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People Are Sharing Famous Companies That Went Bankrupt Over Dumb Decisions, And Now I Finally Know What Happened To Circuit City

"Restaurants brought out the servings slowly and were like, 'Nobody is going to sit there for hours and just eat them.' Actually, lots of people did."

In light of OnlyFans reversing its ban on sexual content, you might wonder what other companies made seemingly dumb or greedy decisions that they really paid for later.

An OnlyFans logo seen displayed on a smartphone
Sopa Images / SOPA Images/LightRocket via Getty Images

Well, look no further. Recently, u/WolfgangCaesar asked, "Now that OnlyFans is taking back its ban on sexual content, what other company bankrupted itself (or nearly bankrupted itself) through poorly thought-out or unnecessary decisions?"

People were quick to respond with companies that notoriously bankrupted (or nearly bankrupted) themselves over similar types of decisions:

1. "One time, Red Lobster offered an unlimited [snow] crab leg deal. They brought the servings out slowly and were like, 'Nobody is going to sit there for six hours and just eat crab legs.' Actually, lots of people did — so many, they lost millions."

The Red Lobster sign outside of a Red Lobster location
Rivernorthphotography / Getty Images

u/Omniwing

A 2021 article from Mashed explains that you could get unlimited snow crabs from Red Lobster for $22.99 a person. However, at the time, the price of snow crabs was rising in the U.S. due to farming quotas, and many people were eating three to four servings of snow crabs. 

The article also notes that The New York Post reported that [Red Lobster] lost $405.9 million in stock in a single trading session and $3.3 million in profits.

2. "Photobucket changed its terms of service back in 2017. It then required a yearly fee for all those images you previously posted on it for free."

The Photobucket logo on a mobile screen
Temizyurek / Getty Images

u/drizzes

According to a 2017 article from The Verge, "Thousands of listings from online marketplaces like Amazon and eBay are now filled with unsightly error images by Photobucket after the photo hosting site quietly introduced a $399 annual fee to users who want to embed images on third party websites. 

"Users are now accusing Photobucket of extortion, as the service failed to make the update to its terms of service abundantly clear."

3. "Quiznos. The corporate office decided to buy the vendors and then contract all of the franchises to only buy materials from corporate with a price hike. The margins got way too high, and all of the stores went out of business. They shot themselves straight in the foot."

The storefront of a Quiznos
Justin Sullivan / Getty Images

u/JoshBobJovi

A 2021 article from Eat This cites that "Quiznos reached a high of $1.9 billion in systemwide sales in 2007" but "generates less than $100 million a year in sales across all its stores" as of this year. The article goes on to say that experts attribute Quiznos' fall to rapid expansion at the expense of their franchisees. 

Quiznos onboarded inexperienced franchisees and made "difficult financial demands which precluded these small operators from making a profit." Eat This also cites YouTuber Company Man, stating that a large portion of Quiznos' revenue came from franchise fees.

They also sold "food and paper products to its franchisees through a subsidiary called American Food Distributors. Operators were forced to buy these supplies at prices far higher than the industry average, while Quiznos directly profited from hiking up the prices."

4. "Netflix almost bankrupted themselves as they made the transition from DVDs. They had a period where they dropped to dangerously low subscribers."

Netflix DVD packages
Justin Sullivan / Getty Images

u/RagnarDann3skj0ld

If you don't remember, Netflix lost 800,000 members in 2011 when it split its rental service into two separate subscription plans: one for streaming movies online and one for getting DVDs in the mail. 

Rather than pay $10 for one plan, each subscription plan cost $8, resulting in a 60% price increase for customers. According to the New York Times, Netflix stock also "plummeted more than 25 percent in after-hours trading."

5. "JCPenney tried to stop bullshitting customers, and it backfired. They said no more sales. They were just going to price everything low because pretty much all sales at department stores are lies, anyway. You’re not really getting 70% off — the retail price was deliberately set stupid high to convince you it was a great deal, but the discount price is the actual value of it. JCPenney’s heart was in the right place, but ultimately, it failed because customers are really that dumb and would rather be lied to."

