About
About
A hospitality executive for more than 20 years, Jeffrey Zeiger managed several ventures in both the former Soviet Union and modern-day Russia, including the first American-owned restaurant chain to open in the USSR. From 1989 through 1995, Mr. Zeiger launched and managed TrenMos Restaurants, the first U.S.-owned restaurant chain in the Soviet Union. In addition to managing staff, banquets, marketing and general business operations, he worked with international and domestic business suppliers to develop an efficient supply chain and expanded the operation to include a total of three outlets in three years.
Between 2001 and 2004, Mr. Zeiger was Managing Director of VIP National Club and Casino in Moscow, a high-end establishment with $25 million in annual sales that offered a 110-seat restaurant and 14-table casino to an international clientele. In that position, he oversaw marketing programs, developed training programs and sales incentives for Russian associates, instituted Western-style beverage controls that resulted in improvement in costs, and created and oversaw new sales strategies.
From 2004 – 2008, Jeffrey M. Zeiger was a partner in the New Jersey restaurant and hospitality advisory firm Zeiger Consulting, identifying and evaluating potential development sites for international clients and advised Russian businesses on negotiating and business strategies with U.S. corporations.
Fluent in Russian, Mr. Zeiger attended the Cornell School of Hotel Administration and is married with 2 children.
Between 2001 and 2004, Mr. Zeiger was Managing Director of VIP National Club and Casino in Moscow, a high-end establishment with $25 million in annual sales that offered a 110-seat restaurant and 14-table casino to an international clientele. In that position, he oversaw marketing programs, developed training programs and sales incentives for Russian associates, instituted Western-style beverage controls that resulted in improvement in costs, and created and oversaw new sales strategies.
From 2004 – 2008, Jeffrey M. Zeiger was a partner in the New Jersey restaurant and hospitality advisory firm Zeiger Consulting, identifying and evaluating potential development sites for international clients and advised Russian businesses on negotiating and business strategies with U.S. corporations.
Fluent in Russian, Mr. Zeiger attended the Cornell School of Hotel Administration and is married with 2 children.
Daniel Satinsky: Okay, so just to get started, you were one of the early pioneers, if you will, of expats in Moscow, and I’m just curious if you could start by when did you go there and why?
Paul Heth: Okay.
Daniel Satinsky: What were you thinking when you went there?
Paul Heth: So, I went in, I believe, in April…in spring of 1993, or thereabouts. I went there because I was a soldier and I was finishing my term of service in the American army, and I was trying to figure out what I wanted to do. I met a businessman and a lawyer in Los Angeles that had some investments in the Far East of Russia, and they were looking for someone to go check out what was happening there and report back to them and given my military background they thought maybe I was the best person for that.
But that was kind of like a casual acquaintance reference. I was more interested in kind of having fun in all the European capitals as a young guy to drink and date and so on, and Russia was kind of…Moscow was the last city on that checklist before I had to start my life, or my business life or whatever. So, I did those two things. I went to Moscow in ’93, and that’s kind of how I got started.
Daniel Satinsky: So, you didn’t know any Russian when you went?
Paul Heth: I didn’t speak a single word of Russian. I did know a little—I did study in college. I had a degree where I specialized kind of in Europe, post-World War II, so I did have some kind of like historical background or contemporary background of Russia, the Soviet Union, and some historical context which I was fascinated about, but I didn’t speak any Russian.
Daniel Satinsky: Okay, and just where did you go to school?
Paul Heth: I went to a small school at the time—it’s a big school now—called the University of Tampa in Tampa, Florida. And because I enlisted in the army, I went to night school and then I won a scholarship from the Secretary of Defense, and they paid my college, and Tampa threw in room and board, and on their thing, they had like a swimming pool in good weather. So, being a soldier in Germany at the time I thought that was the best deal ever, so I went there. And then I graduated and went in the army.
Daniel Satinsky: I see, So, that was sort of part of your enlistment, in a way?
Paul Heth: Well, I was enlisted, and then the army had a program where they identified young leaders, so the army would come up and say hey, we think you have the foundation to be a good officer, but to be an officer you need a college education—we’ll pay for that, but then you come back to us after you graduate. And that was part of that program.
Daniel Satinsky: Okay. And so, then after you did whatever your required service, did you serve in Europe then?
Paul Heth: I served in a number of places, but I was, I served in—this was the time of the Gulf War, Desert Storm, so at that time—the first one. I’d say at that time I was in Europe and in North America.
Daniel Satinsky: Okay. So, when you went to Moscow did you know anybody?
Paul Heth: I didn’t know a single person, with the exception of the group in L.A. that I was going to do this kind of quasi commitment, which was kind of like expenses only kind of thing. This is crazy. I flew into Moscow, I met the woman who was kind of the translator and head of office for these guys, a woman named Olga Chirikhina. She picked me up, they took me to a flat, I took a shower, and I got back on an Aeroflot flight to go fly to Khabarovsk.
And by the way, I didn’t even have a jacket, like a big jacket, so her husband Alexei gave me like a big warm jacket. I flew to Khabarovsk, which, I stayed for like a month. I was the only English-speaking person I met in Khabarovsk other than the translator I had there, and some people with the church. And that was a wild deal because they had invested, these guys, in a logging business with Samsung, and every day they would pick me up in Khabarovsk, which was wild.
I stayed in an Intourist hotel in the penthouse suite, supposedly. It was like $30 a day. It had intermittent hot water. And the only thing that was kind of interesting, they had CNN on the bar. It was a wild time. And they’d pick me up and I’d helicopter to a logging camp and go meet the general director and all that. Then I realized that it was going to be very difficult, for a lot of reasons which I don’t need to get into now, but to be profitable. But I had an interesting time out there, so…for months, can you imagine?
And I was like such an unusual person, this young American guy, to be in Khabarovsk. And I was very respectful, because I had military training, so I was very respectful of people’s authority. You know, I was always very formal, addressed them. But in those times the general director of a big factory was like a god, you know, compared to… So, I’d go see him every day, and we’d have these elaborate lunches with a lot of alcohol. And then I realized, so like this isn’t a profit endeavor. But anyway, then I went back to Moscow.
Daniel Satinsky: Then you went back to Moscow. Just out of curiosity, the church people were missionaries that were there?
Paul Heth: Yes, missionaries, yeah. And they would, you know, I stayed on the floor. And in the hotels back then they’d have a babushka on each floor that you got your key from, and, you know, I was an upstanding guy, but a lot of people would try to call and oh, who’s this American kid? Various people of various reputations would try to come up to my floor, like in the middle of the night. And thank God for them, they kept them out of there. But the church guys would show up with a bottle of vodka every night and try to convert me to whatever the thing was. And I’m a Catholic kid, and so they were interesting conversations, but as the month went on with more vodka, they became more interesting. But it was just a social thing for me.
Daniel Satinsky: Yeah. Okay, so then you flew back to Moscow.
Paul Heth: Yeah, which was an adventure, too, because I show up at the hotel—excuse me, the airport—four straight days the flight got canceled every day, then finally got a flight. It was a wild scene, the flight. It was like an 11-hour flight. And the planes weren’t so modern. You know, it was quite a leap of faith.
Daniel Satinsky: Yeah, I flew from Moscow to Vladivostok in 1991 on Aeroflot—
Paul Heth: Yeah, so you know.
Daniel Satinsky: —so I know what you were facing, yeah. And then okay, so you got back to Moscow and—
Paul Heth: Then I got back to Moscow. I had a little flat. It was like $200 a month that a…I got the flat, I was able to rent the flat, and it came with lunch every day. The owner of the flat was a woman that would come, a little bit older than me, she was probably early 40s. She’d come down and make chicken broth for me, and vegetables, and that was part of the deal, so that was my main sustenance. And I was there, and then I went out to the—there was a couple of places where there were expats. I want to say like Rosie O’Grady’s or some kind of a pub type thing on the Novy Arbat*area, maybe.
Daniel Satinsky: Yeah.
Paul Heth: And then I met some other expats and kind of developed some friends who would go out, mainly young guys who would go out drinking, and started developing kind of a social group.
And also, but by the way, because I’m friends with some of the people you’ve talked to, I really liked basketball, so that got me into kind of a clique with some expats that played basketball—Scott Nicol, who at that time was founding Clearwater, that became Nestle Water, and Bernie Sucher. So, we developed this kind of sports basketball background, and then kind of socializing. And then that kind of started my introduction to the social fabric of Moscow.
Daniel Satinsky: So, were you still working for your L.A. guys at that point?
Paul Heth: Kind of. And then what happened there was I was out one night with another American young person, a lawyer that went to the London School of Economics and Notre Dame, and I was kind of saying you know what, there’s not—let’s go to a movie, and realized there was no movie theater, so I kind of got an idea, hey, maybe there’s a way to get the movie theaters going again. And being an entrepreneur, I knew an agent from L.A. And how did I know that agent? I don’t remember how. But I called him and said look, I have this idea.
And then I met someone else that was trying to open…trying to do something at the Radisson Slavyanskaya and could I get some advertising support, so I kind of put the two together and essentially started, with the lawyer, this thing called American House of Cinema—American House of Cinema at the Radisson Slavyanskaya, which, I had like $600 to my name which I threw into that.
I got this lawyer—excuse me—this agent in L.A. to get me a print of the film. I took an economy flight to, can you imagine, all the way to L.A. I got to L.A. I met the producer. He said I’ll give you this print, but you got to give me some money. I didn’t have any money. I said I’ll tell you what, I’ll take the print, I’ll be back in two weeks with the money for the print, $5,000. I said I’ll give my word as an officer. So, he let me take the print, which I flew back, and I held it in my lap on the plane.
And then I also there, I bought like candies and stuff and some Gap uniforms, and went back to the Radisson, because I’d negotiated a lease at the Radisson for an old conference hall on the second floor that had a Soviet projector. Then I got the script and I found a young person to do translation. So, we would literally give our guests headphones, they would translate the script, both the male and female voices, with one guy, and we’d show the movies. Oh, and the people that spoke English, which was a lot of expats and Russians, they’d watch it out of the headphones.
Daniel Satinsky: Do you remember what the name of that movie was?
Paul Heth: Yeah. Believe it or not, “The Plague.”
Daniel Satinsky: “The Plague,” by Camus.
Paul Heth: By Camus. It was a motion picture with Robert Duvall and Raul Julia, and it never got released in North America—and William Hurt. It never got released because of a crazy litigation. And so, we said it was a world premiere.
So, I did that. And then I went to the Moscow Times, and they had a woman there that was very kind. Them and Coca-Cola gave me credit. I said I don’t have any money, but I’ll give you my word, just give me a week, I’ll come back with the accounts payable. And they gave me credit for advertising, which we did on like a Mac computer. And then we got Robert Duvall to call the local expat radio station. And then we open, and I couldn’t believe it, we made like a $20,000 profit our first weekend. I went around and paid everyone, and that kind of—by the way, that started kind of the modern moviegoing experience in Russia. So, we started running that. And I got more and more movies for that where I had to fly back and forth.
The first big one was a movie called “Tombstone,” which was Kurt Russell—about the Wyatt Earp story and Doc Holiday story. And I met the producer who, by the way, has become very famous in our industry, and I said look, let me get it. And he’s like Paul, I can’t, come on. But I said Mr. Clinton and Mr. Yeltsin are doing a summit, maybe some of them can come over and see the movie while they’re in town. So, then he marketed it like for the summit, you know what I mean? It was a bit of an exaggeration, but… So, we got that movie, and Kurt Russell did some stuff, and that sold out. And then I started getting it going, you know.
Daniel Satinsky: Who was your audience for these movies?
Paul Heth: It was expats and Russian—so the Russian film business, prior to perestroika, was 10,000 movie theaters in Russia, single screens. And they had a very vibrant industry of self-production—of local, domestic production, and phenomenal, as you know, phenomenal filmmakers. You know, Bondarchuk, and I can just go on and on on these wonderful—you know, going back to Eisenstein and the “Battleship Potemkin” and all that, because they had a great tradition, but after perestroika they had no money to fund the productions, so all those theaters became car dealerships, hair salons, grocery stores in disrepair. So, the entire box office of the Russian market in that time was like a million to two million dollars a year for a market of 160 million people, right, 140 million.
