這位傳奇CEO振興了7-11，卻救不了百視達(dá)
James Keyes
2024-01-25
詹姆斯·凱斯現(xiàn)任Key Development有限責(zé)任公司的董事長，之前曾經(jīng)擔(dān)任7-11和百視達(dá)的首席執(zhí)行官。圖片來源：ANGELA TALLEY COURTESY OF JAMES KEYES
變化不可避免。自古以來，人類都會想方設(shè)法將變化變成機(jī)會，商業(yè)由此誕生。在人類歷史上，一些最好的商業(yè)機(jī)遇，都源自個(gè)人或企業(yè)在變革期抓住了機(jī)會。事實(shí)上，這就是首席執(zhí)行官的主要工作。在7-11（7-Eleven）和百視達(dá)（Blockbuster）擔(dān)任首席執(zhí)行官期間，我對CEO這個(gè)首字母縮略詞的解讀并不是“首席執(zhí)行官”，而是“變化等于機(jī)會”（Change Equals Opportunity）。
一些首席執(zhí)行官和他們所在的公司會擁抱變革，抓住機(jī)遇，實(shí)現(xiàn)繁榮發(fā)展，有些卻會錯(cuò)失良機(jī)。兩者的區(qū)別往往在于他們是否具備了成功推動業(yè)務(wù)轉(zhuǎn)型的先決條件。決定輸贏的并非變化本身，而是人們應(yīng)對變化的方式。有時(shí)候我們會通過正規(guī)的商業(yè)教育學(xué)到這些原則，但通常情況下這些知識都源自來之不易的經(jīng)歷。納爾遜·曼德拉曾經(jīng)說過：“我從未失敗。要么贏，要么成長。”現(xiàn)在，我有一些可以分享的“成長經(jīng)歷”。
面對變化，成功實(shí)現(xiàn)業(yè)務(wù)轉(zhuǎn)型有三個(gè)先決條件：現(xiàn)金管理、信心和合作。迄今為止，管理現(xiàn)金流是最重要的，但維持充足的現(xiàn)金需要信心與合作。
振興7-11
7-11是研究現(xiàn)金流的重要性和合作的力量的一個(gè)案例。美國南方公司（The Southland Corporation）在1987年6月宣布杠桿收購（LBO）期間，有擴(kuò)張全球最大便利零售商的大計(jì)劃。但到10月，金融市場遭遇了嚴(yán)重的市場崩潰，史稱“黑色星期一”（Black Monday），一夜之間市值縮水了超過1.7萬億美元。南方公司繼續(xù)自己的計(jì)劃，最終獲得了交易需要的資金，但公司為此負(fù)債40億美元，利率超過16%。在杠桿收購交易之后，公司必須立即調(diào)整業(yè)務(wù)重心，以應(yīng)對巨額利息負(fù)擔(dān)。出售業(yè)績不佳的門店、附屬業(yè)務(wù)和公務(wù)機(jī)隊(duì)遠(yuǎn)遠(yuǎn)不夠。1991年，公司被迫申請破產(chǎn)重組。管理層、特許經(jīng)營商和員工對公司的商業(yè)模式失去了信心。公司銷售下滑，士氣低迷。
但得益于現(xiàn)金流管理、合作與信心，公司看到了一線希望。7-11最大、最成功的授權(quán)商日本伊藤洋華堂（Ito Yokado）通過預(yù)裝破產(chǎn)為公司提供了資金和幫助。憑借對技術(shù)的成功利用和授權(quán)商證明的新產(chǎn)品的優(yōu)勢，公司改善了經(jīng)營模式，逆轉(zhuǎn)了長達(dá)10年的同店銷售額負(fù)增長周期，在業(yè)務(wù)轉(zhuǎn)型后同店銷售額有40個(gè)季度保持增長，創(chuàng)歷史紀(jì)錄?？蛻魧Ρ憷男枨竺刻於紩l(fā)生變化，而7-11利用技術(shù)，在全球8萬多家門店跟上了變化的速度。
全球最大的便利零售商瀕臨破產(chǎn)的經(jīng)歷，足以讓人們警醒，讓人們認(rèn)識到在便利零售業(yè)，變化和積極應(yīng)對變化是基礎(chǔ)。