A JCPenney department store
Sopa Images / SOPA Images/LightRocket via Getty Images

u/Phil_Drill

In 2012, JCPenney announced no more "fake prices." Instead, their new pricing structure set original prices at least 40% lower than their previous prices so that customers no longer needed to rely on sales or coupons. However, when the company released its first-quarter results, it reported a $163 million net loss.

Time reported that a woman interviewed in an Associated Press story said, "The closest JCPenney is about a half-hour away from me. If I don’t get a special discount, it’s not worth the trip."

6. "In 1998, Yahoo refused to buy Google for $1 million. In 2002, Yahoo [was in talks] to buy Google, but Google wanted more money. Yahoo refused the offer. In 2006, Yahoo wanted to buy Facebook for $1 billion, but Facebook backed out. In 2008, Microsoft offered to buy Yahoo for $44.6 billion, but Yahoo refused. In 2016, Verizon bought Yahoo for $4.8 billion."

The old Yahoo header from the desktop site
Andrew Holbrooke / Corbis via Getty Images

u/WickedCoolUsername

Yahoo did indeed have two opportunities to acquire Google. In 1998, Larry Page and Sergei Brin were willing to sell their startup — their "soon-to-be patented PageRank system," the core of Google — for $1 million to continue their studies at Stanford. Yahoo declined the purchase because it wanted users to spend "time on its own platform" rather than being sent to a relevant site.

In 2002, Yahoo entered negotiations to purchase Google for $1 billion. However, during the length of the negotiation, Google raised its valuation to $3 billion. Since search only made up 6% of Yahoo's income stream, Yahoo refused the offer.

In 2006, Mark Zuckerberg refused Yahoo's offer to purchase Facebook for $1 billion. However, reports allege that Facebook's "board of directors would have forced Zuckerberg to accept an offer of $1.1 billion, yet Yahoo executives would not agree to the increased bid." However, Zuckerberg did not want to sell since Facebook had not yet built all of its products — at the time, Facebook was about to launch its News Feed.  

In 2008, Microsoft proposed acquiring Yahoo for $44.6 billion, at $31 per share, but Yahoo wanted more per share. Ultimately, in 2016, Verizon announced its acquisition of Yahoo for $4.83 billion, then sold Yahoo (and AOL together) for $5 billion in 2021. 

7. "Sears ended their catalog/mail-order business in 1993. For over 100 years, they had sold everything from hubcaps to houses via mail order and shipped them all over the country. Amazon was founded in 1994."

The entrance to Sears inside of a mall
P A Thompson / Getty Images

u/kkngs

While Sears filed for bankruptcy in 2019, its sales accounted for 1% of the entire US economy in 1969. In the 1980s, Sears' catalog division annually made $4 billion, but the cost of mailing catalogs that sold low-margin products made the business unprofitable. So in 1993, Sears ended its catalog division and "dismantled the distribution infrastructure while failing to keep updated customer lists." 

When Sears launched its e-commerce site in 1997, it had to rebuild but began offering in-store pickup of e-commerce purchases before Macy's or Target. However, by 2000, its merchandise failed to lure new customers. CEO Eddie Lampert wanted to prioritize e-commerce over department stores after merging with Kmart in 2005. The decision led to Sears stores being neglected, and many stores closed. 

"On paper, Sears had everything to be the e-commerce retailer that dominated the globe. By 1985, they had their own credit card, Discover, to rival MasterCard and Visa. They had their own insurance company in Allstate. They partnered with IBM to create 'Prodigy,' one of the first proto-ISPs in 1984, that offered all sorts of online services (except buying stuff from Sears) years before the World Wide Web existed. In theory, they were posed to make e-commerce a thing back in the late '80s and sweep the world in the '90s — with no chance for outsiders like Amazon, who had to build their stuff from the ground up, to catch on."

