Maverick Mogul

It didn't take long for Cuban and Philip Garvin, a veteran TV producer, to vow to fill the void with their own network. "That was in July of 2000," Garvin remembers. "A year and two months later, we launched HDNet." (In 2002, they launched a second channel, HDNet Movies.)

Wagner, meanwhile, had set off on his own in the wake of the Broadcast.com sale and was busy learning the movie business from the inside out. "I spent 18 months just meeting with studio heads, directors, and producers, and just asking questions," he says. "Why is it done this way? What's broken?" Wagner cofinanced several movies to get "behind the curtain," including three with Steven Soderbergh, the director of such hits as Ocean's Eleven and Traffic.

Wagner noticed all of the things that drive studio execs to the Mylanta bottle: giant budgets, greedy talent, union labor, high costs for making and shipping prints of films, and the eternity that passes between a movie's theater run and when it shows up on DVD, by which time consumers may have forgotten about it entirely.

Cuban and Wagner decided to reunite in late 2001, buying Rysher Entertainment, a library of television and movie properties and, in 2003, the Landmark Theatres chain. They bought the remainder of Magnolia Pictures, a New York distribution company they'd invested in earlier, and started financing more features and documentaries through 2929 Productions and HDNet Films.

The duo admit there was no initial plan to build a vertical media machine. The acquisitions were designed to tip the movie industry's daunting odds in their favor. "If you just invest in [producing] movies, that's like going to Vegas," Wagner says. "You might get lucky and win at blackjack. But if you go to Vegas often enough, the casino's going to beat you." With 2929 Entertainment, he says, "we wanted to start making ourselves look more like the house. We could make a movie, put it on our screens, play it on our TV stations." (The two of them are also rumored to be building their own DVD-distribution business.)

Cuban and Wagner immediately focused on controlling the costs of their productions, as well as on boosting revenues by making it easier to consume their movies--in whatever format moviegoers wanted.

One early experiment was to offer incentives for going to the theater--a free soundtrack download to ticket buyers, or putting CDs and DVDs on sale in the lobby. "What we've learned is that if it's a product that's hard to find or ties into something going on in our theater, that does well," says the CEO of Landmark and Magnolia, Bill Banowsky. The soundtrack to Garden State was a hit, as was the DVD of Richard Linklater's Before Sunrise, when Landmark was showing the sequel to that movie.

They're looking at other offbeat and technologically avant-garde ways of moving product as well (selling movies loaded onto key-chain USB drives, for instance). And while other theater chains have dragged their heels on installing digital projectors, Landmark is committed to doing so--just as soon as it can get ahold of some.

Digital projection would not only ensure a consistently high-quality image over the course of a film's run (no scratches or blotches) but also open the door to entirely new forms of on-screen entertainment. In fact, HDNet has already brought unconventional content to theaters: In 2003 it delivered MLS soccer games to Regal Cinemas, a more mainstream chain of cineplexes. But when Cuban talks about the possibilities down the road, his eyes get wide and his speech accelerates from light speed to warp speed. "Can you imagine what the season premiere for Lost would be like? You'd make it like a VIP environment. People would pay 20 bucks. And they might even flock to see every episode in the theater first, with all their fellow Lost fans. And they'll buy the DVD of the single episode for $15 on the way out."

Perhaps unsurprisingly, the networks' contractual constraints have thwarted that plan for now. So Cuban and Wagner are building their own digital-content machine to feed their theaters and networks. Their most strategic coup to date: signing up Soderbergh, at this year's Tribeca Film Festival, to direct six movies. With a single deal, they signaled to Hollywood that it was time to overhaul the business. "We'd go and grab lunch in New York," Wagner says, recalling how the deal came together, "and I'd walk Steven through this whole strategy we'd developed. I told him we didn't need anybody's blessing to decide what movies we'd do. His eyes lit up, and he said, 'I've got some things that would be perfect to do.' "

Soderbergh's films will all be shot digitally, on low budgets (HDNet says it generally keeps budgets under $2 million; it's also pursuing other directors). But there's an even more novel component to the deal: His upcoming drama Bubble will be released in January simultaneously in theaters, on DVD, on HDNet Movies, and possibly as an Internet download.