Home Entertainment: Blockbuster • James Keyes
Blockbuster Wasn’t Killed by Netflix — The Asteroid That Hit the Movie Giant
In this episode, we sit down with James Keyes, former CEO of Blockbuster, to revisit one of the most iconic stories in business lore—the rise of Netflix and the fall of Blockbuster. But as Keyes explains, the real story is far more complex than the usual disruption narrative.
We explore how Blockbuster was already preparing to enter the streaming space, even holding talks with Google to build what could have been a dominant digital platform. So what happened? Keyes shares how technological limitations, bad timing, and the shock of the 2009 financial collapse—with a billion dollars in debt—intersected to create a perfect storm.
From innovation to collaboration to the role of timing in transformation, this conversation re-examines the mythology around Netflix and what could have been if the bandwidth—and the world—had been ready just a little sooner.
-
(Auto-generated by Spotify. Errors may exist.)
James W. Keyes is a global business leader, best-selling author, philanthropist, artist, musician, commercial pilot, and modern Renaissance man. He’s the former CEO of two globally recognized Fortune 500 companies, 7-Eleven Inc. and Blockbuster Inc.
His other business interests cover a broad range of industries from retail, consumer products, technology, healthcare, cybersecurity, new space, energy, and advanced nuclear.
He sits on several public company boards and serves as a board advisor to a venture capital firm and a number of startup companies.
Jim Keyes has experience successfully leading multinational corporations with a deep understanding of global and local franchise operations.
His creativity, innovation, and adoption of leading-edge technology contributed to the successful transformation of both public and private organizations.
He’s a seasoned executive known internationally for leading transformational change. Jim is a personification of the American Dream as he comes from humble beginnings. He was inducted in 2005 as a member of the Horatio Alger Association of Distinguished Americans. In 2024, he received the Robert S. Folsom Leadership Award presented by Methodist Health System Foundation to recognize demonstrated community leadership.
Host: Jim, it’s such an honor to have you here on our unNatural Selection. Thanks for being here.
James Keyes: Thanks, Nic. It’s great to join you.
Host: And, and your career is, is so distinguished. I mean, you’ve, you’ve influenced so many large organizations. And one of the things that we didn't really talk about is that you also sit on the board of the American Red Cross.
Host: You’ve sat on the board of Columbia University and so many other organizations. And so it’s, it’s such a, it’s an honor to have you here. But obviously, we’ll focus on the Blockbuster story because that’s such a pivotal moment in our lifetime. But your career has been so distinguished that this could be five hours long, but we’ll try to keep it to an hour.
0:00 - 5:00
Host: So if we focus on Blockbuster. What business, human, or societal need were you addressing at the time and what was your role in meeting it?
James Keyes: Well, believe it or not, I'm actually going to, going to take you down a path because Blockbuster is a fabulous case study. I mean, you’re at Harvard. Harvard is known for the case study. Blockbuster is a case study. If people can overcome their perception of Blockbuster and instead have a perspective of what we were doing at the time and what was going on. To share that perspective, though, I'm going to have to take you back to 7-Eleven, because when I joined 7-Eleven, I thought it was about beer and beef jerky and Slurpees.
James Keyes: But 7-Eleven went bankrupt in 1991, and I sat down with the chairman of the company. I said, you know, should I stay? I was pretty young at the time. And he told me the story of his dad, who started with an ice house. They were selling blocks of ice in 1927 in Dallas, Texas, and they would harvest it literally in the Great Lakes and bring it all the way down to Dallas, bury it underground, sell chunks for people to put in their icebox. It's the only way to keep things cold. It's hard to even imagine today. But he said in 1929 somebody invented something called the Frigidaire. And he said, what does that do to your business? It was his customers that told him, we don't come here for the ice, we come here for the convenience of getting ice.
James Keyes: His message to me, now 1991, he said, if we didn't see our business as convenience, we saw it as ice, we would have been out of business by 1930. But today we have 20, 30 thousand stores worldwide at the time. And he said that's because we defined our business as convenience and convenience will never die. People will always need convenience. So your job, Jim, is find things that people need conveniently. And I did and it worked. Travelled all over the world looking for ways to make people's life more convenient through products and services. Everything from ATMs in every store to aluminum bottles with beer to taquitos on the roller grill. I mean, we, we innovated like crazy.