The outside of a Sears department store
Mario Tama / Getty Images

u/Loki-L

Sears launched the Discover card nationwide in 1985 with no annual fee and a higher credit limit than most other credit cards. At the time, Sears was the largest retailer in the US. Discover later introduced the innovative "Cashback Bonus." However, by the fourth quarter of 1986, Sears lost $22 million in credit card operations. Sears sold its financial business in 1993 and began accepting MasterCard and Visa, in addition to Discover.

Sears named Allstate Insurance after a car tire it sold in its catalog. In 1993, it took almost 20% of the company public and by 1995, AllState became fully public. 

Prodigy, an online server turned Internet service provider, began in the late '80s as a joint venture between Sears and IBM. By 1990, Prodigy was the "second-largest server of its kind" and enabled users to shop, email, participate in online forums, and read news online. Despite becoming the largest server in 1993, Prodigy eventually suffered from low pricing, heavily moderated forums, privacy concerns, and the taking away of its unlimited chat feature. In 1996, Sears and IBM sold Prodigy

8. "Kodak completely went under when they chose not to adopt digital photography. They eventually came back several years later, somehow."

Kodak color film next to a Kodak disc 3100 camera
Tom Williams / CQ-Roll Call, Inc via Getty Images

u/thehankinato

From a 2012 article from Forbes, "There are few corporate blunders as staggering as Kodak’s missed opportunities in digital photography, a technology that it invented. This strategic failure was the direct cause of Kodak’s decades-long decline as digital photography destroyed its film-based business model."

9. "A&W created the third-pounder. It was the same price as McDonald's quarter-pounder. It bombed massively. When they tried to find out why, it was discovered that Americans thought they were being cheated because three is a smaller number than four. A&W — realizing they can't explain grade school fractions to fully grown adults without coming across as condescending assholes — quietly took the burger off the menu."

Don & Melinda Crawford/Education Images/Universal Images Group via Getty Images

u/wildcharmander1992

According to A&W's own blog post, "In the 1980s, then-owner A. Alfred Taubman launched the 'Third is the Word' campaign to promote A&W's new third-pound burgers and compete with another brand's smaller quarter-pound burger."

Despite aggressive marketing, the third-pound burgers were not selling, so A&W brought in a market research firm. "The firm eventually conducted a focus group to discover the truth: participants were concerned about the price of the burger. 'Why should we pay the same amount for a third of a pound of meat as we do for a quarter-pound of meat?' they asked. 

"It turns out the majority of participants incorrectly believed one-third of a pound was actually smaller than a quarter of a pound."

10. "In 2012, after a three-year hiatus in the sport, Lotus F1 team signed driver Kimi Raikkonen. His contract included a clause that stated Raikkonen would earn €50,000 for every point he scored in the two seasons of his contract. Raikkonen went on to finish third in the 2012 championship and fifth in the 2013 season — which was exceptionally impressive for Lotus. In doing this, he scored 390 points in two seasons. He earned €19.5 million off of that bonus alone, which led to Lotus almost filing for bankruptcy."

Kimi Raikkoken driving for Lotus
Gerlach Delissen - Corbis / Corbis via Getty Images

u/Aimaan-Zakaria

Though Raikkonen did score 390 points in his 2012 and 2013 seasons with Lotus and a clause in his contract guaranteed him €19.5 million for those points, Lotus did not pay him in full until 2014. Lotus executive direction Mattew Carter said, "The situation with the creditors is much better compared to last year. [Raikkonen's salary] was a big part of our debt, but it has been paid in full by now."

feature for the Official Formula 1 Magazine reported, "When, during the second season, the money started to run out, the team spirit at Lotus began to flag. It looked likely that Raikkonen would not drive in the 2013 Abu Dhabi Grand Prix but, after a good deal of dithering, he turned up. Asked why he had arrived so late, he replied: 'When you’ve been paid nothing for a whole year, it’s hardly conducive to positive thinking…'" Unpaid, Raikkonen quit before the end of 2013.

