Phil Anschutz: Media Wildcatter
By the time the idea of making a movie about the life of singer Ray Charles was pitched to Philip F. Anschutz, just about every major Hollywood studio had passed on it. Young people wouldn't know Charles, producer Stuart Benjamin was told. And biographies of African Americans don't sell well, the naysayers added. Even Anschutz' advisers said it would be better as a TV movie. But the 65-year-old financier, a longtime Charles fan, went with his gut and backed the film with $37 million. Ray went on to score two Oscars -- including best actor for Jamie Foxx -- and gross $125 million at the box office.
In an investment career that started with oil back in the 1960s, Anschutz has usually zigged when others zagged. The contrarian strategy has paid off handsomely: Today he's worth an estimated $5 billion. And although he's now investing in high-profile businesses such as movies, sports teams, and daily newspapers, Anschutz is still doing much the same thing -- finding out-of-favor assets and figuring out a way to build them into something. "Nobody is better at winning long-shot gambles," says newspaper magnate William Dean Singleton, a friend of Anschutz.
Anschutz and his 10-person investment staff work on the 24th floor of an office tower his family owns in downtown Denver. What persuades them to pick one counterintuitive deal over another? He won't say. Following a long-standing policy of not talking to the press, Anschutz declined to comment for this article. A devout Christian and a heavy contributor to Republican politicians, he has had some media watchers speculating that he will use his newspaper and entertainment ventures to promote a conservative agenda. But Robert F. Starzel, a longtime Anschutz executive who is now chairman of the San Francisco Examiner, says his investments are strictly about the bottom line: "Phil's strategy is to meet a challenge and make money."
At the same time, Anschutz gives the managers of his various operations enormous leeway. "I speak with him once a week, but it's pretty much like we're running an independent business," says Timothy J. Leiweke, chief executive of Anschutz Entertainment Group Inc., a sports and live-events unit.
Sometimes his hands-off style can lead to problems. Qwest Communications International Inc. (Q ), which he founded in 1988, became tarred with a financial scandal that forced it to lower its reported profits by $2.5 billion for 2000 and 2001. The Securities & Exchange Commission has charged seven former Qwest executives -- including former Chairman and CEO Joseph P. Nacchio, but not Anschutz or other board members -- with orchestrating a massive accounting fraud. All seven maintain their innocence.
Meanwhile, Qwest is involved in a battle to snare MCI Inc. away from Verizon Communications Inc. Anschutz still owns 18% of the stock; it's worth about $1.1 billion, down from $17 billion at its height in 2000. He had previously reaped $1.9 billion, selling 17% of his stake.
Anschutz' gutsiest bet right now is in newspapers. Last year he picked up the money-losing Examiner for $20 million. Once the launching pad for William Randolph Hearst's empire, the 145-year-old Examiner had long been in decline as the city's second major paper. Last fall, Anschutz bought Journal Newspapers Inc., publisher of three struggling dailies in suburban Washington, D.C., for an undisclosed sum. He relaunched them on Feb. 1 under the Examiner masthead. Together the papers, which are distributed for free, form the core of a new company, Denver-based Clarity Media Group. Thinking long-term, Clarity has trademarked the Examiner name in some 60 cities.
Clarity's strategy is to outflank newspaper rivals by targeting the readers advertisers most want to reach -- young, college-educated homeowners in the most affluent zip codes. Thanks to Anschutz' deep pockets, Clarity has doubled the daily print run to about 162,000 copies in San Francisco and 266,000 in Washington. By blanketing a neighborhood with free copies, Clarity can claim it is reaching readers who don't subscribe to Brand X. "We feel like we're hitting some folks we wouldn't be hitting in the [San Francisco] Chronicle," says Jennifer MacCloskey, marketing director for Wells Fargo & Co. (WFC ) in the Bay area.
The big question is whether Anschutz can generate enough ad revenue to cover his publishing and distribution costs. Clarity admits that some residents have asked it to stop the free deliveries, contending that the bare-bones, tabloid-style papers litter their driveways. Clarity officials are tight-lipped about how much money they plan to spend before they expect to turn a profit. But the track record of newspaper startups is poor. "No effort to establish a new daily newspaper in a U.S. city has worked [in decades]," says veteran newspaper analyst John Morton. "It's a very expensive proposition."
Anschutz used a similar buy-and-build strategy in his sports and live-entertainment businesses. In 1995, with a partner, he acquired the Los Angeles Kings hockey team in bankruptcy court for $113 million. He later bought an interest in basketball's Los Angeles Lakers and built them both a $400 million arena, the Staples Center, in downtown Los Angeles. Looking to fill the property on off nights, he bought some local promoters and formed a concert-booking outfit. Today, Anschutz Entertainment Group is the nation's second-largest promoter of live events, after Clear Channel Communications Inc. (CCU ). And Anschutz is also considered the savior of U.S. professional soccer, stepping up to buy as many as six of the league's 12 teams when the circuit ran into financial trouble.
Anschutz is still looking to expand his entertainment business. He hopes to build a concert venue inside the vacant Millennium Dome near London, an effort others have passed on. He's spending $35 million to stage a Tour of California bike race, modeled after the Tour de France, next year. And he's spearheading a $1 billion development next to the Staples Center that will include a 55-story hotel, theaters for movie premieres, and a music museum showcasing the Grammy Awards.
In Hollywood, Anschutz also found a creative way to enter the business. Five years ago he and partner Oaktree Capital Management LLC began buying up the bank loans of three overextended theater chains. After putting them through bankruptcy so they could reduce debt and drop expensive leases, Anschutz merged them to form Regal Entertainment Group, now the nation's largest cinema operator, with 6,500 screens. Last year it earned $334 million on sales of $2.5 billion.
HIT AND MISS
After noticing that G- and PG-rated movies made more money than R movies, Anschutz began bankrolling family-friendly films. While his PG13-rated Ray was a hit, he also has had some major flops, including last year's Around the World in 80 Days, which cost $110 million and grossed just $75 million at the box office.
Long ago, Anschutz discovered that he had a knack for finding value where others didn't. The son of a Kansas wildcatter, he made his first fortune buying up ranch land in the Rockies and drilling for oil. In 1982 he sold his half-interest in Wyoming's Anschutz Ranch East field for $500 million. At the same time he began investing in railroads, an industry long under pressure from trucking. After buying the Denver & Rio Grande and the Southern Pacific, Anschutz sold both to Union Pacific Corp. (UNP ) for $5.4 billion in 1996. In the process, he kept the rights of way, which he used to build Qwest.
Despite his billions and his increasing reach into glamorous industries, Anschutz remains a humble, low-key man. At a party last year celebrating the Examiner purchase, John Burks, head of the journalism department at San Francisco State University, asked Anschutz whether the newspaper might be able to hire some of his students as interns. Anschutz turned the question around, asking Burks instead whether he might be able to take journalism classes. Anschutz hasn't appeared in Burks' classroom yet. Given his long career investing in different industries, it looks as if he prefers on-the-job training.
By Christopher Palmeri in Los Angeles