5:00 - 10:00
James Keyes: Then I go to Blockbuster and you might think Blockbuster was a DVD rental company, which is what it was. Many people saw it that way. They were competing with Netflix at the time. Netflix was doing DVDs by mail for rent. Yeah, they're the red envelopes. Exactly. But I never saw Blockbuster as a DVD rental company. It was convenient access to media entertainment company. That meant my job as CEO was to find how to deliver content where, when, and how people wanted to see it. That meant obviously streaming, but it was an evolution to streaming because we were ahead of our time. We didn't have the bandwidth. We didn't have smart TVs. Even the iPhone wasn't invented until 2007, the year I arrived at Blockbuster. So yeah, it was that was the purpose was convenient access to media entertainment. That's the the the challenge we were trying to solve for the ultimate consumer.
Host: It's refreshing to hear you say that very broad perspective, which is like Blockbuster wasn't about rentals, it was about convenience and and making entertainment at home as convenient as possible.
James Keyes: Exactly.
Host: And, and, and, you know, that's my purpose also for looking into these case studies. It's in retrospect, it's so easy for people to look back and say, "Oh, you should have done this." "Oh, you should have seen the writing on the wall." But it's never so straightforward, right? I mean, when you're sitting there, you have a business that's been printing money for decades. You have an interesting business model, maybe a startup that comes around. It's like, "OK, that sounds, that looks interesting, but who knows?" Startups come up and go and, and trends change. You have stakeholders, you have shareholders, you have investors, you have all, you have institutional inertia, you have a culture and skill sets that are hired into an organization. And so, but when you're in those seats, it's, it's really not that straightforward to say we should cannibalize our own business because of this interesting idea that's popping up.
James Keyes: Well, but it, it, it, it, it actually was, though it's not as straightforward. But the perception of Blockbuster is that they didn't, that they, they got beat by Netflix to the technology solution, the reality. I'll share the reality with you because it's totally counter to all the perceptions that are out there. In the year 2000, this is Netflix was still doing DVD, just starting up with DVDs by mail. In the year 2000, Blockbuster partnered with Enron. Very few people realize this. Enron had quietly bought up Spectrum, so they were sitting on the technological capability to stream video before anybody else was even thinking about streaming video. Mark Cuban was was just getting started with his broadcast.com I think it was. And there were a couple of just startup streaming companies, but there was no bandwidth. So Enron was trying to corner the market on bandwidth by buying up all this spectrum. Then they partnered with Blockbuster to be able to have a use for that spectrum, that bandwidth with streaming movies. This was way, way ahead. This talking, we're talking 10 years before there was any practical application or ability for the consumer to stream on devices. Now why did that fail? Well, we all know what happened with Enron. They got themselves sideways with financial misdoings and blah, blah, blah. And unfortunately, that bandwidth then was sold and etcetera. Now who bought the bandwidth? Much of it was then acquired the spectrum by Dish Networks. Charlie Ergen, the founder of Dish Networks, you take this story full circle. Who did I sell Blockbuster to after a restructuring? Dish Networks. Very purpose of deploying that spectrum to make the most convenient access to media entertainment.
10:00 - 15:00
James Keyes: Blockbuster was way ahead of its time and way ahead of Netflix in the use of technology for streaming.
Host: Wow, that's fascinating. I really did not know that. And it definitely paints an entire new light on that dynamic that was happening at the time. Because I know that especially in your tenure, you actually tried to bring in streaming into Blockbuster as well. I did not know about this other side of what was happening. And yeah, it's I remember 2000, the the bandwidth was incredibly low. You couldn't imagine streaming movies at the time.
James Keyes: And it was just hard getting e-mail. Exactly, exactly.
Host: Remember the the dial ups and the? Yeah, yeah. The the, the, you know, the, the modems and everything that sometimes they work, sometimes they didn't, take 30 seconds just to connect. Exactly. It was terrible.
James Keyes: It was terrible. And even when I arrived, I arrived in 2007, bandwidth was still, I think the iPhone came out that year. I think it came out with like 2G or something capabilities, not you. You could stream YouTube videos, but that's about it at the time. And the very first thing I had, my very first objective as CEO was to acquire because it was a build or buy for the streaming capability. I chose to buy because it was faster. And the studios, five of the six major studios, Sony, Warner, et cetera, had come together. Paramount, they created a company called Movielink. And not only did they have the technology to stream, but they digitized 3,000 of the newest titles, which was a huge advantage because 80% of Blockbuster's rental business was new releases. That new released wall. And so here's the studios digitizing all of those new releases, packaging up in a streaming company called Movielink that we acquired in 2007, renamed Blockbuster on Demand. That's.
Host: Right.
