Until last week, NetZero, a Westlake Village-based Internet service provider, was trading at less than a dollar per share. That went on for three weeks. The news was noted by many including company officials who have seen an increasingly aggressive Nasdaq purge dot-coms from its stock index for falling below the $1 per share mark. Officials from NetZero, reputed to be the first free ad-supported Internet service provider, would not comment on their stock price struggles, but some observers say the company’s performance is not unique among new media firms. Henry Blodget, an analyst with Merrill Lynch & Co., said the company’s woes are part of the tech sector’s general weakness that devastated Nasdaq last year. “It’s the overall tech market and the dwindling ad revenues that has the company scrambling to stay ahead,” Blodget said, noting that the company counts on ad sales for much of its revenue. With the seeming domino effect of dot-com firms going by the wayside last year, NetZero, like others, felt the brunt of investor nervousness, Blodget said. The company saw its stock price go from a 52-week high of $36 3/8 last February to $1.65 last Friday. NetZero’s net revenue figures remained flat through much of 2000, with costs increasing each quarter. Net revenue for the quarter ending Sept. 30 reached $16.5 million with expenses topping $21.3 million. Its available cash for the same period shrank to $132 million from $201 million in June. Along with news of some recent acquisitions, the company has stayed in the headlines with a December lawsuit against fellow free Internet service provider Juno Online Services, Inc., claiming the company violated NetZero’s patent for a floating advertisement window. Juno has counter-sued, claiming NetZero infringed on a patent of its own. Both suits are pending. While NetZero officials would not discuss their plans to bolster the stock price, company Chairman Mark Goldston said he is optimistic about the company’s direction and potential growth. “We have recently experienced phenomenal member growth as many of our competitors have closed their doors,” Goldston said, “and we remain committed to providing free Internet access to the vast majority of consumers who use the Internet recreationally and on a limited basis.” After one of Nasdaq’s most miserable years in a decade, the index is trying to return some of its mid-1990s luster by booting out once-high flying stocks that have hit the skids and landed in seeming penny stock hell. Pets.com, best known for its babbling sock puppet in television commercials, was among those facing delisting when it abruptly pulled the plug on its operation in November. Others companies that have seen hard times include E-stamp, which closed up shop late last year, and Quepasa.com, a web portal targeted to Latinos that chose to go out of business rather than be delisted after Nasdaq threatened to boot it off its index. In a move meant to bolster the company’s efforts, NetZero last week added Western International Media founder Dennis Holt to its board of directors. Holt replaces original NetZero investor and Idealab Chairman Bill Gross who left earlier this month. Goldston said Holt’s expertise in the telecommunications and new media fields will help the company move forward. Headed downhill NetZero’s stock price has been steadily heading south since June, hitting an all-time low last month when it dipped below $1 for the first time and remained there until Jan. 12. It closed that day at $1.13 after spending three weeks below the magic $1 mark. Under Nasdaq rules, there are two reasons why a company would be delisted: – A company’s stock price would fall below $1 for 30 consecutive days. Moreover, if a company’s stock price moves above the $1 mark after more than 30 straight days below that price, it must remain above a dollar for at least 10 straight days or off it goes. – Alternately, a company with a market cap of less than $50 million can be delisted if its stock falls below $5. Companies have a choice as to which criteria is more suitable. According to Nasdaq rules, companies must have a share price over $1, a minimum $4 million in tangible assets, and at least 750,000 publicly traded stock shares, with corporate officers or others owning more than 10 percent of the company’s stock. Companies must have at least 400 shareholders and two so-called market makers, or brokerage firms, trading in the company’s stock. Mark Gunderson, a spokesman for Nasdaq, said delisted companies may find themselves on the OTC Bulletin Board, generally not listed in most newspapers. Nasdaq is the only major stock market with a minimum stock price requirement. Tom Wyman, an analyst with J.P. Morgan Securities, said delisted companies lose much of their credibility, status and even analyst coverage. Many large brokerage firms refuse to provide financing for delisted companies. “It’s hard for a company to recover from that and they usually don’t,” he said. Delisting, however, is not immediate, but a rather long and protracted process that allows companies a chance to save themselves. Targeted companies are sent a so-called “deficiency notice,” giving them 90 days to comply with Nasdaq regulations. If after 90 days, a company fails to meet minimum requirements, a hearing process takes place that could run for another 90 days, giving the company up to six months where it can remain below $1, Gunderson said. To avoid delisting, companies in the past have done reverse stock splits, where the company asks shareholders to turn in their shares in return for fewer shares at a higher value, thus reducing the number of outstanding shares and boosting their individual value. “It’s a way for companies to get around these rules when they are not really changing the way they do business,” Wyman said. In September, for instance, Reston, Va.-based custom CD retailer MusicMaker underwent a 10-for-1 reverse stock split to boost its stock’s value, then around 50 cents a share. The plan worked and the struggling net firm avoided delisting but, earlier this month, its board of directors agreed to cease operations and liquidate its assets, citing a tough market. While NetZero’s stock price is back above $1, it is not out of the woods yet. “Anytime a stock price falls below $5, a red flag goes up,” Wyman said.

