Latest / Your Dark Companion Podcast / Saving 7-Eleven and the Blockbuster That Could’ve Won | Jim Keyes | Ep 216
Transcript
- Speaker 1: Nobody would have thought that I would be the one. Ryder, sports talk. Oh, with the big mic. Oh, okay. Alright. Yeah. Okay. Now I get it. We had a lightning strike, boys. What happened over there, Grego? We had a little lightning strike right outside the window. The Texas Rangers win the world series. Alright. Alright. Here's a tip for all these Americano League teams. Don't what? You said tip. Yeah. Tip. Okay. With a p. Keep jamming. The the ticket colon. Nothing but a big Gen X jerk off set. Is this a cool night or what? I wish somebody would hear that go bullshit. I'm back, I'll teach you soon. Just like that, go. No countdown, no nothing, just go.Speaker 2: Technically, got a countdown to 35 and then it just kinda stopped. Yeah.Speaker 1: Okay. I say go. I go. What am I gonna do? Not Hi, everybody. This is your dark companion. And as you can tell, we are not in the nurturing biosphere of the mothership today. We are here at the Anatol Hotel in Dallas. Everybody knows where the Anatol is. It's out on Stemmons Freeway or I 35 as the less initiated prefer to call it. But, we are here today because SpaceX has been going on here. EarthX. EarthX. I'm sorry.Speaker 3: It's close though.Speaker 2: I was gonna say.Speaker 3: It's close.Speaker 2: Yeah. It encompasses that.Speaker 1: And I was doing so well.Speaker 3: Earth is in space. Yeah.Speaker 1: Alright. At EarthX, they talk a lot about space. There you go. It's easy to get them confused. But Earth X has been going on here for the the last few days. How well I remember this last year because it was here. This time a year ago that I got to interview Jeff Skunk Baxter. My first and only interaction with a member of Steely Dan Proper. That was a thrill. Today, another thrill because we have a guy who has pulled a lot of big operations out of a lot of deep doo doo. His name is Jim Keyes. He has a book called Education is Freedom. The future is in your hands. That's right. Your hands. Not mine. Not his. Yours. And he is with us today. It's a pleasure to talk to you.Speaker 3: It's great to be with you, and I had the privilege of being with Skunk on Monday night.Speaker 1: Oh, really?Speaker 3: Yeah. He was here kicking off our Earth X, first evening dinner. And, I delivered the invocation, and Skunk followed me with a an amazing, amazing guitar solo that was just incredible. Set the stage.Speaker 1: I can only imagine.Speaker 3: Yeah. It was a beautiful thing.Speaker 1: He's turned out a few of those in his day on the planet.Speaker 3: He did. Well, it was actually even more special because in my invocation, I invoked the words of the Artemis two crew and their observations of the planet Earth from from space. And I showed a a photograph of first Bill Anders '2 1968 image of Earth rise, and then I used Bill Wiseman I'm sorry. Reed Wiseman, the commander of the Artemis two, captured on his iPhone earth setting behind the moon. So I showed that during the invocation. The earth set literally. It's a beautiful image on the screen. And when Skunk began to play, he was talking about music being frequency and that the frequency of the universe is in each of us. And as he began to play, the crew, unbeknownst to Skunk or me, pulled back up that earth set image. And so while he's playing a riff on the Star Spangled Banner and God Bless America, behind him was this image of the earth setting behind the moon. It was just a beautiful moment.Speaker 1: Wow. I would have loved to have seen that, been here for that.Speaker 3: I was I was I was it gave me chills watching that. It was pretty incredible. It's amazing.Speaker 1: Well, Jim here has been involved with a couple of major major operations in his time on the planet. And, he's been involved with, these things while they were in trouble, and he is the guy who pulled them out of trouble. And that's some of the stuff we wanna talk with you about. Two operations are seven Eleven, and show me one person who has not been to seven Eleven in this world, and blockbuster video. Now maybe you're thinking, okay, well, where's that now? Yeah. Okay. We'll give you that. But there was a time. There was a time, especially if you had kids, you knew where Blockbuster Video was.Speaker 2: We lived there back in the day.Speaker 1: That's right. You did live there back in the day. I lived there back in the day.Speaker 3: We all did.Speaker 1: Yes. We all did. I thought it was very interesting, though, that you were the guy who did did you come to both of these places when they