Alan Payne is an Entrepreneur Who Built an Incredibly Profitable Blockbuster Franchise While Blockbuster Was Going Bust. A Must Listen. | Ep. 91 | Business Podcast

Summary

Alan Payne says becoming an Entrepreneur found him when he was working for a grocery store chain that spun off a video rental business in 1985. 

As an operator he cracked the code on the business model that allowed them to effectively print cash with 30% plus net margins. 

He took that business plan, applied it and starting buying Blockbuster franchises. You’ll have to listen to how he did it and what happened. And…

Alan is the author of a new Amazon best selling book, Built to Fail. The Inside Story of Blockbuster’s Inevitable Bust that you will want to buy after listening to this episode. 

Get the book here >>>

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Brandon: 

Hello, friends. Welcome to the show today. We’ve got an exciting episode for you. I had the honor to sit down with Alan Payne, who’s got a new book out called Built to Fail. The Inside Story of Blockbusters. Inevitable bust. And Alan was there with a front row seat, working in the video rental business in the 19 eighties when it really all began and was able to watch the ride. 

Actually not just watch the ride, but be in the ride from the very beginning, up until the end, when he ultimately closed his last blockbuster store in 2000 and 18. This is a really great episode. There’s tons of listens. Allen is awesome. 

Let’s not waste another second. 

Let’s get to it. Alan Payne Built to Fail the Inside Story of Blockbusters. Inevitable bust. 

Welcome to build the business Success Secrets. The only podcast that provides straight talk for entrepreneurs. Whether you’re an entrepreneur, starting with an idea or growing your business, this show is for you. We’ll teach you how to build a strong mindset, powerful body and profitable business so you can achieve success. 

And here’s your host, Brandon C White

Brandon: 

Alan how are you. 

Alan: 

Hello? Hello. 

Brandon: 

I can’t tell you how excited I’ve been for this were great. 

Alan: 

Great. 

Brandon: 

I appreciate you getting back to me, and, um I’m sorry. It took me a minute. I had sent you a message. I tried to contact you everywhere and then, uh, finally saw that LinkedIn message when I got back. 

And I’m really grateful for you joining. 

Alan: 

Well, I think I think, uh, I think the blockbuster story fits a lot of what you do on your podcast. So it’s that’s right. 

Brandon: 

It how? 

Alan: 

How not to start a better business. 

Brandon: 

Well, here’s the other interesting thing Alan is is that I worked. Uh, I wouldn’t say it was ever built to fail, but it was, uh it was definitely a time when they could have transformed themselves. 

Alan: 

I was an early guy at America Online and the Time Warner debacle. 

Alan: 

Yeah, and I actually arrived before that. 

Alan: 

And there’s so many. 

Brandon: 

The thing that I think one is, I’m a I’m a junkie for case studies, which really is what you’ve written and and lived over, like, 35 years. 

Alan: 

Um, but there’s a lot of misconceptions about America online out there. 

Alan: 

That people don’t quite understand really what the story was. 

Alan: 

And when I saw your blockbuster book that is coming out, I said, Uh huh, This is good. 

Alan: 

It’s time for you to write a book. 

Alan: 

Well, maybe you might talk me into it if you told me that it was if it was easy. 

Alan: 

But, um, thank you again. 

Alan: 

So how so You I mean, and also candidly, you you talk about if you’re a baby boomer. 

Brandon: 

But I’m a Generation X And I got to tell you that Blockbuster was a big part of my life and the culture as I was thinking about it when you and I had exchanged some emails the other day, you know, is there and I’m and I still remember and I still go to album shops, vinyl. 

Alan: 

And it was a very similar experience. 

Brandon: 

Yeah, I mean, it was it was people that were not there. 

Alan: 

Don’t don’t remember that there was a time that you could not watch anything you wanted whenever you wanted to watch it. 

Alan: 

And And what created the opportunity for the video store is that that was the first time. 

Alan: 

And it was It was, and of course. 

Alan: 

I don’t know how much you want to get into those early days, but but, uh, but the VCR was was. 

Brandon: 

You know, the video cassette recorder is what started the whole thing. 

Brandon: 

Well, I loved it. 

Brandon: 

I love to talk about that, actually. 

Brandon: 

And even about the what was Sony solution that my dad had a Betamax. 

Brandon: 

Betamax tried to make a run at it. 

Brandon: 

Right. 

Brandon: 

And it looked like an album. 

Alan: 

Well, no, that was the laser disc that came later. 

Alan: 

You know, in the very early days of the video business, there were actually two formats. 

Brandon: 

It was which was which was backed by J. 

Alan: 

V. 

Brandon: 

C and Beta max, which was backed by some. 

Alan: 

And so you had two formats duking it out in the early days of video back in the eighties. 

Brandon: 

And eventually Sony stepped aside and the and the business went to VHS and and model went away. 

Brandon: 

And you don’t Do you know why Sonny stepped aside? 

Brandon: 

Oh, you know, there was. 

Brandon: 

I think a lot of it was the the the the video audio files of the day said that Betamax was a better product, remember? 

Alan: 

It didn’t have as much memory on it, and and they couldn’t get a whole movie on some or some movies anyway. 

Alan: 

They couldn’t get it on one tape, and it was creating those kind of problems. 

Brandon: 

And I think I think that that that VHS recorders got a little less expensive and I don’t remember all of the of what happened to it but it But within about five or six years in those early days, Beta just kind of went away and VHS took it over. 

Brandon: 

But But the interesting thing from those days is that the VCR was obviously created to record television shows when you could, so you could watch them at different times. 

Brandon: 

And the content producers, primarily Hollywood studios, decided that that was should not be legal. 

Brandon: 

So it went all the way. 

Brandon: 

The Supreme Court and, uh, it the V C. 

Brandon: 

So the VCR was almost almost never happened. 

Brandon: 

It was, in fact, the Supreme Court ruled it legal and just a very slim 5 to 4 vote. 

Brandon: 

And that was in well, I forget the exact year, but is somewhere around 1984 or five, or something like that that it was and then and Then the studios tried to get a law passed to outlaw video stores, and by that time the business was pretty large. 

Brandon: 

So Congress, the actual actually Bill was drafted to outlaw video stores in the in the eighties, but it never made it to a vote. 

Brandon: 

So by that time the business was and we’re talking 1985 or so, and by that time the business was a three or $4 billion industry already. 

Brandon: 

And it’s really the interesting thing about that. 

Brandon: 

Is that Is that because it was, it was under such scrutiny? 

Brandon: 

I guess in those early days, the legal aspects of it, as well as whether or not electronic delivery was going to put it out of business in five or six years, it didn’t attract the kind of capital that a typical business of that size does. 

Brandon: 

It was started by a really fragmented group of entrepreneurs all over the country, most of which were undercapitalized and a lot of great business people. 

Brandon: 

Uh, so that’s what that’s what. 

Brandon: 

That’s how the video business got started. 

Brandon: 

And it’s what created the opportunity for somebody like Wayne Hi Zynga, who had just left waste management. 

Brandon: 

He had founded Waste Management, which is still the largest trash company in the world. 

Brandon: 

And he got attracted to Blockbuster and bought into it for about $18 million.7 years later, sold it for over eight billion. 

Brandon: 

So not a bad return on investment? 

Brandon: 

Uh, no. 

Brandon: 

I take that any day. 

Brandon: 

It sounds like a big corn investment. 

Brandon: 

Done it. 

Brandon: 

So that that’s kind of how I got started. 

Brandon: 

Uh, you got you got So this was eighties. 

Brandon: 

Makes the transition. 

Brandon: 

Did you just have a love of business? 

Brandon: 

Was it a love of videos? 

Brandon: 

Was it a love of vinyl? 

Brandon: 

Like a lot of things going through my head here. 

Brandon: 

Now what? 

Brandon: 

What got me into it? 

Alan: 

I came at it. 

Brandon: 

I don’t have an entrepreneurial mind. 

Alan: 

I have an operations mind. 

Alan: 

And I was at the time I was working for a grocery company called H E B. 

Brandon: 

Have you ever heard of them? 

Brandon: 

I have not. 

Alan: 

Okay. 

Brandon: 

HP is the largest grocery company in Texas. It’s a privately owned company. 

Brandon: 

Uh, their sales last year were 27 billion. So it’s it’s not a small organization. 

Brandon: 

They have the highest unit volume of any grocery company in the country. 

Brandon: 

And most, uh, most people consider them the best, if not one of the best, if not the best grocery retailer in the country. 

Brandon: 

They dominate Texas every every place but Dallas because they’re not there yet. 

Brandon: 

Uh, but anyway, I was working for them, and in the eighties, the video business was most supermarkets had video departments in their stores. 

Brandon: 

Okay, so it was becoming a pretty big deal then, and but HIV decided they were going to open up freestanding stores that looked very much like a blockbuster. 

Brandon: 

HP was the only retailer developed retailer of any size that ever did that. 

Brandon: 

Back then. 

Brandon: 

Nobody. 

Brandon: 

None of the other of the grocery companies. 

Brandon: 

WalMart. 

Brandon: 

Nobody. 

Brandon: 

Nobody got into the business on that scale. 

Brandon: 

But H E B Did they call those stores Video Central and I ran operations for those stores from from 86 to 1990 three. 

Brandon: 

Did they just Did they just say, Hey, Alan, we got this video thing and you’re good at moving groceries in the operational chain. 

Brandon: 

You should do this. 

Brandon: 

It was more complicated than they they were. 

Alan: 

They were. They were partnering with a guy named Craig Bogdanovich, who was one of the real early Trailblazers in the business. 

Brandon: 

And he was actually partnering with HB to run those departments in the grocery stores. 

Brandon: 

They bought him his business and brought all of his people in. 

Brandon: 

And, uh, they asked me to run operations and Craig oversaw the the total operation. 

Brandon: 

I ran the stores. 

Brandon: 

Uh, so that’s how it started and had had Craig not been a part of a club at that time. 

Brandon: 

HP would have never gotten into those stores, but he had he had developed a business model. 

Brandon: 

That was, I say in the book was like kryptonite to Blockbuster. 