David Fleming may have lived in Southern California for decades, but he describes himself as a man who arrived in the San Fernando Valley of the 1950s to find a place very much like the Iowa community he had left behind part of a large city in name only, but really a collection of villages where much of the civic life revolved around voluntary organizations. Today the lawyer with the firm of Latham & Watkins has a different view of his Valley of villages from an office on the 25th floor of a Universal City high-rise. His firm belief that this community of 1.6 million people can return to something close to what he discovered more than 40 years ago has made him one of the highest-profile supporters of Valley secession. But, of course, the man who is of counsel to the sixth largest law firm in the world is certainly more than just a one-issue advocate. In fact, his list of philanthropic and civic activities seems almost endless. He is president of the Los Angeles Board of Fire Commissioners and former vice chairman of the California Transportation Commission. Fleming chairs the Economic Alliance of the San Fernando Valley, the Los Angeles County Economic Development Corporation and, for the last 12 years, the Board of the Valley Presbyterian Hospital. He and his wife Jean have contributed more than $3 million to various charities and he has been a close adviser to Mayor Richard Riordan. Still, it apparently is difficult to separate Fleming from one of the most controversial subjects of the day, secession. Indeed, it is hard to stop him from expressing his views on the subject when he gets on a roll. After all, as Fleming is quick to point out, “This is the only major city with a mountain range running through it. It really is the continental divide of Los Angeles.” Question: In the media, you are typically characterized by your civic and philanthropic activities and, of course, your interest in Valley secession. But what do you do in your professional life? Answer: I’ve been of counsel with Latham & Watkins since 1992. I generate business for the firm and I do some direct work in areas of corporate and environmental law. I interface between many of our clients and government. A lot of the time that I spend is in civic, community and government activities. I like economic development. Whatever I can do to strengthen the economy of this area helps everyone. Consequently, economic development is close to my heart. Indirectly, it helps our clients and it helps many of my friends in government. The better the economy does, the better they do. Q: In a nutshell, why do you believe secession is a good idea? A: Los Angeles has to realize that it isn’t one city anymore, that it isn’t one community. You have got to deliver local things on a local basis, regional things on a regional basis. The City of Los Angeles covers nearly 500 square miles. It’s 60 miles from one tip to the other. That’s not a community, that’s a region. Q: Putting aside the arguments for or against it as secession regards the Valley or the region, why are you so personally committed to it? A: I was born in Iowa and lived there the first 22 years of my life. I settled in the Valley in 1956 and it was much the same way. It was a series of villages. They pretty much did things on their own although they were a part of the City of Los Angeles. Taking a page out of de Tocqueville, most of the stuff that went on in the Valley was the result of civic organizations. That’s what cities and communities and villages are all about, but that isn’t what Los Angeles is all about. I’ve always been a government policy wonk and I’ve lived here now for almost 50 years. I’ve seen the changes. I’ve seen government become more and more detached and services have deteriorated. I’ve seen too many people disappointed and they shouldn’t be because this is a marvelous area. Q: What is ahead for the Valley secession movement? A: It’s supposed to hit the ballot in 2002. A few years ago, I thought this was kind of a long shot. Now I don’t think so. From our information, it looks like it’s going to pass pretty comfortably. My sneaking suspicion is that people will wake up the next day and, instead of one city in Los Angeles, there will be four (if secession movements in San Pedro and Hollywood are also successful). You won’t see any difference (at first). I think the Valley will probably contract for the first couple of years with the city of Los Angeles to continue the services we have now. But the Valley will have its own government and be able to begin an evolutionary process to develop into the kind of city all of Los Angeles should have become years ago. Q: Why should the Valley business community support secession? A: First, the city taxation policy is absolutely atrocious. We’ve got all these different taxes. It’s a hodge-podge, it’s terrible: Businesses aren’t able to vote, so let’s tax businesses. This is one of the most anti-businesses cities in America because of the taxing structure. If the Valley were a separate city, the taxing structure would change drastically. Second, we would go out and fight to get businesses here and make this a very, very business-friendly area. I would not be surprised eventually to see some very major corporations move into the Valley and say this is a good place to do business. Q: If there were to be substantial business tax reform in a new Valley city, would there also be some alternative revenue sources to pay for the cost of running a new government? A: That assumes the city can’t cut anything. This city has been all things to all people for too long. I see this (new) city cutting back in the way they’re spending money. Public safety should be number one and pull back on some of the feel-good programs this city has adopted. I look at the other small cities in this region. For the most part, they don’t engage in some of the programs the city of Los Angeles does. Q: Your good friend Mayor Richard Riordan is on record as opposing secession. How do you two reconcile your differences on this issue? A: We’ve had some conversations about it. We’ve agreed to disagree. Q: What is your view on the potential breakup of LAUSD, with or without Valley secession? A: It has got to be broken up. I’ve gotten to the point where I think LAUSD is so big and so fossilized that it would be impossible to make it work. When you consider the number of people who work in administration and absolutely eat up the budget, the money never gets down to the classroom. Again, smaller is better, local is better. We just break LAUSD up into a lot of school districts. But you’ve got to take one thing at a time and right now secession is in front of the voters. Q: Do you see yourself having a substantial official role in any new city? A: No, I’ll just stand on the sidelines and cheer and feel like I’ve done something. Some of the other folks feel the same way. I know Bert Boeckman and Richard Close do. I don’t think any one of us wants to be in office. Q: What do you say to those who complain that the various secession movements would leave Los Angeles a city abandoned to low-income minority communities? A: First, if you look at the ethnic breakdown of the Valley and the rest of the city, it’s almost a mirror. You have the same mix south of Mulholland as you do north of Mulholland. Second, I am now informed by (a recent city study that) the Valley only contributes 31 percent of the city’s taxes. According to their figures, the Valley gets more than it gives, so the city ought to be better off including all those minorities that are on the other side, OK? So there’s hardly going to be a ripple if the Valley leaves. If you can enhance the economic development of any area that’s either in the city of Los Angeles or contiguous to the city of Los Angeles, you’re going to help everybody. To me, the answer in minority areas is to empower them, to give them the power to make decisions and pull themselves up and come up with a taxing system that’s going to allow them to generate a better economy. You can’t do that in a one-size-fits all-city like Los Angeles. No matter what program you’ve got, it’s got to be divisible by 15 and everybody’s got to get their fair share including the West Side, that doesn’t need it.