James Keyes: But there was still no place to stream. Whose kids with an Xbox was about the only ones with a device that was capable of streaming. And then they had to have amazing Wi-Fi to be able to avoid the buffering and all that stuff. So we were just ahead of our time.
Host: It sounds like it. I mean, it's again, back when you think in retrospect, without having that inside view, you could almost think that maybe Blockbuster sat on the success of its business and rentals and, and, and physical sites, which I actually remember fondly. I, I used to, I used to look forward every Friday or Saturday to go there with my family and pick out the video. And there was almost an excitement to you about finding that latest movie with a little bit of fear because you always fear, like, is it going to be totally sold out?
James Keyes: Exactly. Exactly.
Host: And so it was an adventure, whereas looking streaming today, looking for a movie to watch is less of an adventure, more a convenience. There was an adventure for especially as the little kid to go to Blockbuster. And and it's interesting to see that you saw the writing on the wall when it comes to technology, because even back then, I mean, like we said, streaming was it was painful using it, but you guys had the foresight to say, "Yeah, it's it's bad now, but it's going to get better and streaming movies will become a thing." But it sounds like you guys were just just ahead, like maybe a decade ahead of that.
James Keyes: Well, we were, we were, we were just ahead. And it wasn't really, well, first it was a decade ahead. But then as we got closer, by 2009, bandwidth started to be better. But what everybody also forgets is in 2008, Lehman Brothers collapsed. GM and Ford, others were going to the to Washington for bailouts. The banks were shut down and we had a billion dollars of debt. And so really the biggest disruption for Blockbuster and the thing that prevented us from taking it to that next level was a balance sheet that, you know, I inherited when I arrived in 2007. And unfortunately had I gone with my first objective, which is to take the company private, do an LBO, do a buyout and keep it a private entity while we did the transformation, I would have refinanced all the debt in 2007. We would have sailed right through the financial crisis, never bat an eyelash. But unfortunately, I kicked the can and thinking that I'll get a better interest rate after improving the EBITDA of the company. But by 2009, it was virtually impossible to get that debt refinanced. So it it caused us to then to have to restructure the company and still we had a good outcome. We had a sale to Dish Network who was sitting on all this bandwidth with a very different vision of the future of streaming.
15:00 - 20:00
James Keyes: Their vision was to use that spectrum, that bandwidth, acquire AT Mobile or a mobility company and go straight to mobility and bring that mobility, that carrier up to 5G or more. So that the most convenient way to stream movies would have been to download immediately to your device in a matter of seconds and then upload to any big screen that you want anywhere, anytime. That was the vision. But again, Dish was ahead of its time. We're just now getting the 5G, real 5G and even in the United States, this isn't as robust a 5G wireless capability as we find in other countries. That window of time caused Dish to say, you know, let's just, let's just shut it down for now. They shut the stores down and and decided to discontinue Blockbuster on Demand.
Host: Wow, that's incredible. I mean, this sheds such a different picture in my eyes because looking at it from the outside in the the picture that people have is that you have this incumbent that was across the entire US. You have this little startup that could and it was a big disruption story. And what you're telling me is, yeah, you know, Netflix was, well, we'll get into Netflix, but what really happened to Blockbuster was almost separate from whatever Netflix did. It's almost like Netflix, they walked into an opportunity that Blockbuster was working on, but then got hamstrung by this debt and then the financial crisis. And so that that kind of created a perfect storm that enabled Netflix, but then handicapped Blockbuster in a, in a terminal way, almost independent of each other.
James Keyes: Yeah, if Reed, if Reed Hastings was on and we, we should do this sometime, do a side by side. It'll be a lot of fun because I, I first of all, I have a lot of respect for Reed and the team at Netflix did a fabulous job. They, they took advantage of the opportunity when Blockbuster was handcuffed a little bit by the markets and they took some, placed some big bets and won. We can talk about those in a minute, but Reed would tell you that Blockbuster was in a position at least three or four times to crush them. And here's one of them. We had a chance to acquire 60% of the long tail content when, when, when Netflix started streaming, this is what they streamed, a bunch of old movies. But those old movies came up on the market around that time in about 2000, the end of 2007, they brought it to us. Paramount brought it to us as an opportunity exclusively for Blockbuster. So for $100 million a year, we could have acquired 60% of the long tail content. That meant everything but Disney and HBO basically that they weren't going to give theirs up. We would have owned that exclusively, which would have left Netflix with nothing to stream, but they they would have had to go create new content from scratch, which would have been very difficult without a, without a base of streaming. And so why didn't we do that? It was right around that time that the financial markets were collapsing. $100 million commitment per year in 2008 going forward, when we didn't know how long it would take for the bandwidth to really kick in, could have bankrupted Blockbuster had we made that decision. So the board turned it down.