Brandon: 

And it we opened up our first door and we’re doing three times the volume of the blockbuster across the street. 

Brandon: 

What was the secret? 

Brandon: 

It was It was the secret was, And in a nutshell, it was larger inventory, much better managed inventory and lower prices. 

Brandon: 

Uh, that was it. 

Alan: 

I mean, it was it was it was not rocket science. 

Brandon: 

But the fact is that Blockbuster was so successful so early that they just kind of never paid much attention to the details of the business, and they allowed people like us to be very, very successful against them. 

Brandon: 

And even though the stores we were competing against and we had, we wind up with 35 stores before HCB decided to sell them. 

Brandon: 

But we knew that all the all the blockbusters we were competing with we’re doing about half their their average volume and mhm and they never responded to it. 

Brandon: 

You know, we were, you know, they had 3000 stores at the time. 

Brandon: 

We had 35 so we were a Nat to them. 

Brandon: 

But we were in some major markets in Austin and San Antonio and and we had some stores in Houston. 

Brandon: 

We were We were doing very well against them, but they didn’t. 

Brandon: 

It was kind of a window into their thinking. 

Brandon: 

They just didn’t have much interest in what anybody else was doing, even though we were very, very successful against them. 

Brandon: 

So we had a different business model. 

Brandon: 

It was very, very profitable. 

Brandon: 

It was just as profitable as there was, and it was much higher volume. 

Brandon: 

So and and it was there a secret to the ah, I mean, most companies if if you know, on a P and L basis, they’ll be positive, but really their cash flow sucks because they don’t care, You know, their customers don’t pay them for 100 and 20 days. 

Brandon: 

And I remember the blockbuster gig was you know, there were penalties, and they’re really you wanted that churn so that you could get those blockbusters in the hands of new people, which would random, etcetera. 

Brandon: 

What? 

Brandon: 

Was there any aspect of that? 

Brandon: 

Alan, Uh, we you know, it sounds so simplistic, but but one of the big things that we did is we rented new releases for a day at a time, one day at a time. 

Brandon: 

Uh huh. 

Brandon: 

So it was much more efficient. 

Brandon: 

We could charge a little bit less for them. 

Brandon: 

The life of a video back then, as it really is today is the peak of the demand is the first truth of weeks that it’s out. 

Alan: 

So the economics of that particular because back then, we were paying about $65 for a movie. 

Alan: 

Uh, that was the wholesale cost. 

Alan: 

So, uh, your ability to turn that as many times as you possibly could then those first two or three weeks was critical to the economics of the business, but it was also pleasing more customers. 

Brandon: 

Blockbuster had a deal that they called three evenings back then, and so those movies stayed out as many as three nights. 

Alan: 

Uh, it was very, very inefficient, but they had themselves convinced that that multiple day rent was a marketing advantage. 

Brandon: 

And we proved ourselves very early on that it wasn’t so. 

Brandon: 

We we knew that we had the advantage on them over that it was not unusual for somebody to walk in one of our stores and say four or five times as many copies of the new release in the store as in one of their stores because we were generating enough volume that we could economically afford to buy them. 

Brandon: 

Yeah, and I would imagine that those because you were turning that volume getting new people in the stores, they were also picking out that second movie or a third movie that had more than one night, which means you were getting your are pu. 

Brandon: 

Average revenue per user was much higher. 

Brandon: 

The other secret to the business was that where blockbuster remarkably in those days thought that old movies were just as valuable as new movies were. 

Brandon: 

And you know, in the very, very early days of video it was such a novelty that somebody would walk in and be just as happy renting something old as new because it’s something they’ve never been able to do before. 

Brandon: 

But very early into the game, after people have kind of watched, all the ones they wanted to watch are the main ones they wanted to watch. 

Brandon: 

The older movies needed to be priceless. 

Brandon: 

That’s what we did. 

Brandon: 

Blockbuster never did. 

Brandon: 

So a customer that would come in one of our stores. 

Brandon: 

Yeah, they were coming in, probably for a new release, but they would almost always grab something else because it was priced a dollar, and across the street at Blockbuster was $3. 

Brandon: 

They never they never did anything to match that, and it it was fascinating to me. 

Alan: 

Of course, I’m still talking about the time before I joined Blockbuster in 93 but we were always amazed that they never responded to any of it. 

Brandon: 

That’s that’s crazy. 

Brandon: 

And then the customer feels like they’re getting a deal because they’re paying that premium, which makes sense to them, and then they might rent to. 

Brandon: 

Actually, I’m just to be honest, I’m not. 

Brandon: 

I’m just remembering what my wife and I used to do going into the block. 

Brandon: 

I mean into the video. 

Brandon: 

And first, it wasn’t Blockbuster. 

Brandon: 

We had some video store that just did that. 

Brandon: 

And we were like, Yeah, I mean, this is a deal we’ll get. 

Brandon: 

We’ll get the expensive one, and then we’ll get to others and will be guilty. 

Brandon: 

But if you went in a blockbuster and went to look at that older movie was priced the same as the new one, uh, we never could figure out why they did that, but they were but blog buster against the typical competition of the day, they could get by with it because most of the time their competition was was in poor locations. 

Brandon: 

Sometimes it was kind of dimly lit. 

Brandon: 

It just they It wasn’t the kind of place you’d go take your family in a lot of cases, not in all cases been a lot of cases that that’s what the early video stores look like. 

Brandon: 

Well, I I got to ask you this question that’s on my mind, right to you, but and and some people probably be like, Where’s your mind, Brandon? 

Brandon: 

It’s in the dirt, but, um, the truth. 

Brandon: 

I mean, wasn’t there a lot of porn videos in the early days? 

Alan: 

That sort of broke the ground for the mainstream. 

Alan: 

I don’t know if it broke the ground, but it was. 

Alan: 

But it was for for a lot of those early video stores it was It was a significant part of their business, you know? 

Brandon: 

And it was. 

Brandon: 

It would normally be in a back room, unmarked. 

Brandon: 

It was It was crazy, profitable because they would charge more for it. 

Brandon: 

There was no Internet in those days, so there was. 

Brandon: 

You couldn’t access it there, So the easiest place to get it was a video store. 

Brandon: 

Now Blockbuster comes along. 

Brandon: 

And not only were the stores brighter and more colorful and and user friendly to go into, there was there was there was no X rated movies in a blockbuster. 

Brandon: 

So they course back then. 

Alan: 

One of their slogans that they used to gain, you know, to get their national reputation was America’s family video store. 

Alan: 

So they played that up really big, so it was a comfortable place to go And for the first 5 to 6 years, uh, they didn’t really have to have the best consumer proposition in terms of inventory and price. 

Alan: 

Everything else kinda overrode it versus the competitors that they had at the time. 

Brandon: 

So did they just and I, you know, other than your book. 

Brandon: 

But anybody listening may not know did. 

Brandon: 

Did Blockbuster just raise such a large amount of money and go buy real estate locations? 

Brandon: 

That that’s why they had the play on this? 

Brandon: 

No, they they owned very, very little real estate. 

Brandon: 

Uh, it was the money, you know. 

Brandon: 

They continue to. 

Brandon: 

They continue to grow as fast as they could through secondary offerings. 

Brandon: 

You know, they sell stock. 

Brandon: 

They bought competition, but they didn’t buy real estate. 

Brandon: 

These were There’s almost all leased properties and usually 5 to 10 year type deals with with options going forward. 

Brandon: 

So let’s go back to 19 somewhere in 1993. 

Alan: 

The grocery chain sells this, and do they sell it to you or or you split? 

Alan: 

Here’s what happens, and this is a This is a really important part of the story, because H E. 

Brandon: 

B, we still don’t know exactly why they decided to sell it. 

Brandon: 

Because, Charles, But who is the owns? 

Brandon: 

It, uh, is a pretty private person. 

Brandon: 

And the best we could get out of him was that he just wanted to focus on the grocery business. 

Brandon: 

We have become a pretty good size, you know, business within within h e b. 

Brandon: 

And he I think he just decided he didn’t want to continue to grow it. 

Brandon: 

So we encourage them. 

Alan: 

If you don’t, If you’re not gonna let us grow it, let’s sell it and we’ll we’ll stay with it and try and try to, you know, build a larger chain. 

Brandon: 

So he puts it on the market to sell. 

Brandon: 

And a small who was then a very, very small company. 

Brandon: 

Well, let me back up. 

Brandon: 

Blockbuster talked to block to HCB about buying the stores, but never even got to look at the financials. 

Brandon: 

They they something just didn’t go right in the conversations. 

Brandon: 

Which is kind of weird, because Blockbuster bought a lot of their competitors, but they didn’t. 

Brandon: 

They never escalated the discussions with HIV. 

Brandon: 

Uh, for whatever reason, and, uh, you know, turned away. 

Brandon: 

And then a small company called Hollywood Video who had only about 10 or 15 stores at the time, comes in. 

Brandon: 

They have been watching us very closely for years and had copied most of our business model. 

Brandon: 

Mark Waddles was the founder of that company. 

Brandon: 

He had kind of befriended somebody in our organization and learned a lot about how we did things and came in and threw an I. 

Brandon: 

P. 

Brandon: 

O bought the stores for about a million dollars a piece. 

Brandon: 

And so he goes public. 

Brandon: 

Blockbuster continues to ignore them, even though they’re they’re rolling out basically the same business model that we have been beaten up on Blockbuster on a smaller scale and within five years had over 1000 stores. 

Brandon: 

That’s when Blockbuster hit its first financial crisis, Uh, due to Hollywood video and and really, you know, I’m sure we’ll talk about the Netflix miss, but that was the first one, because HIV was our video. 

Brandon: 

Central stores were about the size of Netflix at the time of the Netflix tried to sell to Blockbuster a few years later, but they didn’t have an interest in us either, and and that led to Hollywood video becoming real quickly. 

Brandon: 

Their largest competitor. 

Brandon: 

So with the same model that basically they listened or sol your financials candidate probably and said, Why would we do anything else other than just dump money into this thing and roll it out? 