Like much of the nation, the San Fernando Valley counts small business as a key part of its economic growth. In fact in its 2000-2001 report, Cal State Northridge’s San Fernando Valley Economic Research Center found that lending to these firms jumped 30 percent from 1998 to 1999. Of the 28,000 loans under $1 million made to Valley businesses, a third went to firms with annual revenues of less than $1 million. While the report acknowledges that some of that jump is due to increased reporting, additional lending activity is also a factor. According to researchers, the small business industry sectors experiencing the most growth and the ones that will continue to do so for at least the next year are entertainment, bio-med/bio-tech and home health care. Wexler Video Inc., a 16-year-old Burbank-based firm led by president Chris Thompson, is smack dab in the middle of one of the Valley’s hottest trends. This $20 million entertainment company provides equipment to reality-based television productions such as “Survivor,” “The Real World,” “Road Rules” and “Temptation Island.” With its revenues growing at 20 to 26 percent annually, this 90-employee business has found the region extremely conducive to growth. “The San Fernando Valley is where it’s (reality-based television productions) all done,” says Thompson. “We’re in the epicenter of it. There are a lot of production companies here and, if the companies are not here, the people live here.” He believes cheaper rents, proximity to Hollywood and the long history of entertainment firms such as Universal Studios, Warner Brothers and Disney in the Valley are other reasons the industry is so much a part of the region’s economic fabric. Entertainment strike fears While motion picture production and motion picture production services have grown 110 and 116 percent respectively in the last six years, there is a potential major blip on the entertainment industry’s radar screen in 2001: threatened strikes by the Screen Actors and the Screen Writers guilds. But Thompson of Wexler Video does not expect his firm to be unduly impacted, even if a strike should materialize. “(The productions in my business) are unscripted and without actors, so our work is not going to be affected by the strike too much. I don’t expect a downtown at all,” says Thompson, who believes the reality television boom will last another 18 to 24 months. “The entertainment industry is changing just because of the way business is being done,” says Saul Gomez, director of economic development for the Economic Alliance of the San Fernando Valley. “You now have digital imagery, which means you can work on a film in Calabasas and e-mail it to a network server in Burbank.” Steve Donely, deputy community development director for the city of Burbank, which is home to Disney, Warner Brothers and a host of small firms that support these studios, says his city’s tax structure and lower utility rates make the area so enticing. He also points to an investment Burbank made that has become a vital drawing card. “Our fiber-optic loop, which our utility company laid throughout the city, is really unique among municipalities,” Donely said. “Los Angeles has one too, but it’s very limited in the Northeast Valley. In Southern California, we were one of the few cities to lay our own line.” While growth has been the watchword for the San Fernando Valley, Gomez says the very things that have nurtured it could create future challenges. It’s getting more difficult to find land, which is pushing up the cost of both commercial and residential real estate. Then there’s the constant need to train and retrain workers. Within the city of Los Angeles, Gomez says, the cost of doing business must become more competitive with surrounding municipalities. And he believes Valley communities and cities must view themselves as one contiguous region and begin working together to bring in additional industry, instead of competing to attract companies that merely shift from one part of the area to the other. The newest big thing Two other hot industries in the year to come will be bio-med and bio-tech, predicts Gomez. “Bio-med is medical instrument manufacturing and it’s growing, particularly here in the Valley,” he said. “The growth goes back to aerospace and the whole defense industry. There were certain things developed by JPL and larger research institutions for defense that can also be commercialized.” Gomez adds that workers faced with the prospect of unemployment because of the aerospace pull-out suddenly realized they could apply their knowledge and expertise to the entertainment and medical instrumentation industries. While many of the medical instrumentation companies are big (Baxter International, MiniMed and Advanced Bionics), their presence has created a demand for many small suppliers in the area, or has made the environment very friendly for related companies. Medical Illuminations International is an example. “We are one of the premier manufacturers of medical lighting equipment, from surgery through exam lighting,” says Larry Debord, vice president in charge of sales and marketing for the San Fernando-based company. “We feel that in the Los Angeles area, the Valley is overall the best (place to be) in terms of cost of overhead, building and availability of labor. Transportation is also one big factor. We’re near an interstate, and near the 118 freeway which gives us easy access for trucking,” adds Debord, whose company ships about 90 percent of its products by UPS. “The city of San Fernando has a good police department and it’s very pro-business,’ says Debord, whose 40-employee company moved from Van Nuys to Arleta and then in September to San Fernando. While there may be a general perception that San Fernando is not necessarily the “best” place for a business, Debord says, their decisions were based on nuts-and-bolts issues like available building space, security, access to transportation, a quality labor pool and a reasonable cost of doing business. San Fernando offered all of those things. According to Ahmed Enany, executive director of the Southern California Biomedical Council, there are concentrations of medical device manufacturing firms in Chatsworth, Sylmar and San Fernando, as well as a scattering of companies along Interstate 5. MiniMed’s place in the mix He says another reason the industry is growing in the Valley is Cal State Northridge. While many universities around the nation are sources of technology spin-offs, it was real estate the school owned that made it such a critical player. “In 1997, MiniMed was making a decision about expansion and needed 15 acres,” recalls Enany, who says the firm was even getting offers of free land in other states. A chance tip about 60 prime acres owned by CSUN which wanted to generate $1 million in annual revenue with it provided the impetus the company needed to stay in the Valley. At the same time, MiniMed established a relationship with the school, including courses and internships, which would eventually funnel workers into the company. Enany says a similar effort is under consideration at Pierce College in Woodland Hills. The other hot industry in the Valley home health care services has grown 128 percent in the last six years, according to the San Fernando Valley Economic Research Center. This sector, in general, consists of skilled nursing or medical care in the home done under the supervision of a physician. That growth includes a number of for-profit companies like Home Instead and Care Keepers Inc. that Tim Brown of the National Association for Home Care says provide non-medical “chore services.” These provide transportation to medical appointments, house cleaning and meal preparation. According to Brown, spurring growth in this part of the industry is an aging population that overwhelmingly prefers to do its long-term recuperating at home. Also, in the last three years, a decline in government funding for Medicare-certified home healthcare agencies nationwide has pushed many such entities out of business or forced them to morph into for-profit businesses.

