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High tech companies find gold in Tinseltown

(ran GB edition)

Tom Arnold hasn't had the best of luck with the Internet.

The actor recently did some ads for a high-speed Internet access company. But it took the company months to install service at his home.

When he was considering whether to start a Web site, he went to several companies that promised the world but couldn't deliver. One outfit's computers crashed halfway through a demonstration.

So it was a bit surprising to see Arnold bumping elbows with Web designers and other Internet junkies at a recent private party in an empty studio near Hollywood. It was even more surprising when, between sets by a San Francisco salsa-rap band, he got up on stage to announce he was joining the board of and investing in the party's sponsor, Internet company Broadband Investment Group Corp. He also plans to launch an Internet talk show with the group's help.

"If you would've told me a year ago that you were thinking about doing something on the Internet, I would've puked," Arnold said afterward between puffs of a stubby Cohiba cigar. "But the perception of the Internet has changed. The medium has changed."

And with it, Hollywood is changing, too.

Sure, William Shatner went where no star has been before with his ads for Priceline.com. Several actors have Web sites _ authorized or not.

But while Northern California's Silicon Valley might be the epicenter of technology, only recently have the ripples reached the epicenter of entertainment _ Hollywood and the Southern California cities that surround it _ in a big way. The resulting marriage of glitz and geek promises to produce everything from Internet movies to star-powered technology business incubators.

"We're in a period where for the first time in history technology and creative (entertainment) are beginning to intersect," said Leonard Armato, a Los Angeles talent agent who has also become an Internet entrepreneur.

Armato is best known in Los Angeles as Shaquille O'Neal's agent. He also represents actor Pamela Anderson. In between contracts and negotiations, Armato is starting something he calls the Digital Media Campus, a quasi-technology business incubator where sports and film celebrities can create Internet content.

So far, only Anderson has set up shop there, working on a site she plans to call Pamtv.com. But Digital Media Campus claims to have some hefty backers. Among the advisers and investors Armato lists are actor Arnold Schwarzenegger, music maker Quincy Jones and tech stars such as Oracle Corp.'s Larry Ellison and Netscape co-founder Marc Andreessen. Armato also has a little Web experience: Earlier this year, he and O'Neal teamed up to create Dunk.com to sell shoes and other athletic apparel.

Like Arnold and Anderson, other stars are taking to the Internet with profits in mind. One of the most visible has been actor Melanie Griffith, who made a big splash recently when she launched Oneworldlive.com, which sells beauty supplies and diet programs while providing what it calls "lifestyle and transformational content."

Hollywood's hitch to high tech isn't just about actors and athletes, however. After years of sitting on the sidelines, even major film studios are cautiously starting to get in on the Internet act.

Following the success of last year's The Blair Witch Project, which was promoted extensively through the Internet, every major studio started doing extensive Internet advertising. Universal Pictures reportedly spent $1-million promoting Schwarzenegger's End of Days sci-fi thriller on America Online last year. Look for more cross-marketing deals as AOL completes its purchase of Time Warner Inc., the parent of Warner Bros., New Line Cinema and Turner Entertainment.

Some studios are taking more creative approaches to their newfound technology.

Sony Pictures Entertainment, for example, recently struck a deal with Liberty Digital Inc. aimed at creating the first 24-hour interactive game show network, which promises to let viewers of shows such as Wheel of Fortune and Jeopardy play along using television set-top boxes.

"If we don't eat our own lunch, somebody else is going to," Sony Pictures senior vice president Patrick Kennedy explained at a recent Internet entertainment conference in Hollywood.

In June, in a sign of what might come for film distribution, 20th Century Fox and Cisco Systems Inc. teamed up to send an 80-minute digitized cartoon, Titan AE, over the Internet from California to a theater in Atlanta. The event marked the first time a movie was distributed without putting film in a can and shipping it.

"All of the major corporations, they all recognize that this is something they have to get into some way or another," said Leron Gubler, who as president of the Hollywood Chamber of Commerce spends a good bit of his time gripping and grinning with entertainment's elite. "They know they can't be left behind."

A center for creativity

So far, most of the growth in the Hollywood area's technology industry has come from small companies that do everything from Web site creation to Internet marketing.

Web designer Ready Set Net Inc. is a typical Hollywood tech company.

Founder Darin Andersen started Ready Set Net six years ago in his home in Hollywood Hills, not far from the famed Hollywood sign. When the company grew big enough to warrant its own space, he moved it to downtown Los Angeles, but came back to Hollywood as soon as his lease in a pricey L.A. office building was up.

