Saving The Silver Screen
When Paul Heth first came to Moscow a decade ago “in search of a little adventure,” he had no idea that one day he would become one of Russia’s most successful theater operators, widely credited with having turned around the country’s sagging cinema industry.
By Dylan Markov
At 40, Paul Heth looks every bit the Hollywood executive. With his tailored Italian suit and slicked-back hair, the trim, quick-talking Los Angeles native would fit right in among the producers and power brokers who control the film industry from the town he grew up in. But seated in the enormous, sun-drenched lobby of his company’s new 11-screen KinoStar multiplex cinema on the outskirts of Moscow, he kind of sticks out.
Not that Heth is your average movie executive. A former soldier who did stints in the U.S. military both before and after graduating with a degree in History from the University of Tampa (Florida), he first came to Russia in 1993 on a six-week home-stay with little more than the $600 he had in his pocket.
When he stepped off the plane at Sheremetyevo and walked through customs for the first time, he was anxious to experience an exotic new culture and to have a little adventure. He had no idea at the time that he was embarking on a journey that would, ten years forward, find him one of Russia’s most successful movie theater operators, regarded by many as the person most responsible for revitalizing the country’s struggling cinema industry.
As soon as he arrived in Moscow, Heth could see that the influences of Western culture had already begun to take hold here. Imported goods were abundant, and the Russian people seemed to have a genuine interest in learning about the outside world, which until recently had been completely sealed off to them. The one thing he noticed that was missing, though, was a decent movie house like the ones he knew back home, with their comfortable seats, Dolby Surround Sound, Milk Duds and big tubs of popcorn.
At the time, the Russian theater industry, like most of the economy, was in shambles. What theaters did exist were generally dingy, Soviet-era relics with antiquated equipment and uncomfortable chairs. Hollywood films were virtually non-existent. Theater occupancies in the capital were less than 1%. But Heth thought there was potential for a theater that could provide a genuine Western cinema experience, and he came up with a plan.
Within a few months, Heth and his partner, Ray Markovich, a fellow American whom he had met soon after arriving in Moscow, opened Russia’s first English-language movie theater, "The American House of Cinema," in a converted conference hall at the Radisson Slavyanskaya Hotel.
The two didn’t have a lot money at the time, but they managed to convince their vendors to give them credit, promising to pay them back if they managed to make anything from ticket sales and concessions once they got up and running. The fledgling Moscow Times agreed to run their ads for free, alerting the English-speaking community of the new enterprise, and Coca-Cola provided the refreshments. They even managed to get a movie on consignment from the producer, which Heth flew to Los Angeles to pick up himself, and finagled through customs at Sheremetyevo Airport.
When all was said and done, the bootstrapping entrepreneurs’ hunch proved to be correct. Eager movie-goers turned out in droves that first weekend to see a little-known film called "The Plague" (which never actually made it to theaters in the U.S.); the first week’s shows were complete sell-outs.
Heth and Markovich spent that year running the business from their small, two-room apartment. Every two weeks, one of them would fly back to Los Angeles, drop off one movie and fly back a few days later with a new one, along with two weeks worth of Milk Duds and other essentials to keep the business running.
At the time, the theater was one of the few oases of Western culture in the city where foreigners could escape from the frenzy of the new Russia that was unfolding around them, and the project turned out to be an enormous success.
In the early days of his foray into cinema, Heth might not have been flush with cash (he admits to having maxed out his credit cards more than once to keep the business afloat), but he was determined to learn as much as he could about the industry, and to make contact with those he felt could help him to build it. At times it was a very frustrating experience. "Everyone said, ’You’re crazy, kid.’ I had so many doors slammed in my face, my nose is still bruised," he jokes.
At one point in 1994, Heth made his way to Las Vegas to attend a huge, annual industry convention that brings together the movers and shakers of the movie business. He didn’t have enough money to register for accreditation, but he managed to find a cheap hotel room, and convinced one of the show’s organizers to let him in for free to listen to some of the speeches given by high-level Hollywood execs. One of those speakers was media mogul Sumner Redstone, the head of a closely-held family company called National Amusements, which operates some 1,500 movie screens in the U.S., U.K. and Latin America. It also controls over 70% of Viacom, the media giant which owns Paramount Pictures, Blockbuster Video, CBS television, MTV and a stable of other blue chip media holdings.
"Someone told me, ’That’s the greatest guy in cinema that ever was’," Heth recalls. "There’s no one better. He actually invented the Multiplex concept."
Indeed, Redstone was - and continues to be - one of the driving forces in the industry, controlling the third largest media conglomerate in the world.
"When I was a kid, my grandfather always used to say, ’if you want to be great at something, go be around someone who’s already great at it,’" he recalls. "Try to learn from them, read about them, maybe even get a chance to work with them." Heth left the convention inspired, vowing that one day he would find a way to work with National.
Back in Moscow, he called the chairman of McDonald’s-Russia and convinced him to use his clout to help get him in touch with National’s management. By this time, Redstone’s daughter, Shari, was running the company’s day-to-day operations, and to Heth’s surprise she agreed to meet with him for 15 minutes at the company’s headquarters in Boston. The younger Redstone was apparently bemused with his enthusiasm and passion for the industry, and from that day on, every time he returned to the U.S. over the next several years he would call her to talk about the business and let her know what was going on in the Russian market. Over time, the two became good friends.