Chatsworth-based Capstone Turbine Corp. recently marked a milestone with the delivery of its 1,000th microturbine. What’s more, the energy supplier expects to deliver twice that many before this year is over. “We’re definitely looking to grow in 2001,” said Ake Almgren, Capstone president and chief executive officer. The 12-year-old company began offering commercial power-generating microturbines in 1998 to companies seeking to reduce both their electric power costs and the impact of a power outage on vital equipment. Although Capstone continues to operate in the red, Almgren predicts a turnaround by 2002 when orders for the energy-efficient power turbines bring in enough revenue to offset the more than $145 million in development and related costs the company has burned through since 1988. After going public last June, just months before California was plunged into an energy crisis, the company is riding a wave of investor optimism in its high-tech microturbines, which run on natural gas, but also can operate on diesel, hydrogen and other fuels. After raising $260 million from venture capitalists such as Microsoft Corp. co-founders Bill Gates and Paul Allen, and landing a $20 million federal grant, Capstone spent 10 years developing the newfangled generator that was finally available in 1998. In the meantime, the company suffered net losses of $30.6 million in 1997, $33.1 million in 1998, and $29.5 million in 1999, according to documents filed with the Securities and Exchange Commission. But Capstone’s recent performance hints at a trend toward profitability. Revenues jumped from $1.3 million in the first nine months of 1999 to $16 million through the same period ending Sept. 30, 2000. Still, while revenue figures increased, so did costs. The company remained in the red with a $25 million net loss during the first nine months of this year, substantially more than for the same period in 1999, when it lost $17.9 million. Proceeds from the June public offering amounted to $155 million. Almgren’s optimism is borne out by a flurry of orders for the gas-powered microturbines, which range in price from $30,000 to $60,000 per unit. In September, Chicago-based Harza Engineering Co. inaugurated a three-year distribution deal with a 250-unit order. Capstone also received a 126-unit order in October from Sherman Oaks-based American Energy Savings, Inc. American Energy President Jeffrey Valmus said the microturbines would help improve his company’s efficiency by providing less expensive power to its customers. Next came a major order from Canadian electric utility Mariah Energy, which agreed to purchase 126 microturbines. Hanover Co. ordered 100 units for distribution outside the United States and just last month Illinois-based Invensys Building Systems ordered another 100. “We’re very encouraged by the response we’re getting to our microturbines,” Almgren said. Bear Stearns analyst Robert Winters said the company is poised to become a major player in the energy market. Capstone’s lack of true competition and its high-end clean-burning microturbines will help push the company into the black, he said. Merrill Lynch analyst Sam Brothwell said the new technology holds promise in California, where he guesses legislative initiatives will encourage development. Brothwell predicted the company would continue to expand manufacturing capacity to meet demand. Although Capstone’s stock price took a beating along with many tech stocks this fall due to general low performance in that sector, Winters still considers the stock a “buy.” It peaked at $90 in September and subsequently slid along with other energy and tech stocks to a close of $23 last week. Company officials say they do not comment on stock performance. As a result of the recent electricity scare, Capstone has received inquiries about its microturbines from California companies leery about the possibility of power interruptions. “This is a clean-burning unit that uses natural gas and does not adversely impact the environment,” said Keith Field, Capstone communications director. In fact, the microturbines have only diesel-powered generators as true competitors. Some smaller firms have also begun development on their own microturbines, but none are in the market so far, Field said. The units work much as a jet engine or turbocharger, with blades mounted on a shaft supported by air bearings that rotate up to 96,000 revolutions per minute to generate electricity.

For indie promoters, it’s the bottom line that always gets hammered Four years ago, Barry Cohen saw his first live Wrestlemania show. He sat in the first row. He met World Wrestling Federation impresario Vince McMahon. He was hooked. Today, at 22, Cohen’s Jewish Wrestling Federation plays the West Valley Jewish Community Center, but he dreams of one day selling out Staples Center. “Everyone has a dream of doing something,” said Cohen, who both produces the shows and wrestles in them. “I’ve been a longtime fan of wrestling, and I always wondered, ‘What if?'” Welcome to the world of independent wrestling, a place where a kid can jam and slam, bleed and scream. And dream of becoming the next Stone Cold Steve Austin or even Vince McMahon. Over the past several years, at least four independent wrestling organizations have started up in the San Fernando Valley alone. They play to houses of 20 or 200 at schools and community centers, bar mitzvahs and halls. They sell T-shirts, caps and posters. Some have even snagged sponsors. “Wrestling is becoming so huge, that more guys are getting into it,” said Aaron Hasson, webmaster of socalwrestling.com, a Web site that chronicles independent wrestling. “There are too few slots in the big three, so they get involved in smaller groups.” The World Wrestling Federation empire may have grown to more than $400 million in sales with television broadcasts attracting anywhere from 3 million to 5 million viewers and talent like Austin commanding multi-million salaries. But many of these independent associations, with an average ticket price of about $10, deal in three-digit gate revenues. If they’re lucky, they’ll break even. Other times, they don’t make enough to pay the wrestlers. “A federation in this area means one guy,” said Fred Olen Ray, a film director who started up All Star Championship Wrestling in North Hollywood about a year ago. “Everyone has these fancy schmancy names, but it really means one guy working out of his bedroom.” At 46, Ray has been wrestling for years but, he said, the opportunities have always been too few and the audiences too small. “Sometimes the guys in the dressing room outnumbered the guys in the audience,” he said. “So the objective for me is to sell all the seats in the house.” Rattlesnakes get expensive All Star Championship Wrestling matches, held about every two months, usually at the American Legion Hall in Reseda, draw a robust audience of about 250 people. But with advertising, staff salaries and elaborate special effects an upcoming match on Jan. 26 will feature a crate full of diamondback rattlesnakes the shows cost about $2,000 to produce and, at $10 an adult ticket, the company was barely breaking even. Ray has now raised prices to $12 an adult ticket and he’s attracting sponsors like Coors Light. “These things cost money, but that’s what’s putting people in seats,” he said. Another promoter, Rick Drasin, runs a less elaborate operation, staging his American Wrestling Federation Shows at high schools and colleges and splitting the gate with the schools. A former bodybuilder who began wrestling in 1965 and still works as The Equalizer, 56-year-old Drasin produces four or five shows a year, drawing an average audience of 500 at $10 a ticket. “If I was to rent a building, I wouldn’t do as well. You have to have the support of something like a PE department in a high school,” said Drasin, who recently began selling wrestling merchandise on his Web site, www.taltos.net/bigboy. About a year ago Drasin opened the American Wrestling Federation School in Van Nuys, where students from 17 to 40 shell out about $250 a month to learn the tricks of the trade. At average wages of $25 to $100 a show in these independent leagues, the students are not likely to earn back their costs anytime soon. But the wrestlers say they don’t do it for the money. “Where else can you get paid to tell people they’re stupid?” asked Crayz (a stage name), who says wrestling gives free rein to his alter ego. “When you hit that curtain, you’re somebody else. Crayz, he’s a madman. He’s my escape from reality.” Wrestling fans liken it to a soap opera where viewers can cheer their favorite characters, boo them or harbor fantasies of being just like them. Cohen’s Jewish Wrestling Federation characters are