If telecom stock prices are any indication, the information highway will have to be completed by the WPA, the Depression-era agency that built the Hoover Dam and other great public works. As recently as Nov. 16, a list of 102 domestic and international telecommunications companies on the Morningstar.com Web site showed only seven issues that had positive returns so far this year. All the others 95 of them showed losses that ranged from disturbing to devastating. Ma Bell was off 59 percent, WorldCom was down nearly 71 percent, and its thwarted merger mate (Sprint) was down 64 percent. Losses were about as bad among the snazzy fiber-optic network companies, with Global Crossing down 64 percent, Level 3 Communications down 56 percent, and Metromedia Fiber Network down 24 percent. Nor was the damage limited to domestic telephone companies. Nippon Telephone and Telegraph ADR was down 50 percent, Deutsche Telekom ADR was down 53 percent, France Telcom ADR was down 30 percent, and British Telecommunications ADR was down 56 percent. Big or small, domestic or international, old line or new economy, virtually everything in telecom has been hit and hit hard. Among domestic companies with market capitalization of at least $1 billion, only SBC Communications and BellSouth, up 20 percent and 4 percent respectively, look as unbreakable as Bruce Willis. The telecommunications index, as a whole, was off a whopping 26.5 percent. This is not a minor event. Telecommunications stocks loom large in every major index around the world. Mario Gabelli once joked that in many countries the combination of the phone company, the electric company and the largest brewery was the national index and there wasn’t much else. The ghoulish can easily find areas of the market that have suffered greater percentage losses: online retailing, off 64 percent; home-supply stores, off 43 percent; semiconductor equipment and online information, both off 35 percent. But telecommunications is different. The decline in telecom stocks is worrisome because of their importance to the world economy and, nearly as important, because of the amount of global wealth that has been lost. Only four online retailers have market capitalization greater than $1 billion, only eight semiconductor equipment manufacturers and only three home-supply stores. In telecommunications, more than 60 companies are worth more than $1 billion, and 11 are worth more than $50 billion even after this year’s drubbing. We’re talking about wealth losses that are staggering. About $136 billion at Nippon Telephone, more than $100 billion at Deutsche Telekom, more than $110 billion at AT & T;, more than $100 billion at WorldCom and more than $30 billion at Sprint. What does it all mean? There are two major concerns that we can read into these figures: Worldwide, we’ve aced the innovation test, but we’re failing the profitability test. Visit Best Buy and check out the new electronic products: We’re in one of those cornucopia periods in which new possibilities arise faster than anyone can absorb them. We are truly beginning to suffer from what sociologist Alvin Toffler called “Future Shock.” The Internet revolution is real, but few have figured out how to make any money on it. But when push comes to shove, stock prices are driven by rising profits. We could be facing a market-induced wealth recession. After the market crash in 1987, when the S & P; ended the year with a total return of 5.27 percent after a vicious drop in October, many analysts predicted a “wealth recession” induced by the decline in stock market values. In fact, that was a silly idea because most Americans had far more money invested in their homes. Fixed-income investments still loomed large in personal portfolios. Today, things are different: About 70 percent of all 401(k) money is in equities, technology stocks dominate many mutual fund portfolios, and most of the individual accounts started in recent years have been committed to the highly speculative sectors that have fared so badly this year. Bottom line: Corporate profitability and consumer spending are what to watch as we head into 2001. Not a Budget, a Spending Plan Question: My wife and I consistently disagree over the household budget. I work; she takes care of the home. We have three kids in school. She pays the bills from a household account that I fund bimonthly. I save for emergencies and long-term investments. There is never enough money, so I don’t save what I should. Whenever I mention setting up a budget, she complains that I don’t appreciate what things cost. Help me take the emotion out of this issue. Can you suggest a simple process for us to set up and live with a budget? , H.B., by e-mail Answer: First, call it a spending plan. It sounds better, and it feels better to talk about your plans for how you will spend your money. It’s also accurate since most income is spent, not saved. Even aggressive savers spend more than they save. Second, don’t be too hard on yourselves. The period of our lives when we are raising children is the greatest period of financial stress that most of us ever face. This happens for a very specific reason: The cost of supporting a family, without any inflation, rises at about 6 percent to 7 percent a year. Few families have their real earning power increase at that rate. That’s also why so many families have two earners. Now let’s get down to the hard stuff. As long as one spouse tries to dictate what will be spent, you are doomed to living in Controlville. It does not matter that you have the best intentions. What matters is that one person is in control and the other isn’t. Many primary earners believe that they can, and should, determine how all money is spent. It seems logical, but marriages don’t work on logic. They work on sharing, doing the hard work of setting goals, and on partnering to reach those goals. My suggestion: Find out where the money has been going. This means going through your checkbook register and your credit card statements and assigning expenditures to categories. The easiest way to do this is with a computer program like Quicken or Microsoft Money. Then talk about where the money is going and whether you could spend less in some areas, so you could spend more in others. With a little luck, one area where you’ll agree to “spend more” is on your savings. Questions about personal finance and investments may be sent to Scott Burns, The Dallas Morning News, P.O. Box 655237, Dallas, TX 75265; or by fax: (214) 977-8776; or by e-mail: scott(at)scottburns.com. Check the Web site: www.scottburns.com. Questions of general interest will be answered in future columns.