Brandon: 

Yeah, because it was almost automatic. 

Brandon: 

I mean, in fact, the whole the whole strategy was find the highest volume Blockbuster stores and open across the street. 

Brandon: 

That was it because they were already drawing the people to the intersection and and and the and the market was so dynamic at the time that you could grow the pie by 50% or so just by opening another store and then a lot, a lot more business would come off a blockbuster. 

Brandon: 

And, uh, Hollywood was rolling out these stores one after another that their average volume was close to a million dollars a year and they were cash flowing. 

Brandon: 

About a third of that. 

Brandon: 

It was a crazy, profitable business in those days, so they were all all that out, and every and every blockbuster they open against is just getting destroyed. 

Brandon: 

And within just a few years they had opened enough of them that it had really cut. 

Brandon: 

It had number one it had stopped blockbusters, same store sales growth and cut their cash flow by at least $100 million. 

Brandon: 

Uh, and by 1997 Blockbuster was cash flow negative, which was only four years, 4.5 years after they bought those stores from HPV. 

Brandon: 

Remember seeing a chart somewhere from you that you that you charted that that basically then then they went, and that was really because of Hollywood video. 

Alan: 

It was a combination of Hollywood video and blockbuster, continuing to just relentlessly open more stores to give you an idea. 

Alan: 

During that time period blockbusters, average store sales dropped from about 900,000 to 700,000. 

Alan: 

Now you can imagine what the economics would do in that situation because the video business is a largely fixed cost business. 

Brandon: 

So it was just destroying the economics of the stores. 

Brandon: 

So it was their. 

Brandon: 

Their existing stores were were declining in revenue, and they were pumping hundreds of millions of dollars every year into new stores. 

Brandon: 

Uh, and yet yet they weren’t adding any cash flow to the business, and you know what that does? 

Brandon: 

So that’s that’s crazy, mainly because they were trying to chase growth, but they had a broken model, so they were basically rolling out a broken model on a continual basis, which made them lose more money. 

Brandon: 

Exactly. 

Brandon: 

And the best illustration of that is, you know, if you move forward a couple of years when we start to see the numbers, you know, by the time, by the time we get to 1998 1999 and the and the guy will talk about, I’m sure John Antioco, who had come in and kind of turn the company around and kind of saved it from that debacle, Uh, the company became profitable again, solidly profitable. 

Brandon: 

But they had twice as many stores as they had when the company had sold just four or five years prior. 

Brandon: 

So if you think they in fact they were about as profitable as they were when they sold. 

Brandon: 

But they had twice as many stores to do it. 

Brandon: 

So all that capital gets invested in it. 

Brandon: 

Their their profit margins on a per store basis have eroded significantly because the volumes of hetero eroded. 

Brandon: 

So they pumped all this money in the new store growth. 

Alan: 

Yet they didn’t get the return on investment on it because existing stores were in decline. 

Brandon: 

So you can kind of you can kind of see the scenario that’s that’s building. 

Alan: 

And this is what leads to huge problems as we get into the early two thousands. 

Brandon: 

And we skipped over a really important part there in 1994 when Blockbuster, which was a public company at the time, sold itself to Viacom 1994. 

Brandon: 

And that’s where that’s where Wayne and High Ziggo and all of the early people in the business cashed out and left. 

Brandon: 

So they that was a bio com play, thinking that they could control distribution for some of their media. 

Brandon: 

Most likely it was more. 

Brandon: 

It was more of a matter if you remember back then, Uh uh. 

Brandon: 

They were competing with Q V C Networks and and Barry Diller to by Paramount Pictures. 

Brandon: 

That’s why, by combo blockbuster, Blockbuster was so cash flow rich at the time that they provided the cash that Viacom needed to acquire Pyramid. 

Brandon: 

And that’s what happened. 

Alan: 

They acquired their required blockbuster and then, within a few months, closed the deal to to to buy Paramount for roughly the same amount that they bought Blockbuster for is around eight billion. 

Alan: 

So Viacom went from mainly a cable television business back then MTV and Nickelodeon. 

Brandon: 

That was their kind of Lee brands. 

Brandon: 

So they went from that to a company that owned a major movie studio as well as the absolute dominant player in home entertainment. 

Brandon: 

It sounded great at the time, but it didn’t work very well because six years after they bought it, they spun off 20% of the company to the public, and the company was valued at only 2.5 billion. 

Brandon: 

It had dropped $6 billion in six years in six years. 

Brandon: 

But Netflix and Netflix was just barely getting started at that time. 

Brandon: 

So Netflix had nothing to do with any of that. 

Brandon: 

Yeah, I don’t, uh I would imagine that they, at some point to your point, didn’t really care, because they wanted the cash that they didn’t have to get the Paramount Pictures, which they thought was going to be the the Paramount business. 

Brandon: 

Like I did well, the cash as one of the investors said they bought it for the cash, but the cash never happened. 

Brandon: 

Uh, so, uh, the blockbuster acquisition turned out to be a complete disaster for icon, and they spent the next few years ridding themselves of it. 

Brandon: 

And what are you thinking as a as a guy in the business? 

Brandon: 

You You mean you had come so so early? 

Brandon: 

Were you saying I think there’s an opportunity to own some of these stores like what was going through your mind? 

Brandon: 

Well, what what happened was the How I wound up in it is it was really just a coincidence around the time that HIV was selling the stores that I was running, uh, of a franchise group that was having some problems called me up. 

Brandon: 

We got to talking and I went to work for them. 

Brandon: 

And that was in 1993. 

Brandon: 

They owned at the at the time, 18 stores. 

Brandon: 

They were in Alaska, and they were in El Paso, Texas, And the Alaska stores were kind of struggling, so it was interesting. 

Brandon: 

They were more than willing to listen to a different perspective on how the business should be run. 

Brandon: 

Blog Buster never was, but these these people were, and they were. 

Brandon: 

They were actually cable television. 

Brandon: 

People named the company’s prime cable, and they owned several large cable systems around the country, the biggest of which was Las Vegas. 

Brandon: 

And they had bought into the to the blockbuster business because they thought there might be some synergy down the road somewhere that didn’t really turn out to be the case. 

Alan: 

So it was just basically an investment that they needed to make good on, and they hired me to run it. 

Brandon: 

And then, uh, I went in and basically installed the video central business model in those stores completely turned them around. 

Brandon: 

The first year we won the President’s award for the highest store, uh, same store sales growth in the company completely turned it around with a similar business model. 

Brandon: 

We ran at H B and and then seven years later, uh, Prime decided they wanted to get out of the business and offered it to me to buy and, uh, something I’ve never done before. 

Brandon: 

Try to raise money, and it was a $16 million deal. 

Brandon: 

But I raised the money and bought it in early 2000. 

Brandon: 

So let’s just talk about that. 

Brandon: 

You’ve never read money, but you do know because you’re in the operations that there’s money clearly to be made. 

Brandon: 

These things are thrown off. 

Brandon: 

33 or 35% Free cash flow effectively at the store level. 

Brandon: 

Yeah. 

Brandon: 

Um, so So how do you like, Do you go read a book on how to raise money, or how did that work? 

Brandon: 

How’s that I got in Texas? 

Brandon: 

They What happened is they gave me, uh I mean, I was an operator. 

Brandon: 

I knew how to run the business. 

Brandon: 

I don’t know how to raise money. 

Brandon: 

I didn’t know what investors wanted to hear, and I didn’t know what banks wanted to hear. 

Brandon: 

And for this to work, it was gonna need to be a leveraged deal. 

Brandon: 

We’re going to have to have a lot of debt. 

Alan: 

So, uh, my first couple of presentations to potential investors. 

Brandon: 

You know, I knew this thing would work, but I know how to explain it to them. 

Brandon: 

And I I learned really early on what they were looking internal rate of return or or or and you know, not being a finance person. 

Alan: 

I don’t even know what that was. 

Alan: 

But once I figured it out, and I was pretty good with spreadsheets at the time, So once I figured it out and could show them what would happen. 

Alan: 

What could happen. 

Alan: 

I started getting attention of a lot of investors because it was at the right. 

Brandon: 

We were growing if we could just keep that up. 

Brandon: 

Uh, it was pretty evident it was gonna be a very profitable deal. 

Brandon: 

So we wound up and I ran into a couple of people that really helped me understand that the guy my my name of Bill Wildman, who put the debt together for us really explained a lot of that to me and help me build the presentation that investors wanted to see. 

Brandon: 

And so we wound up buying those stores for $3 million in equity from a private equity company in Oakland, California And, uh, we and and we did and and $13 million.13 million dollar loan. 

Alan: 

So I just want to go back. 

Alan: 

Did you just know this guy, or did you run into them like I’m just trying to understand every, like, everybody thinks that there’s this book we get as entrepreneurs like you’re like, Hey, I know these 10 investors and we’re just gonna call ring them up like well, and the thing is for some business, you might not. 

Brandon: 

You might be able to do that. 

Brandon: 

But for the video business, who in in in the flagship brand was struggling at the time? 

Brandon: 

You know, it wasn’t real easy to raise money, so but there had been a company that had that had done some early debt with some of the blockbuster franchisees, and and that’s who I talked to initially. 

Brandon: 

There was also a lending company called F Mac Back in those days. 

Brandon: 

I don’t know if you remember them, but they they lend it primarily to to franchise organizations. 

Brandon: 

I talked to them as well. 

Brandon: 

Uh, and I wound up going with these other people, and there were very few people that really understood the video business, and this guy had done some some loans early on, and they had all done very, very well. 

Brandon: 

I think he only had one default out of, you know, dozens and dozens. 

Brandon: 

He made a lot of money lending money to blockbuster franchisees, So when I showed him what I thought we could do, he got real real interested. 

Brandon: 

So So I guess I could have never gone to a traditional banker or traditional lender and got the money. 

Brandon: 

It was it was because they would have never understood it. 

Brandon: 

But he did. 

Brandon: 

Yeah, the I think that’s the case for entrepreneurs. 

Brandon: 

I tell people like the General Bank, just they’re just generally not going to get it and you’re gonna waste your time spinning wheels. 