drawn with a self-deprecating sense of humor. Cohen himself wrestles as Jewpac Shakuritz, a play on the late rapper, and body slams his opponent into a bucket of dreidels. He works with David the Mohel, who comes into the ring with hedge clippers to “circumcise” his opponents, and Yosef Allgoodstein, who spits Manischewitz wine and throws matzoh. “Most of our characters aren’t macho tough guys,” said Cohen. “You’re not going to see David the Mohel bench-pressing 300 pounds.” So far, Cohen’s productions, sponsored by the Cal State Northridge chapter of Hillel, have been fund-raisers, but he recently teamed up with another group, Millennium Pro Wrestling, and plans to produce a more mainstream show in March. He is also looking for sponsors and working on a Web site where he hopes to sell T-shirts, bumper stickers and programs. “Obviously, we’re going to target the Jewish community, but I would love to do it for the mass market,” Cohen said. “I think just based on the stereotype, people will show up.” In reality, say many, most of these federations will never cross over into the big leagues. “Eighty percent of promotions will never grow beyond the place where they ran their first show,” said Joe Seanoa, director of wrestling media for Ultimate Pro Wrestling. “I liken it to minor league baseball. Some teams will be around forever, but it’s very hard to transcend to make it into the major leagues.” Ultimate Pro Wrestling may be one of the exceptions. Since starting up about two years ago, holding shows for about 30 people in gyms, the production has moved into the Galaxy Theater in Santa Ana drawing audiences of 900. “Last year we turned away 200 people at the door,” Seanoa said. Ultimate Pro Wrestling, which also runs a school for wrestlers, has become a kind of farm club for the WWF, and some of its wrestlers and behind-the-scenes workers have crossed over to the WWF empire. Still, Seanoa said, “We struggle everyday to keep the company afloat.” In the last analysis, dreams won’t pay the rent. “Wrestling is a business, and business comes first. You don’t do things unless there’s some profit to be made.”

At first, executives at Jafra Cosmetics International Inc. thought all they had to do to reach the Latino market was translate their marketing materials into Spanish. But it soon became clear that language wasn’t the only barrier. Hispanics prefer different cosmetic products than those favored by the general market. They are attracted to different packaging and they even want different catalogs to select from. The Latinos who sell Jafra products too had distinct needs when it came to training and even sales incentives. “We were taking everything for the Anglo market and translating it,” said Beatriz Aguirre-Gutai, general manager of Jafra’s Hispanic division. “You can’t just translate. You have to adapt.” That’s why Westlake Village-based company late last year restructured its organization, creating two distinct divisions. Aguirre-Gutai was named general manager for the Hispanic division and Dyan Lucero was named to the same post for the general market. Cosmetics marketers like Procter & Gamble have long known that Latinas buy more cosmetics than the general population. But Jafra, with estimated sales of $326 million worldwide, had other reasons to revamp its organization structure. The company’s mode of distribution it sells to a network of independent contractors who then retail to consumers using door-to-door, office and party sales techniques is heavily reliant on the Latino community, particularly newer immigrants. “Bell ringing is probably bigger with ethnic groups than with Caucasians, and it’s probably more successful, especially if you’re talking Hispanic or Vietnamese. Whoever is ringing that bell is speaking the home language,” said Marlene Eskin, president and publisher of Market View, a cosmetics industry newsletter and Web site. Unlike the general market, where consumers are comfortable buying online, from catalogs or in retail shops where the sales personnel may change from day to day, Latinos prefer face-to-face interactions with people they know. “Hispanics have a penchant for relationship-based life,” said Carlos Garcia, president of Garcia Research Associates Inc., a Burbank-based market research firm that specializes in the Hispanic market. “They want to know their doctor. They want to know the guy who does their taxes. It’s a very Hispanic cultural value.” New owners see promise When Jafra’s current owners acquired the company from The Gillette Co. in April 1998, its largest market was in Mexico. Meanwhile, U.S. sales languished. However, Jafra officials realized 60 percent of U.S. sales were to Latinos. “We saw no differences (in the U.S.) from the Mexican market, so we decided to have two general managers to exploit all the opportunities we have on the Hispanic side,” said Gonzalo Rubio, president and chief operating officer of Jafra. Company officials did in fact begin by translating the company’s marketing materials into Spanish. But they soon realized bilingual sales materials weren’t going to be enough. For one thing, the company found that the rate of purchasing certain products was much higher for Hispanics than otherwise. “In the general market, it’s skin care (that sells best),” said Aguirre-Gutai. “In the Hispanic market, it’s fragrance and color.” Latinos also showed a decided preference for the gift tins that Jafra used to package its fragrance sets. Most customers didn’t like the tins. And at holiday time, Latinos wanted two separate catalogs coming to their houses at different times. The general market was able to get by with one. In addition to the management changes, Jafra decided to increase its marketing expenditures in the U.S. by allocating another $5 million to the market, Rubio said. The Hispanic division began putting extra emphasis on the fragrance and color line, creating specific promotions in those product categories. “The general market isn’t even going to feature those promotions in their catalog,” said Aguirre-Gutai. Just the beginning Down the road, Jafra executives say, the company may even develop different products for the Latino market as well. Latinas have the same skin types found in the general market and do not require different formulations in those products, but they tend to prefer deeper, more vibrant colors in lipsticks and eye shadows, Aguirre-Gutai said. At the same time, the Hispanic division is now better able to cultivate its own group of consultants because it can develop distinct sales programs and incentives for Latinos. Door-to-door selling has fallen out of favor as a career path for most people, now that more opportunities are available to women. Competitors with similar multi-tiered marketing organizations like Avon Products Inc. and Mary Kay Inc. have been expanding into online and retail sales techniques as a result. But door-to-door selling is still an ideal way to reach Latino customers. About three out of every five of Jafra’s consultants in the U.S. are Latinas, who often sell within the communities in which they live. Many are attracted to these positions because they don’t require English language skills or formal education. Some become consultants because they are able to choose their own hours, allowing them to give priority to raising a family. Vilma Campos is a case in point. She began selling Jafra when her first child was born and has since put both her children, now teenagers, through private school. The business has grown so large that her husband joined her several years ago, handling administration and deliveries. “Jafra has given me my family,” Campos said. “We go 50-50 with the kids, and there’s always someone home.” Consultants start out by buying a $35 sample case which they use for home demonstrations. As the business grows, they recruit other consultants and receive commissions off those sales as well, ultimately rising to district director level where sales incentives may include vacations and cars. Jafra provides ongoing seminars covering such topics as finance and product information. When both groups of consultants attended meetings together, the company provided simultaneous translation. But the bilingual approach often became unwieldy. Now Jafra will begin holding separate meetings. The company can also develop distinct incentive programs for its Latino sales people, who often have different preferences regarding the locales they want to visit for vacations, for example. Officials said they expect the changes to have a dramatic effect on the company’s sales. Although company officials were reluctant to talk about specific sales projections, Aguirre-Gutai said, “This year we’re going to end up OK. Next year, we’re going to explode.”

