Denver: One
night here in the late 1960s, around the time that Philip F. Anschutz began
laying the foundations of a multibillion-dollar fortune, a drilling supervisor
at one of his Wyoming oil rigs phoned him with bad news: The well was on fire.
And if the fire kept burning, it would bankrupt him.
But there was
a bright side, Mr. Anschutz reasoned. The fire meant that he had finally struck
oil.
He rented a
plane, flew to Wyoming, and by 8 the next morning gambled more money on his
oil venture by buying up land around the burning well, according to an account
that Mr. Anschutz provided to the State Historical Society of Colorado in
1974. He then hired Red Adair, a legendary oil-field firefighter, to put out
the blaze, and, he said, invited a Hollywood studio to shoot the episode for
the John Wayne thriller “Hellfighters.”
“There’s
always a point that if you go forward you win, sometimes you win it all, and
if you go back you lose everything,” Mr. Anschutz told the historian,
recalling the fires. “That was that point for me.”
Today, Mr. Anschutz
is one of the wealthiest — and most secretive — tycoons in the country,
parlaying early oil coups into real estate paydays, savvy runs at the railroad
business, and the creation of Qwest Communications International, a telephony
company that became mired in an accounting scandal. ....
While the Qwest
debacle bruised Mr. Anschutz’s reputation, his deal-making has not slowed
down. In his latest act, he is now the biggest backer of professional soccer
in the United States, having recruited the British star David Beckham with
a five-year, $27.5 million package to play for the Los Angeles Galaxy, the
highest-profile of Mr. Anschutz’s three soccer teams.
He has also
started free newspapers to challenge local media incumbents like The Washington
Post, and he controls America’s largest theater chain ...
Mr. Anschutz’s
senior managers say he is confident that he can convert one of the world’s
last big non-soccer-crazy nations to the sport, while also influencing the
type of films that Hollywood produces. ...
“Twenty
years ago, you would have won an enormous amount of money with people who
would have bet you that he would not touch the entertainment industry,”
says Tim Leiweke, one of Mr. Anschutz’s chief lieutenants, who runs AEG,
Mr. Anschutz’s entertainment and sports enterprise, based in Los Angeles.
“But it does follow a pattern. He has an unbelievable gut instinct for
what is about to come (good).” ...
Like his older
sister, Sue Anschutz-Rogers, Mr. Anschutz was raised in Kansas, enveloped
by their father’s passion for real estate and oil.
“My father
had a real knack for buying ranch land which also became a successful oil
field,” Ms. Anschutz-Rogers recalled in an interview with a Denver historian.
“As a girl, I would go out with him to check on oil wells and sit there
on the wellhead with him, waiting hopefully for it to come in.” ...
He currently
owns three ranches, and his affinity for land has lasted throughout his life.
“I have always had faith in real estate,” he said in the Colorado
historical society interview, one of the few forums in which he has offered
on-the-record recollections about his life and career.
In 1980, Amoco
discovered major oil and gas reserves in Wyoming, abutting the Anschutz Ranch
East — a discovery that meant Mr. Anschutz was sitting on one of the
biggest oil finds in decades. In 1982, as the oil market was booming, he sold
half of his holdings to Mobil Oil for $500 million. “Anschutz was ahead
of the curve because he got out before oil prices hit 10 bucks a barrel,”
said Ron Rizzuto, a business professor at the University of Denver, of the
subsequent price drop that crushed the oil market. “It was brilliant
timing.”
Two years later,
already having diversified into mining and Denver real estate, Mr. Anschutz
latched onto railroads — deeply unfashionable relics from the 19th century.
He bought a small local railroad before acquiring for $1.5 billion the vast
Southern Pacific railroad, which had been slammed by years of underinvestment
and competitive pressure from trucking.
“We got
it on Oct. 13, 1988, and by January we realized we had a terrible hole,”
said Robert F. Starzel, a lawyer who worked for the Anschutz Company for three
decades. “We had negative cash flow of $450,000 a day.”
Mr. Anschutz
moved to San Francisco, Southern Pacific’s home, for five days a week,
taking a room in the Hyatt, and forced Southern Pacific to modernize its systems
and controls. He also extended the line’s geographical reach to Chicago,
while selling off $2 billion in other unwanted routes and real estate. He
took Southern Pacific public in 1993 and then merged it with Union Pacific
three years later in a $5.4 billion deal. He still owns slightly less than
one percent of Union Pacific, a stake worth around $273 million, and until
last year had a seat on the board.