11. "Circuit City. It was a major retail chain in the 1980s that collapsed under mismanagement. Its arguably biggest blunder was firing all of their experienced, better-paid workers for cheaper, inexperienced ones. Apparently, selling merchandise and keeping customers happy are important in the retail business. Who knew?"

A Circuit City storefront
Karen Bleier / AFP via Getty Images

u/Mount_Drew

Consumers cited Circuit City's most obvious failing as its customer service, according to a 2008 article from Time. "In March 2007, [Circuit City] announced plans to lay off its highest-paid hourly employees, including salespeople, and replace them with cheaper workers. That same year, then CEO Philip Schoonover received some $7 million in compensation." 

The highest-paid employees were the most experienced employees (who had accumulated higher wages over the years). Circuit City also outsourced its IT department. After the company fired over 3,000 employees, WSWS reported, "The firings are the most abrupt and brazen manifestation of a trend by corporate America to push out older and better-compensated workers and replace them with a smaller, younger, uninsured and underpaid workforce."

12. "Borders Books. A conversation happened between Amazon and the giant Borders Books. This Internet thing was starting to look like it would harm retail sales, so Borders agreed to sell books online through Amazon. By 2007, Borders ended its marketing alliance with Amazon."

A Borders location
Justin Sullivan / Getty Images

u/EnnuiDeBlase

In 2001, Borders and Amazon partnered to sell books online. As a result, Amazon handled Borders' inventory, site content, and customer service while Borders "leveraged its brand name to drive sales." But in 2007, Borders ended its arrangement with Amazon and launched its own online business in 2008. 

However, as book-buying shifted from in-person to online, Borders then struggled to compete with Amazon — and even with Barnes & Noble, which had begun selling books directly online in 1997. On top of that, Amazon released its e-reader, the Kindle, in 2007, and Barnes and Noble released the Nook in 2009. 

13. "Quibi — when it decided that 10-minute clips watched in portrait on a commuter train is the future of home entertainment."

The Quibi logo on a mobile screen
Sopa Images / SOPA Images/LightRocket via Getty Images

u/oftenGetsItWrong

When announcing they were shutting down Quibi six months after its April 2020 launch, co-founders Jeffrey Katzenberg and Meg Whitman "cited the unique environment created by the Covid-19 pandemic" as a condition for the company's failure. Quibi — a portmanteau of "quick bites" —  raised $1.75 billion from investors and targeted users on the go with five- to 10-minute episodes.

However, other reasons attributed to Quibi's downfall include poor original content, weak marketing, and a lack of paying customers. In May 2021, Roku debuted "Roku Originals" — consisting of 30 shows originally produced for Quibi that Roku acquired the global rights to — for free, including Kevin Hart's "Die Hart," the Emmy-winning drama, "#FreeRayshawn," and Comedy Central's revived "Reno 911!"

14. "Ayds Diet Candy. They didn’t change their name after the emergence of the AIDS virus."

A screenshot of an Ayds candy box from a commercial
Ayds / Jeffrey Martin Inc. / Via youtube.com

u/NoSoul2335

Initially, the AIDS epidemic in the 1980s did not negatively affect the sales of Ayds, the appetite-suppressant candy. The media attention allegedly helped Ayds sales grow, according to Martin Himmel, president of Jeffrey Martin, Inc., the company that manufactured Ayds.

In 1986, chief operating officer Frank DiPrima said, "Consumers are smart enough to tell the difference between a disease and a diet product. The product has been around for 45 years. Let the disease change its name." 

But by 1988, sales were reported to have dropped by as much as 50 percent due to association with the AIDS epidemic. In Britain, Ayds was remarketed as Aydslim, while in the U.S., the name was changed to Diet Ayds. 

15. "Yik Yak. It was a completely anonymous message posting app at first. Obviously, it became a fun anonymous messaging app. They then started to make it less anonymous by introducing usernames which — while they can still be throwaway usernames — certainly made people lose the favor of the app. They eventually shut down."