為什么現(xiàn)金始終為王
2005年，7-11公司被成功出售之后，我迫切想把這些經(jīng)驗(yàn)教訓(xùn)，應(yīng)用到另一家面臨挑戰(zhàn)、需要進(jìn)行業(yè)務(wù)轉(zhuǎn)型的公司。百視達(dá)就是最好的目標(biāo)。這家公司順利度過了從VHS錄像帶到DVD的媒體娛樂轉(zhuǎn)型，甚至經(jīng)歷了DVD領(lǐng)域的“藍(lán)光與高清”之爭并存活了下來，但該公司并沒有數(shù)字化轉(zhuǎn)型的明確計(jì)劃。
百視達(dá)的DVD郵寄租賃業(yè)務(wù)能夠與Netflix成功競爭，但該公司在這個(gè)競爭領(lǐng)域卻采取了極端措施。Netflix的首席執(zhí)行官里德·黑斯廷斯稱因?yàn)閷Π僖曔_(dá)的逾期費(fèi)用不滿，并受此啟發(fā)創(chuàng)建了Netflix的商業(yè)模式。百視達(dá)當(dāng)時(shí)的應(yīng)對方式是取消逾期費(fèi)，這最終導(dǎo)致該公司放棄了高達(dá)8,000萬美元的息稅折舊攤銷前收益（EBITDA）。百視達(dá)的資產(chǎn)負(fù)債表上有超過10億美元的負(fù)債，失去了這筆息稅折舊攤銷前收益，不僅限制了百視達(dá)與Netflix競爭的能力，也讓百視達(dá)無法履行其債務(wù)義務(wù)。
2007年7月，在我擔(dān)任百視達(dá)首席執(zhí)行官的第一周，我發(fā)現(xiàn)百視達(dá)（再次）違反了一項(xiàng)銀行協(xié)議，并且陷入了現(xiàn)金流危機(jī)。我根據(jù)我們的新轉(zhuǎn)型計(jì)劃，通過談判使這項(xiàng)違約得到豁免。
轉(zhuǎn)型計(jì)劃的一個(gè)重要組成部分是收購由六家大型電影制片廠中的五家合作創(chuàng)建的視頻流媒體服務(wù)公司MovieLink。當(dāng)時(shí)，MovieLink擁有規(guī)模最大的流媒體視頻庫，提供3,000多部電影。百視達(dá)收購MovieLink后，將后者更名為Blockbuster On Demand，在與Netflix的DVD郵寄租賃業(yè)務(wù)甚至新推出的流媒體業(yè)務(wù)的競爭里，獲得了巨大的優(yōu)勢。當(dāng)時(shí)Netflix僅提供數(shù)量極其有限的老電影資源庫。相比之下，百視達(dá)推出了全接入（Total Access）服務(wù)，提供5,000多家百視達(dá)門店、Blockbuster By Mail、Blockbuster Kiosks和Blockbuster On Demand的娛樂內(nèi)容，擁有最便利的媒體娛樂渠道。
百視達(dá)有得天獨(dú)厚的條件在視頻大戰(zhàn)中取勝，在2008年第三季度的財(cái)報(bào)里，百視達(dá)公布了強(qiáng)勁的凈收益，息稅折舊攤銷前收益幾乎翻了一番。當(dāng)時(shí)，公司逃過了現(xiàn)金流危機(jī)，但2009年公司即將需要償還一筆債務(wù)，百視達(dá)的債務(wù)再融資變得至關(guān)重要。與此同時(shí)，雷曼兄弟（Lehman Brothers）的破產(chǎn)讓全球金融市場崩潰，對市場造成了沖擊。我們一直在游說穆迪（Moody’s）和標(biāo)準(zhǔn)普爾（S&P）重新評估百視達(dá)的債務(wù)評級。穆迪把公司的債務(wù)評級提高了兩級，但卻在新聞稿中表示，金融市場的不確定性提高了百視達(dá)的違約概率。百視達(dá)的10億美元債務(wù)里，有三分之一計(jì)劃在2009年再融資，穆迪警告百視達(dá)可能無法完成債務(wù)再融資。