Brandon: 

That’s exactly right. 

Brandon: 

And there’s an, uh there’s there’s a handful of lenders out there now specialize in franchise groups, and and they’ve They’ve studied those individual businesses and they understand it. 

Brandon: 

So you know, they’re anxious to do deals with with good operators. 

Brandon: 

But if you took that same deal to a traditional lender in a bank, they’d never get it at all because they’re looking for different things. 

Brandon: 

The blockbuster business, like, I think, a lot of franchise businesses. 

Brandon: 

It’s very much a cash flow business. 

Alan: 

There’s not a lot of of heart. 

Alan: 

Well, as the ongoing cash flow stream, it’s not. 

Alan: 

It’s not hard assets, it’s not. 

Alan: 

It’s not real estate. 

Brandon: 

Um, I’m getting a message here. 

Alan: 

Says my Internet is Are we still okay? 

Alan: 

Yeah, we’re still okay. 

Brandon: 

You stop there 1st. 

Brandon: 

2nd, but we’re catching up. 

Brandon: 

Okay. 

Brandon: 

Um so yeah, does that does that get at it? 

Brandon: 

It was it Does you just, like, called some people basically and said, Hey, I want to raise some money. 

Brandon: 

I got a business that I think can make some money. 

Brandon: 

Once you figured out after failing a bunch of times that they wanted that I our our calculation basis, that was everything to them, that was everything. 

Brandon: 

And once we got them comfortable that that we could deliver them, And in this case, they all wanted at least 30%. 

Brandon: 

Are are for us to have any any ownership at all. 

Brandon: 

You know, we have to give them a 30% are are before our management ownership kicked in, and, uh, in our deal, we we cashed them out of the 40% our art about four years. 

Brandon: 

So we got we got them out in a hurry, Which was your goal, I imagine. 

Brandon: 

Oh, yeah, because that was the only way we were ever going to make any money on the deal. 

Brandon: 

And then we at the time. 

Brandon: 

Then we still had, you know, uh, at least $10 million of debt to pay off. 

Brandon: 

And keep in mind this is in the early two thousands. 

Brandon: 

When Blockbuster is getting in in financial difficulty, I do have a question that you were a franchise. 

Brandon: 

You are a Franchising, a blockbuster, which it sounds like to me. 

Brandon: 

Basically, you got their sign in their name. 

Brandon: 

But it was your business model because the blockbuster didn’t even understand your business model. 

Brandon: 

Yeah, and that’s That was the That was the neat thing about Blockbuster. 

Brandon: 

I’m not real familiar with other franchise models, but I know like McDonald’s, for instance, there’s a there’s probably a lot more rules you’ve got to follow than we did. 

Brandon: 

We bought all of our own product. 

Brandon: 

They didn’t have anything to do with it. 

Brandon: 

We set all of our own pricing. 

Alan: 

We set all of our own terms. 

Brandon: 

We set all of our own late fees, the dreaded late fees. 

Alan: 

We picked all of our own real estate, uh, in our case, because we had dedicated markets where we didn’t share them with anyone else. 

Brandon: 

We did a lot of our own advertising, so we looked at it as we were really running our own company, even our own business, even even though we had the blockbuster brand on it and, uh, you know, the franchise group within Blockbuster never was more than 25% of the stores. 

Brandon: 

And that’s important because most franchise companies are 80 90 sometimes more higher than that. 

Brandon: 

So it’s they are truly franchise run and financed organisations blog Buster never was, and that was good and bad. 

Brandon: 

They didn’t pay a whole lot of attention to us because we weren’t a significant part of the financial picture of Blockbuster. 

Brandon: 

Never were. 

Brandon: 

But the bad news is they didn’t pay any attention to us because they didn’t care what we were doing. 

Brandon: 

They never listened to us. 

Brandon: 

They didn’t have a whole lot of interest in how we were running the business. 

Brandon: 

And even though we were thriving in a lot of those years where they were failing, we never had a substantial discussion about what we were doing versus what they were doing, because you just paid them some, I guess. 

Brandon: 

Franchise, What was the percentage? 

Brandon: 

Yeah, it varied by the according to when you did the deal, but it was anywhere from 4% to 8% royalties off the top line, plus advertising fees and computer fees. 

Brandon: 

And, you know, we were paying an average of about 89% to blockbuster off the top line every year. 

Brandon: 

That sounds expensive. 

Brandon: 

It was very expensive. 

Alan: 

But the business model when? 

Alan: 

When run right? 

Alan: 

You know, you could afford to pay that because the margins were still where you still throwing off 30 35% freak out. 

Brandon: 

Our profit margins, particularly gross margins, actually went up as as the as VHS transition to DVD, that is, and that is a, I think, probably the biggest part of the whole story, because when the business started switching from VHS to DVD in 1997 and by around 2004, the transition was complete, the IT completely changed the business because DVD was was, it was go back to the $65 video cassettes that essentially created what we call the rental window. 

Brandon: 

Wal Mart was not gonna buy those and mark them up and sell them for 80 bucks or $90 to 2 customers. 

Brandon: 

So the only people that bought those movies were rental stores. 

Brandon: 

Okay, so we had them as much as six months before mass merchants would have them for sale because what they would do is six months later, they lower the price to go into what they call the self shelter window. 

Brandon: 

Uh, when DVD came along everything and came out for sale. 

Brandon: 

If you remember, you know, Lion King, all that stuff was coming out at DVD, and it was, and you could buy anywhere for around $20. 

Brandon: 

We bought it wholesale for about 17. 

Brandon: 

We’ll think about that. 

Brandon: 

Uh, we were paying as much as 60 plus dollars for most of the movies in the nineties and all of a sudden our cost of $17. 

Brandon: 

So we use that to buy more movies, have better availability and improve our gross margins. 

Brandon: 

Uh, and that’s what allowed us to succeed. 

Alan: 

Now the DVD was created to to kill the video store, really, because the studios wanted wanted to get their money off of selling versus selling director consumer versus selling the video stores because they were only making about a buck 50 off of a rent. 

Brandon: 

But they were making about 14 $15 off of the cell of a DVD. 

Brandon: 

The good news is, is that even though that transition from VHS to DVD kind of flatlined the growth of the rental business. 

Brandon: 

It didn’t send it into decline. 

Alan: 

It stayed pretty flat. 

Brandon: 

In fact, there was some years in there where it actually grew a little bit. 

Brandon: 

Even though Walmart essentially became a direct competitor and every and every mass merchant in the country, every supermarket in the country was a direct competitor with Blockbuster because of DVD. 

Brandon: 

And here’s the other two things. 

Brandon: 

DVD was such a small, convenient package it allowed mailing them to customers. 

Brandon: 

That’s what started Netflix. 

Alan: 

Netflix started as a by mail DVD company. 

Brandon: 

Later on, DVD allowed kiosk vending machines to come along well, that was never possible with cassettes. 

Brandon: 

So DVD allowed the creation of Netflix and later Red Box. 

Brandon: 

And it also made every mass merchant in the country a direct competitor. 

Brandon: 

So the business just flipped totally and and how it needed to be run. 

Alan: 

And Blockbuster really never really adapted to. 

Alan: 

That doesn’t sound like they were in touch with the actual stores, but more in touch with whatever corporate. 

Brandon: 

Well, a few years into the conversion of the transition from VHS to DVD, their gross margins margins were essentially the same. 

Brandon: 

They didn’t take advantage of it. 

Brandon: 

They were essentially the same as they were in VHS days. 

Brandon: 

I never could understand that. 

Brandon: 

And they did it because they did a deal that that’s probably too complicated to talk about here. 

Brandon: 

But they did. 

Brandon: 

They did a deal called revenue sharing, uh, that split revenue with studios and the deals that they did produce the same kind of gross margins that they were getting back in VHS days. 

Brandon: 

They improved a little bit, but not very much. 

Brandon: 

But you’re out there on an island, in many ways, running your own gig, still making money. 

Brandon: 

Yeah, so here. 

Brandon: 

Here’s the startling fact is that from 2000, which is when Netflix kind of got going. 

Brandon: 

In fact, that was the year that they tried to sell themselves to Blockbuster and then, and that didn’t happen. 

Brandon: 

Well, thank God from 2000 to 2007, which is the year that John Antioco, who is the CEO during most of this time period we’re talking about. 

Alan: 

When he left in 2000 and seven, Blockbuster was in deep financial trouble. 

Alan: 

Now he would say otherwise, but that’s just not true. 

Brandon: 

The stock was down, you know, 80% from its highs. 

Brandon: 

And they were. 

Alan: 

They had already defaulted on some loans. 

Brandon: 

They had escaped bankruptcy a couple times already. 

Brandon: 

Uh, they were in trouble financially when he left in oh, seven. 

Alan: 

During that same period of time, we triple the profits in our company. 

Brandon: 

And, yeah, we’re a small company. 

Brandon: 

But we were running the same stories they were. 

Brandon: 

There was there was no reason they could have been doing the same things we were doing. 

Brandon: 

So So you guys. 

Brandon: 

I mean, it was interesting, but you all were probably What did you have some other you were talking about? 

Brandon: 

Other people were there. 

Brandon: 

Did you have an operating team that you are the CEO? 

Brandon: 

Did you share or did you have partners or how did you set up that your program? 

Brandon: 

We’re talking about ownership, ownership wise and leadership. 

Brandon: 

Well, you know, uh, management had had some ownership, and I shared some of that with the with the key operators in the in the company. 

Brandon: 

And, uh, we we and we also were We were kind of geographically challenged because we had stores. 

Brandon: 

There were 5000 miles apart. 

Brandon: 

Basically, we had stores in Alaska and and as far south as Brownsville, Texas. 

Brandon: 

That’s as that’s as far as away part as you can get. 

Brandon: 

So we had a lot of independent, you know, excellent people running stores, running groups of stores. 

Brandon: 

Uh, that, you know, we we just met the challenge and and really coming from a grocery store business. 

Brandon: 

The video rental business was not all that difficult to run, Uh, compared to a grocery store, so I never I never found it. 

Brandon: 

It didn’t take it. 

