The Star Wars Explosion

"It is the biggest picture to play a Broadway theater--ever," says a spokesman for Loews, the conglomerate that operates one of the nation's largest movie chains. That kind of talk about the science-fiction movie Star Wars finds avid listeners among investors and stockbrokers disgusted by the aimless zigs and zags of a dispirited market. The price of shares in 20th Century-Fox, the maker of Star Wars, has more than doubled since the film opened in 32 theaters four weeks ago, leading a boom in movie and entertainment stocks generally. MGM has roared from $16 to $24.25 this year, Columbia Pictures shares have doubled to $15.75, and even Boston-based General Cinema Corp., a theater chain, has become an investors' favorite. Says Columbia Executive Dan Melnick: "It's a reflection of a solid performance by the motion-picture companies."

T Shirts. Produced at a cost of $10 million, Star Wars by most estimates will gross $100 million this year alone. Fox, which owns 60% of the picture (Director George Lucas and some partners share the rest) stands to gain $30 million. Add in Fox's share of cult merchandise already inspired by the film --model spaceships, T shirts, 640,000 sound-track record albums, figurines of the movie's fantastic characters, such as Artoo-Detoo and Chewbacca--and the company stands to stash away a lot of cash. On top of that. Fox has in distribution several other movies that are hot at the box office, including The Other Side of Midnight and Silver Streak.

The run-up in Fox's stock (about 90% of the outstanding shares have changed hands in the past month) is based on the expectation that Star Wars will at least triple the company's 1976 earnings of $1.41 per share. Moreover, rumors have floated around Wall Street that the company was a likely takeover candidate. But any purchaser would now have to pony up more than $70 million above the stated book value of the company, an unlikely scenario.

Nobody in the movie business, where negative thinking seldom intrudes, can remember a summer so financially successful. United Artists, a subsidiary of the San Francisco conglomerate Transamerica, is scooping up wads of money from Rocky, which has grossed more than $100 million, Network ($30 million), The Pink Panther-Strikes Again ($40 million) and Woody Allen's Annie Hall, which took in $14 million in only seven weeks. Competitors are openly envious. Sighs Charles Bluhdorn, chairman of Gulf + Western, which operates Paramount Pictures: "I saw the first 15 minutes of Rocky, and I said, 'Why the hell didn't we make that?' "

Bluhdorn is hoping to repeat the success of The Godfather with one of the dozen or so movies that Paramount will introduce this year: Orca, the saga of a killer whale, produced by Dino de Laurentiis, or Looking for Mr. Goodbar, a Richard Brooks adaptation of the best-selling novel. Columbia is putting its big bets on Close Encounters of the Third Kind, another science adventure epic, and The Deep, a successor to Jaws, which is the highest-grossing motion picture of all time (MCA's count of the worldwide gross: $196 million). A rash of copycat productions is about to break out: Exorcist II, Jaws 2 and Sting II are either scheduled or in the can.

Pare Down. Another reason for investor approval of the movie business is that it has markedly changed since the era of intuitive plungers like Darryl Zanuck and Jack Warner. Many prudent, budget-pruning professionals are at the top these days. To analyze marketing methods, Fox brought in Doyle Dane Bernbach, the New York City ad agency, while Columbia turned to McKinsey & Co., management consultants. With an eye on Wall Street, most movie companies are paring down debt, presenting an image of stability and conservatism. MCA, for example, paid off all its long-term debt with the help of earnings from Jaws, and has a comfortable $150 million in the till.

With all that cash, the movie companies are diversifying to offset the roller-coaster effect of unpredictable film earnings. MGM is investing in a new casino complex in Reno. Columbia acquired D. Gottlieb & Co., a Chicago maker of pinball machines. MCA owns a savings and loan association. Another safety cushion is provided by television's appetite for what movie people call "product." Gulf + Western is getting $76 million for leasing a library of films to ABC, CBS and NBC. MCA grossed some $250 million last year from sales to the networks and independent TV stations.

The movie game itself, though, remains a gambler's domain. Says MCA President Sidney Scheinberg: "You try to make the best value judgment you can. But I doubt that anyone can call a Jaws or a Star Wars in advance."

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