雖然百視達(dá)積極響應(yīng)變化，但2008年金融市場的突然崩潰迫使公司必須馬上采取行動。在這種充滿挑戰(zhàn)性的時(shí)期，維持董事會、員工和股東的信心至關(guān)重要。合作變得更重要，因?yàn)轱@而易見，公司的現(xiàn)金跑道不足以進(jìn)行債務(wù)再融資以及繼續(xù)投資數(shù)字轉(zhuǎn)型。
公司探索了多次合作機(jī)會。與維亞康姆公司（Viacom）的潛在合作，有可能讓公司獲得市場上60%以上老電影的獨(dú)家數(shù)字版權(quán)。百視達(dá)收購MovieLink之后，已經(jīng)獲得了新流媒體內(nèi)容的使用權(quán)限。與維亞康姆合作本來可以阻止Netflix獲得流媒體內(nèi)容，但價(jià)格高昂。五年5億美元的價(jià)格超出了百視達(dá)當(dāng)時(shí)能夠支撐的現(xiàn)金流，導(dǎo)致董事會放棄了這次機(jī)會，并讓Netflix有機(jī)會獲得流媒體內(nèi)容的非排他性使用權(quán)。第二個(gè)甚至更令人激動的合作對象是谷歌（Google）。與谷歌合作，本來可以讓YouTube和百視達(dá)分享YouTube上的任何免費(fèi)內(nèi)容和百視達(dá)上的付費(fèi)內(nèi)容。將谷歌變成發(fā)行合作伙伴，能夠給百視達(dá)帶來巨大的競爭優(yōu)勢，形成一個(gè)現(xiàn)在尚未出現(xiàn)的一站式流媒體娛樂平臺。百視達(dá)董事會簽署了最終協(xié)議，但《洛杉磯時(shí)報(bào)》（LA Times）曝出百視達(dá)可能被迫申請破產(chǎn)的“謠言”后，合作被迫擱置。
這條謠言在電影公司中引起了恐慌。它們紛紛把百視達(dá)的信用條款從90天縮短到現(xiàn)金支付，在短短幾周內(nèi)，百視達(dá)的現(xiàn)金減少了近3億美元。利益相關(guān)者的信心難以維持，但它可能決定了公司根據(jù)《破產(chǎn)法》第7章申請破產(chǎn)清算，還是根據(jù)第11章申請破產(chǎn)重組。好在我們找到了另外一家合作伙伴Dish Network，并在重組過程里被后者收購。得益于與Dish的合作，百視達(dá)可以在視頻流媒體戰(zhàn)爭中繼續(xù)戰(zhàn)斗。雖然百視達(dá)品牌依舊處于被擱置的狀態(tài)，但在Dish的領(lǐng)導(dǎo)下，未來它可能會重新崛起，或許能夠提供目前視頻流媒體市場上尚不存在的內(nèi)容聚合服務(wù)。
在7-11和百視達(dá)的經(jīng)歷告訴我，任何公司都需要適應(yīng)變化。這需要公司有信心規(guī)劃新路線，成功度過業(yè)務(wù)轉(zhuǎn)型的艱難過程，但積極管理現(xiàn)金流依舊是首要任務(wù)。雖然債務(wù)可以是任何公司發(fā)展的重要工具，但在經(jīng)濟(jì)動蕩和金融市場波動時(shí)期，始終是現(xiàn)金為王。（財(cái)富中文網(wǎng)）
本文作者詹姆斯·凱斯（James Keyes）現(xiàn)任Key Development有限責(zé)任公司（Key Development LLC）的董事長，之前曾經(jīng)擔(dān)任7-11和百視達(dá)的首席執(zhí)行官。
譯者：劉進(jìn)龍
審校：汪皓
變化不可避免。自古以來，人類都會想方設(shè)法將變化變成機(jī)會，商業(yè)由此誕生。在人類歷史上，一些最好的商業(yè)機(jī)遇，都源自個(gè)人或企業(yè)在變革期抓住了機(jī)會。事實(shí)上，這就是首席執(zhí)行官的主要工作。在7-11（7-Eleven）和百視達(dá)（Blockbuster）擔(dān)任首席執(zhí)行官期間，我對CEO這個(gè)首字母縮略詞的解讀并不是“首席執(zhí)行官”，而是“變化等于機(jī)會”（Change Equals Opportunity）。