Daniel Satinsky: Wow.
Paul Heth: So, we started there, so a lot of people would come to Americom, including expats, and, you know, were people that are there on corporate assignments, and Russians that spoke English, which, as you know, most educated Russians speak multiple languages, right? It’s very unique. Not like America.
And so, we started with that and then—but I had to do everything. We had to—I brought the uniforms in for Gap. I’d bring 20 boxes of candy on my luggage, and then of course the customs guys didn’t know what to do, so I’d give them a box of the candy, and then we threw in this and that. We kind of weren’t complying with any—we didn’t know anything about taxes or anything, we just were trying to get going. And so…because there was not even really a vehicle to do like a company back then. It was like a different thing.
So, then I started a second one at the Penta called the Dome Theater, which was also a conference room. And then—so this was probably ’95, ’94, ’95. And, you know, I was making a modest living at the time where I could afford a flat, and we had a team. We took one flat and turned it into an office where we took shifts sleeping, and then we’d have like a little team to answer the phone and all that. And then that kind of grew.
And then what happened was one of the Mafia groups—not the Mafia groups—but let’s say a colorful group involved with the city of Moscow basically took the Radisson from me and said it’s ours now. But it’s a great story. I won’t say the name of who, but we had like probably $8,000 in accounts payable due to our vendors, so they kind of showed up one day and said we have the lease, get out. It was a group that was in arguments with that guy Paul Tatum. And this was a group that was hostile to him and his process, so I was kind of a byproduct of that.
Daniel Satinsky: Right. Can I just ask you about that a little bit? Because my understanding from someone else was that they, this group that came in were somehow part of the Moscow city’s position of that joint venture.
Paul Heth: Yes. As I understood it that the Moscow city had a department of like foreign hotels and hospitality and things like that, and this group somehow was involved with it, or this individual. And of course I had no documentation, and I wasn’t in a position to kind of argue. But they showed up with legal documents—your lease is out. Because we had a lease with them. We were paying a couple thousand dollars a month for this. It was one of the first leases ever in Russia, probably, and—or like arrangement—and it’s ours now, and we’re taking it over, and deal with it. Kind of tough-minded.
So, I went back to my flat, I put on my best Men’s Wearhouse suit and then I stormed into that guy’s office, past his security, and sat in front of him. And he had two big guys, and I was thinking I’m going to get killed here, but I said sir—very formal—I understand you have the lease now you showed me, but you probably respect that I have obligations to accounts payable, and I think you’re an honorable person, I’m very honorable. And I’m always very formal and very polite. But I’m not leaving your office until I at least can get the money from you to pay the people I owe money to because it’s not correct and not right, and I think you don’t conduct business that way, either. You wouldn’t put me in that position. And he looked at me incredulously, and these guys are about to beat my ass, you know.
But he said—then I sat there and I was sweating, like I was very nervous, but, you know, very respectful, you know, and I said you kind of took, and this is not right how I was treated, I built this, and I have to pay these people that we owe money to, and that will fall on me; you did what you had to do, and I respect that, and it’s yours, but please respect what I’m saying. And then he looked at me, he looked at me. He couldn’t believe it. His guys are like should we throw him out on the street and kick him in the pants?
He left the room for like 40 minutes, and I’m sitting there like oh my god, I’m going to be…you know, this is a tough guy. Then a guy came back, a huge guy, like 250-pound muscle guy with no, with like a short haircut and short neck, tapped me on the shoulder—I said this is it—and gave me the bag with $8,000 in it, which was my accounts payable. And then I said wow.
So he gave me a bag of the $8,000, and then I stood up, and then that gentleman, who’s a very well-known person in this kind of colorful area of Russia back then, always dressed beautifully in the most expensive clothes—I’m wearing Men’s Wearhouse clothes because I’m pretty hand-to-mouth, right? He said come here. He said, you know, you conduct yourself like a distinguished gentleman, but such a gentleman should always have a very nice tie. And he took his tie off and gave it to me.
Daniel Satinsky: Wow.
Paul Heth: And he like—the tie was more expensive than my whole wardrobe. And can you imagine? So, he said I respected how you were formal, you stated your case, and you, you know, so here. And then he said next time you come to see me, wear this kind of tie. So, I took the bag, I paid off everyone.
And then at the time I was in the Moscow airport on one of those errands to go get product from Los Angeles. I was like sitting in a—this is like, this is how life is, how unusual it is—I was sitting in the lobby waiting for the, you know, the gate before our—I think I was on Delta or Pan Am. And there was a guy from Kodak there, and he’s talking to someone, and I realized he was from Kodak, and I said nice to meet you, sir, my name’s Paul Heth, and I’m trying to revitalize the cinema sector—I started one, I have a second one, I have big ideas for the market. And he said oh, this is interesting because we used to sell a lot of film to those theaters. It was a big budget, a big revenue item, but now that’s gone. If you have an idea, maybe we can be supportive of it. And I said, well, I do have an idea.
And then he invited me to London to meet his team to see if we could sort something. So, this is crazy. So, I had another friend who was trying to, who was just starting the modern theatrical distribution business in Russia to get films back in the market in theaters. But there’s no theaters, so we had to solve a front and back-end problem. And so, him and I went to London. And by the way, we’re both just entrepreneurs with not very much money. So, we get off, we take this flight, we get to London, we take a cab, I think, into Kensington, and we don’t even have a hotel reservation. And it’s raining like, you know, in London, whenever you need an umbrella or policeman you can never find them, and when you don’t need them, they’re all over, right?
So, we’re just…and we…it’s a very funny story. We went to a hotel, the first, like, the small hotels, where you get like eggs and a bed for like 30, 40 pounds. And they thought we were a couple and were like oh, you guys can share this. We’re like no-no-no-no. Then we went to the next one and it had like a bird head, which we’ve always told in the stories the chicken head hotel, and they gave us a room with two beds, and they included [toast] for like 40 pounds, and we’re like this is greatest thing ever, we get breakfast.
And then we went over and we were able to source some movies from the studios. And the funny thing about that was they were like what are you guys doing in town? We’re being proud—oh, we’re going to go to some shows. They’re like oh, we have a West End ticket booth downstairs; come down and pick your show and you can buy the tickets right here. And I’m like oh my god, my credit card is so full I’m going to be embarrassed. And Michael and I looked at each other, and it all falls down, and I’m like this is it, so I said give us two tickets to this show, and I gave the card, and you hear that—remember back then you hear the fax machine—dee-dee-dee-dee. I go I’m going to get denied and be so embarrassed. And somehow it worked, so we got the tickets and that. But in that same meeting we went over to Kodak with this gentleman, who’s become very famous in Russia for being the theatrical distribution king, where I’m the theater king, right?
And we went to Kodak, and I said I have an idea, why don’t we build a showcase cinema right in the middle of Pushkin Square? Because I had found an Izvestiya building* there where I walked in literally off the street and they had this big conference room with a lobby not being used. Well, I did the first lease with—remember Rostic's?
Daniel Satinsky: Oh, yeah.
Paul Heth: With Rostislav [Ordovsky-Tanaevsky Blanco]. Rostic's had done a deal with them to try to do a restaurant there, but I did like a lease, a sublease, so one of the first leases with Izvestiya and Rostic's where I took that space for a theater for like $4,000 a month. It was like a huge building. And it was one of the very first ones ever done. But I had no money, had nothing. I was just kind of like I hope we’ll pull this off.
And then believe it or not, I got, in that meeting Kodak agreed to invest $2 million to build this theater. And we were going to partner with the Walt Disney company, so I went out to L.A. and met the Disney guys. But ultimately it ended up just being Kodak and us. Ad we developed Kodak Kino Mir, we built that building, and we started basically the modern cinema business in Russia. And that—
Daniel Satinsky: Describe a little bit more—I mean, you said some about the theater, the movie business. What was it like at that time? I mean, you—
Paul Heth: No, it was run down, like very, you know, old technology, no real modern sound, mono sound, old, really uncomfortable seats, more of an efficiency model, old Soviet style projectors that would kind of cut and this and that. And so we brought in there, we built like literally with brass rails, beautiful polished brass, sweeping staircase, like a throwback to Hollywood’s kind of palace era.
And we bought a theater in—there was a theater that we cleaned up the chairs. You know, were…because it was more of a conference center, so they had a little bit more comfortable chair. We redid the fabric. We put in digital sound and everything. So, it was like the Paramount in New York City in the ‘40s, like really, but with modern technology. I put in a modern concessions operation with Coca-Cola.
Now we needed a movie. We didn’t have a movie. So, I went to Disney. I said give me a movie. Because the market at the time was boycotted. It was still boycotted because they had such…at the end of perestroika all the pirates came and were selling every movie on video cassettes back then.
Paul Heth: Okay.
Daniel Satinsky: What were you thinking when you went there?
Paul Heth: So, I went in, I believe, in April…in spring of 1993, or thereabouts. I went there because I was a soldier and I was finishing my term of service in the American army, and I was trying to figure out what I wanted to do. I met a businessman and a lawyer in Los Angeles that had some investments in the Far East of Russia, and they were looking for someone to go check out what was happening there and report back to them and given my military background they thought maybe I was the best person for that.
But that was kind of like a casual acquaintance reference. I was more interested in kind of having fun in all the European capitals as a young guy to drink and date and so on, and Russia was kind of…Moscow was the last city on that checklist before I had to start my life, or my business life or whatever. So, I did those two things. I went to Moscow in ’93, and that’s kind of how I got started.
Daniel Satinsky: So, you didn’t know any Russian when you went?
Paul Heth: I didn’t speak a single word of Russian. I did know a little—I did study in college. I had a degree where I specialized kind of in Europe, post-World War II, so I did have some kind of like historical background or contemporary background of Russia, the Soviet Union, and some historical context which I was fascinated about, but I didn’t speak any Russian.
Daniel Satinsky: Okay, and just where did you go to school?
Paul Heth: I went to a small school at the time—it’s a big school now—called the University of Tampa in Tampa, Florida. And because I enlisted in the army, I went to night school and then I won a scholarship from the Secretary of Defense, and they paid my college, and Tampa threw in room and board, and on their thing, they had like a swimming pool in good weather. So, being a soldier in Germany at the time I thought that was the best deal ever, so I went there. And then I graduated and went in the army.
Daniel Satinsky: I see, So, that was sort of part of your enlistment, in a way?
Paul Heth: Well, I was enlisted, and then the army had a program where they identified young leaders, so the army would come up and say hey, we think you have the foundation to be a good officer, but to be an officer you need a college education—we’ll pay for that, but then you come back to us after you graduate. And that was part of that program.
Daniel Satinsky: Okay. And so, then after you did whatever your required service, did you serve in Europe then?
Paul Heth: I served in a number of places, but I was, I served in—this was the time of the Gulf War, Desert Storm, so at that time—the first one. I’d say at that time I was in Europe and in North America.
Daniel Satinsky: Okay. So, when you went to Moscow did you know anybody?
Paul Heth: I didn’t know a single person, with the exception of the group in L.A. that I was going to do this kind of quasi commitment, which was kind of like expenses only kind of thing. This is crazy. I flew into Moscow, I met the woman who was kind of the translator and head of office for these guys, a woman named Olga Chirikhina. She picked me up, they took me to a flat, I took a shower, and I got back on an Aeroflot flight to go fly to Khabarovsk.
And by the way, I didn’t even have a jacket, like a big jacket, so her husband Alexei gave me like a big warm jacket. I flew to Khabarovsk, which, I stayed for like a month. I was the only English-speaking person I met in Khabarovsk other than the translator I had there, and some people with the church. And that was a wild deal because they had invested, these guys, in a logging business with Samsung, and every day they would pick me up in Khabarovsk, which was wild.
I stayed in an Intourist hotel in the penthouse suite, supposedly. It was like $30 a day. It had intermittent hot water. And the only thing that was kind of interesting, they had CNN on the bar. It was a wild time. And they’d pick me up and I’d helicopter to a logging camp and go meet the general director and all that. Then I realized that it was going to be very difficult, for a lot of reasons which I don’t need to get into now, but to be profitable. But I had an interesting time out there, so…for months, can you imagine?