In 1995, Heth decided to open a second theater, this time on his own, called the "Dome Cinema." Housed in a round building adjacent to the Olympic Penta Hotel (now the Renaissance), he once again lured crowds with a uniquely Western cinema experience and it, too, became very popular.
Then, in 1996, banking on the success of the first two projects, Heth teamed up with Markovich again in a multimillion-dollar joint venture with Kodak to open the fantastically successful Kodak KinoMir. The theater, occupying a large converted conference hall in the Izvestia building just off Pushkin Square, quickly became the highest grossing (per seat) movie theater in the world, often accounting for up to 50 percent of the entire country’s box office receipts on any given weekend. The kid from California was on a roll.
Disaster or destiny?
Cut to 1999. The previous year’s financial crisis had wreaked havoc on the local cinema industry. Russia-wide ticket sales slumped 90%, to just under $10 million a year, and dozens of private theaters that were just finding their way in the new market economy went bust. Spooked by the uncertainty of the times, Kodak pulled the plug on its plans for expansion. Heth tried to raise his own capital to fund the project, but the banks wanted no part of it. Frustrated, he exited his relationship with Kodak and returned to the U.S. where Redstone, with whom he had already developed a rapport, agreed to give him a chance to work with her in jointly developing a project with National.
"Sometimes you just have to keep fighting until you get lucky and someone opens the door for you a little," Heth muses. "And sometimes, if you’re really lucky, someone like Shari Redstone comes along and opens the door all the way."
Redstone and Heth set up a joint company called CineBridge Ventures, Inc. whose purpose was to develop and operate a revolutionary new style of movie theaters which they called "The Bridge." The theaters, which they opened in Los Angeles and Philadelphia, feature up to 17 wall-to-wall screens, and incorporate trendy, new-age design, restaurants and lounges, full-service bars, special auditoriums with wide leather seating, concierge services and live pre-show entertainment. The company, with Ms. Redstone as CEO and Heth as President, is thriving and has been widely credited by the industry for setting a new standard in theater-going experience in the U.S.
The success of the CineBridge project gave the National team and Heth the confidence they needed to continue working together, and in 2002, with the Russian economy apparently back on track, they set up a new joint venture called Rising Star Media whose main focus is to develop a thriving circuit of state-of-the-art multiplex cinemas in Moscow and St. Petersburg, similar in many ways to the CineBridge projects in the U.S. The company does not disclose figures, but local industry sources estimate the total cost of the project to be $50 million.
Throughout his time working with CineBridge, Heth had a burning desire to return to Russia and to participate in the further development of the cinema industry. To keep his dream alive, he maintained a small team on the ground in Moscow to scout real estate and track local legislation, so when he got the opportunity to return to Russia in the summer of 2002, his infrastructure was already in place.
Rising Star’s first project in Russia was to develop the enormous, 11-screen, 3,250-seat KinoStar De lux multiplex, which opened in the MEGA Mall shopping center last September. The theater, which is the largest in Russia, features stadium-style seating, wall-to-wall screens, Dolby digital sound and two "De lux Halls" boasting oversized leather seats and personalized food service. The theater shows a broad spectrum of first run Western and Russian films, as well as select, high-profile independents.
Russian films currently account for about 10% of KinoStar’s offerings, though that number is expected to increase to 25% over the next two to three years as the industry matures and increases its output. "We see Russian film as a real enhancer for our business," Heth notes, "but the fact of the matter is there just aren’t that many commercially viable Russian films being made." To Heth, that means films appealing to a wide audience demographic, as opposed to smaller art house films, which might be worthy artistically, but whose niche audiences might not fill enough seats to justify showing them in a large hall.
"When I was a kid, my grandfather always used to say, ’if you want to be great at something, go be around someone who’s already great at it."
As for the more mainstream films that are being made, he is anxious to see producers take a more Western approach to marketing them. That means Hollywood-style premiers, film trailers, and more aggressive advertising on billboards, TV, and radio. "It’s not for me to say what someone should put on screen, but if you want your film to be successful, you really have to make it for the widest possible audience, and make sure that people want to see it."
Heth is straightforward in his assessment of the challenges he and his partners face launching such an ambitious project in Russia. In addition to the government bureaucracy, an oppressive tax regime, and the absence of a mature real estate development community that can provide the kind of spaces needed to support multiplexes, there is also a shortage of vendors capable of servicing the industry. Sourcing things as simple as hot dogs and nacho chips and cheese and the solvents to clean the seats - things that are almost an afterthought in the West - have proven a consistent source of frustration here. But he insists that progress is being made.
Regarding his relationship with National Amusements, Heth is effusive in his praise. "Ms. Redstone and her team are cinema people," he says. "For them, it’s not just about the numbers. They want to see cinema succeed here in Russia and they’re committed to this project in the long term. As an entrepreneur, it’s thrilling to have the opportunity to work with people like that."
When asked what aspect of the business he finds most gratifying, Heth responds without hesitation: It’s the people he’s had the chance to work with over the years. Many of those who started with him in the early ‘90s are still with him today. Some have gone on to become executives with other cinema firms, something which makes him proud.
I love everything about the movies," Heth confides. And he expects those around him to share that same passion. "Whenever someone new comes to work with us, the first thing we always ask them is, ’What’s your favorite movie?’" And at that he pauses, as if in the simplicity of the statement he has stumbled upon some elusive truth.
"What a great business to be in," he adds with a smile.