The Yik Yak page in the Google Play Store on a mobile phone
Mandel Ngan / AFP via Getty Images

u/downtimeredditor

Founded in 2013, Yik Yak had, at one point, a $400 million valuation. While the ability to post anonymously made Yik Yak popular among high school and college students, it also led to cyberbullying, harassment, and hate speech. By 2014, multiple schools either evacuated students or were put on lockdown due to bomb threats or threats of violence made on the app. The same year, one university student penned an open letter after "being targeted on the app for her weight."

In 2017, "two feminist groups and several former students filed a federal complaint" against the University of Mary Washington and its former president over cyber-harassment and threats of physical and sexual violence on Yik Yak. One of the lawyers involved told the New York Times, "The lack of responsiveness and inability to control this devastating hate speech I think is what ultimately did this app in."

By the end of 2016, Yik Yak laid off 60% of its employees and shut down operations. It sold off "intellectual property and employee contracts to Square Inc., a mobile payment company, for $1 million."

16. "Vine. It seemed like the best thing at the time."

The app for Vine
Franckreporter / Getty Images

u/WarheadADHD

In 2012, Twitter bought Vine for a reported $30 million, "as a near-perfect video analog to its flagship app’s short-form text posts." By 2016, Twitter announced it would discontinue the mobile app. 

According to The Verge, former executives said that Instagram's then-new 15-second video clips were "the beginning of the end" as Vine "didn't move fast enough to differentiate." As a result, marketers shifted money away from Vine, and Snapchat "became the casual mass-market lifecasting app that Vine’s founders had once pitched their product to Twitter as."

17. "Schlitz. Throughout the '60s, it was one of America's biggest national beers. In 1974, Schlitz's president and chairman, Robert Uihlein, Jr., believed beer drinkers couldn't distinguish their favorite beer from other brands and oversaw the introduction of a slimmer brewing process. It replaced barley with corn syrup and used silica gel as a preservative during the brewing process that was then filtered out, i.e. didn't have to be listed as an ingredient. Instead, the beer spoiled faster, grew cloudy on racks, didn't produce a frothy head when poured, and was flavorless — resulting in a 100-million bottle recall. Schlitz also didn't realize light beer was becoming a thing, so it got its clock cleaned by Bud and Miller. It then ran an ad campaign with some belligerent-sounding guy threatening to kill another guy, who was off-camera, if he took his Schlitz away. By the '80s, it went back to its original brewing process, but the damage was done."

A Schlitz billboard sign above a highway in the 70s
Scott Mcpartland / Getty Images

u/SniffleBot

Schiltz was the world's top-selling brewery in 1934, but by 1982, it was bought out by Stroh. The 'Schlitz Mistake,' as it's notoriously called, was the company's attempt to cut corners on quality to save on costs in the early 1970s. It implemented a new process called "accelerated batch fermentation." When the company recalled more than 100 million cans and bottles of beer, it lost more than $1.4 million

In 1976, Schlitz tried to combat the success of Miller Lite and launched Schlitz Light, but it was deemed a failure. To turn around its declining sales, Schlitz launched a disastrous ad campaign in 1977, dubbed the "Drink Schlitz or I’ll kill you" campaign. The ads failed so badly that Schlitz pulled them 10 weeks after they aires and fired their advertisers. 

Here's one ad from the "Drink Schlitz or I’ll kill you" campaign:

View this video on YouTube

youtube.com

18. "Digg was bigger than Reddit until they decided to force changes on the site. The changes were immensely unpopular — to the point where users began posting Reddit links as a way of rebellion. Digg stuck to their new ways and collapsed."

The Digg top news page
NetPhotos / Alamy Stock Photo

u/mtg-Moonkeeper

According to a 2012 article from Technology Review, a big reason Digg failed was "the changes to Digg’s user experience. ...  In particular, a redesign in August 2010 angered users by changing popular features and rolling out with bugs. Over time, 'it just became more complex of a layout,' [industry analysts] Owyang says, which caused people to leave."

Other changes included an inability to let users communicate directly with another, prompting some to move to Reddit, Facebook, and Twitter — where users could share links.