And I was like such an unusual person, this young American guy, to be in Khabarovsk. And I was very respectful, because I had military training, so I was very respectful of people’s authority. You know, I was always very formal, addressed them. But in those times the general director of a big factory was like a god, you know, compared to… So, I’d go see him every day, and we’d have these elaborate lunches with a lot of alcohol. And then I realized, so like this isn’t a profit endeavor. But anyway, then I went back to Moscow.
Daniel Satinsky: Then you went back to Moscow. Just out of curiosity, the church people were missionaries that were there?
Paul Heth: Yes, missionaries, yeah. And they would, you know, I stayed on the floor. And in the hotels back then they’d have a babushka on each floor that you got your key from, and, you know, I was an upstanding guy, but a lot of people would try to call and oh, who’s this American kid? Various people of various reputations would try to come up to my floor, like in the middle of the night. And thank God for them, they kept them out of there. But the church guys would show up with a bottle of vodka every night and try to convert me to whatever the thing was. And I’m a Catholic kid, and so they were interesting conversations, but as the month went on with more vodka, they became more interesting. But it was just a social thing for me.
Daniel Satinsky: Yeah. Okay, so then you flew back to Moscow.
Paul Heth: Yeah, which was an adventure, too, because I show up at the hotel—excuse me, the airport—four straight days the flight got canceled every day, then finally got a flight. It was a wild scene, the flight. It was like an 11-hour flight. And the planes weren’t so modern. You know, it was quite a leap of faith.
Daniel Satinsky: Yeah, I flew from Moscow to Vladivostok in 1991 on Aeroflot—
Paul Heth: Yeah, so you know.
Daniel Satinsky: —so I know what you were facing, yeah. And then okay, so you got back to Moscow and—
Paul Heth: Then I got back to Moscow. I had a little flat. It was like $200 a month that a…I got the flat, I was able to rent the flat, and it came with lunch every day. The owner of the flat was a woman that would come, a little bit older than me, she was probably early 40s. She’d come down and make chicken broth for me, and vegetables, and that was part of the deal, so that was my main sustenance. And I was there, and then I went out to the—there was a couple of places where there were expats. I want to say like Rosie O’Grady’s or some kind of a pub type thing on the Novy Arbat*area, maybe.
Daniel Satinsky: Yeah.
Paul Heth: And then I met some other expats and kind of developed some friends who would go out, mainly young guys who would go out drinking, and started developing kind of a social group.
And also, but by the way, because I’m friends with some of the people you’ve talked to, I really liked basketball, so that got me into kind of a clique with some expats that played basketball—Scott Nicol, who at that time was founding Clearwater, that became Nestle Water, and Bernie Sucher. So, we developed this kind of sports basketball background, and then kind of socializing. And then that kind of started my introduction to the social fabric of Moscow.
Daniel Satinsky: So, were you still working for your L.A. guys at that point?
Paul Heth: Kind of. And then what happened there was I was out one night with another American young person, a lawyer that went to the London School of Economics and Notre Dame, and I was kind of saying you know what, there’s not—let’s go to a movie, and realized there was no movie theater, so I kind of got an idea, hey, maybe there’s a way to get the movie theaters going again. And being an entrepreneur, I knew an agent from L.A. And how did I know that agent? I don’t remember how. But I called him and said look, I have this idea.
And then I met someone else that was trying to open…trying to do something at the Radisson Slavyanskaya and could I get some advertising support, so I kind of put the two together and essentially started, with the lawyer, this thing called American House of Cinema—American House of Cinema at the Radisson Slavyanskaya, which, I had like $600 to my name which I threw into that.
I got this lawyer—excuse me—this agent in L.A. to get me a print of the film. I took an economy flight to, can you imagine, all the way to L.A. I got to L.A. I met the producer. He said I’ll give you this print, but you got to give me some money. I didn’t have any money. I said I’ll tell you what, I’ll take the print, I’ll be back in two weeks with the money for the print, $5,000. I said I’ll give my word as an officer. So, he let me take the print, which I flew back, and I held it in my lap on the plane.
And then I also there, I bought like candies and stuff and some Gap uniforms, and went back to the Radisson, because I’d negotiated a lease at the Radisson for an old conference hall on the second floor that had a Soviet projector. Then I got the script and I found a young person to do translation. So, we would literally give our guests headphones, they would translate the script, both the male and female voices, with one guy, and we’d show the movies. Oh, and the people that spoke English, which was a lot of expats and Russians, they’d watch it out of the headphones.
Daniel Satinsky: Do you remember what the name of that movie was?
Paul Heth: Yeah. Believe it or not, “The Plague.”
Daniel Satinsky: “The Plague,” by Camus.
Paul Heth: By Camus. It was a motion picture with Robert Duvall and Raul Julia, and it never got released in North America—and William Hurt. It never got released because of a crazy litigation. And so, we said it was a world premiere.
So, I did that. And then I went to the Moscow Times, and they had a woman there that was very kind. Them and Coca-Cola gave me credit. I said I don’t have any money, but I’ll give you my word, just give me a week, I’ll come back with the accounts payable. And they gave me credit for advertising, which we did on like a Mac computer. And then we got Robert Duvall to call the local expat radio station. And then we open, and I couldn’t believe it, we made like a $20,000 profit our first weekend. I went around and paid everyone, and that kind of—by the way, that started kind of the modern moviegoing experience in Russia. So, we started running that. And I got more and more movies for that where I had to fly back and forth.
The first big one was a movie called “Tombstone,” which was Kurt Russell—about the Wyatt Earp story and Doc Holiday story. And I met the producer who, by the way, has become very famous in our industry, and I said look, let me get it. And he’s like Paul, I can’t, come on. But I said Mr. Clinton and Mr. Yeltsin are doing a summit, maybe some of them can come over and see the movie while they’re in town. So, then he marketed it like for the summit, you know what I mean? It was a bit of an exaggeration, but… So, we got that movie, and Kurt Russell did some stuff, and that sold out. And then I started getting it going, you know.
Daniel Satinsky: Who was your audience for these movies?
Paul Heth: It was expats and Russian—so the Russian film business, prior to perestroika, was 10,000 movie theaters in Russia, single screens. And they had a very vibrant industry of self-production—of local, domestic production, and phenomenal, as you know, phenomenal filmmakers. You know, Bondarchuk, and I can just go on and on on these wonderful—you know, going back to Eisenstein and the “Battleship Potemkin” and all that, because they had a great tradition, but after perestroika they had no money to fund the productions, so all those theaters became car dealerships, hair salons, grocery stores in disrepair. So, the entire box office of the Russian market in that time was like a million to two million dollars a year for a market of 160 million people, right, 140 million.
Daniel Satinsky: Wow.
Paul Heth: So, we started there, so a lot of people would come to Americom, including expats, and, you know, were people that are there on corporate assignments, and Russians that spoke English, which, as you know, most educated Russians speak multiple languages, right? It’s very unique. Not like America.
And so, we started with that and then—but I had to do everything. We had to—I brought the uniforms in for Gap. I’d bring 20 boxes of candy on my luggage, and then of course the customs guys didn’t know what to do, so I’d give them a box of the candy, and then we threw in this and that. We kind of weren’t complying with any—we didn’t know anything about taxes or anything, we just were trying to get going. And so…because there was not even really a vehicle to do like a company back then. It was like a different thing.
So, then I started a second one at the Penta called the Dome Theater, which was also a conference room. And then—so this was probably ’95, ’94, ’95. And, you know, I was making a modest living at the time where I could afford a flat, and we had a team. We took one flat and turned it into an office where we took shifts sleeping, and then we’d have like a little team to answer the phone and all that. And then that kind of grew.
And then what happened was one of the Mafia groups—not the Mafia groups—but let’s say a colorful group involved with the city of Moscow basically took the Radisson from me and said it’s ours now. But it’s a great story. I won’t say the name of who, but we had like probably $8,000 in accounts payable due to our vendors, so they kind of showed up one day and said we have the lease, get out. It was a group that was in arguments with that guy Paul Tatum. And this was a group that was hostile to him and his process, so I was kind of a byproduct of that.
Daniel Satinsky: Right. Can I just ask you about that a little bit? Because my understanding from someone else was that they, this group that came in were somehow part of the Moscow city’s position of that joint venture.
Paul Heth: Yes. As I understood it that the Moscow city had a department of like foreign hotels and hospitality and things like that, and this group somehow was involved with it, or this individual. And of course I had no documentation, and I wasn’t in a position to kind of argue. But they showed up with legal documents—your lease is out. Because we had a lease with them. We were paying a couple thousand dollars a month for this. It was one of the first leases ever in Russia, probably, and—or like arrangement—and it’s ours now, and we’re taking it over, and deal with it. Kind of tough-minded.
So, I went back to my flat, I put on my best Men’s Wearhouse suit and then I stormed into that guy’s office, past his security, and sat in front of him. And he had two big guys, and I was thinking I’m going to get killed here, but I said sir—very formal—I understand you have the lease now you showed me, but you probably respect that I have obligations to accounts payable, and I think you’re an honorable person, I’m very honorable. And I’m always very formal and very polite. But I’m not leaving your office until I at least can get the money from you to pay the people I owe money to because it’s not correct and not right, and I think you don’t conduct business that way, either. You wouldn’t put me in that position. And he looked at me incredulously, and these guys are about to beat my ass, you know.
But he said—then I sat there and I was sweating, like I was very nervous, but, you know, very respectful, you know, and I said you kind of took, and this is not right how I was treated, I built this, and I have to pay these people that we owe money to, and that will fall on me; you did what you had to do, and I respect that, and it’s yours, but please respect what I’m saying. And then he looked at me, he looked at me. He couldn’t believe it. His guys are like should we throw him out on the street and kick him in the pants?
He left the room for like 40 minutes, and I’m sitting there like oh my god, I’m going to be…you know, this is a tough guy. Then a guy came back, a huge guy, like 250-pound muscle guy with no, with like a short haircut and short neck, tapped me on the shoulder—I said this is it—and gave me the bag with $8,000 in it, which was my accounts payable. And then I said wow.
So he gave me a bag of the $8,000, and then I stood up, and then that gentleman, who’s a very well-known person in this kind of colorful area of Russia back then, always dressed beautifully in the most expensive clothes—I’m wearing Men’s Wearhouse clothes because I’m pretty hand-to-mouth, right? He said come here. He said, you know, you conduct yourself like a distinguished gentleman, but such a gentleman should always have a very nice tie. And he took his tie off and gave it to me.
Daniel Satinsky: Wow.
Paul Heth: And he like—the tie was more expensive than my whole wardrobe. And can you imagine? So, he said I respected how you were formal, you stated your case, and you, you know, so here. And then he said next time you come to see me, wear this kind of tie. So, I took the bag, I paid off everyone.
And then at the time I was in the Moscow airport on one of those errands to go get product from Los Angeles. I was like sitting in a—this is like, this is how life is, how unusual it is—I was sitting in the lobby waiting for the, you know, the gate before our—I think I was on Delta or Pan Am. And there was a guy from Kodak there, and he’s talking to someone, and I realized he was from Kodak, and I said nice to meet you, sir, my name’s Paul Heth, and I’m trying to revitalize the cinema sector—I started one, I have a second one, I have big ideas for the market. And he said oh, this is interesting because we used to sell a lot of film to those theaters. It was a big budget, a big revenue item, but now that’s gone. If you have an idea, maybe we can be supportive of it. And I said, well, I do have an idea.
And then he invited me to London to meet his team to see if we could sort something. So, this is crazy. So, I had another friend who was trying to, who was just starting the modern theatrical distribution business in Russia to get films back in the market in theaters. But there’s no theaters, so we had to solve a front and back-end problem. And so, him and I went to London. And by the way, we’re both just entrepreneurs with not very much money. So, we get off, we take this flight, we get to London, we take a cab, I think, into Kensington, and we don’t even have a hotel reservation. And it’s raining like, you know, in London, whenever you need an umbrella or policeman you can never find them, and when you don’t need them, they’re all over, right?
So, we’re just…and we…it’s a very funny story. We went to a hotel, the first, like, the small hotels, where you get like eggs and a bed for like 30, 40 pounds. And they thought we were a couple and were like oh, you guys can share this. We’re like no-no-no-no. Then we went to the next one and it had like a bird head, which we’ve always told in the stories the chicken head hotel, and they gave us a room with two beds, and they included [toast] for like 40 pounds, and we’re like this is greatest thing ever, we get breakfast.