"We would have clients that would come to our offices and they'd say "Gee, this is really corporate, isn't it?' " said Andersen, whose company lists MGM Studios and CBS Television as its clients. "It's not what they expected from a Web company."

Today, Ready Set Net is based in a 70-year-old building off Hollywood Boulevard, a few blocks from Mann's Chinese Theater Theatre and across from Musso & Frank's Grill, one of the Los Angeles area's oldest restaurants, best known for its chilled martinis and for people-watching.

The four-story building, the original home of the Screen Actors Guild, has high ceilings, tile floors, transom windows and other remnants of Hollywood's first golden age, the 1920s and 1930s. In a different time, the basement was home to the Masque, a rock club where Blondie, the Go Gos and other 1980s bands played their early gigs.

More importantly, the building is in the center of a breeding ground for creativity. And in the Web design business, creativity is key.

"A lot of our employees come from the (film) production industry _ we're really tapping into that," Andersen said. "If you think about it, a Web site is constructed in a very similar fashion to a movie. It's basically a one-time, major production, with a lot of the same types of elements," like scripts and special effects, he said.

Tracking how many technology companies have sprung up in the Hollywood area is tough, since the industry is so new and growing so fast.

But by most accounts, technology discovered Tinseltown _ and vice versa _ about three years ago, and the love affair has been growing ever since.

"Three years ago, we might have had 150 companies in this area" in the technology and electronic entertainment business, said Mark Richter, economic development manager for Santa Monica, west of Hollywood. "Now we have probably well over 1,000 in Santa Monica alone."

Santa Monica's "e-entertainment" businesses, as Richter calls them, range from film marketing company Reelplay.com Inc. to Iam.com Inc., an online talent agency for actors, models and musicians.

While some companies have come to the region for talent, others have come simply because it's Hollywood, and Hollywood is where you need to be if you're in the entertainment business.

About a mile from Ready Set Net's offices is the headquarters for the hottest Internet film company in business today, Ifilm Corp. On Ifilm's Web site is 405, a short movie about an airplane that lands on an SUV on busy Interstate 405 in Los Angeles. The film, with highly detailed special effects done entirely with computers, has become the Internet's first big hit, luring audiences in offices, campus dorm rooms and wherever else a fast Web connection is available.

Ifilm chairman and chief executive Kevin Wendle helped to start the popular technology information Web site CNet.com and was one of the first executives at Fox Broadcasting _ he created Beverly Hills 90210 _ before getting into the online film business.

"The company (Ifilm) was started in Silicon Valley," he said. "But . . . when it comes to the film community, Hollywood and L.A. are such company towns that you just need to be here."

A reason to hesitate

With features such as 405, visitors to Ifilm.com can experience what many in Hollywood see as the Internet's Holy Grail: downloadable films.

Until the Web gets faster, however, nobody will make much money from Internet films. Most of today's Web productions are low-budget, independent films that aspiring directors can post on sites such as Ifilm.comfor free. Viewers can watch for free, too _ and many of the movies are so bad that few would pay to watch them anyway. To help bring in revenue, Ifilm also runs a site that links entertainment industry employers with prospective job candidates. It also recently made the jump from the Web to television, striking a deal with cable's Independent Film Channel to support each other and produce a 26-episode series about independent film production.

The lack of profits and the uncertainty over where the Internet might take the film business are what kept Hollywood from jumping on the technology bandwagon sooner. Hollywood, like Wall Street, hates uncertainty (think about all those Beverly Hills Cop sequels.)

"The question has sort of been, okay, we need to get online, but what do we do whenever we get there?" said Malcolm Maclachlan, media and e-commerce analyst with research company International Data Corp.

"Eventually, yes, we're going to see on-demand movies and TV shows delivered over the Internet," he said. "But that could be awhile."

In the meantime, the metamorphosis has clearly begun.

"Hollywood has been lagging behind technologically and in exploiting and operating on the Web," said Andersen. "But it's really gotten the message now. And with the star power in this town, you're going to see a lot more buzz."

Walk into the restaurants and clubs around Andersen's offices near Hollywood Boulevard and you can already hear it. Table talk is no longer just about scripts and screens, it's also about bandwidth and page views and cross-media marketing.

Even if they don't know exactly how just yet, it seems that everybody who's anybody in Hollywood wants in on the tech trend. And that's a far cry from where they were just a few years ago.

"Five years ago, there was practically no such thing as e-mail in Hollywood," said Ifilm's Wendle. "And up until two years ago, many senior-level executives here were still having their secretaries print their e-mails for them and respond for them.

"I still see that happening occasionally, but the sea change is occurring."

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