With the start of a new year, Valley employers are getting ready to bite the bullet as a number of their health-care providers plan to impose rate hikes of between 10 and 13 percent. The double-digit increases reflect increasing medical costs over the past 10 years, insurers say, but for many companies and their employees, the end result will be higher health insurance premiums, payroll deductions and deductibles. Although many Valley companies still await the potential double-digit rate increases, some are hoping for the best. Debra Bennett, human resources manager for Granada Hills-based Duncan Industries, says rate increases are always expected at this time of year. “But the question is how much?” Bennett said. The security services company, which employs about 30 employees, would be forced to pass along any major increases to its workers, some of whom may opt to cancel their insurance altogether. Beverly Hayon, a spokeswoman for Kaiser Permanente Inc., with 6 million patients in California, said her company’s 10-percent rate increase is a reflection of the overall rise in health care. “The costs of pharmaceuticals is 19 percent a year and that is a huge challenge for an organization like ourselves to provide the kind of service we provide at a reasonable cost,” she said. According to a study by Illinois-based health care consulting firm Hewitt & Associates, companies can be expected to pass along at least 25 percent of any rate increase to their workers. Moreover, the average employer-provided health plan (which cost $4,222 last year) will increase by about $500, forcing employees to pay an additional $125 for coverage. The study showed that companies will be hit by an average 10 percent rate increase for preferred provider organizations, those plans that contract with selected physicians. Health maintenance organizations will generally offer a 13 percent increase while point of service plans, those in which physicians are paid at the time they provide the service, will increase by 10 percent, according to the study that examined 2,000 health plans in 139 cities. Statistics show this will be the third consecutive year of marked rate increases. Last year, rate increases averaged 9.4 percent. “So far, we’ve been lucky and haven’t had any rate changes,” said Carlos Garcia, president of Garcia Research Associates, which employs 24 people in Burbank. “But you never know.” Investors look to bottom line Jack Bruner, an analyst with Hewitt, said health maintenance organizations in particular are under pressure from investors to increase profits. But perhaps the biggest impact will be on those who cannot afford the rate increases and will opt out of their plans altogether. A study by the nonprofit Economic and Social Policy Research Institute in Washington D.C. estimates that the number of uninsured Americans could jump to 50 million in 2001, up from 44.3 million in 1999. Government employees also will see higher costs, with single federal employees paying an estimated 14 percent more beginning this month, while those with families will pay 21 percent more, according to Blue Cross, which insures about half of the nation’s 8 million federal employees. Bruner said some companies, depending on the industry and circumstances, will try to absorb the costs to avoid losing valuable employees. And, he said, some could benefit by simply shopping around. “Employers should regularly review the performance of their current health plans and eliminate those that aren’t cost-efficient or those that don’t meet employees’ needs,” he said. Companies with older workers with certain conditions like diabetes or asthma can also save money by contracting with health plans offering programs in those areas, giving employees more specialized care. Some workers, like Norah Mullen, a Woodland Hills store clerk, said after a recent 10-percent rate increase that she is looking into other health care options, even going so far as to suggest another health care provider to her company. Many self-employed workers are also looking for alternatives. “You start wondering if it’s really worth it,” said Joe Solis, a Glendale auto repair shop owner who pays about $4,000 a year for his health insurance. But for Hewitt’s Bruner, the latest increases are only the beginning. “Companies may continue to see 10-percent increases over the next few years,” he said, “and this will result in a significant impact on an organization’s bottom line.”

