Movieland's Mystery Man

The cost of movie tickets just soared to a wallet-busting $10 in Manhattan, a large popcorn and soda will set you back as much as two Happy Meals, and for all that you get Kevin Costner's psychotic Elvis impersonator in "3,000 Miles to Graceland." Does anyone think going to the movies is a good deal?

Philip Anschutz certainly does, and in about as much time as it takes to sit through the coming attractions, the secretive billionaire investor has grabbed control of three of the nation's biggest theater chains, representing one out of five movie screens in the country. His cinematic shopping spree comes at a pivotal moment for movie theaters, which have been bleeding red ink and are hunting for new ways to boost flat ticket sales. Anschutz, 61, the nation's sixth richest person, already has extensive holdings in sports teams, arenas and a rock-concert company. If he combines them with his newly acquired theaters, as people familiar with his company and his investments say he may do, he could single-handedly usher Hollywood's much-ballyhooed digital revolution into the neighborhood multiplex. And when that happens, theatergoing will never be the same.

Imagine settling into those stadium seats to watch not only the latest Hollywood blockbuster, but also the World Series, a Broadway musical or Eminem's next concert--all live. With digital technology, movie houses could be linked together in an electronic network, receiving "content" from almost anywhere, be it Yankee Stadium, Carnegie Hall or the Rose Bowl.

For the past few years, moviemakers have been toying with the technology to make that happen. George Lucas is making his new "Star Wars" movie with digital cameras. In Las Vegas this week the National Association of Theatre Owners will put an array of high-tech digital projectors through rigorous tests. And on Saturday, Texas Instruments, maker of one of the top digital projectors, will test the appetite for Broadway in the 'burbs by showing a digital recording of "Jekyll & Hyde: The Musical" in seven cities. None of this is cheap. Converting to digital projectors can run up to $150,000 a theater, and so far only a handful have done so, showing digitized versions of such movies as "Toy Story 2" and "Bounce."

Distributors and exhibitors are betting that Anschutz will be the one to finally bring digital entertainment to a mass audience. Just as he purchased undervalued Southern Pacific Railroad and later used its rights of way to lay fiber-optic lines for his Qwest Communications, Anschutz is buying up what could well become the electronic train tracks for a digital-entertainment circuit. On Friday, Anschutz, who declined to be interviewed, ushered United Artists Theater Co. and its 1,604 screens out of bankruptcy reorganization. He intends to bail out the similarly troubled 708-screen Edwards Theatres Circuit Inc. and has also accumulated a majority chunk of cents-on-the-dollar debt in struggling Regal Cinemas, the nation's largest chain, with 4,361 screens.

Thanks to bankruptcy rules, Anschutz's theaters can walk away from bad leases and plug leaking balance sheets. Before Anschutz arrived last year, UA was buried under more than $700 million in debt. Today it owes just $250 million. Even though theater chains overbuilt expensive megaplexes to the brink of financial ruin, motion-picture exhibition and concession sales remain a steady, $10 billion-a-year cash business. "This is a sick business that is actually quite healthy," says Tom Sherak, a longtime Twentieth Century Fox senior executive who is among the founders of the new Revolution Studios. "What Anschutz is doing is brilliant."

But for that investment to flourish, Anschutz's new properties will need to show something other than "The Mexican." A fundamental flaw of the exhibition business is that movie houses still make 75 percent of their money during just 25 percent of the week. The challenge is to find some activity that will lure audiences when the weekend is over. "Right now the exhibitors are stuck," says analyst Andrew Lipman of investment bank ING Barings. "They can only show movies, and the distributors of movies know it. The balance of power changes when the exhibitor can show other forms of entertainment."

Anschutz's financial advisers tell NEWSWEEK that he is buying theaters merely as an investment. Yet Anschutz's theatrical holdings are already taking some fledgling digital steps. UA pocketed $5 million in revenues last year by using theaters for satellite business-to-business meetings, and Regal chairman Michael Campbell has plans to begin showing concerts in some of his digital theaters later this year. "The people acquiring screens are looking at possibilities beyond film," says Edwards president Stephen Coffey, hinting at what his newfound patron may have up his sleeve. "There will always be film," he says, "but there will be lots of potential uses for the theaters."

That includes Anschutz's own movies. A year ago the politically conservative Anschutz cofounded Crusader Entertainment, a Hollywood production company committed to making "compelling, positive" movies without "gratuitous sex and profanity." "We would not have made 'Hannibal,' and we would not have made 'Scary Movie'," says Crusader president Howard Baldwin. "But we would have been happy to make 'Remember the Titans'."

Will Anschutz himself become a show-business titan worth remembering? Hollywood newcomers and their money are often soon parted. But in the short term, his investments look very smart, and he is buying at a steep discount. He spent about $65 million for UA, $200 million for Edwards and $450 million for Regal. After combining them, Anschutz will be able to enjoy cost savings all the way down to the Red Vines. But it is the prospect of a national digital-theater chain that's generating the most buzz. "At one time, hanging an air-conditioner sign outside the theater was a big plus," says Edwards's Coffey. "This is the next big plus."