5 of the Worst Business Decisions in History

5 of the Worst Business Decisions in History

Because Who Needs All That Money, Anyway?

Hindsight is always 20/20 so it’s easy for us in the present to look back at some obvious mistakes of the past and go “How could you not realize?” And it’s not really fair for us to do so and that’s why this article isn’t really about criticizing the companies or people in question. It’s meant to present us with a “What if” scenario that looks back on some of the biggest business mistakes ever made.

1. Blockbuster Doesn’t Buy Netflix

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Photo Credit: Stu pendousmat via Wiki Commons

Right now, if you want to watch a movie at home, there is one word that immediately comes to mind – Netflix. It is a multibillion dollar juggernaut that has become the premiere service for home entertainment. But it wasn’t always like that, though. Back in the 90s, a company called Blockbuster was the big cheese. Netflix was just a young startup that offered a DVD-by-mail service which was steadily gaining popularity.

And here comes the screwup. Blockbuster could have bought Netflix, now worth $20 billion, for just $50 million. Netflix executives actually flew down to Blockbuster HQ and basically said “Please, buy our company”. Well, not really, but they were willing to sell a 49% stake in the company, adopt the Blockbuster name and basically become a subsidiary that offered streaming services. Blockbuster’s answer? A resounding NO.

The reason for this monumentally incorrect decision? Lack of vision for the future. Digital media wasn’t really a thing yet. Sure, the internet was around, but most of us still used dial-up modems and had to put up with that annoying noise every time it connected. Plus, the tech bubble just burst and most internet companies were in trouble so Blockbuster can’t really be faulted for being a little skeptical about the whole deal. Even so, fast forward to today and Netflix is the aforementioned $20-billion titan while Blockbuster filed for bankruptcy and closed its last retail store back in 2010.

2. Western Union Passes on the Telephone

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Not all business mistakes are recent. As long as enterprising people have been around, there have been others who failed to understand their vision. Here is what President of Western Union, William Orton, had to say about a recent invention to its very own inventor: “After careful consideration of your invention, while it is a very interesting novelty, we have come to the conclusion that it has no commercial possibilities…What use could this company make of an electrical toy?”

Any idea what he was talking about? Would it help if we mentioned that the inventor’s name was Alexander Graham Bell? Yup, Orton was talking about the telephone. Something that most people in the United States own – a novelty with no commercial possibilities. Again, Bell was actually asking Western Union to buy his patents and they said no. True, he was asking for $100,000 which was equal to $2 million today and that’s a lot of money. However, it’s still nowhere near the value that the telephone would eventually have.

It only took a few years for Bell’s own company to start seeing some substantial profits off his invention and then, shockingly, Western Union wanted back in. Obviously, Bell was no longer interested so Western Union hired Thomas Edison to work on Bell’s patent and improve it sufficiently enough so that they could file their own patent. Unsurprisingly, Bell took them to court over this for the next few years until Western Union eventually conceded and pulled out of the telephone market.

3. Decca Records Refuse to Sign The Beatles

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Have you ever heard of them? Well, if you’re into music, you probably should have. Starting out as a British record label in the 1920s, Decca pioneered several recording methods and was highly influential within the music business for decades. Nowadays it’s a subsidiary of Universal Music Group and still relevant. Even so, it could have been a lot bigger.

The year is 1961. Decca bigwigs are looking for new talent and they have several auditions scheduled on the same day. In comes a four-piece guitar group. They play some songs which, ultimately, fail to impress the guys at Decca Records. One of them, A&R man Dick Rowe even tells them that “guitar groups were on their way out”. Hey, this was Decca Records, a pioneer in the industry, surely the guy knew what he was talking about. The company eventually decided to sign a band called Brian Poole and the Tremoloes (who, apparently, are still active today). Oh, and the band Decca passed on? The Beatles!

4. 12 Different Publishing Houses Turn Down “Harry Potter”

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Photo Credit: B.Davis2003 via Wiki Commons

This time, there isn’t any single company that can take the blame for having no vision whatsoever. 12 different publishers were offered this book and they all said no. Partly, they had just cause to do so. The author was unknown and the work was a children’s book, something that doesn’t really bring in the money. Eventually, one publisher called Bloomsbury decided to take a chance and published what would become the best-selling book series in history. The author – J.K. Rowling. The series – Harry Potter.

That’s right, 12 companies had the chance to make enough money to buy the Moon and they said “Neah…” And even the company which eventually published the book did so through a series of fortunate events. First, Rowling was finding it difficult even finding an agent. Eventually, Christopher Little Literary Agents agreed to represent her after an assistant convinced Little (who never actually read the manuscript) that the book was quite good. Afterwards Little gave the book to Bloomsbury editor Barry Cunningham who agreed to look it over as a favor.

He wasn’t impressed, but he was the first one, quite surprisingly, who had this thought: “Hey, it’s a kid’s book, let’s see if a kid likes it”. So he gave the first chapter to his 8-year old daughter to read. She tore through it and came back demanding more so Bloomsbury decided to take a chance. Worth it…

5. 20th Century Fox Gives Away Star Wars Merchandising Rights

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Photo Credit: Michael Neel via Flickr

Here is something that you are probably aware of – Star Wars is worth a lot of money. A lot of money! Ignoring the main movie series, there are the spin-offs, the games and the tons upon tons of merchandise which is worth something just because it has Star Wars written on it. You know where most of that money is going? George Lucas. He is worth roughly $7 billion and almost all of that comes from Star Wars.

He has 20th Century Fox to thank for that. I don’t know if you knew this, but nobody was really expecting Star Wars to be anything special. Most people simply didn’t get it. Not even Lucas was too convinced. That’s why he traded part of the profits with Spielberg in exchange for a percentage of the profits from “Close Encounters of the Third Kind”.

The people who really weren’t convinced were the bigwigs at 20th Century Fox. They were almost certain they had a flop here. Still, Lucas just made “American Graffiti”. It was huge at the box-office and was nominated for six Oscars so Lucas was the talk of the town. He was also in line for a significant pay bump: from $150,000 he got for “American Graffiti” to half a million for his next project. However, Lucas made 20th Century Fox a simple offer: he kept his old salary in exchange for merchandising and sequel rights to Star Wars…and Fox said yes! Now, a few decades on, 20th Century Fox have made Lucas several billion dollars richer.