were in trouble or getting into trouble? Or what was the status of them when you got there?Speaker 3: Well, theSpeaker 1: Start with seven Eleven first.Speaker 3: Yeah. Let's start with seven Eleven. I I was a kid not long out of school, joined the oil industry, worked for Gulf Oil. Seven Eleven had, acquired just acquired a company called Sitco Petroleum, and they, needed some industry people to come help turn it around. It was it was a bit troubled, and, that's how I got to seven Eleven, the South Incorporation. Joined the company. We turned around Sitco, had it profitable, sold it to Venezuela. The Thompson family, the founders asked me to stay with seven eleven. I thought, boy, this is a great career move. And a couple of years later, seven eleven did a leverage buyout, put on a lot of debt. The financial markets collapsed, and, I've had the fortunate or or unfortunate experience of living through two of those, the biggest financial market collapses in the last hundred years. But in in October '87 was the first Black Monday, and, seven eleven loaded up with debt, $4,000,000,000 is 17%. By 1991, they were in chapter 11 restructuring, bankrupt.Speaker 1: Now when when you're going through something like that, do people look at you and say, this is all happening? I mean, you were at the top of the flowchart. Right?Speaker 3: Not yet. When that when that happened at seven Eleven, I was leading the retail gasoline business. So I wasn't really in charge. I wasn't CEO of the company. But here's what I experienced. In those times of crisis, humans are really not good with change. And so many people had their head down, took a victim mentality. Oh, woe is me. Seven eleven's going away. My job's gonna go away. And here's the the the secret weapon that I had. I grew up in a situation with literally no running water. My house my mom left when I was five. My house was condemned when I was 11 years old. And that adversity that I faced as a child let me realize that there's nothing I can do about the things the universe will deal. It's out of my control. But there's everything I can do about the way I respond to that change. And that attitude really drove me through high school, college, graduate school. And when I get to seven eleven, okay, the world's falling apart around me. Who cares? Nothing I can do about that, but what I can control is how I respond to it. That attitude helped me get through that crisis. And at the end of the process, I stepped back and looked at it, and I said, change, which is inevitable, equals opportunity. Think about that acronym, c e o. It's the job of a CEO. That was my secret weapon to be able to recognize change equals opportunity. It was an opportunity for me personally. I ended up coming out of that bankruptcy with a promotion. I ended up as CFO of a public company. It probably wouldn't have happened in a successful public company. And it was an opportunity for seven eleven that needed to reinvent itself. But for the crisis of bankruptcy, I'm not sure seven eleven would have survived on its own. It had to reinvent itself, and it was forced to do that during that change.Speaker 1: Do you ever think about what might have happened had things not gone the way they did? And you look back on that time, and you think, gosh, if I'd have done this instead of this, then that would have been an awful move to make and just replay the whole thing in your mind.Speaker 3: Yeah. It's always easy to go back and second guess. You can second guess yourself, the decisions we've made, etcetera, etcetera. But, I like looking forward because, you know, I can go back to my blockbuster days, which were equally stressful, and say, wow, I wish I had done this or this or this because, you know, there are things that I could have done that would have changed the course of Blockbuster. But you do the best that you can with the tools that you have at the time. As a a favorite expression I have, it's easy to second guess the decisions people make, but we don't know what choices they had at the time.Speaker 1: Yeah. How did you get from seven Eleven to Blockbuster?Speaker 3: Well, we we had a good run at seven Eleven. I had the privilege, as you know, of sitting in a lot of chairs from CFO to being chief operating officer and ultimately CEO of the company. We had a really good run. During my tenure as CEO, the stock went from $4 to 40, and we had ten years of same store sales increase, fabulous improvement in in earnings and EBITDA, and so we had a good run. The Japanese decided the licensee that decided they wanted to buy the company. The primary motive was to get access to the Chinese