It seems that bigger really is better, even when it comes to the most independent spirits in real estate. Ron Feder, who left Lee & Associates two years ago to form RJ Feder & Associates, has merged his company back into his former employer’s fold. “I’ve always had a desire to own my own business,” Feder said. “It was very fruitful for me, but the corporate clients, the institutional clients, it’s hard for a small boutique to attain them.” With the merger, Feder takes over as president of Lee & Associates’ Los Angeles North and Ventura County office based in Sherman Oaks. His associate at RJ Feder, Jack Schlaifer, joins him and will set up the brokerage’s first Conejo Valley office. Feder was a managing principal of Lee & Associates when he decided to go off on his own, opening a full service commercial brokerage in Calabasas in 1998 and developing a client list that included City National Bank, Litton Industries, Performance Products and Coast United Advertising. But the small size of the shop made it difficult to recruit brokers and limited the firm’s ability to attract larger client prospects. “The larger entities are looking for national or regional firms,” Feder said. “It’s a safe bet.” Feder said middle managers responsible for real estate decisions in corporate America prefer suppliers with well-known brand names because it’s easier to sell those decisions to top management, and it can help to insulate them if something goes wrong. In other words, as the saying goes, you’ll never get fired for choosing IBM. Lee & Associates, a brokerage with 19 offices, covers a territory that spans San Diego to Stockton and the west side of Los Angeles to Phoenix and Las Vegas. At the same time, Feder said, the company’s organizational structure allows brokers to retain upward of 90 percent of the fees they bring in. “You can’t get that anywhere else,” he said. Each of the Lee & Associates offices is set up as a separate corporation with brokers holding partnership positions that allow them to share in the profits at the end of the year, said Bill Lee, the company’s founder. Last year, company’s revenues reached $100 million, he added. The brokerage saw several high-profile departures last year. John Sabourin and Mark Spellman, who handled the deal that brought Health Net to the LNR Warner Center, left to join Colliers Seeley, and Jeff Woolf, the former head of the Sherman Oaks office, left to join Cushman & Wakefield Inc. More Action for Empire Center It looks as if the office portion of Burbank’s Empire Center is following in the successful footsteps of the retail segment. Less than a month after taking over 17.2 acres of the project under development by Zelman Cos., Menlo Equities has signed its first tenant. Allianz Insurance Co. inked a deal for a 97,000-square-foot build-to-suit on the site at Empire Avenue and Buena Vista Street in Burbank. When completed in March 2002, the Allianz building will become part of a 390,000-square-foot corporate office park within the 103-acre Empire Center. Allianz will relocate from other offices in Burbank. Zelman Cos., the primary developer of the site, has nearly completed leasing the retail portion of the project, about 900,000 square feet of the complex. The retail center will be anchored by The Great Indoors, Costco and Lowe’s Home Improvement Warehouse and include Best Buy, Target, Linens ‘N Things, Sportmart, Staples and Marshalls. It will also include a food court. Zelman, which acquired the Empire Center site from Lockheed Martin Corp., in December sold the office portion of the project to Menlo, a Palo Alto-based real estate investment firm. Two hotels are also planned for the Empire Center complex. Mark Sullivan, Seth Dudley and Rosey Miller, brokers with Julien J. Studley, represented Allianz in the deal. The developer was represented by Paul Stockwell and Onno Zwaneveld, also of Studley. Legacy Oaks Sold Adler Realty Advisors has acquired Legacy Oaks Corporate Center in Thousand Oaks for $24.2 million. The Woodland Hills-based private investment group bought the 156,000-square-foot center from Legacy Partners. Legacy Oaks Corporate Center, at 225 W. Hillcrest Drive, is 96 percent leased. Kevin Shannon and Tom Festa, both with Grubb & Ellis Co., represented the buyer and the seller. Locals Redevelop Directors LLC has purchased a 3.2-acre site at 2999 Thousand Oaks Blvd. for $3.1 million. The buyers, managed by local residents Robert Hamilton and Frances Prince, plan to redevelop the parcel into an office building. The planned three-story, 60,000-square-foot office building would replace Rubber Duck Auto and Tire Repair, which currently occupies the property. Tony Principe, a broker with Westcord Commercial Real Estate Services, represented the buyer and seller, a privately held company headed by Walter and Valerie Heinz and Lee Cohn. Newhall Roundup Several sale transactions were completed in Newhall Land and Farming Co.’s Valencia Gateway center. Sheldon Appel Associates acquired an 18.6-acre parcel in Gateway IV. Circle W Enterprises Inc. acquired a 15,513-square-foot industrial building in the Gateway’s Clifford Rockefeller Business Center. Doug Sonderegger and Craig Peters with CB Richard Ellis Inc. represented the buyers and Newhall in both transactions. Don Manning with CB Richard Ellis Inc., represented Aronoff and Steve Scott of Lee & Associates represented the seller in that transaction. Staff reporter Shelly Garcia can be reached at (818) 676-1750, ext. 14 or by e-mail at [email protected].

Women’s apparel pros refused to recognize the riskier side of the fashion world when they went to work for themselves To hear Richard Hirsh and John Paul Beltran tell it, starting John Paul Richard Inc. was a snap. They just called a few suppliers they had known in former jobs and rang the doorbells of some old customers. And oh, by the way, they also hocked most of their belongings, borrowed a few million and went more than six nail-biting months without any revenue at all. However, much of that dark side of the startup has faded from memory in the four years since the two co-chief executive officers launched John Paul Richard. Then too, the partners say, there’s another reason they never dwelled on the riskier aspects of the endeavor. Launching John Paul Richard may have been nerve-rattling, “but we had a lot of fun,” said Hirsh. And success. Since its launch in 1996, the Calabasas-based women’s apparel maker has elbowed its way into a market dominated by far larger suppliers and grown to a $120 million business selling to some of the largest retailers in the country. This year, the company landed in the No. 6 spot on the San Fernando Valley Business Journal’s list of fastest-growing private companies, having boosted revenues 140 percent since 1997. “Robinsons May was one of the first department stores to carry John Paul Richard,” noted Milinda Martin, a spokeswoman for the store. “We like the fact that they understand our customer.” Industry veterans who ran their own apparel company before selling it to St. Louis conglomerate Kellwood Co., Hirsh and Beltran decided to strike off on their own after 10 years on Kellwood’s management team. “The corporate culture got to us,” said Hirsh. With a $2.6 million loan, the two set up their new company, calling on longstanding relationships with factories around the world to manufacture their designs and with retail stores to sell their products. But while their experience in the industry helped find the best suppliers and open doors to the largest customers, those relationships alone weren’t enough to get the company off the ground. “You have to be online with (customers). You have to have the computer systems. They check your financing, your shipping capability,” said Beltran. “We did all that up front.” Before they ever accepted their first order, the partners set up a full-scale operation with computerized shipping and inventory control, quality control and