ENGLEWOOD, Colo. — For 10 years, Stewart Blair was a close disciple of John Malone, the forward-thinking chief executive of Tele-Communications Inc., the nation's largest cable television company.
Throughout the 1980s, the two executives invested in advanced technologies and even built cable systems on foreign soil.
But Blair spurned those cutting-edge ventures when he decided to go out on his own.
In May, the 43-year-old Scottish immigrant led a buyout of the United Artists movie theater circuit from TCI for $680 million. United Artists is the nation's largest theater circuit, with 2,376 screens, or about 10% of the total. Yet the theater business is mature, with scant prospect of dramatic growth. Why is Blair betting his future on movie exhibition, which is considered a dinosaur by many in the entertainment industry?
Blair maintains that the movie-theater business is more promising than skeptics believe. He and other UA executives describe their theater chain as an annuity, capable of generating predictable--and increasing--cash flow. Friends expect him to use the company as a springboard to more exotic ventures, and Blair admits that he would like to invest in international theaters and cable television.
Blair's game plan requires United Artists to increase its operating cash flow at an annual rate of 5% to 10% by increasing concession sales while unloading inefficient theaters.
That's easier said than done, according to some executives who know the movie exhibition business. Even Blair doesn't dispute these facts: Too many screens were added in the 1980s, attendance has been stagnant for a quarter of a century and new delivery systems threaten to siphon off more of the audience.
John W. Miller, managing director of Chemical Bank's entertainment industries group, is skeptical: "When the consumer has increasing options for entertainment, and there's questionable elasticity in ticket pricing, and with costs growing each year, I just don't see how you can suck out 5% or more increases annually in cash flow."
Sumner Redstone, the chairman of Viacom International who made his first fortune in the movie theater business, goes even further. "There is a general eroding dynamic in the industry," he says.
While Redstone says he won't sell his National Amusements theater circuit, he pointedly bet his future on cable television when he acquired control of Viacom in 1987. "Anyone who assumes that, on a screen-for-screen basis, cash flows are going to increase is making a pretty aggressive gamble," he says.
Still, he won't deny Blair's abilities. "Stewart is as smart a guy as I know," Redstone says. "He learned the motion picture business overnight. When you finally get down to it, nothing counts more than management."
Blair has defied conventional wisdom before. With his Scottish brogue and self-deprecating wit, he has stood out in the American business crowd since he emigrated 20 years ago.
Born in the heart of Glasgow, he was the only child of a Welsh mother and Scottish father who rose from messenger to director at a woman's fur coat firm. Blair attended the University of Glasgow, then took a job with Chase Manhattan's London branch after graduation. The following year he was transferred to New York, where he rose rapidly to vice president before his banking career stalled.
"I couldn't fathom the politics. I didn't even recognize that there was such a thing as politics," Blair says, recounting how he lost the job of running the bank's aerospace lending division to Michael Garstin, a rival who later became a friend and investment banker.
Blair transferred to Chase's media division, where he caught the eye of Tele-Communications treasurer Donne Fisher. In 1981, Blair moved to Denver to work for the cable TV company, and his career took off again.
"Maybe he'd found a home by the time he got to TCI," says Brendan Clouston, chief operating officer of the cable TV giant and a close friend of Blair. "TCI is not a very conventional corporation. He (Blair) is, by most American business standards, in the top 1% or 2% intellectually. And No. 2, he has the ability to get deals done."
During the 1980s, there were plenty of deals to work on. TCI's revenue grew almost sixfold, to $3.6 billion, in 1990, from $646 million in 1986, largely through acquisitions.
For Blair, the pivotal deal came in 1986, when TCI acquired 55% of United Artists Communications Inc. UA was a proud old company, based at the time in San Francisco. The theater circuit dated back to 1926, and its founding shareholders included Mary Pickford, Douglas Fairbanks, Sam Goldwyn and Joe Schenck. But TCI wanted UA primarily for the newer cable TV division, which had good franchises and better equipment than many of its competitors.