一些首席執(zhí)行官和他們所在的公司會擁抱變革，抓住機(jī)遇，實(shí)現(xiàn)繁榮發(fā)展，有些卻會錯(cuò)失良機(jī)。兩者的區(qū)別往往在于他們是否具備了成功推動業(yè)務(wù)轉(zhuǎn)型的先決條件。決定輸贏的并非變化本身，而是人們應(yīng)對變化的方式。有時(shí)候我們會通過正規(guī)的商業(yè)教育學(xué)到這些原則，但通常情況下這些知識都源自來之不易的經(jīng)歷。納爾遜·曼德拉曾經(jīng)說過：“我從未失敗。要么贏，要么成長?！爆F(xiàn)在，我有一些可以分享的“成長經(jīng)歷”。
面對變化，成功實(shí)現(xiàn)業(yè)務(wù)轉(zhuǎn)型有三個(gè)先決條件：現(xiàn)金管理、信心和合作。迄今為止，管理現(xiàn)金流是最重要的，但維持充足的現(xiàn)金需要信心與合作。
振興7-11
7-11是研究現(xiàn)金流的重要性和合作的力量的一個(gè)案例。美國南方公司（The Southland Corporation）在1987年6月宣布杠桿收購（LBO）期間，有擴(kuò)張全球最大便利零售商的大計(jì)劃。但到10月，金融市場遭遇了嚴(yán)重的市場崩潰，史稱“黑色星期一”（Black Monday），一夜之間市值縮水了超過1.7萬億美元。南方公司繼續(xù)自己的計(jì)劃，最終獲得了交易需要的資金，但公司為此負(fù)債40億美元，利率超過16%。在杠桿收購交易之后，公司必須立即調(diào)整業(yè)務(wù)重心，以應(yīng)對巨額利息負(fù)擔(dān)。出售業(yè)績不佳的門店、附屬業(yè)務(wù)和公務(wù)機(jī)隊(duì)遠(yuǎn)遠(yuǎn)不夠。1991年，公司被迫申請破產(chǎn)重組。管理層、特許經(jīng)營商和員工對公司的商業(yè)模式失去了信心。公司銷售下滑，士氣低迷。
但得益于現(xiàn)金流管理、合作與信心，公司看到了一線希望。7-11最大、最成功的授權(quán)商日本伊藤洋華堂（Ito Yokado）通過預(yù)裝破產(chǎn)為公司提供了資金和幫助。憑借對技術(shù)的成功利用和授權(quán)商證明的新產(chǎn)品的優(yōu)勢，公司改善了經(jīng)營模式，逆轉(zhuǎn)了長達(dá)10年的同店銷售額負(fù)增長周期，在業(yè)務(wù)轉(zhuǎn)型后同店銷售額有40個(gè)季度保持增長，創(chuàng)歷史紀(jì)錄?？蛻魧Ρ憷男枨竺刻於紩l(fā)生變化，而7-11利用技術(shù)，在全球8萬多家門店跟上了變化的速度。
全球最大的便利零售商瀕臨破產(chǎn)的經(jīng)歷，足以讓人們警醒，讓人們認(rèn)識到在便利零售業(yè)，變化和積極應(yīng)對變化是基礎(chǔ)。
為什么現(xiàn)金始終為王
2005年，7-11公司被成功出售之后，我迫切想把這些經(jīng)驗(yàn)教訓(xùn)，應(yīng)用到另一家面臨挑戰(zhàn)、需要進(jìn)行業(yè)務(wù)轉(zhuǎn)型的公司。百視達(dá)就是最好的目標(biāo)。這家公司順利度過了從VHS錄像帶到DVD的媒體娛樂轉(zhuǎn)型，甚至經(jīng)歷了DVD領(lǐng)域的“藍(lán)光與高清”之爭并存活了下來，但該公司并沒有數(shù)字化轉(zhuǎn)型的明確計(jì)劃。