all the other functions they needed so that customers felt confident the company would perform. “In the first six months, we lost $1.2 million,” Beltran said. John Paul Richard went without revenues for six months while the principals set up their systems and hired a staff. Then, with everything in place and its first line, sold under the labels Uniform, Studio JPR and Outfit JPR, orders began to pour in. In the first full year of operation, John Paul Richard’s sales reached $46 million. By the third year, sales had grown to $112 million. And this year, the partners expect to hit the $120 million mark. Far larger companies like Sag Harbor and Koret were well entrenched on retailers’ floors, but chains like Federated Department Stores Inc., The May Department Stores Co., Mervyns’s and Kohl’s Corp. made room for the new supplier because of the combination of fashionable styling and low prices it offered. “John Paul Richard provides updated, yet moderately priced clothing perfect for the woman who understands fashion but wants a value price,” said Martin at Robinsons May. “If you look at traditional moderate lines, those businesses have been around for anywhere from 50 to 80 years, and the customer who buys those labels is fairly old,” said Beltran. “Her daughter doesn’t want those looks.” Designer labels operate with a 50- to 60-percent gross margin, the difference between the cost of making the goods and the selling price. But in the segment of the business that John Paul Richard operates in, margins are more likely to be in the teens. “You can only do that by doing large volume, and you’ve got to be able to keep your costs down,” said Hirsh. Hirsh and Beltran attribute much of their success to their employees. The company set up shop in Calabasas rather than downtown L.A., where most apparel operations are based, to make it easier to attract top-notch talent, and it gave senior managers partnership positions in the company. That way, “they’re very concerned about how the company is running,” said Hirsh. John Paul Richard also gives employees room to manage their personal lives. One manager whose husband was relocated to New Jersey continues to work at the company, traveling from her new home to Los Angeles several times a month. And all employees are discouraged from working into the night and on weekends. “We learned what gets people burned out and frustrated in a large corporation and we set out to make a company where the best people in the industry would like to work,” Beltran said. The partners say they did not start out to build a company that would get larger and larger and their goals continue to be modest. While they are pleased that the business provides them with good incomes, their real satisfaction comes with the ability to take pride in their work and the environment they have built for the company’s 98 employees. “What’s going to keep us successful is to stay focused on our business, but not any more than we stay focused on our personal lives, and make sure the people who make this place sing are happy and stay here,” said Beltran.

Wolf Patterson doesn’t mind sitting on his behind for a living. “It’s work and I’ll take it,” said the 42-year-old Canadian. Patterson is part of a growing trend in the entertainment industry he’s a paid audience member for network television shows. Earning $6.25 per hour for a minimum four hours, Patterson, a struggling singer and actor, makes nearly $300 each week watching situation comedies and daytime talk shows. “It pays my rent, so what more could I ask for?” Patterson quipped. It was just last year that the country and western singer arrived from Vancouver, via Nashville, to make his mark in the music industry. But after a few stints as a store clerk and waiter, Patterson drifted into being a paid audience member by day and a musician by night. Patterson’s story is not unusual, says Rebecca Statkus Smith, manager of AppleOne Employment Services in Woodland Hills. Smith, whose agency places Patterson and others for those shows, says paid audience members often come back for more. “A lot of them do it for a living, believe it or not,” Smith said. Although paying people is a recent development, live audiences have been around situation comedies, in particular, since the 1950s. In a 1989 interview just before her death, Lucille Ball said she and her husband Desi Arnaz had to fight with CBS to allow them to film “I Love Lucy” in front of a live audience in 1950. Soon after the show became a ratings hit, others, like “The Honeymooners,” followed suit and the practice became an industry standard. Many today credit “I Love Lucy’s” success to eventual widespread use of live audiences for situation comedies from the late 1960s until the present. “Today it’s unthinkable to film a situation comedy without an audience. You just can’t do it,” said Alan Kirschenbaum, producer of CBS’s “Yes, Dear,” which also uses paid audiences recruited by AppleOne. A handful of the most popular sitcoms particularly “Friends” and Frasier” still manage to attract audiences who want nothing more than the chance to see their favorite TV stars in action. Most, however, use paid audiences. With more efficient schedules that require filming during daytime hours when most potential audience members are at work, television producers say they have been hiring audiences for the past five years, more and more heavily each season. Hard day at the sitcom Smith has been hiring audience participants just since July when a television production company approached her about the issue. The office places an average of 20 people per day for various television tapings. Altogether, Smith has about 300 people in a database of paid audience participants with more added every day. Through its web site, the company advertises for potential audience members who are then asked to sign up by calling the Woodland Hills office. Applicants are screened, given a brief orientation class and shown a video about workplace safety. Unlike other job seekers, these applicants are not tested or trained on computers or other equipment, Smith said. “We want people who like to watch television and who want to have fun,” she said. AppleOne’s core job opportunities remain clerical and entry-level administrative positions. But its audience participation jobs continue to attract a steady stream of both young and old, along with those hoping to break into show business. Patterson, for instance, says he wanted to meet industry professionals and to network with fellow performers, many of whom have joined the ranks of these paid television show audiences. “You can’t believe the kinds of people I’ve met out there,” Patterson said. One woman, who goes only by the name Christina, said she hopes to break into acting by attending the tapings and meeting important people. “It’s a dream of mine, you could say, to act and get into the business,” said the 22-year-old college student. But, like Patterson, Christina said she enjoys watching the shows even if she does get paid for it. “I love watching people work and do comedy. It’s the best,” she said. Among her favorite shows to watch in person are CBS’s “Becker,” starring Ted Danson, and “Yes, Dear,” a new sitcom that premiered in October. Although the tapings usually last two hours, many run longer, depending on the number of “takes” or scenes filmed. Many times, scenes are shot several times, in front of an audience that must still react to the jokes as if they were brand new. ‘It’s a living’ None of this bothers Patterson, who says he loves every minute of it. “It’s like magic. I love the whole process, so it doesn’t bore me,” he said. Patterson’s kind of enthusiasm is gratifying to “Yes, Dear” producer Kirschenbaum whose show’s success, he said, relies on audience reaction. “In comedy, you need that immediate feedback that only an audience can give,” he said. “In shows like ours, you need that proof to know that it’s very funny.”