market. So they wanted to acquire the parent company to be able to develop China. And that was an opportunity for me to say, okay. I'm still a pretty young guy. Let's take these tools that I've been able to learn the power of technology and transforming seven eleven, embracing change. Let's take it to another company that needs help. Blockbuster was kind of the perfect candidate. It it was needed technology. It needed to embrace change. And so I saw it as as yet another challenge.Speaker 1: When you got to Blockbuster, as time passed, it seems like the product itself changed. You know, at seven Eleven, maybe not so much. I mean, seven Eleven has always been and I know I'm I'm really cutting across a wide swath here, but seven Eleven has always kind of been seven Eleven. It's always pretty much done the same thing.Speaker 3: Not at all. Not at all.Speaker 1: Not at all?Speaker 3: Not at all. The secret to seven Eleven's success was that we changed every single day. Now the the beauty of it is that you didn't see those changes. But you think of seven eleven in 1990, what we were is beer, soft drinks, and cigarettes, and a little gasoline. But when we were in bankruptcy, I went to the to the founder, John Thompson. Said should I stay or should I leave? And he told me the story about how seven eleven started in 1927. They were an ice house over in 12th Street, Oak Cliff. Yep. And he said, somebody invented something called a Frigidaire. And they would have been out of business because all they sold is ice. But his uncle Johnny Green went on the dock and asked customers what they wanted and they said, we don't come here for the ice, we come here for the convenience. Where are we going to get ice in Dallas, Texas? And he said, your job now this is 1990. He said, we're stuck in a rut. We sell beer, soft drinks, and cigarettes, but everybody sells those. So your job should be find other things people need for convenience because he said there's one thing I can tell you, kid. And I was a kid. The need for convenience isn't going anywhere but up. So your job is find things that people need more conveniently. We began putting ATMs in every store. We put island card readers at every gas pump. We just made it more convenient for people to come. We brought fresh food into the store in a way that you had never seen before. All we had is packaged food or hot dogs. And so we we constantly we brought prepaid phone cards, aluminum bottles for beer, a constant pipeline of innovation of new products that people just took for granted, but it always put seven Eleven ahead of the pack. Yeah.Speaker 2: Well, I was gonna say the big game changer for me had to be the taquitos. So for me, that's when your success really started.Speaker 3: I love it. I love it. We we we had fun. That was a fun product.Speaker 2: I still like it.Speaker 1: Well, when you when you got to Blockbuster, that changed very rapidly, didn't it?Speaker 3: It did. And a lot of people scratch their head. They said, okay. Why is this retail guy, this seven eleven guy going to Blockbuster? But think about what Blockbuster was. Some people saw it as a place to rent DVDs. They said that's gonna be dead. I saw Blockbuster as a place for convenient access to media entertainment. You look at it that way, you say, okay. Where they want, what they want, when they want it. That was seven eleven's mantra. Why not the same for Blockbuster? What they want, where they want, when they want it. So that meant DVDs in the DVD era. When Netflix came along, that meant DVDs by mail. They want the convenience of getting home. Fine. We did the same thing. Red Box came along. DVDs in a kiosk. No sweat. We can do a kiosk. We had a kiosk. We had something called total access. The very first thing I did then when I arrived at 07:11 I mean, at Blockbuster, was to buy a streaming video company from the studios who had already developed streaming. The difference isSpeaker 1: And this was what year?Speaker 3: '19 sorry. 