First off, Marshall Brain is his real name. Second, the self-described “normal, average American guy,” who was born in Santa Monica 39 years ago, started out just wanting to write an article or two that people like him could understand. So, about three years ago, he wrote a how-to article about car engines and put it on his personal Web page. Eventually, he did 100 or so similar articles about how things work (for instance, the pendulum clock, batteries, electrical motors, etc.). By December 1998, Web tracking service Hitbox.com was saying Brain had had 94,000 visitors to his site in a single month. The following month, his Web site won the “Coolest Site on the Internet” award from CoolSiteOfTheDay.com. At that point, Brain said, “I started to get the impression that I might be onto something a little bigger than I had suspected.” And today, howstuffworks.com with offices in Woodland Hills and Cary, N.C. gets a million hits a month. It also supplies content to the Los Angeles Times’ new Tech Times section, the USA Today Web site, its own children’s magazine (How Stuff Works Express) and 600 other newspapers and magazines through a syndication agreement with Koz.com. What’s more, the company (incorporated in September 1999 and, naturally, funded with venture capital) has managed so far to avoid the problems that have befallen so many dot-coms that started out much the same way. “We’re either na & #271;ve or geniuses,” Brain said. For one thing, when founder Brain and company President Marco Fregenal went out to look for venture capital almost two years ago, they didn’t find much. (Still, you won’t get them to say they had a hard time finding any.) Their first round of funding finally came this past January and amounted to $900,000. In the second round in May, they raised $4.5 million, and they are now seeking their third round of $2 million to $3 million. “We were blessed by not receiving a lot of venture capital,” Brain says now. He also said the seeds of many dot-coms’ demise has been the fact they were not so blessed. Venture capitalists give you money, he said, “and you’re expected to spend it.” “So, how are you going to spend $100 million if you’re two guys and an idea? You hire 1,000 people and spend $50 million on advertising.” On the other hand, Brain and his colleagues would like to believe howstuffworks.com attracts visitors and business because those who have found it like it. Just for the exposure In fact, Allison Walsh, the firm’s vice president of media development, said that’s how she managed the deal to provide content to the L.A. Times’ Tech Times. She had made contact with an organization called the Special Librarians Association, one of whose members was a researcher at the Times. And her husband is an avid fan of howstuffworks. The Web site itself is full of articles like “How Radio Works,” “How Christmas Works” and even “How Christmas Lights Work.” And, of course, on the morning of Nov. 8, there was suddenly a need for a “How the Electoral College Works” and, a few weeks before that, a “How Submarines Work,” following the crash of a Russian sub. Corresponding with the theme of Tech Times, there have been how-to articles on e-mail, DVDs and other tech-related subjects. While howstuffworks.com has a traditional syndication deal with Koz.com, Walsh said, “We’re not doing (Tech Times) for revenue right now. We’re doing it for the 1.1 million readers a day.” She also said the most recent agreements with the Times, USA Today and Koz.com are too new to tell how much business will be generated as a result. In fact, Brain and Walsh were both reluctant to talk about revenues in any but the most general terms. “We are a privately-held company,” Brain said, “and we plan to act as one.” He did say, referring to the hoped-for third round of financing, “For us to break even, we need about $2 million.” While refusing to refer to either www.discovery.com or Encyclopedia Britannica’s Web site as competitors (“We’re one of the companies that help people to learn more,” Brain said.), he did say information on his Web site is perhaps accessible in a way that information on others is not. “There are places that make it a lot more complicated than it should be,” Brain said. “We want material that people can understand.” That probably would explain the baby pictures of himself that accompany the Web site’s article: “How ‘How Stuff Works’ Works.”