百視達(dá)的DVD郵寄租賃業(yè)務(wù)能夠與Netflix成功競爭，但該公司在這個(gè)競爭領(lǐng)域卻采取了極端措施。Netflix的首席執(zhí)行官里德·黑斯廷斯稱因?yàn)閷Π僖曔_(dá)的逾期費(fèi)用不滿，并受此啟發(fā)創(chuàng)建了Netflix的商業(yè)模式。百視達(dá)當(dāng)時(shí)的應(yīng)對方式是取消逾期費(fèi)，這最終導(dǎo)致該公司放棄了高達(dá)8,000萬美元的息稅折舊攤銷前收益（EBITDA）。百視達(dá)的資產(chǎn)負(fù)債表上有超過10億美元的負(fù)債，失去了這筆息稅折舊攤銷前收益，不僅限制了百視達(dá)與Netflix競爭的能力，也讓百視達(dá)無法履行其債務(wù)義務(wù)。
2007年7月，在我擔(dān)任百視達(dá)首席執(zhí)行官的第一周，我發(fā)現(xiàn)百視達(dá)（再次）違反了一項(xiàng)銀行協(xié)議，并且陷入了現(xiàn)金流危機(jī)。我根據(jù)我們的新轉(zhuǎn)型計(jì)劃，通過談判使這項(xiàng)違約得到豁免。
轉(zhuǎn)型計(jì)劃的一個(gè)重要組成部分是收購由六家大型電影制片廠中的五家合作創(chuàng)建的視頻流媒體服務(wù)公司MovieLink。當(dāng)時(shí)，MovieLink擁有規(guī)模最大的流媒體視頻庫，提供3,000多部電影。百視達(dá)收購MovieLink后，將后者更名為Blockbuster On Demand，在與Netflix的DVD郵寄租賃業(yè)務(wù)甚至新推出的流媒體業(yè)務(wù)的競爭里，獲得了巨大的優(yōu)勢。當(dāng)時(shí)Netflix僅提供數(shù)量極其有限的老電影資源庫。相比之下，百視達(dá)推出了全接入（Total Access）服務(wù)，提供5,000多家百視達(dá)門店、Blockbuster By Mail、Blockbuster Kiosks和Blockbuster On Demand的娛樂內(nèi)容，擁有最便利的媒體娛樂渠道。
百視達(dá)有得天獨(dú)厚的條件在視頻大戰(zhàn)中取勝，在2008年第三季度的財(cái)報(bào)里，百視達(dá)公布了強(qiáng)勁的凈收益，息稅折舊攤銷前收益幾乎翻了一番。當(dāng)時(shí)，公司逃過了現(xiàn)金流危機(jī)，但2009年公司即將需要償還一筆債務(wù)，百視達(dá)的債務(wù)再融資變得至關(guān)重要。與此同時(shí)，雷曼兄弟（Lehman Brothers）的破產(chǎn)讓全球金融市場崩潰，對市場造成了沖擊。我們一直在游說穆迪（Moody’s）和標(biāo)準(zhǔn)普爾（S&P）重新評估百視達(dá)的債務(wù)評級。穆迪把公司的債務(wù)評級提高了兩級，但卻在新聞稿中表示，金融市場的不確定性提高了百視達(dá)的違約概率。百視達(dá)的10億美元債務(wù)里，有三分之一計(jì)劃在2009年再融資，穆迪警告百視達(dá)可能無法完成債務(wù)再融資。
雖然百視達(dá)積極響應(yīng)變化，但2008年金融市場的突然崩潰迫使公司必須馬上采取行動。在這種充滿挑戰(zhàn)性的時(shí)期，維持董事會、員工和股東的信心至關(guān)重要。合作變得更重要，因?yàn)轱@而易見，公司的現(xiàn)金跑道不足以進(jìn)行債務(wù)再融資以及繼續(xù)投資數(shù)字轉(zhuǎn)型。