And then we went over and we were able to source some movies from the studios. And the funny thing about that was they were like what are you guys doing in town? We’re being proud—oh, we’re going to go to some shows. They’re like oh, we have a West End ticket booth downstairs; come down and pick your show and you can buy the tickets right here. And I’m like oh my god, my credit card is so full I’m going to be embarrassed. And Michael and I looked at each other, and it all falls down, and I’m like this is it, so I said give us two tickets to this show, and I gave the card, and you hear that—remember back then you hear the fax machine—dee-dee-dee-dee. I go I’m going to get denied and be so embarrassed. And somehow it worked, so we got the tickets and that. But in that same meeting we went over to Kodak with this gentleman, who’s become very famous in Russia for being the theatrical distribution king, where I’m the theater king, right?
And we went to Kodak, and I said I have an idea, why don’t we build a showcase cinema right in the middle of Pushkin Square? Because I had found an Izvestiya building* there where I walked in literally off the street and they had this big conference room with a lobby not being used. Well, I did the first lease with—remember Rostic's?
Daniel Satinsky: Oh, yeah.
Paul Heth: With Rostislav [Ordovsky-Tanaevsky Blanco]. Rostic's had done a deal with them to try to do a restaurant there, but I did like a lease, a sublease, so one of the first leases with Izvestiya and Rostic's where I took that space for a theater for like $4,000 a month. It was like a huge building. And it was one of the very first ones ever done. But I had no money, had nothing. I was just kind of like I hope we’ll pull this off.
And then believe it or not, I got, in that meeting Kodak agreed to invest $2 million to build this theater. And we were going to partner with the Walt Disney company, so I went out to L.A. and met the Disney guys. But ultimately it ended up just being Kodak and us. Ad we developed Kodak Kino Mir, we built that building, and we started basically the modern cinema business in Russia. And that—
Daniel Satinsky: Describe a little bit more—I mean, you said some about the theater, the movie business. What was it like at that time? I mean, you—
Paul Heth: No, it was run down, like very, you know, old technology, no real modern sound, mono sound, old, really uncomfortable seats, more of an efficiency model, old Soviet style projectors that would kind of cut and this and that. And so we brought in there, we built like literally with brass rails, beautiful polished brass, sweeping staircase, like a throwback to Hollywood’s kind of palace era.
And we bought a theater in—there was a theater that we cleaned up the chairs. You know, were…because it was more of a conference center, so they had a little bit more comfortable chair. We redid the fabric. We put in digital sound and everything. So, it was like the Paramount in New York City in the ‘40s, like really, but with modern technology. I put in a modern concessions operation with Coca-Cola.
Now we needed a movie. We didn’t have a movie. So, I went to Disney. I said give me a movie. Because the market at the time was boycotted. It was still boycotted because they had such…at the end of perestroika all the pirates came and were selling every movie on video cassettes back then.
Daniel Satinsky: Ah, right.
Paul Heth: It was like boycotted by the Motion Picture Association as a pirated market. So, I went in there and we did all this, and I got Disney to give me a movie with Sean Connery called “The Rock,” about—a crazy story about Alcatraz, but it was—
Daniel Satinsky: About Alcatraz, yeah.
Paul Heth: But to Disney’s credit, they scored the movie and they did a soundtrack with 60 different voices, Russian, in digital sound. And we opened—so guys said oh, you can sell tickets for three, four dollars. I said no, I don’t know. So, we opened at like a seven-dollar ticket. The day we opened we had lines over one kilometer.
Daniel Satinsky: Wow.
Paul Heth: And we sold out essentially for the next several years. From 9:00 in the morning till 1:00 in the morning we did shows.
Daniel Satinsky: And these were mostly Russian moviegoers, right?
Paul Heth: No, it was all—well, some expats would go, but everything was in Russian, so we did everything with proper dubs. And we basically started the modern theatrical business. And that era kind of started the film studios to come back, local production. At that time local production was only one to three percent of our box office, but I always tried to play a Russian movie. Even though the audience would come in, no-no, we want to see Hollywood. And we got the studios to start working in the market. And then what happened was I’m like okay, I’m Russia’s big exhibitor with one location, but we were doing like $16 million turnover on one screen, and in the middle, right in Pushkin Square.
Daniel Satinsky: 16 million per what?
Paul Heth: Per year in gross sales. In gross sales. Which is an insane number for a single screen. It’s insane. It’s probably the highest grossing in the history of our industry. So, at that time I heard about the Redstone family, so I started calling the Redstone family in Boston, Sumner and Shari’s offices, and said I’m the biggest exhibitor in Russia, would you meet with me. And then finally, after a couple years, like around ’99, 2000, I got a meeting with Miss Redstone, and then she was kind enough to take me to meet her father.
And they said listen, we believe in—you’re kind of this crazy guy, and you’re very passionate, we believe in you, but we’re not so ready for Russia, why don’t we start a business together in America so we can work together in a more defined market. But I said okay, guys, I’ll do that, but I’m going to keep my team working in Moscow. At this point we had left…we ended our Kodak arrangement because Kodak had decided to kind of leave the market, and we ended up selling that screen to one of the, like a smaller competitor that was starting. But I kept my team in place, and I started negotiating—
Daniel Satinsky: Okay, so you no longer owned the theater, but you had the team.
Paul Heth: I had the team. And I started, I kept the team and we started…I started negotiating like a 10 site deal with Ikea to build my concept of the modern, like a big multiplex business. And so I developed a business in the U.S. with the Redstones. At the same time they allowed me every quarter to go back to Russia and keep my efforts going, because I basically was taking all my salary and compensation from that and investing in Russia, literally like get it that day and back out.
And so that woman who met me, Olga Chirikhina, was like my COO, and my housekeeper was my F&B director, like I had my team. And we…and by the way, something I’m proud of, if you look at the cinema business in Russia now, all the big firms are, either I founded the firm or people that worked for me lead those companies to this day.
Daniel Satinsky: Wow. So, you seeded the whole industry.
Paul Heth: Yeah, the whole thing, 100%. Like the four biggest operators, either I founded it or the people that worked for me. Matter of fact, the top 20 box office sites in Russia right before Ukraine started, I probably either founded it or developed 18 of the top 20 locations, including one through ten in the entire Russian market of 4,000 screens. So, you know, so I’m very proud. If you go to any company, either there’s someone that worked for me there or I founded that company, you know what I mean?
Daniel Satinsky: Right. You developed these multiplexes with Ikea malls?
Paul Heth: With Ikea. Well, then it came down to it, so I went to Miss Redstone. I said, Miss Redstone, I have to decide, either…why don’t we do that together with you, because you’ve seen what I can do—and she’s a phenomenal partner and backed me up—or I’m going to do it with one of the Russian oligarch groups. Because I started a dialogue with Potanin’s group. So, it was kind of like this very stressful, because I had to sign like a $60 million commitment to Ikea. And so I had to sign that with not $60 million yet. But Shari said I’ll tell you what, I’ll go to Moscow and then I’ll decide.
And when she flew into Moscow, we met her at the private air terminal, and by the time we even got in the center and her car, she’s like I see it, we’re in. And so then they helped me, and then I was able to back up my commitment to Ikea. I started Kinostar, which became phenomenally successful. We developed…we were doing something like 18 million admissions in ten properties—six properties, like just insane numbers, but we built these big places in Ikea MEGAs*. And then that further started the Russian cinema sector. So, by the time the Ukraine war started, from when I started, we took the box office of Russia from less than $3 million a year to nearly a billion dollars a year. Just theater tickets.
Daniel Satinsky: And it also then led to production houses, Russian—
Paul Heth: Well, then local production. Russia’s one of the few markets where you can still make a movie and make most of its costs back just by a theatrical run. In developed markets they still need all the platforms—they need the money from streaming, from this and that. But Russia’s kind of a throwback to the 1950s and ‘40s of American, where a successful movie can return it’s, like its cost. And so that started and the studios started supporting.
Then I started, with Sony I started a company called Monumental where we started making movies in Russia. And we made a number of huge box office movies under our Monumental brand, with the same gentleman Michael that I told you I went to London with. So, I’m pretty well threaded in the DNA of the modern kind of cinema business in Russia, and—
Daniel Satinsky: And would you…you changed the way people entertain themselves.
Paul Heth: Yes. And the thing I’d say is what we did there, I would put that experience that we offer moviegoers—because I still have Karo in Russia, and Karo is the No. 1 circuit in Russia. I’m not active in management. I’m on kind of the shareholder level and the advisory committee board level, but it’s my, you know, I’m threaded in there. I’m the only probably American shareholder in the sector. Everybody’s left.
My wife’s Russian, so we decided we were committed to Russia long-term, and we believe that you have, even in good days and bad days you don’t give up on relationships, right? So, we certainly don’t disagree with the politics, what’s happened, that’s not our business, but we have great love for the country. My children, you know, were christened in monasteries of the church there. We’re bilingual. We’re not going to give up on a historic friendship. But can we express our disappointment? Sure. Can we try to… We believe by staying and keeping cultural and commercial ties you can influence decisions over a long-term. You can’t just be like we’re in or we’re out. You’ve got to be in or out. And so, we’re in long-term. And that’s been hard, you know, but we’re still there, and we’ve kept that up. And we’re very, immensely proud.
And what’s interesting about me is in Russia I get a lot of respect from the government, or the ministries or people in the cultural sector because they know that I kind of…moviemaking in Russia was a really, really very important…it was the largest industry, hard currency generating industry for the government except for arms sales and vodka before perestroika. It was a big tool for entertainment for the masses. And it literally went away until we invigorated it. Now there was other people that came along, the great directors and producers, but we kind of started that era, and we’re very proud of it.
And I would argue that the Russian moviegoing, the experience we developed for our patrons there is the best in class globally. If you go to one of my…it’s just a very much more better experience, and I’m very proud of it. And I think there’s more, better things to come once hopefully Mr. Putin and the political atmosphere and all that, that gets sorted. But Russia long-term is such an extraordinary cultural participant globally. If you look at their writers, directors, musicians, composers. I mean, they’re just so immensely talented in the arts. We’re very proud that the local production we had a big hand in, you know, in addition to showing Hollywood movies, but we’re very proud of the whole thing, you know, so…
Daniel Satinsky: So, you took the American sort of experience in distribution and production—
Paul Heth: And moviegoing.
Daniel Satinsky: And moviegoing, and Russified it, if you will.
Paul Heth: Well, I think we perfected it for… We made it, I think, a much more, when you go to our theaters, much more momentum, where, like, I would pick the play list, and we’d play music everywhere, and we’d bring local craft food and beverage guys to integrate them with the obvious Coke and popcorn. We’d try to, you know. And we know that, you know, we’d offer a luxury experience, an aspirational experience, as well as a mass market experience. We would, you know, how we did the films. It was, you know, it’s quite different, but in my view, if we brought that business—and maybe I will—to some other markets, it would be a category killer because we were very fast-paced, a lot of momentum, so a real experience for the moviegoer, where the theater is as much an attraction as what’s on the screen.
Daniel Satinsky: Could you describe, when you said a combination of a luxury experience and a mass market. What constitutes a luxury experience?
Paul Heth: Well, we would take these…well, when I had Kodak Kino Mir it was crazy because we only had 580 seats, so all these oligarchs would call me and say—I became friends with all the oligarchs because we were like the hottest ticket in Europe, right? And they would come and rent like ten seats in the middle for a movie, and they’d bring their security apparatus and their wives or girlfriends and sit in the middle.
And then we did, like by the way, there were people scalping Kodak Kino Mir tickets on the street for $100. And one idea I said, one guy said, well, Paul, why don’t you take like 100 tickets and scalp them yourself? I said no-no-no, we don’t want to do that. We want to make it accessible for all economic groups. So, we kept the tickets at $7, and then we started only allowing, you could buy only a couple tickets per day because guys would come in and try to buy 100, like tough guys would try to, and then they could sell it for $100 outside. And we said no. Because then, before you know it, you’ll have kind of a wrong kind of feel.