2007. Now, when people say Blockbuster didn't keep up with technology, the the truth is we were too early because we acquired the streaming company with 3,000 digitized new releases. We're ready to go. Well, the market wasn't. There were no smart TVs. There were no smartphones. The Apple iPhone didn't come out until o seven. The iPad, not till o nine. And bandwidth was so terrible that you could run short form YouTube videos, but you couldn't stream a full length movie in 2007 with the buffering and the slowness. So we acquired this company to position us for the future, and we were extremely well positioned for the future. Then the world fell apart. Same thing as in 1987. Lehman Brothers collapsed, the banks shut down, GM and Ford go to the White House begging for bailouts. We're blockbuster. We happen to have a billion dollars of debt. My job as CEO changed from being a transformative CEO to being a CEO that now had to full time focus on rescuing the company. Keep it out of bankruptcy, and then ultimately restructure the company and give it another chance, another bite at the apple, another chance for success.Speaker 1: How'd you do that?Speaker 3: Well, it's funny. I I did an interview a little earlier today, and and they reminded me that today or this year is the anniversary of Roger Staubach and Drew Pearson and the Hail Mary pass. It was a bit of a Hail Mary because we had a billion dollars of debt. The banks were shut down. There was no way to refinance that debt. A third of it due in 2009. By all practical purposes, we were toast. And the debt holders were happily ready to push us into chapter seven liquidation because they could buy the cheap debt, close all the stores, liquidate the videos at $5 apiece and make a couple $100,000,000. So that was their mission. So I had all of the dynamic, activist shareholders, negative press, street pushing the stock price down, board members nervous. I had all of the dynamic of a crisis on my hands. But I also had a solid strategic vision for where the company was going and partners. Google was this close to partnering, would have been a total game changer. And that was one of my Hail Marys, to partner with Google. They had just bought YouTube, and we were gonna put it side by side with Blockbuster. Everything free, YouTube. Everything paid. Total aggregation doesn't exist today. Would have been a fabulous distribution partner. That combined with MovieLink, Blockbuster On Demand that we had already acquired, and a chance to lock up the old movies exclusively would have been a total game changer. But the rumor leaked that we were going to file for bankruptcy. That leaked rumor caused Google to call me up and say, even though our board had signed a definitive agreement, it was with their board for signature, we're probably a week away from a total game changer. They called up and said, until you get through this financial crisis, we're gonna have to pull the deal. Okay. What do you do now? I still had in my pocket two other strategic players, Korea Korea South Korea Telecom and Dish Network. Both of them came to the table. We were able to get the company restructured and Dish prevailed as the buyer to help Blockbuster live to see another day. So that was my Hail Mary. To some extent, close my eyes, restructure the company, pray in bankruptcy court that somebody will be there to catch the ball. Dish Network caught the ball, and their vision, which was actually brilliant, was to take streaming straight to your cell phone. They were gonna buy Sprint, T Mobile, use our stores as a way to sell the service, free long tail movies with every cell contract, and pay per view movies under the block all under the Blockbuster brand. It would have been a a brilliant strategy, but again, they were early. The government didn't release the spectrum that they they own, And so we didn't get to five g on our phones until, what, 2012, 2014 maybe? Or maybe even later than that. So they were just early. They Dish ultimately decided to shelve the Blockbuster brand, close the stores, and move on. But at least I was able to give the company a chance to to live for another day and and get another bite at the apple.Speaker 1: How'd that make you feel when they decided to just shut everything down?Speaker 3: Oh, it's it's very disappointing. You know, you've got so much skin in the game. You wanna you wanna see them get it you wanna see them win the game. We we threw the the hail Mary. They caught it. I wanted to see them come down the field and score the touchdown against Netflix because I believe they could have and arguably should have, but things changed. The dynamic changed. Their corporate priorities changed, and and they they basically said, we'll just wait and do this when the time is right. And, you know, you never know. They may come back. They still own the Blockbuster brand. We don't yet have an aggregation player in the market. It's frankly it's a pain in the butt when you're trying to find the movie you want to figure out which streaming service has it, and still we have to subscribe to multiple streaming services. So perhaps someone will aggregate at some point. I'd love to see that under the Blockbuster brand, but who knows?Speaker 1: It used to be so easy back then. It was. I mean, if you