James Keyes: But here's another piece of the puzzle. Around the same time we're talking to Google. Google was basically getting grief from the studios because kids were streaming movie content free on YouTube. Google wanted to find a way to fix that and satisfy the studios. So we, with Google and the studios put together a J-V structure where Google and Blockbuster would exist side by side. YouTube everything free, Blockbuster everything paid on the Google platform, total aggregation. We would have with that deal acquired the exclusive content for long tail.
20:00 - 25:00
James Keyes: So now we would have been able to provide a total aggregation, old movies, new movies, virtually anything you want to see, TV basically on the Google platform through the Blockbuster on Demand brand. That deal was signed by my by my board. It was with the Google board when someone leaked to the press that Blockbuster may file for bankruptcy. I know, I know.
Host: Wow, I know you were like hours away from having that deal absolute.
James Keyes: Dominance, which I don't even know if Reed knows how close we were. He knows that when we ultimately turn down the exclusive on the content, that opened the window for him to come in and get a non-exclusive deal on the content. And that's where he when he started streaming, I don't think he had any idea that we were that close on a Google deal.
Host: It'd be amazing. To just kind of have a retrospective from these two very different sides because, yeah, like you said, I mean, I'm sure there are tons of things that Reed has no idea about and maybe things as well that he was looking into that, you know, to this day you weren't aware of.
James Keyes: Oh yeah. Yeah, I mean, he did. They did some innovative things. They they were first to put a box in the market with Roku. We were instead of trying to do Roku, we were talking of the the big TV manufacturers. I was trying to get inside of Sony and and Samsung with a smart TV, which was a bit, a bit of a bigger challenge. Neither of us were going to get allowed into Apple because they saw themselves as a streaming player into the future. So yeah, it was a fascinating times. And Netflix dodged the bullet a couple of times because Dish then had a chance now, because Dish had strong studio relationships. Now they're the the, you know, obviously satellite TV provider, very strong studio relationships. They could have really put a hurt on Netflix streaming capabilities. But around that time, just as Dish was trying to decide, do we even stay in the business? Netflix, I, I, I like to, to say place the big bet. It was $100 million investment that they put out on House of Cards. Nobody, nobody did this. I mean, there was no binge watching back then. Netflix had a bunch of old movies, right? And people were bored with the content. It was like, why am I paying $9.99 a month for a bunch of old movies that I don't really even want to see? They rolled the dice. They went from a distribution company now to a production company in effect, which is a big, big difference and and it could have failed. It would have put them under potentially I think that kind of a chance that they took. But obviously House of Cards wildly successful.
Host: You're bringing. Some of these things up, they're jogging my memory because I obviously lived through them. And I remember House of Cards coming out. And the funny thing is I look back and I until you mentioned it, I don't even remember watching it on a Netflix. It could be an HBO for all I know. It's just, it's been so long ago, but I remember it having such a profound effect on just the discussion with people. Everybody was talking about House of Cards and it didn't. And even if I remember that it was Netflix, I wouldn't have known that it was such a wild bet that they just happened to hit it out of the park. But it could have actually crushed them if it hadn't worked out.
James Keyes: Yeah, I. Mean $100 million on one dollars on one production. And maybe it wouldn't have crushed them, but it would have hurt them pretty badly. Yeah, really. Badly and. And it did the opposite because it created now a whole market for binge watching for for, for a new approach to content. And I, I, like I said, I have a lot of respect for Reed and the team. They invented that idea of a new form of entertainment. It wasn't long form, it wasn't TV. It was now package it all up in a season, watch it all together, watch it, you know, one week at a time, whatever you want. Convenient access to media entertainment is what they did. So they they ultimately were successful with it and I credit them for that.
James Keyes: The interesting thing is, I've seen over the last couple of years people rolling that back, that convenience of binge watching, you know, and I live for it because I, I, I don't want to wait a week for that next episode.
Host: But I see different companies like HBO, Cinemax and others, now they're back to releasing streaming once a week, which to your very point, it eliminates that convenience, Yeah.
James Keyes: Yeah, exactly. And, and they'll keep going back and forth and trying different things. But yeah, the, the industry is still evolving and will continue to evolve. But I, I, I think the winners will be those that recognize it is about convenience and the, and the one missing piece today that if I had the Blockbuster brand, and you never know, Dish may come back and reintroduce it at some point.
