The Billionaire Newsboy
Making sense of Philip Anschutz's Examiners.
Multibillionaire Philip Anschutz hasn't given an interview in more than 30 years, so we can't ask him why he entered competitive newspaper markets in San Francisco and Washington with his free, home-delivered tabloid Examiners. Nor can we ask if he intends to take the enterprise to any of the nearly 70 cities where he's filed trademark applications for the Examiner name.
Conventional wisdom holds that the newspaper industry is a mature business, and that once a daily establishes its dominance in a market, only fools and ideologues ever go head-to-head with them—either by starting a paper or, as Anschutz has in San Francisco and Washington, pumping up existing, faltering franchises.
Nobody thinks Anschutz is a fool. An oil wildcatter raised by an oil wildcatter, he moved into the railroad business in the early 1980s and made billions by laying fiber-optic cable along his Southern Pacific Railroad track and purchasing Qwest Communications. According to one biography, his original $55 million investment in Qwest turned into a $4.9 billion profit when the company went public in 1997.
On the other hand, everybody recognizes that Anschutz is a conservative Republican ideologue and a devout Christian. In a February 2004 speech, he stated that he entered the movie business because he wanted to stop "cursing the darkness" (Hollywood's violent and vulgar R-rated films) and start making family fare. He owns the largest theater chain in the country, Regal, and has invested in more than a dozen pictures, including Holes, a remake of Around the World in 80 Days (a huge bomb), the biopic Ray, Because of Winn-Dixie, and the forthcoming Sahara and A Sound of Thunder. His biggest bet is a series of movies based on C.S. Lewis' Narnia books, with the first scheduled to reach screens Christmas 2005.
In his speech, Anschutz added this "aw shucks" justification for investing in movies. If he could be persuaded to take the call, he'd probably say the same thing about his newspaper ventures:
My friends think I'm a candidate for a lobotomy, and my competitors think I'm naive or stupid or both. But you know what? I don't care. If we can make some movies that have a positive effect on people's lives and on our culture, that's enough for me.
Nobody dumps hundreds of millions of dollars into the movie and exhibition business—or newspapers—to uplift the masses. There's got to be an angle.
In the case of the movie business, let's say Anschutz's first Narnia project proves moderately successful, and he films all seven books. If he's negotiated the right deal with his distributor, the gross payout could be in the hundreds of millions, not counting the extra cut from screening them at Regal Cinemas. By virtue of its standing as a literary classic, the Narnia cycle comes almost as pre-sold as the Lord of the Rings movies, so the franchise could earn Anschutz billions from the movies and from the long tail of DVDs, soundtracks, toys, screenings on cable and the networks, games, ring-tones, and other tie-ins over the next two decades.
Anschutz excels in finding value in underappreciated assets, be they railroads or movies. A business model sketched by Philip Meyer in his just-published book The Vanishing Newspaper, suggests a strategy that might be behind Anschutz's Examiner s.
Meyer describes newspapers as vulnerable to competition in these days of declining readership and media upheaval. A successful attack on a fading newspaper, he writes, depends on the understanding that only 20 percent of a newspaper's value is physical assets, such as printing plants, trucks, computers, and offices. The remaining 80 percent is the goodwill—the faith that readers and advertisers place in the final product.