公司探索了多次合作機(jī)會。與維亞康姆公司（Viacom）的潛在合作，有可能讓公司獲得市場上60%以上老電影的獨(dú)家數(shù)字版權(quán)。百視達(dá)收購MovieLink之后，已經(jīng)獲得了新流媒體內(nèi)容的使用權(quán)限。與維亞康姆合作本來可以阻止Netflix獲得流媒體內(nèi)容，但價(jià)格高昂。五年5億美元的價(jià)格超出了百視達(dá)當(dāng)時(shí)能夠支撐的現(xiàn)金流，導(dǎo)致董事會放棄了這次機(jī)會，并讓Netflix有機(jī)會獲得流媒體內(nèi)容的非排他性使用權(quán)。第二個(gè)甚至更令人激動的合作對象是谷歌（Google）。與谷歌合作，本來可以讓YouTube和百視達(dá)分享YouTube上的任何免費(fèi)內(nèi)容和百視達(dá)上的付費(fèi)內(nèi)容。將谷歌變成發(fā)行合作伙伴，能夠給百視達(dá)帶來巨大的競爭優(yōu)勢，形成一個(gè)現(xiàn)在尚未出現(xiàn)的一站式流媒體娛樂平臺。百視達(dá)董事會簽署了最終協(xié)議，但《洛杉磯時(shí)報(bào)》（LA Times）曝出百視達(dá)可能被迫申請破產(chǎn)的“謠言”后，合作被迫擱置。
這條謠言在電影公司中引起了恐慌。它們紛紛把百視達(dá)的信用條款從90天縮短到現(xiàn)金支付，在短短幾周內(nèi)，百視達(dá)的現(xiàn)金減少了近3億美元。利益相關(guān)者的信心難以維持，但它可能決定了公司根據(jù)《破產(chǎn)法》第7章申請破產(chǎn)清算，還是根據(jù)第11章申請破產(chǎn)重組。好在我們找到了另外一家合作伙伴Dish Network，并在重組過程里被后者收購。得益于與Dish的合作，百視達(dá)可以在視頻流媒體戰(zhàn)爭中繼續(xù)戰(zhàn)斗。雖然百視達(dá)品牌依舊處于被擱置的狀態(tài)，但在Dish的領(lǐng)導(dǎo)下，未來它可能會重新崛起，或許能夠提供目前視頻流媒體市場上尚不存在的內(nèi)容聚合服務(wù)。
在7-11和百視達(dá)的經(jīng)歷告訴我，任何公司都需要適應(yīng)變化。這需要公司有信心規(guī)劃新路線，成功度過業(yè)務(wù)轉(zhuǎn)型的艱難過程，但積極管理現(xiàn)金流依舊是首要任務(wù)。雖然債務(wù)可以是任何公司發(fā)展的重要工具，但在經(jīng)濟(jì)動蕩和金融市場波動時(shí)期，始終是現(xiàn)金為王。（財(cái)富中文網(wǎng)）
本文作者詹姆斯·凱斯（James Keyes）現(xiàn)任Key Development有限責(zé)任公司（Key Development LLC）的董事長，之前曾經(jīng)擔(dān)任7-11和百視達(dá)的首席執(zhí)行官。
譯者：劉進(jìn)龍
審校：汪皓
Change happens! Since the beginning of time, mankind found ways to turn change into opportunity–and commerce was born. Throughout history, some of the best commercial opportunities arose from individuals or corporations seizing opportunities during times of change. In fact, this is the primary role of a CEO. During my tenures as CEO of both 7-Eleven and Blockbuster, my interpretation of the acronym was not Chief Executive Officer–but “Change Equals Opportunity.”