San Fernando Valley taxi passengers, meet San Gabriel. San Gabriel Transit Co., that is, because as of Jan. 1 that is the company that will be one of two primary providers of taxicabs to the San Fernando Valley. And the odd man out is Valley Cab Co., which late last month officially lost its franchise to offer cab service to the Valley. In fact, out of nine Los Angeles taxicab companies up for the renewal of licenses for the first time in a quarter-century, Valley Cab was the only one to lose its franchise. The reason? Valley Cab officials would not return repeated calls from the Business Journal. They may be reluctant to talk about what happened Nov. 28 when the Los Angeles City Council passed out new franchises throughout the city, but others in the industry say the company’s demise is the end of an era and an end to a way of doing business. City taxicab administrator Thomas Drischler would only say, “Valley Cab was not as complete as the other companies in its proposal.” But Scott Schaffer, senior vice president of San Gabriel Transit (which will take over the taxicab authorization that Valley Cab once had), was not so reticent. “As peers, we know which operators take a minimalist approach” when it comes to service, Shaffer said. Howard Sunkin of Cerrell Associates, a lobbyist for L.A. taxicab franchise holders for the last 14 years, called Valley Cab a “throwback to the old days” and said the answer to its demise is very simple: “Service, service, service.” “They were licensed for 96 cabs,” Sunkin said, “but they never had more than 55 on the street. How do you serve 1.6 million people with 55 cabs?” San Gabriel Transit already operates 400 cabs in 50 cities in Los Angeles, Riverside and San Bernardino counties. It also supplies a number of “paratransit” services (like Dial-a-Ride) in those communities. Schaffer said he expects to add about 60 additional cabs and 100 drivers to San Gabriel Transit’s existing fleet to accommodate the move into the Valley. He expects about $3 million in additional annual revenue as a result, added to the $18 million to $20 million that San Gabriel Transit already brings in each year. Service isn’t everything Service complaints, however, may not have been the only thing Valley Cab had going against it. According to an L.A. Ethics Commission report released last week, almost $100,000 was spent on lobbying activities involving the taxicab franchise issue in the third quarter of the year. Earlier this year, operators spent about $180,000 on lobbying. United Taxi spent more than $31,000. What’s more, in 1999 United contributed $8,750 to the political campaigns of city council members, including an unsuccessful State Assembly campaign for Councilman Rudy Svorinich. San Gabriel Transit spent $1,500. Valley Cab, on the other hand, spent nothing on either lobbying or campaign contributions, according to the Ethics Commission. Lobbyist Sunkin said, “I was stunned that they didn’t stage a campaign. Instead, they hired a former district attorney to sue the city.” Former District Attorney Ira Reiner has filed a lawsuit on its behalf. Valley Cab had shared the franchise to the Valley with United Taxi of San Fernando Valley for more than two decades. United Taxi’s franchise was reinstated by the city council, with the proviso that it would make the same improvements to service that a new Los Angeles Taxicab Commission has demanded of operators all over the city: computerized dispatching and service monitoring, allowing passengers to pay with credit cards, and a gradual move toward vehicles that use cleaner fuels and offer wheelchair access. The computerized dispatching system costs about $2,000 per cab but the system, and most of the other improvements requested by the city, have been in place for some time at most cab companies. “Almost every firm was doing it before,” Schaffer said, “except for Valley Cab.” While Valley Cab never publicly refused to make those changes, its application for renewal of its franchise was so incomplete, there was never clear evidence it had a plan to do anything differently than it does now. According to both Sunkin and Schaffer, Valley Cab had far fewer cabs available for service (45 to 55) than it was authorized to have (96). In fact, Sunkin said, “Their response time was horrible because they only had 55 cabs.” “My client, L.A. Taxi (Cooperative Inc.), gets hundreds and hundreds of calls every day from the San Fernando Valley,” he said. However, according to current regulations, L.A. Taxi would then have to dispatch a cab “from the other side of the hill” rather than allow them to wait for calls