5 Big-Name Businesses That Completely Failed
Starting a business is easy. Making it successful is the hard part. Every year, more than 400,000 new businesses open their doors in the U.S. That sounds like a lot, until you consider that roughly another 470,000 businesses shut their doors each year. That’s right, in recent years, the U.S. – the land of the self-made man (or woman) – has been losing businesses left and right.
Most businesses shut down for pretty predictable reasons. Owners retire, companies are sold to competitors, or they can’t adapt to a changing market or get a toehold in an existing one. It’s a natural cycle of birth and death. Most of these enterprises shut down quietly and their owners and employees move on to other ventures.
But some companies aren’t content to simply fade away. Every so often, a business goes south in a dramatic fashion. Often, these failures seem to come out of nowhere, when a once-thriving company suddenly goes belly up. In other cases, an ambitious new product or businesses is launched to great fanfare, only to sink suddenly.
Here are five businesses that went down in flames.
OK, so it might be a bit premature to call Tidal a complete failure. But things certainly aren’t looking good for Jay Z’s streaming music service. Bloomberg recently dubbed the subscription-only service, which launched in March 2015, a “complete disaster.” Only 900,000 people have signed up, and many of them aren’t paying subscribers.
Music fans were introduced to Tidal at a star-studded press conference, where Beyoncé, Jack White, Madonna, Kanye West, and other performers pitched the new service as a way to make sure that artists were fairly paid. But consumers weren’t persuaded by the argument that millionaire musicians needed even more cash.
Tidal still hasn’t recovered from that early misstep. But even without the tone deaf launch, there’s a good chance that the company would have struggled. Jay Z’s a savvy businessman, but even relatively established companies like Spotify have struggled to find a way to turn music streaming into a profitable business.
2. Fashion Café
Celebrity-focused theme restaurants were kind of a thing in the 1990s, which saw the launch of Planet Hollywood, House of Blues, the Motown Café, and the Official All Star Café, with each enjoying varying degrees of success. But none failed as dramatically as the Fashion Café, a misguided attempt to marry food with fashion.
Founded in 1995, the chain was associated with supermodels Naomi Campbell, Elle Macpherson, and Claudia Schiffer. But it ran into problems from the start. An early review described a vacant restaurant and bad food. Diners just weren’t interested in the confusing concept – after all, there’s not a natural association between modeling and eating.
But lukewarm consumer response turned out to be the least of Fashion Café’s problems. The Italian businessmen who created the concept were eventually indicted for conspiracy, fraud, and money laundering. The restaurant also failed to pay taxes and rent at its New York City location, according to a 2000 report in the New York Times. Investors reportedly lost millions.
3. The XFL
Back in 2001, the World Wrestling Federation (WWF) owner Vince McMahon decided that what America really needed was a more aggressive, absurdly over-the-top hybrid of professional football and wrestling. And so, the much-maligned XFL was born.
This short-lived sports league was co-owned by the WWF and NBC and featured teams with names like the “Hitmen” and the “Maniax,” an opening scramble rather than a coin toss, and scantily-clad cheerleaders, among other questionable innovations. No one took the game seriously, least of all NFL fans, who objected to a number of rule changes the league instituted. Ratings were terrible and McMahon ended up losing $35 million on the XFL’s single season.
“Was it wrestling or was it football?” Jon Mandel, co-managing director of Mediacom, a unit of Grey Global Group Inc., said in an interview with the Wall Street Journal. “It was neither. And that managed to turn off both audiences.”
Video gaming is a $22.4 billion a year industry in the U.S., according to the Entertainment Software Association. And it might not even exist if it weren’t for Atari. While the company didn’t produce the first home video game console, the release of the Atari 2600 in 1977 was instrumental in popularizing the pastime. The company made millions in the late ‘70s and early ‘80s, but in 1983, it all came crashing down.
Urban legend blames Atari’s failure on a single misstep: the release of E.T., a game designed to capitalize on the immensely popular film and which was rushed to market in time for the Christmas 1982 shopping season. But the game didn’t sell as well as expected, and Atari was stuck with millions of unsold cartridges.
It’s a good story, but it’s not exactly fair to blame Atari’s downfall on a single bad product, even one that’s sometimes called “the worst video game of all time.” The underlying causes of the company’s collapse included a saturated home video game market, a recession that meant many families had less money to spend on expensive electronics, the increasing popularity of home computers, and the fact that Atari failed to prevent third-party developers from creating games for its system. To make matters worse, two of its executives were charged with insider trading shortly after the E.T. debacle. The company didn’t go out of business after its big stumble, but it never recovered its preeminent position in the U.S. video game market.
5. DeLorean Motor Company
A list of dramatic business failures wouldn’t be complete without a mention of the infamous DeLorean Motor Company (DMC), a start-up auto manufacturer founded in 1975 by former GM executive John DeLorean. He built a factory in Northern Ireland with millions of dollars in funding from the British government, and the first cars rolled off the assembly line in 1981.
Despite the iconic gull-wing design (later immortalized in Back to the Future), the car didn’t exactly fly with consumers. Fewer than 9,000 vehicles were actually produced before the company shut down in 1982, following DeLorean’s arrest on drug trafficking charges (he was later acquitted).
“The problem was he did not have the money to back his big idea for a very different type of sports car,” James Kerr, BBC Northern Ireland’s business editor said in BBC obituary for DeLorean, who died in 2009. “The car was launched in the midst of a recession. The market collapsed as did the company when the government refused to bail him out.”
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