Brandon: 

Didn’t take a genius to run a good video store. 

Brandon: 

You just had to pay attention to what was going on. 

Brandon: 

And you are from a corporate office in Yeah, we stayed. 

Brandon: 

And, uh, I lived in Austin all those years, and our stores were along the Rio Grande River from El Paso all the way to Brownsville in Texas And then and then all over the state, in Alaska from in some of those stores were almost 2000 miles apart in Alaska. 

Brandon: 

So, uh, I did a lot of traveling, but I didn’t. 

Brandon: 

I didn’t travel to run the stores. 

Brandon: 

I traveled to visit and, you know, strategize. 

Brandon: 

I had good people that ran the stores day today And, you know, unfortunately, uh, even when we got the private equity group out, we still have a lot of debt to pay. 

Brandon: 

And, uh, that was a 10 year alone, so it wasn’t gonna be paid off until 2010. 

Brandon: 

And, uh, everything was going great. 

Brandon: 

We were making decisions based on the fact that we were going to last a while. 

Brandon: 

And then the great recession hits in 2000 and eight. 

Brandon: 

And that really kind of was a big haircut, because we we didn’t see that coming like a lot of people didn’t. 

Brandon: 

And we wound up having to restructure the debt and and didn’t pay it off until 2012, which was two years after Blockbuster filed bankruptcy. 

Brandon: 

Wow. 

Brandon: 

So but we did. 

Brandon: 

We never We never made the money. 

Brandon: 

We felt like we deserved, because by the time we got the debt paid off, the businesses in a pretty steep decline, that’s what I was going to say to you. 

Brandon: 

Did you? 

Brandon: 

Where did you ever I mean, you had seen so many phases all the way going to beta max. 

Brandon: 

You know, the VCR to disk Laser disc. 

Brandon: 

Did you, um, were you imagining that the and seeing that the Internet was getting was that possibly some point this would be digitally delivered and that, you know, you needed to figure out how to harvest the revenue because it because you didn’t think you were going to sell it Or did you think you were going to sell this or what? 

Brandon: 

We’re Well, we we knew that we knew that digital was going to happen eventually. 

Alan: 

Uh, but we had a lot of faith in the business because we had managed to grow the business as Netflix was growing and we were growing the business even as red box was growing. 

Brandon: 

So, yeah, you know, in 2000 and 7, 2000 and eight are most profitable. 

Brandon: 

Year was in 2007, the year before the great recession hit. 

Brandon: 

We had We had grown the business every year. 

Brandon: 

And so, you know, we’re sitting there going, Honey, we’re home free. 

Brandon: 

Here. 

Brandon: 

We got, we got we got a couple of years left on the debt. 

Brandon: 

Once we get that paid off, you know, we’re gonna We’re in the money. 

Brandon: 

Uh, and the video business had had had survived several recessions during its lifespan. 

Brandon: 

So even when that happened, I thought we would recover. 

Brandon: 

Uh, but we never did. 

Alan: 

You know it. 

Alan: 

The business just declined about 2020% and never came back, which was really weird. 

Brandon: 

And I think a lot of it was because, uh, you know, Blockbuster had had had had such had such a poor reputation by that time was just the loser in the whole deal. 

Brandon: 

Red Box was was growing very, very fast. 

Brandon: 

Netflix was still growing very, very fast, and I think it just it just kind of took the wind out of the sales of video stores. 

Alan: 

And even though we had done really, really well up to that point, we got hurt really bad by the recession. 

Brandon: 

And And although we we ran the business another 10 years and Blockbuster didn’t obviously, uh, we never had the kind of years we had in the in the mid two thousands, and we were pretty much in decline every year thereafter. 

Brandon: 

Yeah, I was thinking as your as your talking. 

Brandon: 

There was sort of this. 

Brandon: 

So I’m remembering. 

Brandon: 

I actually lived on the east Coast in a small town on the eastern shore called Easton and there was a blockbuster and it was super exciting. 

Brandon: 

I mean, And before that, it was just, uh the blockbuster basically put out the local video store and put them out of business because they came in with this, You know, they built a building in this town that it’s probably the biggest supermarket. 

Brandon: 

Maybe, um but there was sort of this feeling because you were reading the press or even if you weren’t a business person, you were hearing blockbusters bankrupt or blockbuster this and Blockbuster that. 

Brandon: 

And then they put a red box machine, uh, at the Walgreens and at the Walmart, and you can reserve it online. 

Brandon: 

And then I remember my dad made the switch before I did because he said, Um, yeah, I’m doing. 

Alan: 

He went to Netflix, Netflix. 

Alan: 

He’s like doing this Netflix mailing thing. 

Brandon: 

It’s great. 

Alan: 

I get it in the mail. 

Brandon: 

I just watch it as long as I want. 

Brandon: 

And I put it back and I remember telling my wife he said, I was like, You know, Dad’s doing this. 

Brandon: 

Maybe maybe we should check this thing out and and and it and I will say this. 

Brandon: 

There was nothing wrong at the time with the store a blockbuster. 

Brandon: 

It was just this feeling that it had past. 

Brandon: 

It’s time, for whatever reason, it’s really weird. 

Brandon: 

We’ll see. 

Brandon: 

I I think what made it what you know, because I think what where they lost it is they didn’t take advantage of all the things that DVD offered. 

Brandon: 

A real good example is Netflix. 

Brandon: 

Your Your dad probably wasn’t all that big on new release movies, because that was Netflix’s weakness. 

Alan: 

They couldn’t really compete on the availability of new releases in those first couple of weeks because there was too much time in the mail. 

Brandon: 

In fact, you know, they discovered very early on that the only way Netflix could really work is to get people to to want to watch older movies and older television shows. 

Brandon: 

So their business model pretty much dictated that 80 to 90% of all the movies they mail their subscribers were old. 

Brandon: 

And that’s what they that’s what they did. 

Brandon: 

I think my investor store was the exact opposite a block. 

Brandon: 

The typical block, a dip of corporate blockbuster store, about 90% of what they rented was new and by new I mean, six months to eight months, almost everything out after release date. 

Brandon: 

Almost everything that they rented was a near release. 

Brandon: 

Almost everything that Netflix rented was old, and they and they learned their customer base and and marketed to them and got them convinced that you don’t have to rent the new stuff. 

Brandon: 

We’ll eventually get it to you. 

Brandon: 

It doesn’t matter if you get it the first two or three weeks, we’ll get it to you that don’t worry about it, we’ll send you something else you like. 

Brandon: 

They did that masterfully and and and at the same time, everything that Blockbuster was doing was hurting the availability of new releases in their stores. 

Brandon: 

It was the only advantage they had, and they were making it worse. 

Brandon: 

Uh, and and then you have Netflix come along, which was really nothing but near releases. 

Brandon: 

So you got Blockbuster sitting here in the middle of this storm? 

Brandon: 

You’ve got Netflix appealing to all these people that really don’t care that much about getting a new release. 

Brandon: 

The first two or three weeks now they were they were shipping them out, but it was you were unlikely to get it in those first two or three weeks, and then and then red box comes along. 

Brandon: 

And that’s all they’ve got in those little boxes as new releases. 

Brandon: 

And they’re renting them for a dollar and blockbuster renting for four or $5. 

Brandon: 

Well, what do you think is gonna happen you’ve got You’ve got this perfect storm of people pulling of your biggest competitors, pulling customers away. 

Alan: 

Blog Buster was defenseless, and mm, we were running the same stores at that time, and we were still growing because we understood what Netflix was doing. 

Alan: 

Uh, over half of the movies that we rented in our stores were old movies. 

Alan: 

It was never as much as Netflix for a lot of reasons, but but we We focused on making sure that we had all that old stuff, just like Netflix did and then in and Red Box, even though they were, they had a They had a great offering to to rent new releases for a buck a day. 

Alan: 

That’s all they had. 

Alan: 

So if we could create an environment in a blockbuster store, that was more fun to go there where you could get anything and yeah, you’re going to pay more for a new release, but we got a lot more stuff. 

Brandon: 

Uh, we kept a lot of those customers, and red box hurt us, and they took a lot of customers, but, uh, but we never But But we weren’t in decline then. 

Brandon: 

It was the It was the recession that did it. 

Brandon: 

Yeah, I was thinking back. 

Brandon: 

I think my dad just mathematically said, Well, if I get on cycle getting it late, that I’m just always getting a new release for me, whether or not it’s six weeks later or not, doesn’t matter. 

Brandon: 

And and the And the great thing about that is for Netflix is they use that knowledge to build the streaming business later on. 

Brandon: 

You know, they figured out and I would I would love to sit down with Ted Sarandos, who’s their CEO now was there was their product by all those years, and we knew him from back in video days. 

Brandon: 

He was just a you know, he was just a district manager with a distributor back in those days, right? 

Brandon: 

And he’s a great guy, and I I think that he they learned early on how to market content Older content that it wasn’t about being knew it was about how good it was. 

Brandon: 

And could they match up with their elaborate algorithms? 

Brandon: 

Could they match demand to their customer base? 

Brandon: 

And they did a brilliant job of it. 

Brandon: 

And I think, you know, if you go on Netflix now, a lot of the content is older. 

Brandon: 

You know, they Yeah, they’ve got a lot of new fresh stuff because they’ve got to because they can’t get it from the studio as much anymore. 

Brandon: 

But up until just, I think I don’t know if they still have the office on Netflix or not. 

Brandon: 

But for years, the office was their most watched program on Netflix, Uh, the management of Blockbuster that would have never occurred to them to have old stuff in a blockbuster store that was continuing to rent. 

Brandon: 

It just didn’t occur to them. 

Brandon: 

Yeah, I remember we used to rent the old seasons. 

Brandon: 

We would wait for a whole season of an HBO thing to come out. 

Brandon: 

We just rent that whole season. 

Brandon: 

But I gotta say, I think Netflix stinks to this day, to be honest with you, But but I’m a subscriber in the minority Well, I’m gonna say this. 

Brandon: 

I’m a subscriber, and I can’t not subscribe because they come out with just enough like it doesn’t have the blockbusters. 

