By 2010 Blockbuster went bankrupt and today there is only one surviving store in Oregon. Meanwhile, streaming powerhouse Netflix has skyrocketed in value to $268 billion—and the saga is frequently recounted as a cautionary tale on the consequences of failing to modernize.

“I think the more important lesson—a lesson that Blockbuster learned too late—is simply this: If you are unwilling to disrupt yourself, there will always be someone willing to disrupt your business for you.”, Marc Randolph, who cofounded Netflix with Reed Hastings in 1997, said last year.

But now its former CEO wants to set the record straight. In an interview with Management Today, James Keyes claims trial by the media is what ultimately killed the iconic company—not Netflix. 

“When spin gets out there, it can create a run on the bank,” he said.

“There’s some kid on the couch, eating popcorn, saying ‘This is the guy that screwed up Blockbuster’,” he added. “I just think you have no idea what it took at the time to be able to withstand that storm.”

A ‘killer headline’ put the nail in Blockbuster’s coffin

Blockbuster’s finances were in a precarious position when Keyes took its helm in 2007.

Fresh from his success reviving 7-Eleven, where he served as chief from 2000-2005, Keyes wasted no time turning around Blockbuster.

Less than a year into the role, he had controversially reinstated the late fees his predecessor had scrapped and acquired a video streaming company, Movielink, giving Blockbuster access to one of the largest online movie libraries at the time.

“We were very well positioned to succeed over Netflix because we had arguably a superior offer,” Keyes told Management Today.

The company’s cash flow crisis had been averted for the time being and it had an exciting deal with Google in the works.

But it all came crashing when the media got a hold of a damning Moody’s press release. 

After the collapse of Lehman Brothers in 2008, the credit ratings 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.

“The probability to fail just was a killer headline,” Keyes said. “All of a sudden, the press started saying Blockbuster was going to file for bankruptcy. We had no intention of doing so.” 

The New York Post printed a half-page photo of his image with a Pinocchio nose and the headline “Blockbusted” when Keyes denied the company was going bankrupt. 

“We had strategic partners that could have been game changers. I had a very strong board. I had Carl Icahn, who was very supportive early on. I had reason to have confidence at the time,” he added.  

“But when spin gets out there, it can create a run on the bank.” 

In the end, the bankruptcy headlines spooked the movie studios. They reduced Blockbuster’s credit terms from 90 days to cash payment, taking nearly $300 million of float out of the Blockbuster system in just a few weeks, and by 23 September 2010, Blockbuster filed for Chapter 11 bankruptcy protection.

Keyes still haunted by the failure

Looking back, Blockbuster’s fall from grace in the eyes of the public still haunts Keyes. 

“When I google my name today, I’m still plagued with being the guy that failed to keep up with technology,” he said. “That hurts given the fact that my great purpose of being there was to embrace technology and take it to the next level.” 

His lesson from the fallout? It’s not personal. 

“That’s the number one lesson you have to take,” Keyes said while adding that he’s instilled a lesson from Nelson Mandela: “I never lose, I win or learn.”

“You run into obstacles, and it seems they are dire at the time and that you’ll never make it through,” he added. “Then you get to the other side, and you learn from the experience.” 

Now that he’s crossed that hurdle, he would “absolutely do it all over again if I had the chance.”