wanted to see something, you knew where to go to do it.Speaker 3: Exactly. Exactly. Now convenient access to media entertainment. Yeah. That's what that's what Blockbuster was.Speaker 1: And now you're exactly right. You gotta figure out where it is and do you have it? Exactly. And if you really want it, but you don't have it, what are you gonna do about it? How do you get it? You know? Much youSpeaker 3: gotta pay for it. Yeah. Someone will aggregate at some point. We're in this period of time where the industry changed. There are players. In fact, I was chastised over the Internet for a comment I made in a press release. It was an earnings release back in February. And I said Netflix is really not the competition. Because at the time, Netflix had just started streaming, and they're streaming old movies. 80% of Blockbuster's business was new releases. Remember the new release wall? So I said the likely winner, the likely competitor for Blockbuster is Amazon, is Apple, maybe Google. But somebody who can take those new releases, combine them with the older content, and provide an aggregated one stop shop for anyone looking for convenient access to media entertainment. That would have been the Google Play where it was YouTube and Blockbuster side by side. That could be still Amazon. It could be Apple. But someone has to leverage their financial wherewithal to lock up these intellectual property rightsSpeaker 1: Yeah.Speaker 3: And aggregate the content. I believe it will happen. It's just a question of when.Speaker 1: Are you the guy to do it?Speaker 3: I would love to, but I don't know. I need a I need a a deep some deep pockets to help.Speaker 2: Right there.Speaker 1: They're out there somewhere. ComeSpeaker 3: on. Come on, Mike. Let's do it.Speaker 2: Yeah. Come on, Shoopy.Speaker 1: I barely have a nickel to my name.Speaker 3: That well, wait. Wait. Wait. I've been down that path before.Speaker 1: What do you hope to accomplish with the book here?Speaker 3: You know, I've been on a mission and and and, you know, you you heard my story that I Yeah. I came from pretty humble beginnings. Look around now and say, look, the biggest problem that mankind has now is us. We we are not behaving well as humans. We use such a tiny portion of our brain, and we revert back to what I call our caveman brain. And that's that, oh, I'm afraid you're gonna do something to me, take something from me, so I'm gonna revert to my fight or flight caveman instinct that triggers something in your brain called the amygdala that kept us from being eaten by a tiger. But we don't have natural predators anymore and we're still behaving like cavemen in the boardroom. So my mission with this book, Education is Freedom, is there's an antidote to that ignorance that's out there that causes that caveman behavior. The antidote is knowledge. And to the extent we can take responsibility as humans to learn, Knowledge is the antidote to fear because the more you know, the less you have to be afraid of. So I'm on a mission to be able to say, look, an AI may be, new technology may be the answer that we could elevate human learning to the point we've never seen before. And if we can do that, can we eliminate that fear that causes that bad behavior and have all of us take responsibility for our critical thinking skills? Instead of getting mad at something that we see on the Internet or when someone says trigger words like climate change, you know, instead of getting angry, can just step back and say, well, wait. I want fresh water, clean water. I want clean air. How do we work together? Let's make this happen as opposed to let's fight about it. That's my mission.Speaker 1: He is a renaissance man. He is on that mission. He is Jim Keyes. The book is called education is freedom. And, if you've, are inspired by this today, it is your mission to pick this book up, read it, adhere to these principles, make this world a better place. It's what it's all about. Right?Speaker 3: Absolutely. And the subtitle is more powerful than the title itself. The future is in your hands. We're in this together. If each of us takes the responsibility individually, then collectively, we can do so much better.Speaker 1: Our hands, your hands. Get this book in your hands. Read it. Adhere to it. Thank you, Jim Kees. We appreciate it.Speaker 3: Thank you, Mike. I appreciate it. Thank you. And, Mike, thank you. Thank you, sir.Speaker 1: Alright. This is your dark companion from SpaceX today. EarthX. EarthX. God. I did it again. EarthX, not SpaceX. Bye. Alright. I'm gonna go take your pants off. You're Dark Companion is a stolen water media presentation.