In Local Economy, Hollywood Is Star

Hollywood, which gave Southern California its glamorous image around the world, is rapidly moving from supporting player to star of the region’s economy on the strength of exploding global demand for its movies, TV shows and new entertainment technologies.

The Hollywood dream factory in its broadest sense--from films, music and television to amusement parks, interactive computer games, themed restaurants and retail entertainment stores--is growing so fast that by early next decade, UCLA economists predict, more people in California will work in The Industry than in electronics and aerospace combined.

In the number of jobs, entertainment already eclipses the aerospace and defense industries that were the cornerstone of Los Angeles County’s post-World War II boom. At the beginning of the 1990s, about 143,000 people in Los Angeles worked in the core businesses of motion pictures and television. This year, the number is about 262,000, an 83% increase in just seven years, according to the Los Angeles Economic Development Council.

That doesn’t include as many as 50,000 additional workers in areas that are either affiliated with entertainment or that frequently overlap, such as multimedia, theme parks, the area’s recorded music industry and its prolific advertising production business. Nor does it include thousands of professionals such as lawyers, accountants, agents, managers, caterers or the vast number of workers who do everything from supplying trailers for stars to cooking meals for film crews.

By some estimates, entertainment at its broadest definition will grow to as large as a $40-billion annual business in California by 2000.

“Five years ago or so, entertainment was this glitzy thing that nobody took seriously as an industry,” said economist David Friedman, a consultant and fellow with the MIT Japan Program. “It had pretty faces and star appeal, and people thought it was run by a bunch of hustlers. Almost miraculously, the industry’s ability to plug into just about every industry to provide content has moved it from being a gloss on the economy to something that is emblematic of industry in the 21st century. It’s at the apex of the regional economy.”

The entertainment boom of the 1990s is being credited by economists with helping lift Southern California out of the economic tailspin caused in part by defense cuts. State officials estimate that for every job lost in aerospace, two jobs in entertainment were created, many with smaller, entrepreneurial entertainment companies and contractors that play an ever-growing role in the making of movies and TV shows.

“Once we lost those aerospace jobs, entertainment came in to fill in the gap,” said Rajeev Dhawan, director of econometric forecasting at the UCLA Anderson Forecast group.

In one of the most direct examples, Los Angeles aerospace giant Hughes Electronics Corp. successfully leveraged its defense know-how to create a lucrative entertainment-related business with its direct broadcast satellite system.

The transformation goes beyond paychecks and employment data and is changing the nature of the Southern California work force. A growing number of workers belong to a highly paid, but rootless, class of workers at the heart of the entertainment business. They typically move from job to job for work that lasts only a few months at a time.

“Think of each of these productions as a business that can run to $100 million. It just pops up like a mushroom, forms together, hires gadzillions of contractors and, in three to six months, vanishes forever. It is the most flexible and remarkable business. And it does it over and over and over again,” Friedman said.

In exchange for the lack of security that comes with such a lifestyle, there’s glamour and a pretty good paycheck. According to state figures, the average weekly salary in Southern California in entertainment exceeds $1,200, more than double the average for manufacturing.

The pay and glamour make Hollywood a magnet for the world’s talent. Other parts of the country, eager to entice a business that is fast growing and environmentally clean, have launched full-scale assaults hoping to attract the business. But with a few exceptions, notably the extensive shooting of television movies in Vancouver, Canada, Southern California has to date fended off most of those assaults.

“If you look at overall activity, we do five times what New York City does,” Los Angeles Mayor Richard Riordan said.

As a result of Hollywood’s growth spurt, vast entertainment-generated fortunes are being built in much the same way that the explosive growth of high tech quickly created fortunes in Silicon Valley and Seattle. The rapidly acquired wealth is spawning such things as personal charitable foundations with the potential to influence Los Angeles society and culture for years to come.

A hired hand like Walt Disney chief executive Michael Eisner reaped $565 million in a single day by exercising stock options. Eisner has accumulated close to $1 billion in salary, bonuses and stock options since taking over Disney in 1984. Recently, he set up a charitable foundation for children, donating 1 million shares of his Disney stock.

A former agent, Michael Ovitz, donated $25 million for a medical building at UCLA. And the first major start-up studio in decades, the $2-billion DreamWorks SKG, is owned and operated by three college dropouts, Steven Spielberg, Jeffrey Katzenberg and David Geffen.

