I think your overreading my argument. Im not saying it was the only factor, just that I think Sprig made it much less of a factor than it probably was.
And yes I do think doing the things that a normal game company does started to put it out of buisness. Its done the same for lots of companies lately, and frankly KS backs me up on that blaming the slowing of the RPG market.
When other companies were retooling their lines to make them more competitive and streamlined Palladium kept to the same format. This isn't 1985 E, the major competition for RPGs out there isnt other RPG's its video games. While the video game deal was a good idea it fizzled. The video game model is exactly why d20 is so successful (well that and the huge amount of marketing) because characters in the game are more video game like advance faster and have a breakneck release schedule to deal with Gamer ADD.
Once palladium books looked great ,and that was a big draw, but now, everyone has pretty much surpassed that, switched to better paper, hardcovers, better art and much much more. Now Palladium games undercompete because they aren't the slick new thing. Sure they sell consistantly to old players, but new players are snapping up D20, and a lot of slick small press games.
One thing I do know about gaming and publishing company is that one or two bad products and slumping sales can torpedo a company faster than you can say jimeny cricket. Thats what FASA and GDW had to deal with and they arent around today.
In this day and age, playing the same game in the publishing buisness isn't going to pay the bills, or at least it doesnt seem like it.
Now the embezzlement hurt, and hurt them badly, I wont deny that (and never did) but the embezzelment has kind of been old news (its at least a year old now even though it was only whispered about earlier) but like I said, this has been going on for a while. I was making the argument that the embezzlement wasnt the only cause of their financial situation.
I hope Palladium can pull itself away from the brink, I have fond memories of the Robotech game, but I do think that they need to start changing with the times or they wont be around much longer.