Two Cheers for DreamWorks and a Resurgent L.A.

In touting the extravagant blueprint for the $200-million DreamWorks Studios development at Playa Vista, Los Angeles Mayor Richard Riordan gushed at one point last week that the prospect of snagging this project “is more important than bringing an NFL team to L.A.”

He was being serious. For the mayor and others the plans to launch the DreamWorks Studio amount to a major vote of confidence for the region’s economy and the will of its elected officials to make Los Angeles a more attractive place to do business.

And to be sure the project is impressive. DreamWorks SKG, the company founded 14 months ago by Steven Spielberg, Jeffrey Katzenberg and David Geffen, is going to build a studio complex with 15 sound stages for motion picture, television, CD-ROM and music video production at the Playa Vista commercial and residential development.

But behind all the gushing by politicians and Hollywood moguls are serious questions with ramifications for the future of the entertainment industry and the Southern California economy.

Is the DreamWorks proposal an epochal economic event that will help lift Los Angeles’ stumbling economy, spearheading a new era of business moving to the area?

Or is it an example of questionable policy, with city officials doing favors for high-profile Hollywood deal-makers while neglecting needier, less glamorous areas?

Based on interviews with scores of entertainment industry executives, public officials, economists and investment and technology analysts, the proposal on balance is positive.

In the context of an entertainment industry that is growing in importance for California and Los Angeles, the DreamWorks studio is a significant event that will create jobs, add to city tax coffers and help dispel the perception that Los Angeles is not a business friendly place.

But there is less agreement--and some skepticism--about the venture’s long-term impact on the industry and the economy.

The first studio built in more than 50 years in Los Angeles, it is to be equipped with the latest in technological capabilities--everything fiber optic telecommunications and computer graphics will allow.

The venture, repeatedly called a studio for the 21st century, is envisioned as a magnet drawing multimedia and high-tech companies to set up operations at or near its 1,087-acre campus, a couple of miles north of Los Angeles Airport.

More to the point, the studio and adjoining office and residential development promise to generate lots of jobs--almost 9,000 in Los Angeles, 32,000 in the state of California, according to DreamWorks publicity.

That’s why the city and the state are supporting the project with more than $70 million worth of tax incentives and help with infrastructure--not to mention loud public acclaim.

The new studio “affirms that California will lead the worldwide entertainment industry,” Gov. Pete Wilson said. “It says loud and clear that L.A. is back,” Riordan declared.

Political actions speak louder than economic ones, at least initially. “For the first time Los Angeles affirmed that the entertainment industry is important to the city,” says George Vradenburg of Latham & Watkins, a longtime entertainment industry lawyer.

In doing so, the city recognized that the entertainment industry, with more than 200,000 jobs in the Los Angeles area, has replaced shrunken aerospace-defense as the region’s top provider of employment and job growth.

Moreover, jobs in the motion picture industry are relatively high paying, $39,000 a year on average.

That’s why tax credits for jobs are key to the incentive package for DreamWorks at Playa Vista. The city gives a credit of less than $2,000 against utility and business taxes to new companies that create jobs, Deputy Mayor Michael Keeley explains. But for jobs paying $25,000 a year or more, the credit goes up to $3,500.

Playa Vista promises 7,000 jobs that will qualify for the credit. “If they produce the jobs, we’ll be happy to grant the credit as we would for any business,” Keeley says.

DreamWorks, thus, could serve as a model for a city determined to attract new business.

But City Hall better spread the wealth around because many people are skeptical of the DreamWorks deal. “In terms of jobs, who’s going to work there? I don’t think the people from my community in South-Central are going to work there,” says Marva Smith Battle-Bey, director of the Vermont Slauson Economic Development Corp.

Others say Los Angeles has no choice but to offer incentives. The DreamWorks deal “is definitely giving money to rich guys, but everyone else is offering tax incentives and it’s important for Los Angeles to keep its hand in this emerging entertainment industry,” says Manuel Pastor Jr., an economics professor at Occidental College.

It will be interesting, Pastor says, “to see what we expect from DreamWorks” in terms of training and apprenticeship programs that will lead to jobs for lower income residents.

In fact, there seems to be ample opportunity in the film and entertainment business if young people can get training. With more than 1,000 post-production companies processing films and videos in the Los Angeles area, industry executives report a severe shortage of skilled labor. “We are not training people fast enough to meet rapidly increasing demand,” says a television executive.

Curiously, the film industry, which is currently working round the clock to turn out movies and television shows, is greeting the new DreamWorks studio with a yawn. Some question DreamWorks’ business judgment.

“We wouldn’t build a studio lot today,” says a senior executive at another movie company. “We happen to own one. It’s already amortized, so we use it. Three-fourths of the time we are renting our studio to other people.”

As to the new studio’s links to developing technologies, another executive shrugs: “What matters is what you put up on the screen, not how you get it there.” The executive was echoing current Hollywood thinking, which consoles itself that the success of the computer-generated film “Toy Story” results more from the good script, film editing and distribution of Walt Disney Co. than from the computer work of Pixar Animation Studios of Richmond, Calif.

Yet such discounting of technology could be buggy-whip thinking--not unusual in a movie industry which once failed to appreciate the promise of television.

What computer and software experts in Silicon Valley see occurring is a dramatic change in the “delivery systems” for entertainment products, says Roger McNamee, head of Integral Capital Partners, an investment company in Menlo Park.

The fiber optic lines, which GTE and DreamWorks will spend $100 million to install at Playa Vista, will be capable of transmitting “one million pages of text in four seconds,” according to Lew Wilks, GTE-West’s general manager.

That means more than faster phone calls. “When delivery systems change like that it opens up all sorts of possibilities,” McNamee says. The wall-screen communicators familiar to viewers of Star Trek and readers of science fiction dating to Buck Rogers are about to become reality. And that spells a profound change in the global media business.

DreamWorks, with state-of-the-art sound stages and other facilities in Playa Vista, will be well placed to explore those multimedia possibilities.

To be sure, up-to-date facilities are no guarantee of success--Sony Pictures built an impressive high-tech center on its lot in Culver City. And DreamWorks, which debuts its first television show in January and starts production of its first motion picture in May, still must produce successful entertainment.

But DreamWorks has three individuals with proven track records “and an ambitious schedule of production and distribution of entertainment products in all their various forms and technologies,” notes Arthur Rockwell, research director of Yaeger Capital Markets, a Los Angeles investment firm.

The fundamental facts are that these are serious people, with a serious company capitalized at more than $2.5 billion, based on private investment calculations. And it’s significant that they are building a landmark facility in Los Angeles--and not in Northern California, or Salt Lake City or Phoenix, all of which would have welcomed them.

It reinforces this city’s position as capital of the global entertainment business, a growing giant that accounts for $15 billion a year in business activity in Los Angeles County alone--and annually sells $8 billion worth of entertainment products to the world.

“The entertainment industry is becoming the biggest customer for the computer processes and software of Silicon Valley,” notes Jeffrey Berg, head of the talent agency International Creative Management. “Those companies will invest here to get closer to their customer.”

So the mayor is right. Such a landmark indeed is more important to Los Angeles than attracting an NFL team. By itself it doesn’t mean “L.A. is back!”, but it doesn’t hurt in getting it there.

*

Times staff writer Nancy Rivera Brooks contributed to this column.