Start-Ups Slow to Make Valley Connection, Experts Say
The San Fernando Valley is home to the biggest concentration of entertainment companies in the world, and the “101 Tech Corridor” from the Valley to Ventura County is considered one of the fastest-growing high-technology regions in the nation.
But despite this seemingly unbeatable combination, industry experts say the Valley has yet to establish a reputation as a hotbed for companies trying to marry content with technological wizardry.
In contrast to West Los Angeles, with its bevy of new media start-ups, or Orange County, known for advanced chip producers such as Broadcom and Conexant, the Valley is diffuse, hard to define and still making a name for itself in technology, industry experts say.
The buzz surrounding so-called “convergence companies”--ones that mix entertainment and technology components--has heated up in the last year amid an infusion of venture capital, an explosion in technology stock valuations and growing interest from the major studios, according to technology experts.
Walt Disney Co., for example, has embraced the trend by creating Disney Interactive. It also announced audacious plans for a $2-billion, 125-acre creative campus in Glendale housing a new media division and technology firms with “Disney synergies.”
Similarly, AOL’s acquisition of Time Warner and an aggressive broadband initiative by the combined companies will only step up content efforts like those of Burbank-based Entertaindom, a Time Warner Web site that offers specially produced shorts as well as vintage TV clips and Warner Bros. Looney Tunes cartoons.
Still, most of the action is taking place among mid-size and small players in areas such as animation, digital imaging, virtual reality, fiber optics, net infrastructure, computer graphics and Web page design and the Internet, said Greg Njeos, who consults with tech companies for Price WaterhouseCoopers in Woodland Hills.
Drawn by proximity to the studios and more reasonable rents--that average $2 or less per square foot versus as much as $3.50 per square foot on the Westside--companies are setting up shop along the 101 Tech Corridor.
The corridor has generally been defined as the region along the Ventura Freeway from the west San Fernando Valley to Camarillo, although a recent study by Los Angeles Regional Technology Alliance went as far east as Glendale--allowing it to include the major film studios.
Jack Kyser, chief economist of Los Angeles County Economic Development Corp., said the story of the firms along the corridor often does not get out because of what he calls the “800-pound gorilla of glitz.”
“When you think of the Valley, you think of the motion picture industry first,” Kyser said. “Yet, when you look at the convergences going on, it has the potential for a longer, more lucrative life span than the more heavily hyped Westside new media industry.”
Burbank, for example, is home to Iwerks Entertainment Co., a maker of interactive simulation rides and large-screen theaters; screenwriter software producer Screenplay Systems Inc.; and Four Media Co., a unit of AT&T;’s Liberty Media Group that sells post-production services for movies and Television.
Nearby Glendale also has its share of such firms, including Knowledge Adventure, an education software producer; children’s Internet Web site Kids123.; and Sega Gameworks, a joint venture between Universal Studios Inc. and Sega Enterprises Limited that designs interactive games.
Other areas of the Valley are also seeing growth in convergence companies.
THQ Inc. of Calabasas began in 1990 as an interactive toy and video game developer with 30 employees. In 1995, it turned exclusively to software for console game systems and grew to 350 employees worldwide, making game titles based on content from Disney, Fox, Viacom and Warner Bros.
Van Nuys-based Illusion Inc. started out as a developer of virtual-reality applications for the military, but now makes simulators of extreme sports such as auto racing and parachuting.
Also riding the convergence wave is Stan Lee Media Inc. of Encino, a creator of comic book characters such as the X-Men. Founder Lee has made his hot properties even hotter by transforming them into a multimedia distributor of licensed content.
Bill Allen, president of Starsonline.com and past president of the Economic Alliance of the San Fernando Valley, added that so many companies are involved in the entertainment-technology convergence that it is hard to gauge their numbers.
Part of the problem, said Allen, is the rapid evolution of technology, the lower profile of Valley-based start-ups and the difficulty of keeping tabs on promising new companies that are quickly swallowed up by larger firms--or go bust. Allen, however, said a pattern of growth will become clear as tech companies gravitate to the Valley, where major film studios including Disney, Universal and Warner Bros. are based.
“The first Internet companies were developed on the Westside, and once they start to develop there’s a natural clustering effect,” Allen said. “But as people realize that content is king, they have to come to where those companies are.”
But that could take awhile, said Rohit Shukla, president and chief executive of Los Angeles Regional Technology Alliance, a private nonprofit organization funded in part by the state of California.
Although much of the change in the Valley is anecdotal, the alliance has tried to quantify the trend in a study: “How Green is Our Valley? Technology Transformation Along the Ventura Freeway Corridor.”
The alliance reviewed companies in the area stretching from Glendale to Camarillo and found it had five of the 20 fastest-growing tech communities in the state.
Ranked by projected job growth, Chatsworth was No. 5, Camarillo was No. 10, Calabasas and Burbank were Nos. 13 and 14, and Woodland Hills was No. 18.
The study also noted that attracting venture capital to the tech corridor has been far from consistent, with area companies receiving $189 million in funding in 1997, dropping to $126 million the next year and shooting up again in 1999 to $279 million.
“We would all like to believe our time has come and that broadband delivery will guarantee a place in the sun,” Shukla said. “Frankly, it isn’t happening and it won’t for another six to seven years.”