When Forbes first launched its list of the 400 richest Americans in 1982, only a few entertainment moguls--such as industry patriarch Lew Wasserman and producer Ray Stark--were on it. Now, the list is filled with the wealthy who have direct or indirect ties to Hollywood, among them music mogul Geffen, director Spielberg and Disney’s Eisner.

The culture of celebrity that surrounds Hollywood permeates life here as never before. Hollywood now enjoys close ties to Southern California’s fashion industry--top executives Carole Little and Leonard Rabinowitz were both credited as producers on last year’s snake thriller, “Anaconda.” Entertainment dollars have also helped create and nurture the thriving Los Angeles restaurant culture.

The national stature of the entertainment moguls has grown as well, with publications like Vanity Fair dubbing them part of “The New Establishment,” with broad influence over commerce and culture.

Not All Good News

Not everyone is happy with Hollywood’s growing size and influence, however. Culturally, Hollywood is frequently under fire from critics who accuse the industry of liberal-leaning politics and morals. Both Democrats and Republicans regularly take shots in an effort to stir voters. In neighborhoods, film crews can be treated with hostility by people who find them a nuisance.

Nonetheless, Hollywood’s part in the Southern California economy is increasingly formidable.

“The new rising star in Southern California is entertainment, whether people like it or not,” UCLA’s Dhawan said.

To be sure, the region has not become dependent on the entertainment industry the way, say, Detroit has needed the car business--and probably never will. The diverse economy of the Los Angeles area benefits from international trade, health care, light manufacturing and other industries. Whole areas of the region remain relatively untouched by entertainment dollars.

But the business has expanded in size, ambition and geography well beyond the core of Hollywood where stars like Clark Gable, Humphrey Bogart and Jean Harlow once worked.

That the entertainment industry even ended up centered in Southern California is something of a historical accident. Director Cecil B. DeMille ventured to Flagstaff, Ariz., to shoot a western in December 1913. Finding Flagstaff too dull for his tastes, DeMille went to California, sending a telegram asking his backers in New York for authority to “rent a barn in place called Hollywood for $75 a month.”

That place developed from a half a dozen or so major studios in the 1920s and 1930s to vast conglomerates that spend almost as much energy selling T-shirts, figurines, home videos and other products tied to their movies and TV shows as they do tickets to the box office.

A.C. Lyles, who first arrived at the Paramount Pictures lot on Melrose Avenue in 1937 as mogul Adolph Zukor’s office boy, has seen Hollywood from the days when it churned out movies for a Depression-weary world to today’s robust, globally driven business.

“People always ask me what it was like at the studios during the ‘golden years’ of the 1930s to the 1950s,” Lyles said. “I suppose it’s true they were golden, but I really believe that these are the platinum years now. And if Mr. Zukor, or my friend Mr. DeMille, were still around today, I think they’d agree.”

Hollywood’s latest growth is filling empty offices in Burbank, industrial parks in Glendale, once-abandoned warehouses in Santa Monica and Century City high-rise suites. It is even spreading to places like Manhattan Beach, where a studio lot anchored by 20th Century Fox is scheduled to open July 1. In Burbank, entertainment demand has pushed the office vacancy rate to less than 5%, contrasted with 14% for Los Angeles County, according to the real estate firm CB Commercial.

Hollywood’s financial clout also has been pushing home prices up in some areas, especially the Westside, where prices have jumped as much as 25% over the last year, fueled by the demand and open wallets of entertainment workers.

In many cases, the spread of the business is invisible to casual observers. Tucked in a cluster of offices above Broadway Deli on Santa Monica’s 3rd Street Promenade, for instance, are the newly opened offices of Jack Nicklaus Productions, a company founded by the golf legend that produces televised golf matches.

Also in Santa Monica, in an alley off Colorado Avenue, interactive-ride developer Falconer Entertainment shares space with a car-restoration firm. A single chain-link fence separates the grease- and oil-stained garage from the front door of a refurbished industrial area boasting the exposed heating ducts and smell of fresh-brewed cappuccino common in the warehouse-style offices popular among entertainment firms.

Light-industrial buildings that once went for 75 to 85 cents a square foot now command twice that in rent because of demand by entertainment companies, with landlords often willing to sink $100,000 or more into such trendy details as wood ceiling trusses.

“These were widget manufacturers before,” said Westside commercial real estate broker Ian Strano, vice president of Beitler Commercial Real Estate in Brentwood. “Now it’s entertainment. . . . [A] warehouse building built in 1940 is now getting the same rent as an office building built in 1997.”