Mr. Starzel,
who is one of Mr. Anschutz’s closest friends, says that the mogul enjoys
taking aggressive, all-or-nothing risks. “His father was a real deal
maker — he took Phil around as a young child to show him how deals were
made,” Mr. Starzel says. “One of Phil’s requirements in life
and business is to have a number of things going at the same time because
he recognizes that any one or two might fail.”
Southern Pacific
owned a small unit that laid fiber-optic cable beside railroad tracks for
other companies, a business that Mr. Anschutz decided to expand. After banks
refused to back the expansion, he created a separate company, SP Telecom,
that included the fiber-optics business and the railroad’s rights of
way that allowed him to lay cable along Southern Pacific’s route. That
company eventually became Qwest, a darling of the late ’90s Internet
boom; Mr. Anschutz took it public in 1997 in a $297 million offering.
“He didn’t
claim to know telecoms, but it was an asset, the rights of way, that he thought
that he could make a little bit of money on,” says Dan Reingold, a former
telecommunications analyst.
A little bit
of money, indeed: by 2000, Mr. Anschutz’s fortune, enhanced by Qwest
stock, had grown to more than $15 billion.
Mr. Anschutz
took Qwest public a year after the entire telecommunications business was
deregulated, causing the industry’s overall fortunes to soar. To move
things along, he hired Mr. Nacchio, a top AT&T salesman, to steer Qwest’s
growth. Together in 2000, Mr. Nacchio and Mr. Anschutz won a $43.5 billion
all-stock bid for U S West, the Denver-based telephone company whose cash-rich
coffers provided the money to pay for the expansion of Qwest’s network.
Qwest also took on piles of new debt.
AND that’s
when the bubble began to burst. Use of the Internet did not expand as quickly
as they had anticipated, and new compression technology meant that voice and
data traffic could be carried by using a small fraction of the capacity of
the cables that Qwest had laid down, so much of that expensive new network
went unused.
As the entire
telecommunications sector came under siege amid missed revenue goals and overly
rosy financial projections, Qwest’s share price crashed from a peak of
$66 in March 2000 to just over $1 by August 2002. In October 2003, Qwest revised
downward by $2.48 billion its revenue for 2000 and 2001. The next year, it
paid $250 million to settle Securities and Exchange Commission fraud charges
without denying or admitting guilt. (Mr. Anschutz recruited a new chief executive
to replace Mr. Nacchio; Qwest stabilized and was profitable for the first
time in 2006. Its shares currently trade at $8.88.)
The Qwest sell-off
lopped billions of dollars from Mr. Anschutz’s fortune and, analysts
say, may have harmed his reputation. ...
When Qwest’s
fortunes first began slipping, Mr. Anschutz had already embarked on another
venture — in movie theaters. In 2000 and 2001, he bought three bankrupt
theater chains — United Artists Theaters, Regal Cinemas and Edwards Theaters
— with a partner, Oaktree Capital Management. Like the railroads, the
theater business was in disarray because chains had overspent by building
new sites with stadium-style seating.
Mr. Anschutz
bought the companies’ debt, converted it to stock and used bankruptcy
procedures to break the theaters’ property leases and shutter underused
theaters. He rolled the three chains into a single entity, the Regal Entertainment
Group, which now has 6,386, or 18 percent, of screens in the United States.
It went public in 2002, in a $342 million public offering; the theaters have
returned to profit although their earnings have not been stellar and the stock
has traded erratically.
Mr. Anschutz’s
team continues to work on a turnaround. They have found ways to fill theaters
with alternative events when films are not showing, like networked business
meetings and broadcasts of live shows. The Metropolitan Opera in New York
is showing live operas on its screens, and Regal theaters are also offered
as places for worship to faith-based organizations. (Religion is a pillar
of Mr. Anschutz’s life, friends say; a Presbyterian, he attends church
services regularly with his family.)
Regal’s
biggest innovation has been the introduction of national advertising before
the feature presentation. “Theaters were already selling advertising,
but because they were not national, they were attracting local car dealers,”
says Marla S. Backer, an analyst at Soleil — Research Associates. “But
now all of those cinemas together can bring in national advertisers.”
All of this,
associates say, reflects Mr. Anschutz’s modus operandi. “What
he tends to do is buy at the right price, and makes sure there is something
else you can do with the asset you are buying,” says Kurt C. Hall,
who runs Regal’s advertising arm, a joint venture with two other companies;
it was spun off this year. ....
That year, Mr.
Anschutz and a partner bought the bankrupt Los Angeles Kings hockey team for
$113 million; in 1998, they bought a stake in the Los Angeles Lakers basketball
team. That same year they also broke ground on a new Los Angeles sports arena,
the Staples Center. Today, the Staples Center is anchored by Kings and Lakers
games, and AEG makes money from, among other things, ticket sales, merchandising
and sponsorship. It fills out the days when the teams aren’t playing
with concerts and shows.