Brandon: 

Doesn’t. 

Brandon: 

I love the comedies, right? 

Alan: 

But, you know, they have good content, but a lot of it is old and, you know, but I can’t cancel it, But I’ll tell you how they could fix it if they probably not even listen to you and I But maybe they are, uh is they need to fix their interface because their interface is horrible. 

Alan: 

Like, I think it just doesn’t recommend I can’t even find my own list sometimes. 

Alan: 

And I know somebody’s gonna tell me you go over to the left and if they are on the left Yeah, right, Right. 

Alan: 

But, um, that’s me on a rant about Netflix. 

Alan: 

But, um, but it makes me wonder, you know, if if if we we had a we had a program in our stores in those days and the way we fought Netflix on on that is we had a program that we called, We’ve got it or we’ll get it and we literally would buy anything a customer requested, because in those days, DVD would cost, you know, 78 bucks. 

Alan: 

You know, one that expensive the wholesale cost the old ones. 

Alan: 

So we had a We had a deal where the customer came in. 

Alan: 

We didn’t have everything like Netflix had, but we had everything that a customer ever asked for. 

Alan: 

So in some of our stores, we would have as many as 30,000 DVDs in our high log inventory. 

Alan: 

God, 30,000. 

Brandon: 

And we were renting that as many as in some of our higher volume stores in Alaska. 

Alan: 

We were renting those as many as 10,000 times a week. 

Alan: 

That was 33 to 4 times more than a blockbuster was renting of everything. 

Alan: 

So we were proven to ourselves that that there was a massive demand for this, But you had to have it, and you had to have it priced right, because you couldn’t rent it for $4. 

Alan: 

So we were renting it for a dollar and in some cases, even less. 

Alan: 

And, uh, we were generating infinitely more revenue out of that product than Blockbuster was. 

Alan: 

And that’s how we fought Netflix on that, uh, we we knew that the huge weakness that that their weakness was new releases, but our weakness was was the older catalog titles. 

Brandon: 

So we just committed that if a customer wants it, we’re going to have it. 

Brandon: 

And what that produced is a whole bunch of stores that have very customized inventories to what people that ask for. 

Brandon: 

And I remember I remember. 

Brandon: 

In fact, I tell the story in the book John Antioco coming in on one of our stores in Anchorage and and I’m showing him to the inventory. 

Brandon: 

This and this particular store had an inventory of about 25,000 units. 

Brandon: 

Now, not 25 titles. 

Brandon: 

It was probably at least 10,000 titles, probably more like 12 or 13,000 just the catalog. 

Brandon: 

And we were renting at 10,000 times a week where they were renting. 

Brandon: 

Just to put this in perspective, the typical blockbuster of the day was renting about six or 700 catalog titles a week. 

Brandon: 

Six or 700? 

Alan: 

We were running 10,000 in that story. 

Brandon: 

So what a what a what one of our customers came to one of our stores forever for versus what a corporate blockbuster customers going to the story. 

Brandon: 

It was just a totally different. 

Brandon: 

It was a complete We were running a completely different business. 

Brandon: 

And it’s why when I would have want to have discussions with them about it, they just, you know, it just we were on different planets and and they they didn’t have any interest in it. 

Brandon: 

Well, I got to ask you, uh, how did you did you display all 10,000 or 12,000 titles and all those racks in the store? 

Brandon: 

Did you really got? 

Brandon: 

Yeah. 

Brandon: 

What we did is we, uh, you know, blog Buster didn’t do it in very many stores, but, uh, you could go. 

Brandon: 

Is is you could go, like, 10 shells high. 

Brandon: 

In fact, I remember as we as we continue to add inventory, we had to add rows. 

Brandon: 

I mean, we were the stores were just jammed. 

Brandon: 

In some cases, we would have to book ended, you know, like going into a library. 

Brandon: 

Uh, and every time we would do something like that, I would get worried, You know, I get very well. 

Brandon: 

Okay, that’s gonna That’s a little bit too high. 

Brandon: 

Are people gonna want it, you know, or is it still going to rent then? 

Brandon: 

Then when the inventories gets so big, particularly the smaller stores You walk in one of our We had a little store in Saldanha, Alaska, that had massive inventory and 3000 square feet. 

Brandon: 

Virtually the entire catalog was bookended. 

Brandon: 

You walked in there and look like a library. 

Brandon: 

So I was obviously very, very concerned about the presentation. 

Brandon: 

You know, it just it didn’t look like what we would want it to look like. 

Brandon: 

But amazingly, it didn’t hurt threats. 

Brandon: 

People would still go digging through it and find, you know, find what they’re looking for. 

Brandon: 

It was more important to have it then to have it looked pretty, and, uh and once we figure that out, we just we just kept piling in the product. 

Brandon: 

People didn’t care if it looked perfect. 

Brandon: 

That’s a really in prayer. 

Brandon: 

If it was there and it was organized where they could find it, they didn’t care what it looked like. 

Brandon: 

That’s a really important point, because if you are stuck on just the aesthetics and didn’t listen to the data which comes out of the cash register, you guys would have and ladies would have lost a lot of money, and that’s what we were doing. 

Brandon: 

We were just following the customer. 

Brandon: 

You know, we knew we needed to have it in there. 

Brandon: 

We didn’t have the space to do it the way we would like to do it. 

Brandon: 

But we just kept putting it in there, and it just kept raining. 

Alan: 

And the smaller stores where the presentation was not very good. 

Alan: 

Their numbers were just as good as the big ones. 

Brandon: 

It just didn’t seem to matter. 

Brandon: 

So we weren’t. 

Brandon: 

We just weren’t concerned about what it looked like because we knew the customers didn’t care. 

Brandon: 

So why should we care? 

Brandon: 

I mean, you listen to the data, right? 

Alan: 

I mean, the cash register is going to tell you what’s really happening. 

Brandon: 

Yeah. 

Brandon: 

You know, I came from grocery store days where, you know, you walk down an aisle and the, you know, the top shelf is 67 ft up. 

Brandon: 

Right? 

Brandon: 

Well, that’s what our stores started to look like, Uh, where you go in a typical blockbuster store. 

Brandon: 

And they still had the low profile shelves and most of the stores, and they didn’t have near the capacity that we did. 

Brandon: 

Uh, and yet we even had stores that we couldn’t put it face out and had a book in it. 

Brandon: 

They would have never done that because it would have looked. 

Brandon: 

It wouldn’t have looked right. 

Brandon: 

But we knew that our customers didn’t care, so we just kept doing it. 

Brandon: 

So I have a question for you related sort of off topic, but I’m curious of your thoughts. 

Brandon: 

So what about this buyer paralysis thing, right? 

Brandon: 

I mean, there’s there’s a ton of studies out there that said it. 

Brandon: 

If you give a consumer too many choices, they get, they get, they lock up, right, like, you know, and you’re you’re off at. 

Brandon: 

Whereas if you say, here’s the three things Not maybe not videos, obviously. 

Alan: 

But here’s three things, or here’s the two colors the consumer will buy more readily because they don’t get locked into this decision Paralysis. 

Brandon: 

Did you ever think about that? 

Alan: 

Or did that ever come up in in how the business dynamics worked? 

Alan: 

It’s a great question because we did, and we were concerned that the stores are gonna get gonna get difficult to shop that was going to be difficult to walk. 

Brandon: 

There was such a massive selection that we were getting concerned that it would, they would get lost and the morass of all the titles. 

Alan: 

So here’s what we did. 

Alan: 

Uh, one of the smartest things we did we created, uh, if you if you picture this picture this catalog section in a typical store that had, let’s say, 10,000 titles well out of those 10,000 titles, there’s really maybe five or 600 that are generating probably 3/4 of the revenue. 

Alan: 

And there’s not one copy of and there could be 678 copies. 

Brandon: 

Seven. 

Alan: 

We pulled all those out of the catalogue section and put them in their own section, called it Blockbuster Gold. 

Brandon: 

Put it in its own section. 

Brandon: 

Very high profile, very high profile section of the store so that everybody would, in some case, it was It was it was it was either be the first thing you walked in then this you saw it. 

Brandon: 

And the other thing is, as we we charge more for it, it was still it was still just a buck and a half versus a dollar for all everything else. 

Brandon: 

But we were so committed to having and having it in stock that we, we we jacked up the price 50 cents. 

Brandon: 

Well, that small section of movies turned out to be about 50 to 60% of all the revenue that we’re generating out of the catalog in that one section And what and what would typically happen? 

Brandon: 

And it could be, you know, 500. 

Brandon: 

Depending on the story that could be 500 to 1000 titles. 

Brandon: 

They’re grouped in one area, and it was all the evergreen stuff, you know, that that rented forever, you know, And, uh and we would have big quantities of it, like all the Star Wars would be there and all. 

Brandon: 

You know, all that, all the diehards would be there and all that stuff. 

Brandon: 

So if you wanted to go in there and see all the high profile movies that might be 10 2030 years old, that’s where they were. 

Alan: 

They were all in one spot that was so successful. 

Brandon: 

We wind up doing the same thing in the family section where we would pull out primarily all the Disney stuff and put it in its own section. 

Brandon: 

And then television got to be such a big deal in DVD because you know in PhDs days, it was very inconvenient because you couldn’t skip to the episodes. 

Brandon: 

So DVD got to be as much as 20% of the business that television DVD in some of our stores. 

Brandon: 

So there were huge sections in catalogs. 

Brandon: 

So and we had so much of it that we broke out gold sections of television as well. 

Brandon: 

So that address is what you’re asking that Yeah, There’s 10 15,000 titles in there, but the ones that most people are gonna want to watch their in smaller sections. 

Brandon: 

And then if you want to go dig into the to the really deep catalog, it’s there. 

Brandon: 

But it’s not gonna be as convenient for you to go shop. 

Brandon: 

Isn’t that how we did it? 

Brandon: 

Oh, I appreciate you answering that because I never remember those sections, but I I was laughing. 

Brandon: 

When you’re saying it because I’m like blockbuster goal and you just make it up. 

