So how do you struggle or fail in the legal, retail and Wall Street verticals before building a $1 billion-plus digital media business? IMAX CEO Richard Gelfond is shared his journey during a fireside chat Stony Brook University on Long Island. Here's a recap.
The updates so far...
- As of June 30, the company operated 850-plus IMAX theaters.
- Company's market cap on a typical day is $2 billion-plus.
- Gelfond's early experience involved launching a newspaper with 25,000 circulation. He sold ads door to door.
- "At the end of the day it didn't succeed. The better you did the more capital you needed."
- Gelfond attended Stony Brook University in the early 1970s. "I still think it's an entrepreneurial place. You decide what you're interested. You can navigate and become who you want to be."
- He started at Newsday as a sports writer and worked for various media.
- When the blog is done, we'll replace this line with a simple, "the end."
- His key early learning: "You can accumulate capital through hiring other people."
After College: On the Wrong Path
- Gelfond next attended law school and worked for a law firm... but found it unfulfilling.
- "I was the product of lower middle class Jewish parents -- who said the only way to get ahead was to become a doctor or lawyer."
- "I was unhappy waking up, going to work, and even coming home. The path I was on was a bad path for me."
- "The law firm made it easy for me. They told me I wasn't going to be partner. I managed to insult the right people at the right times."
- "Not making partner turned out to be the best thing in my life. Sometimes good news is bad news, and bad news is good news. When you're young sometimes you don't see that."
- A mentor told him: "Make charity a priority in life. No matter how much you give in life, you get more back."
Next Move: Dry Cleaning the McDonalds Way?
- Next he launched a dry cleaning business that was designed to change dry cleaning the way McDonalds changed the food service market.
- He lost roughly $1 million in that business. "You learn so much more from your failures than from your successes."
- But he became an expert in cash collection, which helped him during challenging times at iMax.
Next Move: Wall Street Melt Down
- Yes, he was at Drexel Burnham, led by Michael Milken, when that blew up.
- Much of the problem involved rogue employees in a Los Angeles office.
- Insiders were brainstorming crazy takeovers even while employees were under indictment.
- "The culture was not built on integrity nor long-term partnerships. There were some great people. But the culture was not where you really wanted to be."
- "Sometimes making the right decision isn't the most profitable decision."
- Next up, he launched an investment bank but ultimately moved on amid challenges with three business partners.
The Importance of Networking
- "It goes back to the bigger picture. I philosophically believe what goes around comes around. I always try to make sure anyone I work with feels like they won something. If you want to build your career and attract capital, you must show ways how the other people are going to make money and be successful."
- A relationship with a friend who worked at an aquarium triggered IMAX to open locations at -- surprise -- aquariums.
- "Relationships are the lifeblood of credibility."
- More to come.
- Next up, he focused on a car emissions testing company.
The IMAX Move
- Gelfond got involved in a leveraged buyout of IMAX in 1993-1994.
- He watched an IMAX movie in Washington, D.C., and in the days ahead he heard IMAX was up for sale. Gelfond figured it was too much of a coincidence to pass up.
- "What we saw, was all the revenues they were reporting was cash they hadn't gotten yet. We figured out how to buy the company with its own cash."
- "The people who helped me put the deal together were friends from Drexel Burnham.
Before and After: The Vision Move
- At the time of purchase, IMAX was a 65-theater business that played mostly movies about travel or science. "They were terrific movies but it was a chicken and egg thing. There weren't a lot of movies so you couldn't make a lot of theaters, and vice versa."
- The idea was to grow the network to attract move moves... to grow the network more.
- "If I had any knowledge of the movie industry at that time I wouldn't have made the bet. It it almost couldn't be won."
- George Lucas and Steven Spielberg both declined invites to make movies in IMAX because there weren't enough theaters.
- At the time, building an IMAX theater cost about $5 million and the projectors cost about $2 million.
- During the first seven years, the stoke rose because of cross-over movies. "We developed a lower-cost projector that was way-smaller and fit in existing theaters."
- But crossover films struggled because they weren't scientifically accurate for the scientific community nor fun enough for main street USA.
- The industry began to implode in the early 2000s. And as theaters imploded, IMAX struggled. The company had more than $250 million in debt and only $10 million in cash flow. He kept focusing on one saying: "It's never as good as it looks or as bad as it seems."
- Instead of trying to hit a home run, IMAX dealt with the problem in small ways -- stringing together singles to really chip away at the problem.
- "We were geniuses before this happened and idiots when it happened."
- "The stock was in the garbage so it was a good time to really focus on a long-term model, engineer down the cost of a theater and go digital. Today, an IMAX disk is a hard drive -- it's $150 for that disk."
- "We used to sell the equipment. Instead, when we drove down costs we gave them [theaters and studios] the equipment and kept 20 percent of the box office. When Interstellar plays now on any IMAX theater, we're getting roughly 33 cents on the dollar -- 20 cents from the theaters and 13 cents from the studio. That was the breakthrough model for us."
- "Putting the right model in place, which took us 10 or 12 years to do, was the key to success."
- As a leader, "be the first one to share bad news. Don't let people hear the bad news from somebody else. Anybody else [on the team] can be the first to share the good news."
- IMAX, working with the film producers of Polar Express, re-ignited the 3D market.
- An early look at James Cameron's Avatar movie production convinced Gelfond to bet the house on running that movie across the IMAX theater network. "Clearly, it's great to be lucky some times."
- "I recognized China as an opportunity in the late 1990s. China was my thing. We had politically neutral content and had our chance to get into that market before rivals."
- Always put aside 20 percent of your work time to do the things you love. "China," he reiterates, "was my thing."
- "Consistency of message -- from the top down -- is critical for any company. You need to know what to say, when to say it and how to control the message from your team."
- "My style of managing is I walk the halls and I'm on the phone with the team."
- IMAX acknowledges that more and more movie and entertainment will occur over the web directly to the home.
- In response, IMAX has built an IMAX at Home business, which includes direct-to-home movies and $300,000 home theaters.
- The IMAX team has a New York City skunkworks team focused on the next transition of the business...
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