Taking High-Tech Road to ‘New Hollywood’

When 20th Century Fox Chairman Joe Roth left for a producing deal at Disney last fall, a lot of people in Hollywood assumed that Strauss Zelnick would be the next one out the door.

Zelnick, the studio’s president and chief operating officer, had openly campaigned for Roth’s job, but lost out to Fox TV executive Peter Chernin. Now, nine months later, Zelnick has made his long-anticipated exit, and the door he chose says a lot about the expanding opportunities for entertainment executives.

By signing on with Crystal Dynamics Inc., a video game company that’s saddled with a goofy new-age name, Zelnick has reinvented himself in a way that wasn’t possible until recently. His new job calls for him to, among other things, use his years of entertainment experience to help an interactive technology company learn how to interact with Hollywood.

Zelnick will be involved in everything from strategic planning to salesmanship as president and chief executive of the Palo Alto-based start-up. Among his first challenges: lining up new investors and setting up crucial distribution channels for the company, which has already created software for 3DO, the interactive TV device backed by several major media firms.

“We are looking for companies that want to participate in what we believe will be a $20-billion entertainment business--as big as the movie business worldwide,” Zelnick said Monday, already sounding like a high-tech zealot two weeks before formally taking the job.

Zelnick’s decision to give up a cushy position to promote an unproven technology has raised eyebrows in Hollywood’s insular circles. But with firms such as Crystal Dynamics offering sizable equity stakes to people with entertainment experience, Scott Walchek, president of Sanctuary Woods Multimedia Corp. in San Mateo, sees other executives making similar moves.

“What Strauss is able to do is bring with him this huge web of contacts,” says Walchek. “To expand and grow quickly, companies have to create alliances with content providers. It’s not just about understanding how it works. It’s also about being linked.”

Entertainment industry sources do not foresee a mass exodus to “the new Hollywood,” as Walchek calls the Silicon Valley. But it’s plainly an option in today’s expanding entertainment universe, especially for young, entrepreneurial executives.

People in Hollywood have taken new technology more seriously since last year, when Barry Diller left the chairman’s suite at Fox Inc. to run QVC, a home shopping network. Diller will walk away with hundreds of millions of dollars if QVC’s expansion flies. Not everyone has something to offer the interactive world, but the two industries are growing ever closer.

Stephen Unger, managing director of the worldwide entertainment division for SpencerStuart executive recruiters in Los Angeles, says he already sees more back-and-forth hiring.

“It’s all about the reconfiguration of the business in the ‘90s,” Unger says. “That’s why it’s deadly to be a so-called motion picture executive. In the long run, it’s much better to be an entertainment executive. Zelnick is a fantastic example of that. He’s like a modem that allows one industry to communicate with another. And those people will be very well rewarded.”

That fact isn’t lost on the young lawyers and MBAs who once aspired to be the next Louis B. Mayer. Many now view the ideal entertainment executive of the future as a cross between Walt Disney Studios Chairman Jeffrey Katzenberg and Microsoft Chairman Bill Gates.

In the William Morris Agency mail room, where many Hollywood executives traditionally got their start, technology is a hot topic. “A lot of these young people grew up with technology, so they automatically gravitate toward it,” Morris President Jerry Katzman said.

Jon P. Goodman, who follows entertainment as the director of the USC Business School’s entrepreneurial program, says dwindling opportunities in Hollywood, where many studios are cutting back on manpower as part of broad cost-cutting efforts, is another motivator.

Goodman sees positions at technology companies gaining more prestige too, unless the major studios become more forward-looking.

“The infrastructure and management at the studios is not conducive to keeping cutting-edge talent,” she said. “The studio system is still being pulled, kicking and screaming, into the ‘70s.”

That’s not to say that Hollywood will have to go begging for help anytime soon. It still offers astronomical pay and unequaled perks, plus the chance to risk millions of dollars on creative impulses.

Besides, says one studio executive, a wave of mergers and co-ventures may soon erase the distinction between technology and entertainment anyway.

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Mancuso Update: Frank G. Mancuso’s expected move to United Artists is not a done deal. The former Paramount Pictures chairman, who was rumored to be close to striking an agreement to run UA and co-manage movie distribution for both UA and MGM, has supposedly hit some snags in his discussions with Credit Lyonnais, the French bank that owns the two studios. Sources close to the discussions say the matter should be resolved within the next week.

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He’ll Be Back: People might think Arnold Schwarzenegger would want to return to the hard-action genre after the trouble-plagued “Last Action Hero.” But sources close to the actor say he intentionally chose another comic-action project, director James Cameron’s “True Lies,” as his next project to prove that “Last Action Hero” was a fluke.