THE LAST VIDEO CHAIN
Five years after Blockbuster failed, Keith Hoogland still has 750 Family Video outlets. His scrappy model has made him a $400 million fortune.
In Granite City, Illinois, a sleepy town of 29,000 where the laws of time seem not to apply, a just-opened Family Video storefront beckons customers with signs promoting the latest Hollywood blockbusters. Inside, long rows of DVDS line aisles festooned with placards offering two movie rentals for a dollar, and at the register a smiling cashier greets regulars by name.
Yes, the year is 2017—and the Granite City store is defying odds, humming along in an industry most people assume has ceased to exist. In fact, the business is “doing gangbusters,” says its owner,
Keith Hoogland, who has grown Family Video into a sprawling chain of 759 locations spread across 19 states and Canada, with a concentration in the Midwest and rural America and with more grand openings on the way. “I’m 57 years old,” says Hoogland, “and this is the most exciting time I’ve ever had in my life.”
Operating from an unassuming two-story office building in Glenview, Illinois, 20 minutes northwest of Chicago, Family Video rents DVDS to loyal customers enamored with its traditional, small-town feel. Last year the company pulled in an estimated $400 million in revenue, more than 10% of which fell to the bottom line. Started by his father in 1978, the chain has grown dramatically under Hoogland’s watch, and he holds roughly a 70% stake, with the rest split among family members. Revenue has flattened and even fallen slightly in recent years, but the decades of growth have afforded Hoogland a remarkable lifestyle: two corporate planes, multiple luxury properties and an estimated net worth north of $400 million. Sitting at his office desk, he proudly displays photos of a vast, ten-bedroom compound he recently com- missioned in Turks and Caicos, alongside what he calls the “No. 1 beach in the world.”
Brimming with energy, Hoogland tries to explain how all of this is possible. After all, it’s been more than five years since the big video chains, Blockbuster and Movie Gallery, filed for bankruptcy, unable to compete in the digital age. At its peak Blockbuster operated more than 9,000 outlets, bringing in $6 billion in annual revenue. Today, just a few dozen of its stores remain.
Hoogland insists that Family Video had no trouble competing with bigger players, and he sees few parallels between those companies and his own. “Everybody thought the reason they went away was because of digital,” he says. “But in reality that wasn’t the case. They weren’t very well-run businesses. They had a lot of debt, leases that were poorly negotiated, and they also were sharing revenue with studios quite a bit. They made a lot of poor decisions.”
Family Video has taken a different approach. Instead of accepting discounted movies in exchange for agreements to split revenue, as Blockbuster did, it has opted to buy films outright and keep 100% of rental proceeds, which has paid off in the long run. Hoogland has also kept his stores entirely companyowned, and he keeps costs down by making many of the items needed for new locations in-house— everything from shelving to point-of-sale software. Most important, though, the company owns just about all the real estate underpinning its stores. As a result, Hoogland has been able to adapt now that sales are beginning to fall. He has shrunk the square footage of many of the video stores, put up drywall and leased out space to other companies, like Subway and H&R Block.
He has also experimented with ventures of his own, using his properties to launch 11 fitness centers, an electronics-repair chain called Digital Doc and 149 Marco’s Pizza franchises (making him the brand’s single largest franchisee). The businesses are managed under the umbrella of Highland Ventures— “Hoogland” means “Highland” in Dutch. Family Video still accounts for nearly 90% of the parent company’s $450 million in annual revenue, and Forbes estimates the chain’s real estate is worth as much as $750 million.
The origins of Family Video can be traced to 1946, when Keith’s grandfather Clarence, a salesman, started a distribution business, Midstates Appliance & Supply Co., in Springfield, Illinois. Seven years later, Keith’s father, Charlie, took over. In the 1970s the company started getting squeezed: Its core customers, mom-and-pop appliance shops, were going out of business, and its main suppliers were forgoing distributors in favor of direct sales. In 1978, left with just a few pieces of real estate and an oversupply of videocassette tapes, Charlie launched the Video Movie Club of Springfield, a precursor to Family Video and one of the first movie-rental stores in the U.S.
Even then Charlie was not convinced the business would last. While the cassettes he rented out were high tech for the time, he feared newer innovations would soon undermine his sales. To