I think it's really just a coincidence that the contract negotiations happened to hit at the same time that Richard Arnold's "Reign of Error" began to be felt.
No coincidence. Richard spoke at conventions about that time - at the time.
During the hiatus between TNG Seasons 1 and 2, Paramount pulled in all existing licensing contracts and did extensive renegotiations to better incorporate TNG into the franchise. Pocket's contract was renewed quickly. FASA's was revoked and not renewed. Lengthy negotiations for DC Comics.
I have to be honest, Ian, I'm not sure I believe this. I'm not saying that your recollection of what Arnold said is incorrect. But at the same time, he's not a disinterested party and, given the politics of the time, it was in his interest to promote the view that Roddenberry was wresting back control of the franchise from the infidels who had pillaged it in his absence.
From a business standpoint, Arnold's story doesn't make any sense. Voiding all of their existing licensing contracts would cost Paramount a lot of money; it would be like the Activision lawsuit of a decade ago, but spread across dozens, even hundreds, of licensees. Admittedly, much of the money Paramount would have to pay out to abrogate the contacts would be paid back if the licenses re-upped after renegotiations. But you're talking about an immense amount of work and an immense amount of money, to say nothing of legal billable hours involved in sorting through the Gordian knots of hundreds of contracts. It just seems... staggeringly, incompetently insane for a company to do this for such marginal benefit given that the products before and after didn't materially change.
The reason I used the word "coincidence" deliberately is that DC Comics' first series ended where you would have expected it to end if they had a five year contract with Paramount and the contract had come to its end without renewal.