AEG is now developing
a $2.5 billion, four-million-square-foot entertainment district around the
Staples Center called L.A. Live, which will include hotels, restaurants and
Regal theater screens. AEG is deploying the same model as it builds entertainment
complexes overseas, in central Berlin and in east London at the Millennium
Dome. Mr. Leiweke says AEG also has plans for “something” soon in
Asia, although he won’t be more specific.
THE sports and
entertainment platforms that Mr. Anschutz has developed are also a launching
pad for what analysts say is his biggest gamble yet: the rollout of soccer
as a major American sport, starring one of the game’s thoroughbreds,
David Beckham.
Mr. Anschutz
initially became interested in soccer, associates say, because he sees it
as family-friendly, something that parents and children can play and watch
together — a view that offers one of the more public instances in which
Mr. Anschutz’s business and personal interests overlap. ...
IF Mr. Anschutz
sees an underappreciated asset in soccer, he sees the same in another out-of-favor
business: newspapers. He had long had an interest in newspapers, according
to Mr. Starzel, whose own father worked for The Associated Press, and they
had many conversations about the industry.
In February
2004, Mr. Anschutz bought The San Francisco Examiner. Like many other newspapers,
The Examiner had falling readership and advertising. But Mr. Anschutz saw
an opportunity to create a low-cost newspaper model that better served local
readers and advertisers, which he thought traditional papers were ignoring.
“We decided
there continues to be a big appetite for news and information, especially
local news and local information, and news that has some use to it,”
said Ryan McKibben, a former Denver Post publisher who now heads the Anschutz
Company’s media division, which includes its newspapers and related Web
sites.
Later in 2004,
Mr. Anschutz bought Journal Newspapers Inc., publisher of three suburban dailies
in the Washington area, and renamed them The Washington Examiner. Last year
he opened another paper, The Baltimore Examiner. His publications are free
and are mostly delivered to homes. Home delivery is the best way, Mr. McKibben
says, to reach readers that advertisers most desire: 25- to 54-year-olds with
household incomes of more than $75,000. All the Examiner papers use census
data to target those readers, and Mr. McKibben said the papers’ low overhead
(staff sizes are small) means that they can charge advertising rates that
are 40 percent to 50 percent lower than those of incumbent newspapers.
Mr. Anschutz
has trademarked The Examiner name in 63 other cities in the United States
and already has Web sites covering 20 of them. Mr. McKibben says the Examiner
papers are not trying to steal readers from city dailies like The Washington
Post, but are seeking new customers who have not previously read newspapers.
Mr. Anschutz’s
papers are still small. The San Francisco Examiner, for example, has a circulation
of just 200,000 (including 150,000 by home delivery), Mr. McKibben says, while
the Washington paper has a circulation of 260,000 (210,000 by home delivery).
The papers favor short articles and wire copy, but Mr. McKibben notes that
they have also successfully hired veteran reporters. Even so, some question
the papers’ journalistic and financial merits.
“They do
not strive to be high-quality,” said Sammy Papert, chief executive of
Belden Associates, a newspaper consulting firm. “There are new audiences,
certainly, but what is less certain is whether the financial underpinnings
are solid.”
Mr. McKibben
defends the quality of his papers and says they are designed to meet the needs
of the market they serve. He declined to discuss the papers’ finances,
but said that a recent audit indicated that readers were spending time with
the publications.
Leaving no business
stone left unturned, Mr. Anschutz has also plunged headlong into filmmaking.
In a speech
at a leadership seminar in Naples, Fla., in 2004, Mr. Anschutz explained why
he’s gone Hollywood. He said that digital production and distribution
were upending the film business, opening opportunities for entrepreneurs like
him. He also said that he believed that Hollywood had wandered too far away
from mainstream tastes by misreading “the market and the mood of a large
segment of the movie-going audience today.”
“Why can’t
movies return to being something that we can go and see with our children
and our grandchildren without being embarrassed or on the edge of our seats?”
he asked.
His corporate
answer to that question is Crusader Entertainment, which he set up in 2000
(later renaming it Bristol Bay Productions). Its first film, “Joshua,”
was about a Christ-like figure in modern rural America. In 2001, he invested
in Walden Media, a production company that specializes in family films. Micheal
Flaherty, Walden’s co-founder, says the company makes movies based on
existing stories already popular among children; Walden does market research
in schools to unearth stories that children find fetching and markets its
films as educational material to teachers and librarians.
Some of Mr.
Anschutz’s early films flopped, but he has also enjoyed some notable
successes. ...
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