Television Fuels the Engine

At the heart of the latest boom is television. Films and TV shows made on Hollywood’s sound stages are needed to fill hundreds of new network, cable and satellite channels being piped around the world.

Domestically, there once was NBC, ABC, CBS and little else. Now, there are the Fox, WB and UPN networks, all airing original sitcoms and dramas that eat up sound-stage space. Add to that cable channels such as Home Box Office, Showtime, Nickelodeon, TNT and USA Networks that are churning out original movies and shows, or have big plans to make their own programs.

Home Box Office now produces from 12 to 15 movies a year, about two-thirds of which are shot in Los Angeles. In addition, five regular HBO series programs are shot at locations across Los Angeles, including “Arliss” at a sound stage in Atwater Village, “The Larry Sanders Show” in Studio City, Tracey Ullman’s “Tracey Takes On. . .” in Culver City, and “Dennis Miller Live” in the Fairfax district.

Pushing the demand is the exponential growth in TV channels in other countries due to privatization of broadcast stations, digital technology and satellite television. These channels need programming.

Programs created in Hollywood that in the past might have aired twice a season in the United States now enjoy a long afterlife internationally. The half-hour episode of the Fran Drescher comedy “The Nanny” that aired Dec. 10 on CBS in the United States was beamed Jan. 1 to Latin America by Sony Entertainment Television, dubbed both in Portuguese and Spanish.

The same episode will be dubbed to air in the Netherlands in March, Australia in May and Malaysia in June. Next fall, it will show in Italy and Germany, and in 1999, in Great Britain and the Philippines.

“The whole international business has turned into a really free market,” said Andy Kaplan, executive vice president of the Columbia-TriStar Television Group.

At the historic Hollywood Center Studios off Santa Monica Boulevard in Hollywood, the walls tell a story of where the entertainment industry has been and where it is going. Visible through a small opening in one wall is a 70-year-old inner shell of wood caked in crusty, shredded newspaper applied to dampen sound in the cavernous stages where Mae West breathed seductive lines and the voice of the talking horse Mr. Ed delivered wisecracks.

Attached to the outer wall is a room kept at 72 degrees through which 20 miles of cables and fiber-optic wires link as many as 4,000 personal computers, laptops, servers and elaborate telecommunications equipment. At a studio where technological innovation was once a greenhouse-like building so sun could light Harold Lloyd’s silent classics, this nerve center ships the same tears, laughs and sighs that have been uttered from Hollywood sound stages for seven decades to a world demanding Hollywood programs.

As a result, it’s a seller’s market for Hollywood. Germany’s Kirch Group, trying to get a fledging digital television service off the ground, in the last two years signed deals worth about $6 billion with major studios to secure film rights.

Demand for Hollywood feature films has also grown. Revenues from foreign ticket sales now exceed domestic ticket sales. Countries that not long ago had few theaters now are building multiplexes.

Recorded music also remains one of Southern California’s major entertainment exports. A global musical artist like Sting records for A&M; Records, based at Charlie Chaplin’s former studio at La Brea Avenue and Sunset Boulevard. Madonna, who has a wide international following, records for Warner Bros. Records in Burbank. Also growing rapidly are interactive entertainment companies, which are settling in large numbers in such trendy office areas as Santa Monica and Venice.

Even as local production grows around the world, Hollywood studios are taking steps to keep a piece of it by financing and working with partners to make movies and shows in foreign countries for their audiences. In one of the more extreme examples, 51 versions of the game show “Wheel of Fortune” are produced globally, each with their own indigenous Pat Sajaks as hosts and Vanna Whites as letter-turners.

An Explosion in Local Filming

The result of all this is an explosion in local production. Through last year, the number of production days--cumulative days spent by crews on the streets of Los Angeles County filming movies, TV shows, commercials, music videos and other entertainment work--totaled 47,669, according to the Entertainment Industry Development Corp., the agency that issues permits.

That number is up 8% from a year ago--and would have been higher except for an unusual dip in November in feature film activity. The number is nearly double the production rate at the same point in 1993. The numbers don’t include filming at studios, where special permits aren’t required.