And by the way, we did things like we brought Nestle and we developed the first kind of coffee business in Russia, you know, coffee café on the second floor. And I regret that because Nestle said Paul, why don’t you leave this and why don’t we JV in building 500 of these in Europe. And I said coffee I don’t know, but movie I do. I probably should have done both, looking back, but…
And then we put in a store. We went to Cosmopolitan and we put in like a store with…we’d merchandise fashionable things through our brand, you know, Kino Mir clothing line. We just tried to make it like more interesting than just flying, you know, than an efficiency model going to like an airport lobby getting in and out. We wanted to make it thrilling.
And then with Ikea we started doing big buildings, like, you know, nine, ten thousand square meters. And so we started adding in—I’d have an area like, you know, we developed kind of a first class offering, the very first. It’s very common in the U.S. now, but we were already ahead of this, where we’d have overstuffed chairs and more like service to your chair. This was like early 2000s, way ahead of the trend in Europe now. And then going into Kinostar, you remember I sold Kinostar in 2011 to Mr. Potanin’s group, and we sold it for an all-time record. But then I invested again in Karo, and we really went—because now we had the advantage of technology, so we developed…we have a very active social media. This was like 2012. We have a huge social media. We have probably 100 million views a year.
Daniel Satinsky: Describe what Karo is.
Paul Heth: Russia’s premier cinema operator.
Daniel Satinsky: Oh, okay, so you own theaters around.
Paul Heth: I own that with, of course, a Russian bank and several non-sanctioned Russian groups. But we have a thing called Next Gen which is a movie going on steroids. So, we have like a Whole Foods food and beverage concept where you go in and pick your foods, and then you scan out yourself. Everything is digitized, no cashiers. It’s got cool music, and like 1,500 SKUs. Most American guys have 40 to 60. We did that experience.
We do a lot with—because you know Russian young people are crazy about technology and using devices, so we have a whole way to communicate with them even when they’re in our theaters. And then we developed different products, like we have a Karo Black which is, we did a deal with Coca-Cola and Brown-Forman, the Jack Daniel’s guys, who had a deal with the Sinatra family. We developed these luxury segments of our property [with] three to four screens, over the top. Like recliners, the screen experience. By the way, this is ten years. It had bar delivery, special products. That became very successful.
Then we developed our own large format brand called LUXE, which is like IMAX, we think better, but we developed that for our audiences. And everything about the lobby experience. You know, I personally pick the play list. We taught our kids kind of the—which I learned from the Four Seasons and Disney how to treat customers. When they’re five feet away you give a greeting [the day], when they’re ten feet you give them a smile, all that stuff. The bathrooms are cleaned every 15 minutes so your wife or your mom wouldn’t be embarrassed to use, you know what I mean?
Daniel Satinsky: Yeah.
Paul Heth: Sounds like a simple thing. It is a simple thing, but it’s important, right? And so that’s done really well, so we’ve kept with that. And even now, we have better margins now than the European guys, and we’re not playing any studio product because of the Ukraine war.
Daniel Satinsky: It’s all Russian product.
Paul Heth: Global product except for the four majors, including a lot of American product. And by the way, we influence about 30% of the market. 70% of the market is showing pirated Hollywood films. They pirate them from somewhere else. They put a cheap soundtrack. I can’t, I won’t do that, so we’re… And we’re still keeping…we’re killing the margins of the guys like in Europe and all that. We’re a better business. So, I’m very proud of that.
And then I’ve kept the production business. I still have Monumental. We did a deal with MTS, it’s called Monumental Vision, where we make content for the theaters and for the streamers. That’s run again by that gentleman Michael. So, I’m very proud about Russia. My wife always jokes that I’m more Russian than she is, even though I’m probably not as fluent as I should be. But in Russia, you know, what’s the saying, every restaurant I get a good table, you know, so…
Daniel Satinsky: [Laughs.] Yeah.
Paul Heth: Because I’ve always acted like a guest. I’ve always been very respectful. I don’t try to get familiar that I’m like an inside player. If I meet someone of a government rank I address them by that, or a military rank. We make sure we’re totally transparent. Because, you know, if you’re transparent you don’t have issues. Like oh, you don’t pay your tax—hey, we pay all the taxes. We do everything. We don’t want to have any adverse… And in Russia—
Daniel Satinsky: No vulnerabilities, right?
Paul Heth: Well, I wouldn’t say that because in a way, as a guest, you’re always…you don’t have a home turf. But we always tried to get really established partners. So, in the film business I was partners with Sony and Fox and Disney. I mean, what is a bad player going to do with them, you know what I mean? Like guys, we’re…okay, l go talk to Burbank, like I’m just, you know. And then the Redstones—
Daniel Satinsky: So, just going back to the ‘90s and the period when krysha* was important for so many people—
Paul Heth: Well, here’s what we did.
Daniel Satinsky: You didn’t need it.
Paul Heth: I was running a 100 million plus cash business in Russia a year with no krysha because why?We pay all the taxes. What I did do is that I went to them, I met the Ministry of Interior. I said look, I have this business, it’s for the benefit of the Russian people. The margins…the margins in cinema, it’s not like natural resources, are modest, you know, 15, 20%.
Daniel Satinsky: But still there’s a lot of cash generated.
Paul Heth: It’s cash, but when you look at the net margin, and I… And so we did arrange a…we hired—they said hire the…this is a security consultant that’s transparent. So, we hired a security group, much like all corporations do, even in America, to look after both our physical plants and for any, these kinds of situations.
So, those guys would approach me, they’d come to my office. And we’re, you know, we have literally millions of dollars in business. They’d say we’d like to be your partner. Here’s what I’d say. Sir, what a pleasure to meet you, may I get you a cup of coffee, and would you like…what can we…would you like some tickets? And I said before we have this conversation can you please speak to our advisors in these matters? And I had a phone, just a business card with one phone number on it, a 77 number. I’d give the number, and they’d say oh, excuse me, Mr. Heth, we’ll show ourselves out.
Daniel Satinsky: Okay.
Paul Heth: You know what I mean? Because they knew that you don’t mess with that level. And I said but if they tell me to sort with you, of course, and I said guys, I’m just, I have to…you have to deal with them, they’ll advise me on how to deal with this. So, I was totally respectful. And I’d say here’s some tickets. Do you have kids, here’s some gifts. But if…and when they saw that number, because they knew what…like an all 7 number, okay, see you later.
Because I also said to the government apparatus, look, I’m trying to bring content to the market, I’m working with multinational companies, it’s not in your interest for us to have an issue here, because it would be a big embarrassment and it would just set you back, and I’m investing in an area where it’s culturally relevant and you need it. And they…they were…they…
By the way, the Russian government to me has always been phenomenal. We’ve never had one issue across multiple ministries, whether it be the sanitation ministry for our garbage pickups, weights and measurement. You know, like they control the servings in the bars, the Ministry of Culture. I’ve always been treated respectfully, you know, I’ve never… I know other people have other… I’ve always—maybe because I was always very formal, never got familiar, and never shortcutted where I could have an obvious malfeasance, you know what I mean?
Daniel Satinsky: Right.
Paul Heth: And so I don’t have anything bad to say about any of that stuff. Matter of fact, I did meet Mr. Putin when we were trying to work in St. Petersburg early in my career. When I started that venture, I told you about in the Far East he was responsible for investments in St. Petersburg for foreign companies, and I did have one meeting with him. And it was…I was—because I knew he had been a colonel, I said Colonel Putin, it’s a great pleasure for me to meet you. He was very respectful, and we talked for a few—I mentioned my military rank, which was kind of junior. I said, you know, I was in the army, I was in tanks. And he was telling me about his family and this and that.
And but I, you know, he was—by the way, one thing I could say, I could tell you he was a very efficient manager because he knew the subject I was there to talk about. He was very well briefed. And it was like 40 minutes. And I had a translator with me. But we did it in Russian, but I could tell he spoke English, so he let me speak in English. Or he understood it and so on.
So, I’m not saying I…I’m not a political person. I don’t…I’m smart enough not to comment on things above my pay grade. But of course, I feel bad what’s happened, and I think it’s awful. I kind of know what that kind of violence means. But in terms of Russia for my family it’s been a phenomenal experience.
Daniel Satinsky: Yeah. So, I want to go back again to the ‘90s. And you grew from a very small beginning to a large group of people. How did you grow your staff? Did you set up your own training programs? Did you bring people in from the outside? Did you bring people from the U.S.? How did you do it?
Paul Heth: Well, I just had a strong idea of… First, I started at Kodak Kino Mir, so I just, all the wonderful things that I liked about service, whether it’s a lesson I picked up back then, like at a grand hotel like the Marriott, or when I remember going to Disney parks, or the things I liked as a moviegoer with my father. Because I came from very, very modest beginnings, and going to the movies was like a big treat for the family.
And so I just kind of incorporated that into my thinking, like hey, let’s try—like I’d buy the khakis from Ikea and we’d iron them, and a shirt and a scarf you had, like a red scarf, and we made sure everyone washed their face and brushed their hair, and how do you dress. And be simple in your offering, but offer it very well, so, you know, super well. And then make sure everything’s clean. Like I’m crazy about the bathrooms and all that.
So, I started that, and then that core team of people, as we got bigger, they went from being in the position to training people, and we kept going. So, Miss Chirikhina kind of became my No. 2 for like 20 years. And I told you that that lady became my F&B director. By the way, she ended up going to a competitor—
Paul Heth: It was like boycotted by the Motion Picture Association as a pirated market. So, I went in there and we did all this, and I got Disney to give me a movie with Sean Connery called “The Rock,” about—a crazy story about Alcatraz, but it was—
Daniel Satinsky: About Alcatraz, yeah.
Paul Heth: But to Disney’s credit, they scored the movie and they did a soundtrack with 60 different voices, Russian, in digital sound. And we opened—so guys said oh, you can sell tickets for three, four dollars. I said no, I don’t know. So, we opened at like a seven-dollar ticket. The day we opened we had lines over one kilometer.
Daniel Satinsky: Wow.
Paul Heth: And we sold out essentially for the next several years. From 9:00 in the morning till 1:00 in the morning we did shows.
Daniel Satinsky: And these were mostly Russian moviegoers, right?
Paul Heth: No, it was all—well, some expats would go, but everything was in Russian, so we did everything with proper dubs. And we basically started the modern theatrical business. And that era kind of started the film studios to come back, local production. At that time local production was only one to three percent of our box office, but I always tried to play a Russian movie. Even though the audience would come in, no-no, we want to see Hollywood. And we got the studios to start working in the market. And then what happened was I’m like okay, I’m Russia’s big exhibitor with one location, but we were doing like $16 million turnover on one screen, and in the middle, right in Pushkin Square.
Daniel Satinsky: 16 million per what?
Paul Heth: Per year in gross sales. In gross sales. Which is an insane number for a single screen. It’s insane. It’s probably the highest grossing in the history of our industry. So, at that time I heard about the Redstone family, so I started calling the Redstone family in Boston, Sumner and Shari’s offices, and said I’m the biggest exhibitor in Russia, would you meet with me. And then finally, after a couple years, like around ’99, 2000, I got a meeting with Miss Redstone, and then she was kind enough to take me to meet her father.
And they said listen, we believe in—you’re kind of this crazy guy, and you’re very passionate, we believe in you, but we’re not so ready for Russia, why don’t we start a business together in America so we can work together in a more defined market. But I said okay, guys, I’ll do that, but I’m going to keep my team working in Moscow. At this point we had left…we ended our Kodak arrangement because Kodak had decided to kind of leave the market, and we ended up selling that screen to one of the, like a smaller competitor that was starting. But I kept my team in place, and I started negotiating—
Daniel Satinsky: Okay, so you no longer owned the theater, but you had the team.
Paul Heth: I had the team. And I started, I kept the team and we started…I started negotiating like a 10 site deal with Ikea to build my concept of the modern, like a big multiplex business. And so I developed a business in the U.S. with the Redstones. At the same time they allowed me every quarter to go back to Russia and keep my efforts going, because I basically was taking all my salary and compensation from that and investing in Russia, literally like get it that day and back out.
And so that woman who met me, Olga Chirikhina, was like my COO, and my housekeeper was my F&B director, like I had my team. And we…and by the way, something I’m proud of, if you look at the cinema business in Russia now, all the big firms are, either I founded the firm or people that worked for me lead those companies to this day.
