S&T's subscribers reupped. Few wanted to send more money to the company that had just ripped them off.
And few of them ever bought any of the wargames TSR began to publish.
And TSR never could figure out why their wargames never sold.
I think that this example is very interesting for a couple of reasons. One, the fact that this was such a large setback to the entire field makes it clear just how important barriers to entry can be in making competition difficult (it would have been infeasible to develop the network that had just been destroyed by another publisher). Two, is the market power of corporations. With their ability to raise equity, they can purchase viable business models but they do not necessarily manage them well.
For a luxury good, like wargames are , it is unfortunate for people who enjoyed them but hardly a tragedy -- other goods will have the chance to thrive in the market instead (and perhaps this is a form of creative destruction?).
But imagine this process for an essential good: like water, electricity or education. I think we should keep examples like this in mind when considering the benefits of privatization. There are massive upsides to capturing the efficiency of a functioning market -- but only if players are allowed to fail.
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