In any given week, fliers with names of productions scrawled in marking pen, and arrows pointing the way for crew members, can be seen taped to scores of telephone poles and street lights across Los Angeles County. On a typical day last week, nearly 150 projects--movies, TV shows, commercials, music videos and even fashion shoots--were working on the streets of Los Angeles. Scenes from the television series “Brooklyn South” are being shot in downtown Los Angeles, with parts of the movie “Lethal Weapon 4” shot on Balboa Boulevard in the San Fernando Valley.

Los Angeles encouraged that growth by setting up a faster permit process. Also, Hollywood unions, fearing that work would flee to nonunion states and countries, began to aggressively work to keep television and low-budget feature film work in Southern California. But a simpler explanation is that no other area boasts anywhere near the creative and production infrastructure that Los Angeles has.

“This is the mecca for production in the world,” said Kevin Townsend, who heads a recently opened office on Highland Avenue in Hollywood for Industrial Light and Magic, the George Lucas-owned special effects giant in Marin County.

Some sound stages are booked through the end of 1998. Empty buildings throughout Southern California, from the former Spruce Goose hangar in Long Beach to the now-closed Redken shampoo factory in Canoga Park, regularly host film and TV crews.

Still, the explosion in entertainment production is paradoxical.

Although production is soaring, the economics of the feature film business at the heart of the industry are among the worst ever. Star and director salaries, expensive special effects and soaring marketing costs eat up an increasingly larger chunk of industry profits. At the beginning of the decade, a $100-million film was unheard of. Now, extravaganzas such as “Titanic” and “Waterworld” cost $200 million or more.

The average cost to make and market a studio movie is nearly $60 million, with $100-million films common now. The stakes have climbed so high that the Warner Bros. film “Batman & Robin” last summer grossed a little more than $100 million domestically, once the definition of a major blockbuster. In Hollywood, the film was considered a disappointment.

Nonetheless, from a pure production standpoint, Hollywood today resembles something analogous to an oil boomtown, like Houston of the 1970s. Creative and technological wildcatters are seeking their fortunes, and in some cases migrating from other industries in decline.

Less than four years ago, aerospace executive Bill Neighbors left that shrinking business to lease a living room-sized office in Westlake Village, hoping to peddle a digital sound system developed by a Caltech professor to studios and movie theaters.

Now, the Digital Theater Systems he heads as president is moving to a 25,000-square-foot headquarters in Agoura; the company generates $25 million annually and employs 72 people worldwide. The company sells compact disc-based sound systems used by filmmakers and systems used to enhance the sound inside cinemas from Manhattan to Bangkok.

For 25 years, Ron Osborne of San Pedro worked for aerospace and computer companies until he was laid off a year ago. At age 58, with a master’s degree earned when operators fed punch cards into computers, Osborne has returned to school through a fellowship at USC aimed at helping former aerospace workers retrain for entertainment jobs.

“My degrees are older than most of the kids I go to school with,” Osborne said.

Near Burbank Airport, the fledging 4-year-old Innovative Design Technology is an example of yet another new kind of company in the Hollywood sphere. It builds “video walls,” a collage of screens that, when assembled, create a giant picture on a wall. The company’s video walls provide a background setting for Jay Leno on “The Tonight Show,” as well as shoppers browsing for sneakers at huge Nike Town stores.

The firm and others like it attract business from the growing field of “location-based entertainment,” serving the demand for themed environments in places like casinos, shopping malls, amusement parks and museums.

“Today you’ve got themed everything,” said Frank Bencivengo, president of Lexington Scenery & Props in Sun Valley, which provides scenery for movies such as “Waterworld” and casinos in Las Vegas. “Themed restaurants. Themed stores. Themed restrooms.”

The Gone With The Wind Era

During the golden years of the 1940s, Hollywood was centered in a handful of factory-like studio lots in such places as Culver City (the old Metro-Goldwyn-Mayer), the heart of Hollywood (site of Paramount Pictures and the original sites of Columbia Pictures, Warner Bros., Twentieth Century Fox and others) and outposts in the San Fernando Valley (Universal Pictures).

The I Love Lucy Era

As television exploded in the 1950s and 1960s, the geographic boundary of Hollywood continued to spread. TV productions facilities were added to studio lots and stand-alone TV centers were established, such as CBS Television City in the Fairfax District.

The Digital Era

In the modern computer-enhanced era, the old studio lots remain, but Hollywood as we know it has spread across the region, from Manhattan Beach to Santa Clarita Valley.

Source: Marc Wanamaker, Bison Archives; Times files

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Times staff writer Jill Leovy contributed to this story.

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