ENTERTAINMENT : BMG Picks Zelnick to Run North American Operations : Media: The move is expected to accelerate the German firm’s expansion into the movie business.

Former studio executive-turned-Silicon Valley entrepreneur Strauss Zelnick was named to run the North American entertainment operations of Bertelsmann Music Group on Tuesday, a move likely to accelerate the German media giant’s long-anticipated expansion into Hollywood.

With his appointment as president and chief executive of BMG Entertainment North America, Zelnick will also take responsibility for revamping BMG’s troubled RCA Records operation.

Zelnick, 37, former president of 20th Century Fox, was hired in June, 1993, as chief executive of interactive software developer Crystal Dynamics in Palo Alto. He was also a consultant to BMG, where he has developed a close working relationship with BMG Entertainment Chairman Michael Dornemann. Zelnick assumes his new job in New York on Jan. 2.

Zelnick’s strategy for expanding BMG into the movie business isn’t likely to take shape for a while. In separate interviews, both Zelnick and Dornemann said it would be premature to discuss strategy. Dornemann insisted that BMG is under no time pressure to move ahead, though he acknowledged that Zelnick will help the company develop its strategy “in a more focused way.”

BMG’s name has frequently surfaced as a prospective buyer for such struggling distributors as Metro-Goldwyn-Mayer and Orion Pictures. BMG also was reportedly in talks to acquire New Line Cinema last year before the independent company was acquired by Turner Broadcasting System.

Hollywood executives expect BMG to build its movie business through acquisitions rather than the bottom-up approach of its fellow European entertainment conglomerate, PolyGram. Zelnick is also expected to actively expand BMG’s interactive media business.

“He’ll be their mergers and acquisitions guy. He’s a great strategic thinker,” one executive said.

Zelnick will also oversee the company’s music operations, the weakest link of which has been RCA. Among his first tasks will be finding a new head for the label. RCA President Joe Galante plans to return to the company’s Nashville operation.

Zelnick is unlikely to become directly involved in BMG’s crown jewel, Arista Records, led by founder and record industry legend Clive Davis. Davis is said to be close to renewing his contract for $35 million over five years, with a possible $15-million performance bonus. Under his contract, Davis reports to an Arista board that will now include Zelnick.

In an interview, BMG Chairman Dornemann said that while RCA “has to get more movement” in expanding its market share, the goal with Arista will be to “leave it as it is. It has the best people running it.”

Crystal Dynamics initially placed its bets heavily on developing titles for the much-hyped 3DO game machine, which is still struggling to gain a meaningful foothold in the interactive market.

Dataquest multimedia analyst Bruce Ryon credits Zelnick with moving Crystal Dynamics away from its attachment to 3DO, attracting investors and raising its profile in a crowded field of competitors. Zelnick’s leaving after just 15 months doesn’t bode well for the company, he added.

Zelnick, who will remain a director and shareholder of Crystal Dynamics, said his move reflects his desire to take advantage of a new opportunity, not any unhappiness at Crystal Dynamics.