Brandon: 

You charge 50% more and you haven’t done anything, and I couldn’t help but say this out and you’re gonna appreciate this, I hope is that this is the butcher presentation in a supermarket, right? 

Brandon: 

They have all the shrimp they have the these quote unquote prime cuts of beef. 

Brandon: 

But what I later learned from a butcher friend is that those shrimp that are in there that may be priced more are no different than the frozen shrimp, except they’ve unfrozen them and presented them differently. 

Brandon: 

And they’re like the blockbuster gold. 

Brandon: 

Yeah, yeah. 

Brandon: 

And and And it became a very popular place to go in the store. 

Brandon: 

It was It was kind of the secondary destination beyond the knee release wall. 

Brandon: 

And did you? 

Brandon: 

So you did think about did you experiment with that and then just listen to the data and then just roll it out into your other stores? 

Brandon: 

Well, we were convinced that we had to do something, so we didn’t really test it. 

Brandon: 

We did it in every store and because we felt like we had to to make it, if nothing else, make it more convenient to shop. 

Brandon: 

And if I remember right, I don’t think we probably We didn’t mark it up when we did it initially, but it was so popular, and we were having so much trouble keeping in stock that we said Okay, we’re gonna commit to never being out of stock on these titles were gonna buy it deep enough That will never be out now. 

Brandon: 

Sometimes we were, but more often than not, we had it. 

Brandon: 

We had multiple copies, enough of them that we were always in stock on it. 

Brandon: 

And we and we, you know, we charged 50 cents more to help us, you know, replenish it and keep it in stock. 

Brandon: 

So where you would walk in a blockbuster store and there might be two copies of Star Wars, we might have 12. 

Brandon: 

Uh, that might not be an example of a title that read that much, but there were some back there like that, You know that we would. 

Alan: 

And it would just continue to rent and rent and rent. 

Alan: 

I think that’s really cool. 

Alan: 

So how does the you run these 2008 happens? 

Brandon: 

You lose about 20% of your business. 

Brandon: 

I think you said it doesn’t really come back. 

Brandon: 

You you got still have overhanging debt. 

Brandon: 

That takes you to 2000 12. 

Brandon: 

What was going at this point? 

Brandon: 

Are you saying to yourself Okay, I’m in it. 

Brandon: 

I’m gonna try to pay off this debt and then just harvest the cash, and eventually I just see this thing sunsetting. 

Brandon: 

Or did you think of something else? 

Brandon: 

Well, I mean the and obviously exit was never an option because we could make more money running it than we would ever get from somebody buying. 

Brandon: 

Nobody wanted to buy Blockbuster stores by then, so that was never an option. 

Brandon: 

So it was just a matter of could we run them? 

Brandon: 

As you know, how long could we run them profitably? 

Brandon: 

And we didn’t We don’t know the answer to that, but, you know, we got forced into doing shorter term lease renewals, you know, because we couldn’t commit to five years in a lot of cases. 

Brandon: 

So, you know, some stores closed before their time because our landlords wouldn’t cooperate with us because, you know, they want a five year renewal, and we’re going, Hey, that’s crazy. 

Brandon: 

We can’t do that right now. 

Brandon: 

There’s too much, you know, there’s too much uncertainty. 

Alan: 

So a lot of stores stay open longer because landlords work with others did not. 

Alan: 

But, uh, you know, the business was still it was it was still solid. 

Alan: 

It’s just that we could we could see that it was, It was it was we lost 20%. 

Alan: 

In most cases, we were continuing to trickle down a little bit. 

Brandon: 

And keep in mind that by by this time Blockbuster is filed bankruptcy. 

Brandon: 

That happened two years after the great recession hit. 

Brandon: 

So Dish has bought them out of bankruptcy for $300 million and and within two years after that, it’s pretty much pretty obvious. 

Brandon: 

They’re done and they start closing stores. 

Brandon: 

So for about three years after they bought the stores, they closed, closed what was left, and they’re all gone. 

Brandon: 

So, you know, just the blockbuster didn’t stand for much good at that point, and and we were fighting an uphill battle. 

Alan: 

So we knew that it was just a matter of how long can we do this? 

Brandon: 

Uh, and you know, in every year you just could have kind of took stock of okay. 

Brandon: 

What does it look like now? 

Brandon: 

What are we going to have to do to survive another year? 

Brandon: 

And obviously we didn’t want to lose money. 

Brandon: 

We were we never We never We never cut anybody’s pay during that whole period. 

Brandon: 

We eliminated bonuses unless we had some money that they ended the year to pay out, and we gradually eliminated some of our benefits. 

Brandon: 

But we never reduced any salaries during that time or hourly rights. 

Alan: 

So, you know, we just kind of held it together as best we could. 

Alan: 

I think in our last door closed in 2000 and 18, which was eight years after Blockbuster filed bankruptcy, which, actually, I want to talk about because I was actually shocked to that. 

Alan: 

I think at the height you were doing 35 or 34.6 million or something like that, Was that right? 

Alan: 

Yeah. 

Alan: 

Yeah. 

Alan: 

In fact, 2000 and seven, we would have done about 35. 

Alan: 

36 million in sales. 

Brandon: 

Um, So So So you management was able to take some money off the table, I assume, to stash away for, uh, another time. 

Brandon: 

Well, we were drawing nice salaries. 

Brandon: 

Uh, and and, uh, we were getting enough money out of the company to pay taxes. 

Brandon: 

And for anybody, that’s that’s, uh, been through something like this. 

Brandon: 

My biggest mistake was not preparing for income tax liability. 

Brandon: 

Uh, that was that was a hard lesson. 

Brandon: 

That was a hard lesson, because uh, when When a deal is structured like that, you’re writing stuff off so fast that you don’t know a bunch income tax. 

Brandon: 

And this was this was an LLC. 

Brandon: 

So, uh, the tax liabilities were passed through to the partners of which I was one. 

Brandon: 

So, uh, for anybody listening in a deal like that, save your money too, to pay income taxes later because you load them later. 

Brandon: 

And our problem was that we still had all that debt. 

Brandon: 

And as you get to the tail end of the debt, you don’t have the interest right off. 

Brandon: 

So your your tax liabilities are going up while your cash flow is going down. 

Brandon: 

So it it got to be kind of a, you know, but tight situation. 

Brandon: 

Toward the end, we were still making money, but our tax liabilities were very high because we didn’t have hardly anything to write off all the interest. 

Brandon: 

Mostly interest had been written off. 

Alan: 

The the most of the fixtures and inventory had been fully depreciated by that point. 

Brandon: 

So we’ve got a lot of taxable income and less cash to pay the taxes off of it. 

Alan: 

So what did you make any sense makes a complete sense. 

Brandon: 

I know a lot of people who made a lot of money on A P and L and cash flow basis and didn’t realize that on on April 15th there was going to come a check that you are going to have to write that save up your your your nickels, that I don’t know how you’re going to generate that the biggest mistake I ever made when we bought the company and I was keeping my That’s the first time I’ve ever owned a company. 

Brandon: 

And I didn’t I didn’t understand, you know, all of the ramifications of it. 

Brandon: 

I was just running a business, you know, I didn’t. 

Brandon: 

So, uh, I should have had a tax professional. 

Brandon: 

Come in and teach me exactly what all this looks like. 

Brandon: 

Here’s your here’s how here’s how. 

Brandon: 

How’s your depreciation? 

Brandon: 

Everything is going to run here is going to be your tax liability. 

Brandon: 

Your first five years estimated here is gonna be your tax liability the second five years, you know, plan for it. 

Alan: 

And don’t assume everything’s gonna go beautifully because it may or may not, And and we, you know, we got kind of caught in a situation where those first several years, things went so well that we just always assumed we’d have the money to pay the taxes. 

Brandon: 

And then when OA came along, that changed everything. 

Brandon: 

Well, nobody could have predicted that. 

Brandon: 

And we survived it. 

Brandon: 

Unlike a lot of businesses that didn’t. 

Brandon: 

But it was tough in those years. 

Brandon: 

Mhm. 

Brandon: 

So what happens towards the end here? 

Brandon: 

You You get to the end, you’re at one story. 

Brandon: 

I assume you cut the staff. 

Brandon: 

Is it just you and a bookkeeper and someone else running the show or Yeah, it just it was a gradual process. 

Brandon: 

We, uh you know, we had as many as 13 people in our corporate office here in Austin at one time, and that eventually got paired down to just me and our controller who was doing all the books. 

Alan: 

And I was doing all the buying and everything else and just just gradually close the stores a little bit at a time. 

Alan: 

We closed the last stores in El Paso in 2016, uh, and closed the last stores in the Rio Grande Valley and, uh, early 18 and then closed the last stores in Alaska in, you know, in the summer of 2018, I’m actually really impressed that you made it as far as 2018, mainly just because of the onset of the Internet and the and the downloads. 

Alan: 

But Alaska makes a lot of sense because they don’t have good band with. 

Alan: 

Got a lot of old months. 

Alan: 

They’re watching T. 

Alan: 

V a lot, right? 

Brandon: 

Yeah. 

Brandon: 

I mean, we had we had advantages there because bandwidth, but we had disadvantages, too, because the cost of operations up there is very high. 

Alan: 

Uh, everything is more expensive in Alaska, so, uh, particularly real estate and labor is more expensive. 

Brandon: 

So And And netflix was a particularly attractive offering because they’re delivered to your house. 

Brandon: 

You don’t have to get out and drive on the snow. 

Brandon: 

So we were real concerned about all that. 

Brandon: 

So, Yeah, Alaska was a great place to do business. 

Brandon: 

But you had to do it right, or it would or would turn on you. 

Brandon: 

So So here we are now. 

Brandon: 

Are you retired? 

Brandon: 

Well, for the last three years, I’ve been working on this book so three years very much. 

Brandon: 

I’m very much not retired. 

Brandon: 

but I don’t know what I’m gonna do now. 

Brandon: 

Uh, I started thinking about this book about a year before we close the last store and started researching and conceptualizing what it might look like and and eventually decided I really wanted to do it. 