25:00 - 30:00
James Keyes: It still has huge popularity all over the world, everywhere I go. And I I've been speaking in Australia, the Middle East and people come up and they show me their Blockbuster card. You know, like, you still carry that. It's just why I love those. Little things, the little the dark blue with the, the, the the laminate. Yeah, they were. Laminated cards and people are still have them in their wallet, after all. "I can't part with it," you know. It's funny. Yeah, but but I think there is a, a role for someone and I, I, I wish Dish would do it 'cause I think it would be a beautiful thing to see him come back to the market. But as an aggregator, because today it is totally inconvenient to sit around with your family and go, "Hey, let's watch the first Top Gun." "Where is it? Is it Hulu? Is it Netflix? Is it Disney?" And that's a pain. That's inconvenient, right? So someone's going to aggregate. I, I, I, I, I don't know who will have the best chance, but I, I think there are some with deep enough pockets that they will, will pull it off.
Host: Maybe it'd be Netflix right now. I was going to ask. You, because I believe Blockbuster still exists. It's, it's not what it used to be, but it still exists. And I've never asked this question of anybody, but I think you have such a unique perspective because I, I spoke with somebody from Kodak before and they underwent a transition obviously like missing the whole digital wave and everything. And Kodak is still around. But I didn't ask this question, you know, what would it take or is it even possible to revive a brand that's gone such a disruption? Because let's say we look at Blockbuster, we look at Kodak. I was thinking about this actually, when I was thinking about the Kodak story. It's still around. Is it is it that the brand at this point is seen in a negative way, so it can't or is it that they're just missing the enlightened leadership? Could a Blockbuster rise back up to become a streaming giant or maybe this idea that you mentioned, one that kind of like encapsulates all the streamers or or does the brand have a negative connotation that makes it impossible?
James Keyes: Yeah, I, I. I think absolutely it can come back. And if you think about, if you, if you think about it from and I'm a brand guy. So if I'm going to start a brand new company and let's say I want to be an aggregator in content, am I going to go out and call it mega movie aggregation? Maybe not. I think that one's already taken. But am I going to start a brand new brand that no one's ever heard of and have to build awareness? Or do I want to go out and go, hey, I'm bringing Blockbuster back now. I think that would be a far smarter play because, and I use as an example, we went through an evolution where Apple people wouldn't use a Mac for a doorstop. I hope you remember. But we had that period of time when they were really struggling and their devices were kind of before the iPhone came out and the Mac was kind of clunky and they tried putting colors on it and doing different things. But the IT was the operating system that wasn't wasn't as as convenient because it didn't other devices. Very close, very close. And then the iPhone was introduced, which changed everything. It completely reinvigorated the Apple brand. Now would the iPhone has been as popular if Jobs came out and said we're going to call this the Job phone? You know, I don't know, you know, maybe that wouldn't be that catchy, but but I think he had a jump start because people already knew what Apple was. He didn't have to teach them what Apple was. They already had a a history of innovation. They had just kind of lost their way. And so reintroducing, reinventing Apple with a new device, I think was easier because it was already Apple.
Host: Well, I I. That's why I asked the question. Kodak, at this point, it's been gone enough that a whole generation probably doesn't remember. But Blockbuster, it's a recent enough story. And again, we spoke about earlier as a kid, I had this nostalgia of going to Blockbuster. It still signifies it's kind of like American family entertainment convenience. It, it, it, it does signify a sense of adventure and, and you almost need it more than ever. In a time where we're dealing with all kinds of disruption and geopolitics and warfare and misinformation online, it almost feels like you kind of need a little bit of wholesome back into our family lives.
30:00 - 35:00
James Keyes: Yeah. Exactly. In fact, that would be if I brought Blockbuster black. If I, that's hard to say.
Host: If I brought Block Blockbuster back, it's a tongue twister. It really. Is. Make sure that's not your. Marketing campaign?
James Keyes: Yeah, bringing Blockbuster. Back I definitely couldn't be the spokesperson for it, but if I did it would probably be as that wholesome entertainment because people used to say, you know, Jim, you guys could make a lot more money if you, you know, sold like put a little section of X-rated movies in the back of the store. Oh yeah, we would have lost the family business. But it was that safe place that turn you can go, go pick up any movie you want.
Host: Exactly.
James Keyes: And and that really worked for us. And I, I think you're right. I think that's part of the, you know, ethos that became, you know, Blockbuster and became American family life. And I think it could. I think it could come back in that fashion even the way.
