James Keyes, former CEO of both Blockbuster Inc. and 7-Eleven, explains why 7-Eleven and Blockbuster were really part of the same business, and what REALLY happened to Blockbuster (and why you may not have seen the last of it).Hear James' full interview in Episode 471 of The Action Catalyst.
People forget that 7-Eleven was bankrupt back in 1991, shortly after I joined the company. And I thought, man, what a bad career decision. I went from a major oil company to 7-Eleven thinking that it was going to be a great career trajectory. And I find them now bankrupt. This is one of those things that change equals opportunity.
The company had 10 years of same-store sales declines, was really on a difficult trajectory. It was growing still, but it was having trouble keeping up with competitors, and it ultimately had to file for bankruptcy. But... that gave it the opportunity to reinvent itself.
We were able to look at the success of our licensed operations around the world, places like Japan, Taiwan, Thailand, bring those learnings back to the United States. So we were able to reinvent the company and come out of bankruptcy as a successful entity. For me personally, It ended up being a great opportunity because I thought I was going to lose my job like everybody else.
But we came out of bankruptcy and I ended up with a promotion and was put in charge of strategic planning for the new enterprise, led to then a career trajectory that gave me an opportunity ultimately to be CEO of 7-Eleven. So we took adversity, crisis, and then turned it into the next 10 years, 15 years of significant success, which when we sold the company in the year 2005,
Gave me the opportunity then to take on the challenge of Blockbuster. So I went into Blockbuster, eyes wide open. I knew it was going to be a challenge. Didn't know the kind of challenge we would face. Yeah. Because no one thinks about Blockbuster and 7-Eleven as the same thing, except they're two iconic brands, right?
If you think about the nature of Blockbuster's business, it wasn't renting DVDs. That wasn't their business. Their business was convenient access to media entertainment. It's a convenience business, not unlike 7-Eleven. They made the pivot from VHS tapes, which is where the industry started, to DVDs. DVDs were more convenient access to media entertainment. So they made that pivot successfully.
The digital transition was coming. Clearly, it was coming. I wanted to take the company there. My very first act as CEO was to buy a streaming video company called Blockbuster On Demand. So we had a massive competitive advantage versus Netflix because Netflix had DVDs by mail, very little else. They had streaming, but they had very old movies.
MovieLink had new releases, which was 80% of the blockbuster business. So we had a much better offering, arguably, a streaming platform, DVDs by mail, stores, in case you didn't want the one you got by mail, you could exchange it. We had kiosks. So we had something called total access, which is any way you want your media entertainment, we have it for you.
Pretty compelling competitive advantage, right? So you say, what happened? Well, we also had a From an IPO, in other words, a public offering that Viacom once owned Blockbuster, and they spun it out and created a new entity, a public company called Blockbuster. In 2004, put on a billion dollars of debt. Third of which was due in 2009.
Now, if you remember what happened in 2008, something called Lehman Brothers occurred. Financial market collapsed around Lehman Brothers failure and others. And we had a refinancing that we had to get done. Yeah. It's like being in a commercial airliner at 40,000 feet and all of a sudden the air gets sucked out. You have a decompression. That's what happened to Blockbuster.
We had to put the aircraft in a bit of a dive, if you will, preserve cash. and get to a safe altitude to be able to then climb back up. So we took it through a restructuring and had a successful sale of the entity to Dish Networks. So in spite of popular belief, Blockbuster didn't liquidate. They didn't go away.
They were sold to Dish Network, who ultimately had a different strategy for 100% streaming and 100% streaming via mobility They were a bit early in their strategy and ultimately closed the stores down. They still own the brand. You never know. It may come back one day.