2e helped bring TSR to its knees. It didn't do it alone - the novels certainly helped (and were the thing that brought the fatal blow), and I'm sure the money TSR spent on the Buck Rogers license which happened to be partially owned by the company's owner could have been spent better.
It just took a while for it to show, because of book-keeping stuff. When a company makes a product, that's not a "cost" in the book-keeping sense - it's just a reshuffling of assets, from cash-on-hand to inventory. You might have spent $100,000 on printing and such, but now you have $100,000 worth of books. Once sold, you then record the cost (to you) of the book as "Cost of goods sold", and the price the customer (or rather, the distributor) paid as revenue.
Except those books weren't worth $100,000, because people weren't buying them. In the words of
Ryan Dancey:
I discovered that the cost of the products that company was making in many cases exceeded the price the company was receiving for selling those products. I toured a warehouse packed from floor to 50 foot ceiling with products valued as though they would soon be sold to a distributor with production stamps stretching back to the late 1980s. I was 10 pages in to a thick green bar report of inventory, calculating the true value of the material in that warehouse when I realized that my last 100 entries had all been "$0"'s.
In 1e, the typical adventure sold between 50,000 and 150,000 copies, with the occasional outlier (e.g. White Plume Mountain at 175k). For 2e, they sold about a tenth of that (
Source). Certainly, 2e also had a whole bunch of non-adventure books sold (splatbooks, settings, regional sourcebooks, and so on), but it shows how each product in the 90s made a whole lot less profit than in the 80s.
And I'm saying that as someone who loved a lot of what was done with 2e. The original Dark Sun boxed set was a frickin' masterpiece, bringing an almost-dead world to life with strong descriptions and stark imagery. Al-Qadim was a thing of beauty. Jakandor was creative in its description of the same (small) setting from the points of view of two diametrically opposed forces. And Spelljammer had just the right amount of crazy. But 2e certainly wasn't financially successful.