Host: That the internal stores, which they all look very, very similar, if not identical. The layout was such that the aisles were very wide, the shelving was low and the lighting was very light. And so even I didn't have kids, I was a kid, but running in there, my dad or you know, my family, they didn't have to run around after me fearing for where I was going to go because it could always kind of see me and, and the kids section was always in a certain area. So they knew where they're going to find me. And so there was, it was more than just a brand and the service, even the layout internally was designed in such a way that was very family friendly.
James Keyes: Yeah. Exactly so.
Host: When we think about Netflix, what did the what did the company represent to you in those early days? It sounds like it was less of a threat than I anticipated. I mean, they probably were a little bit. They were a start up. They were doing something new. They were not as constrained by the same limitations that a huge organization was. But were they just a curiosity? Were they any kind of a threat? Were they a motivator?
James Keyes: They were a good. Competitor. I, I, I think, you know, I'm a, I'm a classic capitalist that, you know, thinks competition is good. You know, I don't, I don't, I don't see them as the enemy. I see them as making us better. And now I, I did see Netflix, Netflix playing a bit of a different game because they made their mark by taking old movies and having an algorithm that would recommend old movies to people. And there was a certain audience for that. And they did really well with that algorithm and by making something out of nothing. Because frankly, like I said, our business, 80% new releases, they had lots of old movies, but nobody really came to Blockbuster to go find some obscure. Well, 20% of the people did. And usually they did when the new releases were out of stock. So they said, "Oh damn it, OK, I'll go rent something else." And and that was by design. Back in the old days. It would literally have limited inventory of the new releases to push people into the other, the rest of the store and I.
Host: Remember there was a now you're jogging my memory. I remember there there was a bin where people returned the videos and if you couldn't find your video the first place, you'd go there and hope that an attendant was so nice that they'd look for it for you.
James Keyes: Exactly that's. Exactly right, exactly right. It was something called design dissatisfaction or something like that. I was like, God, you can't. They were still doing it when I got there. I was like, guys, you can't do that now with Netflix because we'll just push customers into into the competition or Redbox that come out. But yeah, Netflix they were. I used to describe it like this. We're playing football, they're playing soccer. Similar but different. They were chasing that subscription business. Ours was an a la carte business. People didn't subscribe to Blockbuster. They came in and and rented movies, buy the movie because usually they wanted the new release.
35:00 - 40:00
James Keyes: Now the economics of a new release, If you just spent $500 million bucks to make a brand new hit movie, you put it in the theaters for two months and then you put it into the buy the movie rental. It doesn't hit the subscription business like, like HBO was the original HBO and Showtime were the original subscription models.
Host: Oh, yeah. That's like the all you can eat buffet. You're not gonna find prime rib. New York, The all you can eat buffet. That's so true.
James Keyes: It's gonna be kind of the old stuff that's been sitting around under the heat lamps for a while. And that's what Netflix made their business on, which was fine. They did great with it and it was a great platform to then launch into making their own TV, you know, productions and been binge watching all that kind of stuff. But that really wasn't our core business. Our core business was 80% pay-per-view, if you will. So I remember one time I was, I was criticizing effectively, if you Google me, you might even find that quote today. I was on an investor call and they said, well, what do you think about Netflix as a competition and Redbox, aren't they the competition? I said, you know, not really the competition for Blockbuster isn't Netflix. Now the my quote gets truncated there and will show up as Keyes, CEO of 7-Eleven. My competition is Netflix and look at their market cap today and Blockbuster's got, right. The rest of the quote was Google and Apple are because I knew that they had the platform, the technology, the deep pockets, deeper pockets, the Netflix at the time to be able to be that aggregator and to be able to offer pay-per-view a la carte movies, which was a very different market than what Netflix was chasing at the time. So I still think that that model is a little blurred right now. People think, well, it's just subscription business. I don't know if Netflix will ever go into the pay-per-view to have the newest of releases or instead make their own, because the only new releases you'll find on Netflix is what they make themselves, right? And that's a very different model. So I'm not sure where that industry will go, but but yeah, that was the difference. That's why we never really, we didn't find them having that much impact on our business because our DVD by mail model was just like theirs and yet people could come into the store and exchange the movie for something they wanted. So we even had an advantage versus Netflix.
Host: That's true on DVDs by mail. Yeah, you. Didn't even have to mail back those DVDs, you could just stand the way to the grocery store, drop them off.
James Keyes: Right, Exactly, exactly. And, and in fact, one of the things, that's another folklore thing people will say, oh, Blockbuster screwed up. They should have bought Netflix for $50 million bucks.
Host: That's right.
