Tech chic is newest star

High tech is going Hollywood, but the ballyhooed convergence has yet to generate much of anything other than hype.

3 min read
High tech is going Hollywood, but the ballyhooed convergence of technology and entertainment has yet to generate much of anything other than hype.

Nonetheless, two deals were announced today that offer a reminder that the two worlds keep colliding. In one, Apple Computer and Disney agreed to collaborate in the online and software businesses. In another, billionaire technology investor Paul Allen agreed to increase his stake in DreamWorks SKG, the nascent Hollywood studio.

The marriage of the entertainment industry and Silicon Valley, often dubbed "Siliwood," is not new. But it is expanding with the marriage of personal computers and television and as more consumers turn to the Internet for entertainment, not just information.

"The demand for digital content is exploding across all media, whether you're talking about feature-length films, television, or the Internet," said Paul Noglows, an analyst covering the Internet and digital media industries for Hambrecht & Quist. "The convergence is only natural and I think it's justified. As we get higher bandwidth and faster speeds, it will continue."

Added Jill Krutick, an entertainment analyst with Salomon Smith Barney: "Digital animation is a great offshoot to the pure art of animation."

Krutick singled out Disney as being at the heart of the convergence. It has popular entertainment characters, such as Mickey Mouse, as well as huge distribution pipelines such as ABC television and the Internet.

The company recently has been bolstering its Internet strategy by acquiring Starwave, buying a stake in Infoseek, and expanding its fee-based online product, Daily Blast. The company today struck a deal to make the Daily Blast Mac-compatible, expanding its market. Apple has a stronghold in the education market, so the deal is a natural.

Disney and Apple interim chief executive Steve Jobs already work together; Jobs also is CEO of Pixar, which is partly owned by Disney. Pixar and Disney teamed up to produce Toy Story, and Pixar's stock and profits recently have been on a rise. Some analysts have pointed to Pixar as an example of the potential for marrying high-tech firepower with the magic of movies and entertainment.

Disney is not alone in trying to add more technology to its stable. Established media giants such as Time Warner and Viacom also are jumping onto the Internet and adding more high-tech features to their moviemaking.

Newer studios are springing up as well. One example: DreamWorks, founded by Hollywood moguls Jeffrey Katzenberg, Steven Spielberg, and David Geffen. The studio today made news when Allen agreed to increase his stake, adding a vote of confidence to the venture. Allen promotes a "wired world," which brings interactive information and entertainment to people. (Allen is an investor in CNET: The Computer Network.)

Technology companies besides Apple also are turning to Hollywood. They include Intel, Silicon Graphics, and Microsoft, among others. The high-tech companies, having saturated the business market, see new moneymaking opportunities in Tinseltown. They also want to expand the consumer PC market.

Despite all the hype, Siliwood has not lived up to its promise, according to many analysts. For example, Silicon Graphics' technology helped create the dinosaurs of Jurassic Park. But the promise that Hollywood would be a giant moneymaker fizzled for the company. SGI now is trying to return itself to profitability.

Intel's foray into "Web soap operas" such as The Spot, through some investments, has been met with mixed results. (See related report)

On the Hollywood site, DreamWorks also has come under fire for being too slow to churn out new content. In addition, Disney has run into criticism for some elements of its Internet strategy. For example, Mac loyalists said the company took too long to tap their market.

As for incorporating high-tech special effects in moviemaking, the process has not always been a winner. Movies that rely heavily on these effects haven't always lived up to box-office expectations and sometimes have run over budget.

"There's not much to talk about beyond Pixar," said Harold Vogel, an analyst with Cowen & Company. "It's a budding industry, but it's relatively small."