Daniel Satinsky: Wow. So, you seeded the whole industry.
Paul Heth: Yeah, the whole thing, 100%. Like the four biggest operators, either I founded it or the people that worked for me. Matter of fact, the top 20 box office sites in Russia right before Ukraine started, I probably either founded it or developed 18 of the top 20 locations, including one through ten in the entire Russian market of 4,000 screens. So, you know, so I’m very proud. If you go to any company, either there’s someone that worked for me there or I founded that company, you know what I mean?
Daniel Satinsky: Right. You developed these multiplexes with Ikea malls?
Paul Heth: With Ikea. Well, then it came down to it, so I went to Miss Redstone. I said, Miss Redstone, I have to decide, either…why don’t we do that together with you, because you’ve seen what I can do—and she’s a phenomenal partner and backed me up—or I’m going to do it with one of the Russian oligarch groups. Because I started a dialogue with Potanin’s group. So, it was kind of like this very stressful, because I had to sign like a $60 million commitment to Ikea. And so I had to sign that with not $60 million yet. But Shari said I’ll tell you what, I’ll go to Moscow and then I’ll decide.
And when she flew into Moscow, we met her at the private air terminal, and by the time we even got in the center and her car, she’s like I see it, we’re in. And so then they helped me, and then I was able to back up my commitment to Ikea. I started Kinostar, which became phenomenally successful. We developed…we were doing something like 18 million admissions in ten properties—six properties, like just insane numbers, but we built these big places in Ikea MEGAs*. And then that further started the Russian cinema sector. So, by the time the Ukraine war started, from when I started, we took the box office of Russia from less than $3 million a year to nearly a billion dollars a year. Just theater tickets.
Daniel Satinsky: And it also then led to production houses, Russian—
Paul Heth: Well, then local production. Russia’s one of the few markets where you can still make a movie and make most of its costs back just by a theatrical run. In developed markets they still need all the platforms—they need the money from streaming, from this and that. But Russia’s kind of a throwback to the 1950s and ‘40s of American, where a successful movie can return it’s, like its cost. And so that started and the studios started supporting.
Then I started, with Sony I started a company called Monumental where we started making movies in Russia. And we made a number of huge box office movies under our Monumental brand, with the same gentleman Michael that I told you I went to London with. So, I’m pretty well threaded in the DNA of the modern kind of cinema business in Russia, and—
Daniel Satinsky: And would you…you changed the way people entertain themselves.
Paul Heth: Yes. And the thing I’d say is what we did there, I would put that experience that we offer moviegoers—because I still have Karo in Russia, and Karo is the No. 1 circuit in Russia. I’m not active in management. I’m on kind of the shareholder level and the advisory committee board level, but it’s my, you know, I’m threaded in there. I’m the only probably American shareholder in the sector. Everybody’s left.
My wife’s Russian, so we decided we were committed to Russia long-term, and we believe that you have, even in good days and bad days you don’t give up on relationships, right? So, we certainly don’t disagree with the politics, what’s happened, that’s not our business, but we have great love for the country. My children, you know, were christened in monasteries of the church there. We’re bilingual. We’re not going to give up on a historic friendship. But can we express our disappointment? Sure. Can we try to… We believe by staying and keeping cultural and commercial ties you can influence decisions over a long-term. You can’t just be like we’re in or we’re out. You’ve got to be in or out. And so, we’re in long-term. And that’s been hard, you know, but we’re still there, and we’ve kept that up. And we’re very, immensely proud.
And what’s interesting about me is in Russia I get a lot of respect from the government, or the ministries or people in the cultural sector because they know that I kind of…moviemaking in Russia was a really, really very important…it was the largest industry, hard currency generating industry for the government except for arms sales and vodka before perestroika. It was a big tool for entertainment for the masses. And it literally went away until we invigorated it. Now there was other people that came along, the great directors and producers, but we kind of started that era, and we’re very proud of it.
And I would argue that the Russian moviegoing, the experience we developed for our patrons there is the best in class globally. If you go to one of my…it’s just a very much more better experience, and I’m very proud of it. And I think there’s more, better things to come once hopefully Mr. Putin and the political atmosphere and all that, that gets sorted. But Russia long-term is such an extraordinary cultural participant globally. If you look at their writers, directors, musicians, composers. I mean, they’re just so immensely talented in the arts. We’re very proud that the local production we had a big hand in, you know, in addition to showing Hollywood movies, but we’re very proud of the whole thing, you know, so…
Daniel Satinsky: So, you took the American sort of experience in distribution and production—
Paul Heth: And moviegoing.
Daniel Satinsky: And moviegoing, and Russified it, if you will.
Paul Heth: Well, I think we perfected it for… We made it, I think, a much more, when you go to our theaters, much more momentum, where, like, I would pick the play list, and we’d play music everywhere, and we’d bring local craft food and beverage guys to integrate them with the obvious Coke and popcorn. We’d try to, you know. And we know that, you know, we’d offer a luxury experience, an aspirational experience, as well as a mass market experience. We would, you know, how we did the films. It was, you know, it’s quite different, but in my view, if we brought that business—and maybe I will—to some other markets, it would be a category killer because we were very fast-paced, a lot of momentum, so a real experience for the moviegoer, where the theater is as much an attraction as what’s on the screen.
Daniel Satinsky: Could you describe, when you said a combination of a luxury experience and a mass market. What constitutes a luxury experience?
Paul Heth: Well, we would take these…well, when I had Kodak Kino Mir it was crazy because we only had 580 seats, so all these oligarchs would call me and say—I became friends with all the oligarchs because we were like the hottest ticket in Europe, right? And they would come and rent like ten seats in the middle for a movie, and they’d bring their security apparatus and their wives or girlfriends and sit in the middle.
And then we did, like by the way, there were people scalping Kodak Kino Mir tickets on the street for $100. And one idea I said, one guy said, well, Paul, why don’t you take like 100 tickets and scalp them yourself? I said no-no-no, we don’t want to do that. We want to make it accessible for all economic groups. So, we kept the tickets at $7, and then we started only allowing, you could buy only a couple tickets per day because guys would come in and try to buy 100, like tough guys would try to, and then they could sell it for $100 outside. And we said no. Because then, before you know it, you’ll have kind of a wrong kind of feel.
And by the way, we did things like we brought Nestle and we developed the first kind of coffee business in Russia, you know, coffee café on the second floor. And I regret that because Nestle said Paul, why don’t you leave this and why don’t we JV in building 500 of these in Europe. And I said coffee I don’t know, but movie I do. I probably should have done both, looking back, but…
And then we put in a store. We went to Cosmopolitan and we put in like a store with…we’d merchandise fashionable things through our brand, you know, Kino Mir clothing line. We just tried to make it like more interesting than just flying, you know, than an efficiency model going to like an airport lobby getting in and out. We wanted to make it thrilling.
And then with Ikea we started doing big buildings, like, you know, nine, ten thousand square meters. And so we started adding in—I’d have an area like, you know, we developed kind of a first class offering, the very first. It’s very common in the U.S. now, but we were already ahead of this, where we’d have overstuffed chairs and more like service to your chair. This was like early 2000s, way ahead of the trend in Europe now. And then going into Kinostar, you remember I sold Kinostar in 2011 to Mr. Potanin’s group, and we sold it for an all-time record. But then I invested again in Karo, and we really went—because now we had the advantage of technology, so we developed…we have a very active social media. This was like 2012. We have a huge social media. We have probably 100 million views a year.
Daniel Satinsky: Describe what Karo is.
Paul Heth: Russia’s premier cinema operator.
Daniel Satinsky: Oh, okay, so you own theaters around.
Paul Heth: I own that with, of course, a Russian bank and several non-sanctioned Russian groups. But we have a thing called Next Gen which is a movie going on steroids. So, we have like a Whole Foods food and beverage concept where you go in and pick your foods, and then you scan out yourself. Everything is digitized, no cashiers. It’s got cool music, and like 1,500 SKUs. Most American guys have 40 to 60. We did that experience.
We do a lot with—because you know Russian young people are crazy about technology and using devices, so we have a whole way to communicate with them even when they’re in our theaters. And then we developed different products, like we have a Karo Black which is, we did a deal with Coca-Cola and Brown-Forman, the Jack Daniel’s guys, who had a deal with the Sinatra family. We developed these luxury segments of our property [with] three to four screens, over the top. Like recliners, the screen experience. By the way, this is ten years. It had bar delivery, special products. That became very successful.
Then we developed our own large format brand called LUXE, which is like IMAX, we think better, but we developed that for our audiences. And everything about the lobby experience. You know, I personally pick the play list. We taught our kids kind of the—which I learned from the Four Seasons and Disney how to treat customers. When they’re five feet away you give a greeting [the day], when they’re ten feet you give them a smile, all that stuff. The bathrooms are cleaned every 15 minutes so your wife or your mom wouldn’t be embarrassed to use, you know what I mean?
Daniel Satinsky: Yeah.
Paul Heth: Sounds like a simple thing. It is a simple thing, but it’s important, right? And so that’s done really well, so we’ve kept with that. And even now, we have better margins now than the European guys, and we’re not playing any studio product because of the Ukraine war.
Daniel Satinsky: It’s all Russian product.
Paul Heth: Global product except for the four majors, including a lot of American product. And by the way, we influence about 30% of the market. 70% of the market is showing pirated Hollywood films. They pirate them from somewhere else. They put a cheap soundtrack. I can’t, I won’t do that, so we’re… And we’re still keeping…we’re killing the margins of the guys like in Europe and all that. We’re a better business. So, I’m very proud of that.
And then I’ve kept the production business. I still have Monumental. We did a deal with MTS, it’s called Monumental Vision, where we make content for the theaters and for the streamers. That’s run again by that gentleman Michael. So, I’m very proud about Russia. My wife always jokes that I’m more Russian than she is, even though I’m probably not as fluent as I should be. But in Russia, you know, what’s the saying, every restaurant I get a good table, you know, so…
Daniel Satinsky: [Laughs.] Yeah.
Paul Heth: Because I’ve always acted like a guest. I’ve always been very respectful. I don’t try to get familiar that I’m like an inside player. If I meet someone of a government rank I address them by that, or a military rank. We make sure we’re totally transparent. Because, you know, if you’re transparent you don’t have issues. Like oh, you don’t pay your tax—hey, we pay all the taxes. We do everything. We don’t want to have any adverse… And in Russia—
Daniel Satinsky: No vulnerabilities, right?
Paul Heth: Well, I wouldn’t say that because in a way, as a guest, you’re always…you don’t have a home turf. But we always tried to get really established partners. So, in the film business I was partners with Sony and Fox and Disney. I mean, what is a bad player going to do with them, you know what I mean? Like guys, we’re…okay, l go talk to Burbank, like I’m just, you know. And then the Redstones—
Daniel Satinsky: So, just going back to the ‘90s and the period when krysha* was important for so many people—
Paul Heth: Well, here’s what we did.
Daniel Satinsky: You didn’t need it.
Paul Heth: I was running a 100 million plus cash business in Russia a year with no krysha because why?We pay all the taxes. What I did do is that I went to them, I met the Ministry of Interior. I said look, I have this business, it’s for the benefit of the Russian people. The margins…the margins in cinema, it’s not like natural resources, are modest, you know, 15, 20%.
Daniel Satinsky: But still there’s a lot of cash generated.
Paul Heth: It’s cash, but when you look at the net margin, and I… And so we did arrange a…we hired—they said hire the…this is a security consultant that’s transparent. So, we hired a security group, much like all corporations do, even in America, to look after both our physical plants and for any, these kinds of situations.
So, those guys would approach me, they’d come to my office. And we’re, you know, we have literally millions of dollars in business. They’d say we’d like to be your partner. Here’s what I’d say. Sir, what a pleasure to meet you, may I get you a cup of coffee, and would you like…what can we…would you like some tickets? And I said before we have this conversation can you please speak to our advisors in these matters? And I had a phone, just a business card with one phone number on it, a 77 number. I’d give the number, and they’d say oh, excuse me, Mr. Heth, we’ll show ourselves out.
Daniel Satinsky: Okay.