19. "Blackberry. Most popular smartphone in the world — then they were less than 1% of the market share, and their stock value dropped. A couple of years ago, they announced that they would focus more on software and essentially gave up making phones. Lots of BlackBerry executives took advantage of their market share and thought a flat, touchscreen phone wouldn't take off the way it did. How the mighty have fallen."

A Blackberry Pearl
David Mcnew / Getty Images

 —u/valboots

In 2009, Fortune magazine named Blackberry the fastest growing company in the world, but by 2013, Blackberry's stock price collapsed by 90%. Blackberry's insistence on producing phones with full keyboards — despite consumers' preference for touchscreens — is cited as a big reason for their failure to keep up with Apple's iPhones and Google's Androids. 

While they had once controlled 50% of the smartphone market in the US and 20% globally, Blackberry had 0% of the market share by 2016. That same year, Blackberry announced it would stop making its own phones and signed over most of its global branding rights to Chinese manufacture TCL. 

In 2020, Blackberry ended the arrangement with TCL, and Texas start-up Onward Mobility acquired a license to make 5G devices — one being a 5G BlackBerry device with Android and a physical QWERTY keyboard — for Blackberry in 2021. 

20. "Schwinn. The executives of America's most venerable bicycle maker could not be convinced that mountain bikes were anything more than a fad. They made one and called it the Klunker (yes, really). They then got an Asian company to design a mountain bike for them. Today, Schwinn is just a brand name someone else owns."

A Schwinn logo on a bicycle's main axle
Justin Sullivan / Getty Images

u/SniffleBot

In the late '70s, the sport of mountain biking was developed — but mountain bikes were "just one of several trends in cycling that Schwinn considered irrelevant," according to an article published in Strategy+Business. "Company executives had trouble imagining that any adult would spend money on what they thought of as a toy. Mountain bikes, which sell for anywhere from $500 on up through the stratosphere, now dominate the industry."

Over the next decade, Schwinn's 80-year-old Chicago facility struggled to efficiently produce modern bicycles using new processes (like TIG welding), so the company began "importing bikes from Japan, Taiwan, and China, eventually becoming more a marketer than a maker of bikes." 

When Schwinn finally built a new plant, they built it in Mississippi to avoid a unionized workforce. However, the location made it difficult to receive materials from Asian suppliers. The new plant lost money until it was shut down in 1991 to avoid liquidation. In 1992, Schwinn filed for bankruptcy

21. "MoviePass was a weird one. Their model was too good to be true. They lost money on every subscriber who was seeing more than two movies a month — which was most of their subscribers."

The MoviePass logo on a mobile phone
Sopa Images / SOPA Images/LightRocket via Getty Images

u/dirtyLizard

In September 2019, MoviePass shut down after being hailed as a disruptor of the moviegoing business. A 2019 article in the Verge states, "Many MoviePass subscribers who were attracted to the new service by the lower price began using it frequently. MoviePass started losing money on virtually every subscriber, and it then went bankrupt."

The article further explains, "The company’s new bosses understood that they would lose money on every subscriber, but they didn’t care. They wanted leverage in the form of a large, dedicated user base. The company amassed more than 1 million subscribers in the three months after introducing its new unlimited, $9.95 plan." 

MoviePass hoped to recoup the cost of high tickets by buying tickets at a bulk discount and receiving a cut of food and drink sales from partnered theaters. However, AMC refused to partner with MoviePass and announced their own AMC Stubs A-List in June 2018. Due to a myriad of issues over terms of services, customers banded together online and filed two suits against MoviePass before the company finally shut down.

22. And last but not least, "There was a donut shop by my high school. It opened at 6 a.m. and closed at 5 p.m., so students would be there every day before school started at 7:30 and after school ended at 2:15. They changed their hours to 8 a.m. to 3 p.m. and couldn’t make any more money. They shut down a few months after the change."

Trays of donuts behind glass in a donut shop
Ashley Dando / Getty Images/EyeEm

Did you remember all of these companies and know this is what happened to them? What other companies would you add? Let us know in the comments below!

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