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There might be gold for techies in Tinseltown

Studios are opening their arms to technology start-ups, but can the two sides get past copyright issues as well as other differences?

The emergence of online video has begun enticing Silicon Valley entrepreneurs to Hollywood, and unlike an earlier migration during the dot-com era, the film industry is rolling out red carpets.

After spending three days at the Digital Hollywood conference, where I spoke with dozens of entertainment executives as well as tech CEOs, it's easy to spot what's going on: studio executives are more comfortable with online video and clip-playing gadgets than in the past. The entertainment sector also needs help figuring out how to make money from digital. On the other side, the geeks seem less dismissive of studio's copyright concerns and are much impressed with the film industry's glamor and riches.

"In the Hollywood culture, it's about the lawyers. It's an arm wrestle at a table. The (two industries) have a very different understanding of how to structure a deal."
-- Lynda Keeler, former Sony Pictures exec

"The new group descended so quickly on Los Angeles," said Philip Lelyveld, a former Disney executive who is now on his own as an entertainment-technology adviser, and has been a member of Hollywood's tech community for over a decade. "It's been in the last six or seven months where we suddenly saw a huge (spike) in activity. The reason for that is people are seeing startups built around content are suddenly becoming economically viable. The studios have also made their content more available. In some cases, they have made it clear that there are things that can be done with content that were still in dispute a few years ago."

Indeed, the film industry has begun galloping into the digital age.

News Corp. and NBC Universal launched Web video-portal Hulu in March. Earlier this month, the top movie studios agreed to allow Apple to offer flicks via iTunes the same day they're released on DVD. Two weeks ago, Warner Bros. Television announced it was bringing back the WB channel, the TV network shuttered 18 months ago, as an online-only play. According to one Warner Bros. executive, "the TV network of tomorrow won't be found on TV."

The new alliances, however, could still prove fragile. Tech entrepreneurs still complain that it takes too long to close licensing deals. The Studios continue to chafe when the whiz kids build services around their films or TV shows before they obtain rights--ala YouTube. And nobody can overlook the vastly different and often conflicting ways each side does business.

Lynda Keeler, a former Silicon Valley venture capitalist and chief of Sony Pictures Digital Group, said the techies are known for their willingness to work hard for options and equity--the possibility of a future payday. In Hollywood, she said, people want their money upfront. She remembers interviewing for a position with a venture fund after spending most of her career in entertainment. She asked the VC execs if they would like to speak to her lawyers.

"They said, 'Lawyers? We only use lawyers for term sheets," recalled Keeler, who now runs online retailer, "In the Hollywood culture, it's about the lawyers. It's an arm wrestle at a table. The (two industries) have a very different understanding of how to structure a deal."

Despite their differences, it's clear both sides see a profit in working together.

Paramount Pictures executive Derek Broes is helping build bridges between Hollywood and Silicon Valley. Greg Sandoval

Derek Broes is Paramount's senior vice president of worldwide business development and the person assigned to find new ways for the studio to profit from its content. Lelyweld says Broes is among the group driving Hollywood's technology welcome wagon. To launch Paramount's VooZoo service, which allows Facebook users to send famous scenes from the studio's film library to friends, Broes got help from FanRocket, a developer of social-networking and media sites.

"Fan Rocket was a natural," Broes said. "We are a motion picture company that doesn't have a lot of technical experience and we're not in a position to be bringing in engineers on staff and start building things. The folks at FanRocket and Danny Kastner, their CEO, immediately got what I was trying to accomplish. We took off from there. VooZoo is only a first step in a larger strategy"

Broes is a former manager at Microsoft and Brilliant Digital Entertainment, the company that made news for bundling its Altnet P2P application into Kazaa. So he knows something about approaching the studios with a disruptive technology. He said the past friction between Hollywood and Silicon Valley was due to a lack of understanding of each other's businesses.

"I include myself in this," Broes said. "Back then it was almost like, 'Hey, look, give me your content. Look at all these people I have. I'll put ads around it and it will be hugely popular.' Well, they don't understand that the studios have certain restrictions in their business and have previous windows occupied by previous agreements. It wasn't a lack of wanting to go out and make money in a new way. It was just limitations of a legacy business that are now beginning to change."

Broes also said that for any of the new online ad models to work, corporate America must embrace new technologies. During a panel session at Digital Hollywood, Broes singled out the face-mapping system developed by start-up Big Stage. The company uses photos of a person's face to create a digital avatar and then computers manipulate the image to change facial expressions.

Broes asked why the technology couldn't be used for ads. Instead of showing Facebook users a commercial with actors, why not replace an actor's face with a viewer's. "If I can actually star in my own commercials, I'm going to watch them, Broes said."This is where the advertising community has completely failed at adjusting and adapting and being creative."

As for whether the geeks and movie people can get along, there's no doubt, according to Keeler, the former Sony executive.

Although she did not attend, Keeler said she heard that the much-publicized party thrown last month in Los Angeles by TechCrunch was a huge hit. "It was a mash of tech guys and beautiful women," Keeler said. "It showed the two tribes can get together...the children that come from this union are going to have it all, the good looks of Hollywood and the smarts of the valley...but it's going to be a painful pregnancy."

(Read my related blog: Advice for techies who want to star in Hollywood)