Paul Heth: You know what I mean? Because they knew that you don’t mess with that level. And I said but if they tell me to sort with you, of course, and I said guys, I’m just, I have to…you have to deal with them, they’ll advise me on how to deal with this. So, I was totally respectful. And I’d say here’s some tickets. Do you have kids, here’s some gifts. But if…and when they saw that number, because they knew what…like an all 7 number, okay, see you later.
Because I also said to the government apparatus, look, I’m trying to bring content to the market, I’m working with multinational companies, it’s not in your interest for us to have an issue here, because it would be a big embarrassment and it would just set you back, and I’m investing in an area where it’s culturally relevant and you need it. And they…they were…they…
By the way, the Russian government to me has always been phenomenal. We’ve never had one issue across multiple ministries, whether it be the sanitation ministry for our garbage pickups, weights and measurement. You know, like they control the servings in the bars, the Ministry of Culture. I’ve always been treated respectfully, you know, I’ve never… I know other people have other… I’ve always—maybe because I was always very formal, never got familiar, and never shortcutted where I could have an obvious malfeasance, you know what I mean?
Daniel Satinsky: Right.
Paul Heth: And so I don’t have anything bad to say about any of that stuff. Matter of fact, I did meet Mr. Putin when we were trying to work in St. Petersburg early in my career. When I started that venture, I told you about in the Far East he was responsible for investments in St. Petersburg for foreign companies, and I did have one meeting with him. And it was…I was—because I knew he had been a colonel, I said Colonel Putin, it’s a great pleasure for me to meet you. He was very respectful, and we talked for a few—I mentioned my military rank, which was kind of junior. I said, you know, I was in the army, I was in tanks. And he was telling me about his family and this and that.
And but I, you know, he was—by the way, one thing I could say, I could tell you he was a very efficient manager because he knew the subject I was there to talk about. He was very well briefed. And it was like 40 minutes. And I had a translator with me. But we did it in Russian, but I could tell he spoke English, so he let me speak in English. Or he understood it and so on.
So, I’m not saying I…I’m not a political person. I don’t…I’m smart enough not to comment on things above my pay grade. But of course, I feel bad what’s happened, and I think it’s awful. I kind of know what that kind of violence means. But in terms of Russia for my family it’s been a phenomenal experience.
Daniel Satinsky: Yeah. So, I want to go back again to the ‘90s. And you grew from a very small beginning to a large group of people. How did you grow your staff? Did you set up your own training programs? Did you bring people in from the outside? Did you bring people from the U.S.? How did you do it?
Paul Heth: Well, I just had a strong idea of… First, I started at Kodak Kino Mir, so I just, all the wonderful things that I liked about service, whether it’s a lesson I picked up back then, like at a grand hotel like the Marriott, or when I remember going to Disney parks, or the things I liked as a moviegoer with my father. Because I came from very, very modest beginnings, and going to the movies was like a big treat for the family.
And so I just kind of incorporated that into my thinking, like hey, let’s try—like I’d buy the khakis from Ikea and we’d iron them, and a shirt and a scarf you had, like a red scarf, and we made sure everyone washed their face and brushed their hair, and how do you dress. And be simple in your offering, but offer it very well, so, you know, super well. And then make sure everything’s clean. Like I’m crazy about the bathrooms and all that.
So, I started that, and then that core team of people, as we got bigger, they went from being in the position to training people, and we kept going. So, Miss Chirikhina kind of became my No. 2 for like 20 years. And I told you that that lady became my F&B director. By the way, she ended up going to a competitor—
Daniel Satinsky: Say what—for the people listening to this, F&B?
Paul Heth: Food and beverage.
So, she was my landlady that was making the chicken, and she was like 45, she didn’t have a job. I said why don’t you come down and work the concessions counter in my first little theater venture at the Rad, and then she kind of grew with me.
And then Miss Chirikhina, then I hired her husband to kind of be the physical plant guy in development and construction. That was his background. Then her son, I hired him to be our marketing director because he had a marketing [degree]. And then we just kind of grew. We were kind of like a family business, and then we had corporate partners, so we had to conduct ourselves. But that group of people, many of them are still with me today 25 years later, 30 years.
Daniel Satinsky: So, it was a trusted team of people that you built.
Paul Heth: Yes. Yeah. And then, but we were quite sophisticated. We kind of leaned into technologies. We were very careful to look at what was best in class in other markets and try to learn from it. And one thing I found about the Russian workforce—we call them team members—versus other markets. First of all, I think the Russian team members have a much higher level of literacy and education. The vast majority of my team members have at least one, if not two collegiate degrees, you know what I mean? Very well educated. Particularly the finance people are just phenomenal on, you know, have every certification and training.
So, I find that even like a theater manager usually will have a Bachelor’s or Master’s. In the U.S., you know, other markets, they have real big trouble attracting staff. And so, I think we’re able to be a great place for young people that are in university as kind of a—because I think our brand is quite famous to use as a steppingstone. And people don’t want to give a career. We gave them a really nice career, a career path. So, we have extraordinary team members. I think if you go to a European or American equivalent, how many guys could you go in there that have multiple languages, even? Like all my guys speak multiple languages and this and that. So, I think on that side it’s phenomenal.
Daniel Satinsky: So, the stereotype of Russians in the early ‘90s was not service oriented. People who were public facing weren’t always smiling or nice.
Paul Heth: Yeah.
Daniel Satinsky: And so, is that something you had to teach people or…?
Paul Heth: Yeah, yeah. I think, well, first of all that, we were usually getting young people like, you know, 18 to 23, and they weren’t so caught up in the Soviet retail tradition. And then I’m just a super enthusiastic person. I think hopefully that my passion and…hopefully it was a bit infectious, and I was able to [have] kind of a like group of people around me. And if people weren’t like that, we’re like okay, then we’re not for you. Like okay, we’re not for each other. And then it would be interesting too, just that service culture, that really helped us with customers, because they come to my place, man, it’s blazing, and the music, the this and that, this and that. They go to a competitor it’s like a cemetery. So, where do you want to be, you know what I mean? And I feel like I could bring that in any market, that kind of drive and passion.
Daniel Satinsky: Yeah, yeah. Well, I just interviewed Henrik Winther.
Paul Heth: Oh, I know Henrik quite well. He has the restaurant, yeah.
Daniel Satinsky: Yeah, and he talked about how he had…how he built his staff, and training, and his supply chain, so I’m sure you must have gone through a lot of similar things.
Paul Heth: Oh, 100%. We had to…we had to develop a supply chain. There wasn’t one there. We had to figure out how to get, you know, bring in technology, particularly the seating. There wasn’t a manufacturer that had reclining seating and these different things, and projection equipment, which is quite sophisticated. We brought that to market. Then we had to develop a service network to service that. So, I had to do, on supply chain I had to create the supplier and then create the interface between the user and the supplier, so, you know. Because we couldn’t be in both places. We couldn’t put capital in both.
And then I had to bring, I had to get the movie guys in, so I spent like a couple years getting my butt kicked in Hollywood, you know, just kept trying and trying, and a couple guys believed in me. Now Russia, before the Ukraine war, we were the No. 1 market in Europe for admissions and No. 4 or 5 for revenue, just because of the dollar to ruble basis.
Daniel Satinsky: Right.
Paul Heth: So, even now, after the Ukraine war, we’re the No. 2 market for admissions in Europe. You know, so I took it from that to like No. 6 or 7 in the world for cinemas. And by the way, we thought the market would go to 2 billion. Unfortunately, Kyiv happened, so that’s going to set it back. But it’ll pick back up.
Daniel Satinsky: Yeah,. And so, it seems to me—also the other person I interviewed that you have a kind of similar approach is Peter Gerwe.
Paul Heth: Yeah, I know Peter quite well, yes.
Daniel Satinsky: So, Peter also talked about staying out of politics. Being in entertainment. They were an entertainment business and focusing on being entertaining.
Paul Heth: Yes. Remember, we’re guests. Just like I’m sure, let’s say, I was, my name was Pavel, you know, whatever, and I was trying to be in America, it wouldn’t be in my interest to go advise the American political apparatus or the diplomats on how to do their business. Now, if I’m asked, I could give, but respectfully give my opinion, but I’m not going to offer it. I’m going to be very careful.
And I think where guys got in trouble in Russia, they kind of forgot that they were guests. And you have to be careful. For example, in different businesses there’s local guys that might be able to conduct themselves with aggressive tenure, that they might be able to get away with because they can do things, have access in a way that we can’t. And I think if you forget that you get in trouble. You know, you’ve got to—hey, you know. Like I told you the security thing. The guy showed up, hey sir, thank you for seeing me, I’m so honored that you’re interested in my business, if these guys think it’s okay to talk, then talk. But I protected myself.
And I never, ever would say anything, you know, about the Moscow city administration or the Kremlin group. I’m not a Russian citizen. You know, it’s not my right. Now, can I express that hey, I’m really sad how things worked out and disappointed? Sure. But it’s not my place to, you know, particularly when I have… You know, you also think of the greater good. I have 2,000 families that count on us for sustenance. I’ve got to think about that. Just like in America, let’s be clear, a CEO of a Fortune 500 company is going to be very careful what they say about Mr. Trump.
Daniel Satinsky: Yeah, right.
Paul Heth: And that’s the way of the world. I’m not saying it’s right or whatever but just remember your place sometimes. And I think sometimes guys forget their place and there’s consequences.
Daniel Satinsky: Yeah. So, because I’m so focused on the ‘90s I want to ask you about 1998. Were you there then?
Paul Heth: Yes, I was, and we…it was awful. I had Kodak Kino Mir. I had a partner at the time that, I was kind of running the front of the house and he was running finance and the back, and he made a very poor decision. We had significant of our money in those GKOs* which was paying a high turnover. And of course that went bust overnight, so our cash position went from being considerable to being very not considerable.
But having said that, we were able to, because we’re kind of a cash and carry business, meaning that we have cash every day from… So, in terms of our ticket, it didn’t drop off at all.
Daniel Satinsky: It didn’t?
Paul Heth: No, not even a single bit.
Daniel Satinsky: All right. So, you never considered, like some—there was a big outflow of expats at that point.
Paul Heth: No, but I stayed then. I never considered leaving. And yeah, not at all, no.
Daniel Satinsky: Yeah, okay.
Paul Heth: Matter of fact, I started my…I did Kodak and then I opened Kinostar within three years of that. I was already working on that in ’98.
Daniel Satinsky: Are there things that you wanted to talk about your experience that I haven’t asked you about?
Paul Heth: No, I think we’ve covered. I think that it was an… I think there was a couple classes of people—not classes—segments of people that went there. There was the grifters and quick buck guys. They were able to be successful for a while, but eventually they were kind of winnowed out. You know, the guys that could come in, fast talking, kind of take advantage of a less sophisticated market, you know, across a lot of areas. And I think by the end of the ‘90s they were kind of already found out and shown the door, whether it be guys in finance or retail, that was over with.
And then I think there were some extraordinary entrepreneurs there like Scott or Bernie Sucher or Charles Ryan and Michael Calvey in their respective areas. But I think those people would have been—I think myself—whatever market I think we would have been successful. I think that was a high caliber of entrepreneur that would have been successful in any market. Not that Russia was so easy they could be successful; I think it was the reverse. I think you had to even be more extraordinary to have large-scale success in Russia. Because there’s kind of, some people say oh, in Russia anybody could have. No-no-no-no-no. It’s very difficult and hard because you don’t have those fall backs. So, I think that that class—and I consider myself in that class. I think if you ask around, we’re probably something that people point to, like Charlie, or like Michael or Rostislav, extraordinary caliber that would have probably risen wherever they were.
And then I think that in Russia that those folks that gave back and participated in a fair manner, I think Russia was very accommodating. I think people that forgot that, not so accommodating, you know what I mean? So, that would be my…
And I still believe in Russia. I think it’s…even now I always thought it was an unbelievably wonderful country with some really harsh outcomes because maybe how they got the different leadership… The leadership of the country maybe sometimes didn’t meet the promise that the country offered, you know, from a historical context. And so I just think that Russia, with all its resources, the people are absolutely, the Russian people are so wonderful, so well educated, so literate. I mean, the arts is just amazing, if you go watch Chekhov, or if you go to the ballet, or you listen to Tchaikovsky, like it’s amazing.