James Keyes: It's a, it's, it's that that rumor has been out there. I think Mark Rudolph has been out using that on the speaking tour or something. He's one of Reed's partners back in the early days. So yeah, they, they they could have bought us for $50 million bucks. How stupid was that? Well, I don't know how stupid it was. It was in the year 2000. Netflix stock was $0.79 and they were about to go down. That's why they went to Blockbuster. They were really struggling at the time, and Blockbuster could do exactly the same thing with DVDs by mail out of their own warehouses. And $50 million is a lot of money in 2000. There's a lot of money.
Host: Especially given what Netflix market cap was at the time. So yeah. And it's one of those great hindsight, hindsight's 20/20 things. So insightful. Talking to you and obviously the, the Blockbuster Netflix story is, is, is compelling, but you have been innovating in so many different ways. I mean, we, we talked before this interview about your innovation in 7-Eleven. I didn't know that you invented Vanilla Coke that you brought the, the, the metal bottles for, for Budweiser. And you mentioned something a little bit earlier about you welcome competition. It's part of the game. It's part of making you better. And so if I veer into maybe just innovation strategy, because I'd love to hear your perspective from this. What how do you view innovation strategy from the, the cultural speed hierarchy mindset internally?
40:00 - 45:00
Host: There's also all kinds of different ways we've alluded to a little bit. There are different theories. The one that I really like of the ten types of innovation, you can innovate across strategy, systems, experiences, classic stories of like Uber displacing taxis by bringing a whole new experience, even though they didn't build new technology or infrastructure. They kind of just launched that sharing economy and and it sounds like you have a very sound view and control of all these things when you're thinking about your business and you try to imbue them inside the organization. So what's your perspective when you walk into a Blockbuster or a 7-Eleven or other organizations? How do you view innovation strategy? And I think part of what you said was convenience. I think it sounds to me like you start from that understand your demographic, what's convenient to them and then you start working backwards. Is that right?
James Keyes: Yeah, but let. Me, let me take you back because there's a broader, there's a broader definition of innovation that I'll, I'll share with you. And I didn't, I didn't consciously think this way until about a year ago. I put a book out, but I started the book several years ago and the book captures a lot of these stories about, about innovation and Blockbuster and 7-Eleven, the importance of learning because I see the job of a leader is to continue to learn. But I I sat down to write this book and the first three words I put on paper were "Change Equals Opportunity" because I think that sums up everything about commerce and business. All business starts and ends with something changing and someone adapts to that change, comes up with a solution, they get compensated for it. And then usually what happens is they get rich, they get big, they get fat, and they stop changing and somebody else changes and takes advantage of that and. And and so "Change Equals Opportunity." I wrote those three words on the paper. I stepped back and I looked at them and I went, "Huh?" C-E-O, the acronym. Change Equals. Yeah, absolutely. So I.
James Keyes: Own that now I'm out talking all over the world about, you know, I don't care if it's business or if it's just your social life or society or whole country's. Change Equals Opportunity. And that is in essence the role of a leader. The role of a CEO is to embrace change and innovation. And this is this is the difference. The way I approach a company with innovation. A lot of CEOs say, well, that's not my job. I've got a whole department that does that stuff or retailers will say, oh, I'm a retailer, I don't innovate that that that's my consumer product companies, they have research departments. I think the CEO has to own innovation because the CEO has to be the one that recognizes change in the market and that change equals opportunity. So if I if I have my entire organization living and breathing with this notion that change isn't bad, it's good, and innovation is at the leading edge of that change, then we're going to win.
Host: Yeah, what you just said resonates so much with me and a number of different fronts. I've always thought too that I didn't think of his change. I always thought there's always opportunity in chaos. It just it creates new opportunities for some people. It's it's a it's a risk, it's a challenge for others, an opportunity. And my entire adult life, actually, since I was a kid, the first time I read this quote had a profound impact on me was from Louis Pasteur, who said that "Chance favors a prepared mind." And it's along those same lines, right? It's like sometimes things just randomly happen. There's a change, there's an opportunity. If you're not ready, you're not going to seize it. You're not going to see it. But if you are prepared, then that's where magic happens. And, and a lot of it is also the basis behind this podcast. The reason why I call it unNatural Selection and base it on evolution is because of the same thing. If you look at the Serengeti, not a lot of change happens. And so you have the same predators, you have the same prey. They do their thing now as they did a, you know, 100,000 years ago or a million years ago. And when there's a change, like an environmental change where there's a mutation that causes change, that's when all of a sudden you get disruption, you get new opportunities, you get new speciation, you get all kinds of things that happen. And so what you just said hits to the core of everything that I've ever thought about and the whole reason why we're here in this call in the first place.