Some CEOs and their respective corporations embrace change, seize the opportunity, and prosper–while others fail. The difference often lies in whether they have the prerequisites to a successful business transformation. It isn’t the change itself that matters, but rather their response to change that separates the winners from losers. Sometimes we learn these principles through a formal business education, but often they result from hard-earned experience. Nelson Mandela once said, “I never lose…I win, or I learn.” I have had some of those “l(fā)earnings” that I’m now able to share.
There are three prerequisites to a successful business transformation in the face of change: cash management, confidence, and collaboration. Managing cash flow is, by far, the most important but maintaining sufficient cash requires confidence and collaboration.
Turning 7-Eleven around
7-Eleven was a case study on the importance of cash flow and the power of collaboration. During a leveraged buyout (LBO) announced in June 1987, The Southland Corporation had major plans to expand the world’s largest convenience retailer. By October, however, the financial markets experienced the severe market crash known as “Black Monday,” erasing over $1.7 trillion in value overnight. The Southland Corporation continued with its plans and ultimately funded the transaction–but with over $4 billion in debt at over 16% interest. After the LBO transaction, an immediate shift in priority was necessary to satisfy the massive interest burden. The sale of underperforming stores, ancillary businesses, and the fleet of corporate jets weren’t enough. By 1991, the company was forced into a Chapter 11 restructuring. Management, franchisees, and employees had lost confidence in the business model. Sales and morale dwindled.
A silver lining would emerge–thanks to cash-flow management, collaboration, and confidence. 7-Eleven’s largest and most successful licensee, Ito Yokado of Japan, provided financing and helped the corporation through a pre-packaged bankruptcy. An improved business model based on the successful use of technology and strength of new product introductions as demonstrated by the licensee helped the company reverse a 10-year cycle of negative same-store sales and embark on a record 40 quarters of improved same-store sales after transforming the business. Customers’ convenience needs change every day, and 7-Eleven harnessed technology to keep up with those changes in over 80,000 stores worldwide.
The near-death experience of the world’s largest convenience retailer was exactly the wake-up call needed to spark a recognition that change, and the proactive response to change, were fundamental in convenience retail.
Why cash is always king
Following the successful sale of 7-Eleven, Inc in 2005, I was anxious to put these learnings to work in another company challenged with the need for business transformation. What better target than Blockbuster? The company had successfully managed the evolution of media entertainment from VHS tapes to DVDs and even survived the “Blu-Ray vs. HiDef” DVD shootout–but did not have a clear plan for digital transformation.
Blockbuster was able to compete successfully with Netflix for the DVD By-Mail business but took extreme measures in that competitive battle. Netflix CEO Reed Hastings claimed to have been inspired to create the Netflix model after being annoyed with Blockbuster’s late fees. Blockbuster then countered by eliminating late fees–a decision that ultimately caused the company to give up $80mm in earnings before interest, taxes, depreciation, and amortization( EBITDA). With over $1 billion of debt on the balance sheet, the reduction of EBITDA not only constrained the ability to compete with Netflix but also made it more difficult for Blockbuster to satisfy its debt obligations.