Brandon: 

And the main reason was because the common narrative about blockbusters failures, that Netflix killed them, and there’s nothing that could be further from the truth. 

Alan: 

That is just not what happened. 

Alan: 

Uh, Blockbuster was in big, big trouble way before the Netflix, as people know it today existed. 

Alan: 

Netflix didn’t stream a movie until 2000 and seven, and they didn’t really become a streaming. 

Alan: 

Didn’t become a significant part of the business until several years after that. 

Alan: 

And by that time, Blockbuster’s gone. 

Alan: 

So, uh, I just really wanted Blockbuster is a very interesting story, and that it was. 

Brandon: 

It was founded by one of the great entrepreneurs in American history, Wayne Heisenberg, who found that waste management blockbuster and AutoNation. 

Brandon: 

He’s the only He’s the only person who ever found three Fortune 500 companies, and, uh, but Blockbuster was never built as a. 

Brandon: 

They never built a culture of operations excellence and they were just consistently outsmarted by people with much fewer resources that just got dug into the details of the business more than they did. 

Brandon: 

And, uh, Blockbuster was in big trouble long before, you know, the Netflix was even an issue. 

Brandon: 

And so I really wanted to tell that story because I think there’s a lot of great lessons in there to learn from it. 

Brandon: 

You know, Blockbuster had its own set of challenges, but every company does. 

Brandon: 

And any companies in any company that has had huge success up front, you know, needs to be very, very wary. 

Brandon: 

Because just because you did the first few years doesn’t mean you won’t. 

Brandon: 

That doesn’t mean you will the next few years. 

Brandon: 

Yeah, I’m excited. 

Brandon: 

I haven’t read your whole book yet, but I read a piece of it. 

Brandon: 

I didn’t read some of it on purpose because I told you I didn’t want to have a pre pre, uh, prescription here for our conversation. 

Brandon: 

I wanted to discover what what really happened, but I’m really excited now Is is the book out or is it coming out? 

Brandon: 

It official launch date was March the ninth. 

Brandon: 

So yeah, it’s been out about a week now. 

Brandon: 

Yeah. 

Brandon: 

Already a number one bestseller on Amazon. 

Brandon: 

Well, that’s incredible. 

Brandon: 

Several categories. 

Brandon: 

Uh, a lot of very gratifying feedback I’ve gotten on it. 

Brandon: 

So what? 

Brandon: 

What was the If you if you’re willing to talk about it because I read about this and I scoured, like I told you to get a hold of you because I was so excited to hear this story. 

Brandon: 

I’m so grateful for you coming on and sharing it because you have. 

Brandon: 

You know, first you’re in that seat driving the whole way. 

Brandon: 

Really seen seeing what happened. 

Brandon: 

How did you have you? 

Brandon: 

How did you Is the book just organically getting number one, or did you actually, uh, in your operational planning that I know you have plan Plan this out to to make sure that you could achieve that. 

Brandon: 

Well, I’ve got the assistance of a great company that called described Media, who happens to be bought based on here in Austin and they, you know, even even though I think I’ve got a great story to tell, I’m not a writer, so I’m not going to go get a deal with a traditional publisher. 

Brandon: 

So and there’s there’s thousands of us like that, you know, we’ve got a great story to tell. 

Brandon: 

We want to tell it, but we don’t understand the publishing business. 

Brandon: 

So that’s where Scribe Media stepped in and helped me figure out how to do it, how to get it published and how to market it. 

Brandon: 

I don’t have a big marketing budget to do this, but there’s been a we’ve done a wee under. 

Brandon: 

They understand how to get your book noticed and, you know, with the blockbuster name. 

Brandon: 

Obviously we’ve got a lot of built in audience is out there that all the franchisees, a lot of corporate ex employees, uh, Hollywood studios distributors. 

Brandon: 

I mean, there’s all kinds of people built in out there that ought to have an interest in it. 

Brandon: 

So we targeted them and not all of them, obviously, but a lot of them, and hopefully it will kind of grow organically from here if people like the story. 

Alan: 

And so far the feedback I’ve gotten has been almost you all positive. 

Brandon: 

Oh, I couldn’t I couldn’t imagine there’ll. 

Alan: 

There’ll always be somebody out there. 

Alan: 

Um but I gotta tell you, as I’m listening to you, Alan. 

Brandon: 

I’m thinking in myself for the guy who says he wasn’t an entrepreneur and, uh, or born an entrepreneur or whatever that is and wasn’t a book writer. 

Brandon: 

You sure did run a successful business. 

Brandon: 

And now you’ve got a number one selling book. 

Brandon: 

So whatever you’re doing, Alan, I want a little piece of that magic. 

Brandon: 

So I’m gonna read that book, uh, front to cover our front to the back to, uh, to get a piece of that. 

Alan: 

Um, I think you already gave some good advice. 

Brandon: 

Would you have any advice for? 

Brandon: 

You know, there’s been pieces as we’ve talked today, but if you were to say, three piece of as a pieces of advice for an entrepreneur out there, what? 

Brandon: 

What would you give them? 

Brandon: 

Well, I think the first one is Is you play off. 

Brandon: 

What? 

Brandon: 

We’ve been talking about a lot. 

Brandon: 

The, uh uh, early success does not ensure sustained success. 

Brandon: 

Uh, there’s and what I learned, uh, through this whole process is there’s a lot of people. 

Brandon: 

And when I say I’m not on entrepreneur, I’m not the kind of person that’s gonna go mortgage my house to start a business because I think I’ve got the secret sauce. 

Brandon: 

You know, I’m not gonna I’m not I’m not the kind of person that does that, but a lot of people are, And I’m not sure that those are the kind of people that can transition a business into a great operating business. 

Brandon: 

Wayne Hazing was one of the great entrepreneurs of all time, but he had very, very little interest in the inner workings of a blockbuster store. 

Brandon: 

So for anybody that’s that’s studying the story of Blockbuster, that’s the first lesson. 

Brandon: 

I mean, as great as Wayne Hi Zinger was, he didn’t have a clue what was going on a blockbuster store other than it made a lot of money. 

Alan: 

He really didn’t. 

Brandon: 

And he put people around him that didn’t understand it very well, either. 

Alan: 

He tried to to offset that, that lack of knowledge with bringing in retail people, but he didn’t give them the real authority to establish the culture in the company. 

Alan: 

I don’t think, and I think the evidence proves it. 

Alan: 

There’s a lot of examples of founders that were great operators, but if you’re not, if you’re a founder and you’re not a great operator, find one. 

Brandon: 

Because if you don’t, bad things are gonna happen. 

Brandon: 

I think that the next thing is and I’ve always thought this from going back to my grocery days no more about your competition than they don’t know more. 

Brandon: 

I know about you. 

Brandon: 

Uh huh. 

Brandon: 

And by doing that, you’ll know your business better than anybody. 

Brandon: 

Uh, if you allow a competitor ever to know more about you than you know about them, then you’re in trouble. 

Brandon: 

I just I think that’s a very simple rule to follow. 

Brandon: 

And last measure what matters and then and and and kind of an inside definition of that is you gotta know what matters. 

Brandon: 

Figure out what matters and then measure it relentlessly and make sure that you never deviate that from that. 

Brandon: 

Uh, and we did that in our company, and it was difficult at times because blockbusters management information systems were so elementary that we had to come up with ways to get information that they didn’t have readily available to us. 

Brandon: 

Uh, so, you know, most businesses there’s not that many things that are really, really important, but whatever they are, I mean, zero in on and and and and And make sure everybody organization understands what they are. 

Brandon: 

I think those are some great pieces of ice. 

Brandon: 

Where is the best place for someone listening to buy your book? 

Brandon: 

Well, Amazon is the obvious, but it’s there in Kindle and paperback and hardcover, and it can be bought any place that online books are sold. 

Brandon: 

I don’t know that any stores have picked it up yet. 

Brandon: 

Hopefully they do. 

Alan: 

But, uh, that’s where it’s available right now. 

Alan: 

Ah, and ah, built to fail. 

Alan: 

Yeah. 

Brandon: 

Built to fill the inside story of the blockbusters. 

Brandon: 

Inevitable bust. 

Brandon: 

Clever title. 

Brandon: 

I like it. 

Brandon: 

I actually love it. 

Brandon: 

Well, Alan, thank you for being generous with your time. 

Brandon: 

Uh, this evening And best of luck, I’d love to have another conversation with you about some other things in business After you’ve done your book tour and sold a few 100,000 books and, uh, you have some time. 

Brandon: 

What? 

Alan: 

What is next for you, by the way? 

Alan: 

I’m just trying to figure out what happened. 

Brandon: 

I’m just kind of listening to the feedback to the book and we’ll go from here. 

Brandon: 

I don’t know what’s gonna come of it. 

Brandon: 

Uh, it’s it’s been I’ve been so consumed with it for so long that I don’t know. 

Brandon: 

I’m just, uh I hope, uh, you know, we’ll see. 

Brandon: 

I hope that I hope that it that the story is still relevant enough that that people wanted to know more about it. 

Brandon: 

And, uh, you know, I’d love to to to speak to groups about it. 

Alan: 

I think there’s a lot of lessons to learn. 

Brandon: 

The cool thing is that most people remember Blockbuster unless they’re too young, you know, and it’s so they understand it from the customer’s point of view. 

Alan: 

So maybe they can relate to the business side of it and why it fell before its time because it really did. 

Brandon: 

There should Blockbuster should still be alive today in some form or fashion. 

Brandon: 

Certainly not as a store based business, but they should have been the ones that transition to the Internet. 

Brandon: 

Not Netflix. 

Brandon: 

Right. 

Brandon: 

Well, thank you so much. 

Brandon: 

Enjoy the rest of your evening. 

Brandon: 

Allen built to fail. 

Brandon: 

Find it on Amazon. 

Brandon: 

Thanks again. 

Brandon: 

Great to talk to you. 

Brandon: 

Likewise. 

Brandon: 

Take care of yourself. 

Brandon: 

Thanks for being generous with your time and joining us for this episode of build a business success secrets. 

Brandon: 

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Brandon: 

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Brandon: 

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Brandon: 

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