BusinessTN

Denver entrepreneur and self-made billionaire Philip Anschutz has made his share of wild bets in life, but few were as bold as the one on Knoxville-based Regal Cinemas. Two years after he bought the world’s largest cinema chain upon its emergence from Chapter 11 bankruptcy in 2000, and the same year it went public on the New York Stock Exchange, Anschutz moved to technologically transform the outdated movie theater industry. Anschutz signed a deal with Christie Projectors to buy 5,000 digital projectors for Regal at $25,000 apiece, with the possibility of buying more expensive projectors should the experiment prove successful. That was at a time when projector makers and studios had just began bickering over digital standards, and the prospect of beaming movies via satellite seemed remote to most cinema-goers.

Anschutz’ taste for extravagant deals dates back to young adulthood when he sold to a Hollywood studio the rights to film a fire that erupted accidentally at one of his father’s Kansas oil wells. (A fledgling entrepreneur at the time, Anschutz used the proceeds to finance repairs at the well and buy more real estate.) This time around, as Christie, a Cypress, Calif.-based maker of digital projectors, was shipping its first containers to Regal theaters across the country, Hollywood studios watched Anschutz.

Regal did not disappoint those in the entertainment industry intrigued by his bet. When Prince’s Musicology concert opened to a packed crowd at Staples Center in Los Angeles in March, viewers in 85 Regal theaters watched the event live in 43 U.S. markets. The concert was shot in Dolby Digital audio, transmitted via satellite and appeared before remote viewers on Christie RoadRunner L6 devices. Regal collected hefty proceeds from roughly 25,000 people in attendance at its theaters—a crowd that surpassed the Staples Center audience in size.

Much like the Prince concert, every movie would arrive at a Regal theater via satellite from Qwest Communications International in Denver, which was founded by Anschutz and where he is a board member. This way, Regal avoids the costs of duplicating movies and shipping bulky reels to its theaters across America, which as of July 1 spanned 6,053 screens in 544 theaters in 39 states.

The convenience of having the technology ready for producing and delivering digital video gives Regal a shot at increasing its marginal revenues, such as on-screen ads and theater rentals for business meetings and concerts. It’s too early to know exactly how financially helpful the switch to digital projectors will be for Regal Entertainment once they’re used to deliver feature films. In the first nine months of 2004, Regal’s cash flow from operations slipped 22% to a still respectable $209 million, on the same $1.8 billion of revenue as in the year-ago period.

Regal CEO Mike Campbell remains confident in the new technology. “We invested $70 million to wire our screens across the country and were the first to beam everything except feature films via satellite. So far this year, we have had a 30% cash-on-cash return on advertising, which in itself has exceeded our expectations.”

Nonetheless, Regal Cinemas, along with sister companies United Artists and Edwards Theaters under the Regal Entertainment umbrella, have set the new trend for the movie industry. Now Sony, which owns its own Hollywood studio, is planning to make its own digital projector by 2005.