During my first week as the new CEO in July 2007, I discovered that Blockbuster had violated a bank covenant (again) and was in a cashflow crisis. I was able to negotiate a forgiveness of the covenant violation based on the strength of our new transformation plan.
An essential element of that transformation was the acquisition of MovieLink, a streaming video service created by collaboration among five of the six major film studios. MovieLink had the largest library of streaming videos at the time with over 3,000 movies available. Blockbuster’s acquisition of MovieLink, renamed Blockbuster OnDemand, provided a significant competitive advantage over Netflix’s DVD-by-mail business and even their nascent streaming offer which provided a very limited assortment of older movies. In contrast, Blockbuster had the most convenient access to media entertainment with an offer called Total Access that provided entertainment at over 5,000 Blockbuster stores, Blockbuster By Mail, Blockbuster Kiosks, and Blockbuster On Demand.
Well positioned to declare victory in the video wars, Blockbuster announced strong net earnings and nearly doubling EBITDA in its third quarter 2008 earnings release. The company’s cash flow crisis had been averted for the time being–but a debt repayment in 2009 was looming and it was essential that Blockbuster refinanced its debt. Meanwhile, the financial markets worldwide were beginning to crumble with the collapse of Lehman Brothers, sending shockwaves through the market. We had been lobbying Moody’s and S&P to review Blockbuster’s debt ratings and were rewarded with a two-notch upgrade from Moody’s, but in their press release the agency reported that uncertainty in the financial markets caused an increase in Blockbuster’s probability of default. A third of Blockbuster’s $1 billion debt was due to be refinanced in 2009, and Moody’s warned that the company may be unable to refinance its debt.
Despite the company’s proactive response to change, the unexpected collapse of the financial markets in 2008 caused an immediate need for action. Sustaining the confidence of the board, employees, and shareholders during this challenging time was essential. Collaboration became more important since it was clear that the company would not have the cash runway required to both refinance its debt and continue its investment in digital transformation.
Several collaboration opportunities were explored. A potential collaboration with Viacom would have provided exclusive access to digital rights for over 60% of the older movies in the market. Blockbuster already had access to new release streaming through its MovieLink acquisition. The Viacom deal would have prevented Netflix from access to streaming content, but it carried a huge price tag. The five-year, $500mm commitment was simply more than Blockbuster’s cash flow could support at the time, causing the board to decline the opportunity and opening the window for Netflix to acquire non-exclusive access to streaming content. A second, even more exciting deal was in the works with Google. The Google collaboration would have put YouTube and Blockbuster side by side with any free content going to YouTube and any paid content going to Blockbuster. Having Google as a distribution partner would have provided a significant competitive advantage and facilitated the one-stop-shop that still doesn’t exist for access to streaming media entertainment. The Blockbuster board signed the definitive agreement, but the deal stalled when the LA Times reported a “rumor” that Blockbuster may be forced to file for bankruptcy.
The rumor also created fear among the movie studios. One by one, they reduced Blockbuster’s credit terms from 90 days to cash payment, taking nearly $300 million of float out of the Blockbuster system within a matter of weeks. Confidence among stakeholders is difficult to maintain–but it can make the difference between a Chapter 7 liquidation and a Chapter 11 restructuring. Thankfully, we were able to bring another collaboration partner to the table with Dish Network rising to the occasion to acquire the company through restructuring. With Dish, Blockbuster would live to fight another day in the streaming video wars. While still on the shelf, the brand could reemerge one day under Dish’s leadership, perhaps providing the aggregation of content access that doesn’t yet exist in the video streaming market.
Learnings from both the 7-Eleven and Blockbuster journeys point to the need for any business to adapt to change. That adaptation requires confidence to chart a new course and to successfully navigate the turbulent path to business transformation–but the proactive management of cash flow remains job number one. While debt can be an essential tool for the growth of any business, during turbulent times and financial market volatility, cash will always be king.
James Keyes is the chairman of Key Development LLC and a former CEO of 7-Eleven and Blockbuster.
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