But also, with a great sense of humor. One thing that’s funny is that my son, who speaks Russian fluently, is a tennis player, and he got afoul of my wife a couple days ago where he was playing tennis and he kind of forgot that Mom was there and he used some choice language he shouldn’t have. You know, he was frustrated he missed the ball. And my wife used very choice language to kind of remind him of his Ps and Qs. But I always laugh that Russians can swear so beautifully, how they can put together very graphic and descriptive swear words in a sentence, but with a sense of humor. And so, I was laughing so hard. I was talking to Charlie about that today. And by the way, there was that movie that came out this year about the Russian oligarch’s kid in New York. It was the best picture.
Daniel Satinsky: Right.
Paul Heth: But the movie was kind of—it is what it is, that story about the girl. But there’s a couple times in there where they’re swearing, and that was very authentic, you know what I mean?
Daniel Satinsky: Okay. I haven’t seen the movie, but—
Paul Heth: But you know what I’m talking about.
Daniel Satinsky: Yeah, I know which one you’re talking about.
Paul Heth: But the swear words, the swearing was very authentic, the sense of humor. And I love…also the sense of humor in Russia is amazing. And also, I think the thing I like about Russia, if someone’s your friend, they’re really your friend. The concept of best friends, and if someone really is your friend… It’s interesting, the only business problems I ever had in Russia where people tried to go back against contracts, or tried to grift or take advantage, it was never the Russian guys, it was always expats.
Daniel Satinsky: Well, excellent, excellent. Thank you for this.
Paul Heth: Okay.
Daniel Satinsky: I really appreciate it.
Paul Heth: Food and beverage.
So, she was my landlady that was making the chicken, and she was like 45, she didn’t have a job. I said why don’t you come down and work the concessions counter in my first little theater venture at the Rad, and then she kind of grew with me.
And then Miss Chirikhina, then I hired her husband to kind of be the physical plant guy in development and construction. That was his background. Then her son, I hired him to be our marketing director because he had a marketing [degree]. And then we just kind of grew. We were kind of like a family business, and then we had corporate partners, so we had to conduct ourselves. But that group of people, many of them are still with me today 25 years later, 30 years.
Daniel Satinsky: So, it was a trusted team of people that you built.
Paul Heth: Yes. Yeah. And then, but we were quite sophisticated. We kind of leaned into technologies. We were very careful to look at what was best in class in other markets and try to learn from it. And one thing I found about the Russian workforce—we call them team members—versus other markets. First of all, I think the Russian team members have a much higher level of literacy and education. The vast majority of my team members have at least one, if not two collegiate degrees, you know what I mean? Very well educated. Particularly the finance people are just phenomenal on, you know, have every certification and training.
So, I find that even like a theater manager usually will have a Bachelor’s or Master’s. In the U.S., you know, other markets, they have real big trouble attracting staff. And so, I think we’re able to be a great place for young people that are in university as kind of a—because I think our brand is quite famous to use as a steppingstone. And people don’t want to give a career. We gave them a really nice career, a career path. So, we have extraordinary team members. I think if you go to a European or American equivalent, how many guys could you go in there that have multiple languages, even? Like all my guys speak multiple languages and this and that. So, I think on that side it’s phenomenal.
Daniel Satinsky: So, the stereotype of Russians in the early ‘90s was not service oriented. People who were public facing weren’t always smiling or nice.
Paul Heth: Yeah.
Daniel Satinsky: And so, is that something you had to teach people or…?
Paul Heth: Yeah, yeah. I think, well, first of all that, we were usually getting young people like, you know, 18 to 23, and they weren’t so caught up in the Soviet retail tradition. And then I’m just a super enthusiastic person. I think hopefully that my passion and…hopefully it was a bit infectious, and I was able to [have] kind of a like group of people around me. And if people weren’t like that, we’re like okay, then we’re not for you. Like okay, we’re not for each other. And then it would be interesting too, just that service culture, that really helped us with customers, because they come to my place, man, it’s blazing, and the music, the this and that, this and that. They go to a competitor it’s like a cemetery. So, where do you want to be, you know what I mean? And I feel like I could bring that in any market, that kind of drive and passion.
Daniel Satinsky: Yeah, yeah. Well, I just interviewed Henrik Winther.
Paul Heth: Oh, I know Henrik quite well. He has the restaurant, yeah.
Daniel Satinsky: Yeah, and he talked about how he had…how he built his staff, and training, and his supply chain, so I’m sure you must have gone through a lot of similar things.
Paul Heth: Oh, 100%. We had to…we had to develop a supply chain. There wasn’t one there. We had to figure out how to get, you know, bring in technology, particularly the seating. There wasn’t a manufacturer that had reclining seating and these different things, and projection equipment, which is quite sophisticated. We brought that to market. Then we had to develop a service network to service that. So, I had to do, on supply chain I had to create the supplier and then create the interface between the user and the supplier, so, you know. Because we couldn’t be in both places. We couldn’t put capital in both.
And then I had to bring, I had to get the movie guys in, so I spent like a couple years getting my butt kicked in Hollywood, you know, just kept trying and trying, and a couple guys believed in me. Now Russia, before the Ukraine war, we were the No. 1 market in Europe for admissions and No. 4 or 5 for revenue, just because of the dollar to ruble basis.
Daniel Satinsky: Right.
Paul Heth: So, even now, after the Ukraine war, we’re the No. 2 market for admissions in Europe. You know, so I took it from that to like No. 6 or 7 in the world for cinemas. And by the way, we thought the market would go to 2 billion. Unfortunately, Kyiv happened, so that’s going to set it back. But it’ll pick back up.
Daniel Satinsky: Yeah,. And so, it seems to me—also the other person I interviewed that you have a kind of similar approach is Peter Gerwe.
Paul Heth: Yeah, I know Peter quite well, yes.
Daniel Satinsky: So, Peter also talked about staying out of politics. Being in entertainment. They were an entertainment business and focusing on being entertaining.
Paul Heth: Yes. Remember, we’re guests. Just like I’m sure, let’s say, I was, my name was Pavel, you know, whatever, and I was trying to be in America, it wouldn’t be in my interest to go advise the American political apparatus or the diplomats on how to do their business. Now, if I’m asked, I could give, but respectfully give my opinion, but I’m not going to offer it. I’m going to be very careful.
And I think where guys got in trouble in Russia, they kind of forgot that they were guests. And you have to be careful. For example, in different businesses there’s local guys that might be able to conduct themselves with aggressive tenure, that they might be able to get away with because they can do things, have access in a way that we can’t. And I think if you forget that you get in trouble. You know, you’ve got to—hey, you know. Like I told you the security thing. The guy showed up, hey sir, thank you for seeing me, I’m so honored that you’re interested in my business, if these guys think it’s okay to talk, then talk. But I protected myself.
And I never, ever would say anything, you know, about the Moscow city administration or the Kremlin group. I’m not a Russian citizen. You know, it’s not my right. Now, can I express that hey, I’m really sad how things worked out and disappointed? Sure. But it’s not my place to, you know, particularly when I have… You know, you also think of the greater good. I have 2,000 families that count on us for sustenance. I’ve got to think about that. Just like in America, let’s be clear, a CEO of a Fortune 500 company is going to be very careful what they say about Mr. Trump.
Daniel Satinsky: Yeah, right.
Paul Heth: And that’s the way of the world. I’m not saying it’s right or whatever but just remember your place sometimes. And I think sometimes guys forget their place and there’s consequences.
Daniel Satinsky: Yeah. So, because I’m so focused on the ‘90s I want to ask you about 1998. Were you there then?
Paul Heth: Yes, I was, and we…it was awful. I had Kodak Kino Mir. I had a partner at the time that, I was kind of running the front of the house and he was running finance and the back, and he made a very poor decision. We had significant of our money in those GKOs* which was paying a high turnover. And of course that went bust overnight, so our cash position went from being considerable to being very not considerable.
But having said that, we were able to, because we’re kind of a cash and carry business, meaning that we have cash every day from… So, in terms of our ticket, it didn’t drop off at all.
Daniel Satinsky: It didn’t?
Paul Heth: No, not even a single bit.
Daniel Satinsky: All right. So, you never considered, like some—there was a big outflow of expats at that point.
Paul Heth: No, but I stayed then. I never considered leaving. And yeah, not at all, no.
Daniel Satinsky: Yeah, okay.
Paul Heth: Matter of fact, I started my…I did Kodak and then I opened Kinostar within three years of that. I was already working on that in ’98.
Daniel Satinsky: Are there things that you wanted to talk about your experience that I haven’t asked you about?
Paul Heth: No, I think we’ve covered. I think that it was an… I think there was a couple classes of people—not classes—segments of people that went there. There was the grifters and quick buck guys. They were able to be successful for a while, but eventually they were kind of winnowed out. You know, the guys that could come in, fast talking, kind of take advantage of a less sophisticated market, you know, across a lot of areas. And I think by the end of the ‘90s they were kind of already found out and shown the door, whether it be guys in finance or retail, that was over with.
And then I think there were some extraordinary entrepreneurs there like Scott or Bernie Sucher or Charles Ryan and Michael Calvey in their respective areas. But I think those people would have been—I think myself—whatever market I think we would have been successful. I think that was a high caliber of entrepreneur that would have been successful in any market. Not that Russia was so easy they could be successful; I think it was the reverse. I think you had to even be more extraordinary to have large-scale success in Russia. Because there’s kind of, some people say oh, in Russia anybody could have. No-no-no-no-no. It’s very difficult and hard because you don’t have those fall backs. So, I think that that class—and I consider myself in that class. I think if you ask around, we’re probably something that people point to, like Charlie, or like Michael or Rostislav, extraordinary caliber that would have probably risen wherever they were.
And then I think that in Russia that those folks that gave back and participated in a fair manner, I think Russia was very accommodating. I think people that forgot that, not so accommodating, you know what I mean? So, that would be my…
And I still believe in Russia. I think it’s…even now I always thought it was an unbelievably wonderful country with some really harsh outcomes because maybe how they got the different leadership… The leadership of the country maybe sometimes didn’t meet the promise that the country offered, you know, from a historical context. And so I just think that Russia, with all its resources, the people are absolutely, the Russian people are so wonderful, so well educated, so literate. I mean, the arts is just amazing, if you go watch Chekhov, or if you go to the ballet, or you listen to Tchaikovsky, like it’s amazing.
But also, with a great sense of humor. One thing that’s funny is that my son, who speaks Russian fluently, is a tennis player, and he got afoul of my wife a couple days ago where he was playing tennis and he kind of forgot that Mom was there and he used some choice language he shouldn’t have. You know, he was frustrated he missed the ball. And my wife used very choice language to kind of remind him of his Ps and Qs. But I always laugh that Russians can swear so beautifully, how they can put together very graphic and descriptive swear words in a sentence, but with a sense of humor. And so, I was laughing so hard. I was talking to Charlie about that today. And by the way, there was that movie that came out this year about the Russian oligarch’s kid in New York. It was the best picture.
Daniel Satinsky: Right.
Paul Heth: But the movie was kind of—it is what it is, that story about the girl. But there’s a couple times in there where they’re swearing, and that was very authentic, you know what I mean?
Daniel Satinsky: Okay. I haven’t seen the movie, but—
Paul Heth: But you know what I’m talking about.
Daniel Satinsky: Yeah, I know which one you’re talking about.
Paul Heth: But the swear words, the swearing was very authentic, the sense of humor. And I love…also the sense of humor in Russia is amazing. And also, I think the thing I like about Russia, if someone’s your friend, they’re really your friend. The concept of best friends, and if someone really is your friend… It’s interesting, the only business problems I ever had in Russia where people tried to go back against contracts, or tried to grift or take advantage, it was never the Russian guys, it was always expats.
Daniel Satinsky: Well, excellent, excellent. Thank you for this.
Paul Heth: Okay.
Daniel Satinsky: I really appreciate it.
Short-term zero-coupon government bonds
The roof; mafia protection
A chain of shopping malls that housed IKEA stores and others
New Arbat
Izvestiya is a daily newspaper in Russia, founded in February 1917, The building housed the editorial office of the Izvestia newspaper from 1927 to 2011. An object of cultural heritage of regional significance
