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General Cinema More Wall St. Than Hollywood : Investments Pay Off Handsomely for Bottler and Theater-Chain Operator

August 11, 1985|KATHRYN HARRIS | Times Staff Writer

Smith challenges those who contend that a surplus of films might be flooding the market, because "reality is that the home video market and the cable markets require even more films than the theatrical market to meet their requirements."

What's more, Smith appears willing to plunge once again into film-making, if General Cinema controls its own marketing and distribution this time. "I . . . have been close to the picture business for a great many years; I think it's got a great future, and I would simply look at it as as economic opportunity," Smith says.

Sources in the entertainment and financial communities say they believe General Cinema held talks this spring with MGM/UA Entertainment Co. about buying all or part of that Culver City-based motion picture company. Smith and other General Cinema executives have steadily refused comment, although Smith did say he had no interest at that time in investing in a smaller studio such as Orion Pictures or Tri-Star Pictures.

Competitors Bemused

Some competitors are bemused by General Cinema's apparent willingness to invest in a large studio, because of its aloof manner in show-biz affairs.

Sumner Redstone, president and chief operating officer of another New England theater circuit, says, "Dick Smith is a superb manager. In my opinion, he's done an excellent job in the building of that company and in its diversification, particularly in the soft-drink business. But from my perception, he does not involve himself in the warm and sometimes exciting affairs of the motion picture industry."

Another exhibitor, who asks not to be identified, says he finds Smith more interested in Wall Street than Hollywood. "He loves seeing his rankings," the exhibitor says, with an apparent reference to Fortune magazine's annual survey of the 500 largest U.S. industrial corporations. (Last year, General Cinema measured 324th largest in sales, but 73rd highest in total return to investors for the year, and 16th highest for its average return over the previous decade.)

The second exhibitor also believes General Cinema is anxious to try its movie-making hand again. In the exhibition business, he says, "You still are dealing with entrepreneurs who have big egos. . . . They all have the itch to show they can be creative too."

Although General Cinema's stock has traded publicly for nearly a quarter of a century, the Smith family retains a firm grip on its affairs, with nearly 30% in family hands. Smith, now 60, has run the company since the 1961 death of his father, and he has encouraged his own son, Robert, to join the company upon graduation from Harvard Business School this year.

Founded in 1922

Philip Smith, a one-time Pathe film salesman, started the company in 1922 with the acquisition of the 3,000-plus seat National Theatre in Boston, gradually buying more theaters in smaller New England communities.

He "probably had about 25 units by the time the Depression hit him hard, and he had to divest them piecemeal in the early '30s, ending up with three units by 1933," Richard Smith says. Those three theaters kept the company--and family--afloat, according to Smith, until his father took a gamble on opening drive-in theaters in Cleveland and Detroit.

"He wasn't the first to test the concept of whether or not pictures could be shown outdoors," Smith says, but "I believe my father was the first to commercially operate something successful. He invented the idea of having children come in free and of providing playgrounds to try to make it a family experience."

His father owned 9 of the 15 drive-in theaters operating in the United States at the outbreak of World War II, and was well-positioned for the drive-in boom that occurred after the war, according to Smith, who joined the company after graduating from Harvard University in 1946.

By the time the industry peaked in the early 1960s, Smith's "Midwest Drive-In Theatres" boasted more than 50 drive-ins.

Regional shopping centers helped displace the local drive-in, but Smith says his father was one of the first exhibitors to spot the shopping mall's potential as a movie-going site. Around 1947, the elder Smith committed the company to building a theater in a Framingham, Mass., shopping mall, which Smith believes to have been the first of its kind.

Changed Name Twice

In 1960, the company made its first public stock offering, and changed its name to General Drive-In Corp. The name changed again to General Cinema in 1964, to reflect the company's aggressive march on indoor, suburban mall theaters across the country.

Although some regional operators followed General Cinema into the malls, no competitor materialized on a national scale until the 1970s, with companies such as United Artists Theatre Circuit and AMC Entertainment.

General Cinema prospered in the 1960s largely because of the antitrust strictures placed on older theater chains after World War II, Smith says.

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