James Keyes: Yeah, exactly. Exactly. But let me build on that for a second, because you think about it, Nic, what is? Why don't people change? If it's so simple? Change equals opportunity. Why don't we all embrace it? Pasteur was right. It's all about preparation. So here's what happens. Fear kicks in and, and, and resistance to change and inertia. And why is that? And, and that's because we revert back to our caveman self. We're like, wait, self preservation. I don't want to change. That's scary. I, I, I'm comfortable with what I know. And, and I, I've also been working with trying to coin the expression that "Certainty is the enemy of opportunity" because what you know will prevent you from moving forward. Where we learn is in that scary zone where something's different and unusual. We don't know. And that's what keeps us moving forward, that uncertainty part. So I, I, I basically said that yes, Change Equals Opportunity, but the really answer to being able to change, to innovate, is Change Confidence and Clarity.
45:00 - End
James Keyes: Because if you don't have the confidence, you won't be able to embrace change. Confidence, as in Pasteur's quote, comes from preparation, right? The more you prepare for the change, the more you're using knowledge to embrace the change, the more education will.
Host: Be. Education exactly, exactly.
James Keyes: Takes away the fear then. And then the third piece of the leg of the stool is clarity, because how many times do we people see innovate for the sake of innovation? They're not really. It's like, "Wow, look at this cool technology, I can do this." What was the application for it? You know, what are you going to do with it? And so that simplicity, bringing it back to what problem am I trying to solve and how do I clearly articulate this? Because if I, if I could have the best plan in the world, if people don't understand it, they'll never execute it.
Host: Yeah.
James Keyes: And so those three things Change, Confidence, Clarity, I think are the secret to innovation. And once you're, once you're freed up there, there, there is no, there is no stopping you. You can be completely free to innovate because you'll never be wrong. It's just trial and error.
Host: I totally. Agree, yeah. And and that third part, part about the clarity, I, I, I will build on that and say sometimes a, a good story plays really well into that. Because if you want to get that clarity and the message in such a way that the rest of the organization knows how to make decisions based on it, obviously you need a strong mission statement and things that they can actually embrace. But then the story of why you're doing it and who you're solving a problem, or why you're making life better for people, I think that also lends to the inspiration behind moving mountains.
James Keyes: Exactly. Absolutely, yeah.
Host: Jimmy, this has been incredible. It's been such a great experience and I know we're running on time. So let me ask you a question. A final question that I think you and from your vantage point are singularly in a position to potentially try to answer is you experienced a high stakes moment of business evolution. Well, you've experienced multiple high stakes moments, but is specifically with this one from your unique vantage point, what's one enduring lesson about innovation or competition or survival that most people don't see until they've lived through it?
James Keyes: You know, I think the, the biggest lesson that I've had, Nic, is the idea that this is not personal. We, we tend to, our egos tend to make us feel bad about things. We get some negative press. You know, we're going through a tough time financially. That's a macro environment. There's nothing you can do. And, and, and what I've learned through this whole exercise and, and I literally used it as the subtitle of my book, The Future's in Your Hands. We're, we're not in control of those things that are, that happen out there, the macro environment. I can't control a, a complete meltdown in the worldwide financial markets. What I can control is my reaction to it and the things that I do. And as long as I'm using the best knowledge that I had, the best information that I have to make the best decision that I can, I'm going to make that decision in good faith, trusting myself to make that decision because you have to make the call. And once I make it, I'm not going to beat myself up over it if it fails. What I'm going to do is I'm going to learn from that mistake, learn from that failure, and move forward. And that's the biggest learning. The future is in your hands. It starts with each of us. We're in control of our own destiny and we do the best we can. And it's not personal. Put your ego aside, make the best call you can.
Host: I can't tell you how much I've learned from this hour of talking to you. You've opened my eyes not only to the Blockbuster story, but just in so many different ways to just business and life in general. Especially with that closing thought, Jim, I want to just take a moment to first of all, congratulate you in such an extraordinary career. And I know that you stay very active and you speak you, you're in a circuit and you influence entrepreneurs and business people all around the world. As you mentioned before, you're going to Australia right after this. But thank you so much for your time. It has been a privilege and, and I, I really look forward to catching up. Maybe we'll do this in three ways with Reed at some point.
James Keyes: That'd be a. Lot of fun. I'd love to do that anytime, Nic, I enjoyed it. And thanks. Thanks for helping to bring enlightenment to everybody. Appreciate it.