in the Valley. Cash-free economy Valley Cab also did not offer customers the opportunity to use credit cards in an age when many consumers are well on their way to a cash-free economy. “How could you have the exclusive franchise to Universal Studios and CityWalk and not take credit cards?” Schaffer asked. While Valley Cab may have an old-fashioned way of doing business, it also apparently has a tried-and-true way of fighting back: taking the city to court. Reiner says city ordinances require a Public Convenience and Necessity study (PC & N;) before it can create a new franchise, something the city neglected to do this time. “The city attorney said you can discern a PC & N; and ultimately they’re going to argue they don’t need it,” Reiner said. “That’s what you say when you didn’t do it.” Schaffer, who said he has used Reiner himself when he needed legal help on taxicab issues, claims that this time the lawyer is fighting a losing battle based on technicalities. “He’s arguing semicolons at this point,” Schaffer said. “It’s analogous to what’s going on in Florida right now (referring to legal jockeying over the presidential election).” The new regime for Valley taxicab passengers is due to go into effect in early January. Reiner hopes to dash those hopes. He, however, confesses that he is not arguing the validity of the council’s decision, but the process by which it was made. Schaffer, noting that Reiner’s legal fees are likely to be higher than those of most attorneys, said, “If they’d ever spent $100,000 on their business, they wouldn’t have this problem.” The council decision last month is the end of a process that began two years ago when city officials decided reforms were required in the taxicab industry. Besides the first review of franchises since 1975, that process has meant an increase of 120 taxicabs on L.A. streets (to a maximum of 2,303), a 12-percent fare hike last May (the first since 1986) and the mandated upgrades in service. New regulations also allow taxi operators to accept passengers when flagged down on the street outside of their franchise area, assuming they are maintaining certain levels of service. Sunkin said that enhanced competition could mean better service for Valley residents. In the city process, potential franchise holders were evaluated in five categories. Of the three operators vying for the Valley franchise, Valley Cab scored poorest in four of the five categories, including the one that carried the most weight: Feasibility of Management Business Plan. “Some of their responses were not as complete as the others,” Drischler said.

Stacy Vierheilig, a broker with Charles Dunn Co. Inc., figures she’s gotten close to 20 calls in the last month or so from production companies looking for office space. That’s three or four times the number she typically gets in an entire year. But with three strikes threatening to cripple the entertainment industry next year, producers have stepped up the timetable for their projects. And as Hollywood rushes to get film in the can before the strike deadlines, even the real estate industry is feeling a ripple effect. “I’ve had calls from Disney, Warner Bros., CBS, Paramount, Miramax and some smaller production companies,” said Vierheilig. “We’re still getting those calls. It’s like, ‘Sorry, there’s nothing out there anymore.'” Not only are more shows in need of temporary space while the production scramble is underway, landlords are more reluctant than ever to rent to these tenants. “A lot of what would be short-term space is taken up by other shows, and with the economy, buildings we used to go to for short-term space are waiting for long-term tenancy,” said Robert Paulsen, a location scout for feature films.Each time a new film production begins, crews need office space for the administrative work involved and warehouse space for equipment storage for the duration of filming. Most films require 5,000 square feet to 6,000 square feet of office space for anywhere from three months to a year, depending on the production. A number of buildings in the East San Fernando Valley typically set aside odd-sized office space for such purposes, and since productions are usually staggered throughout the year, these landlords can often keep their smaller office spaces filled year-round. But three upcoming contract renewal deadlines, one in May for screenwriters and one in June for actors, has upset the traditional ebb and flow of this niche real estate market. Most in the industry believe that at least one of the unions will call a strike, putting a halt to any productions underway when they do. “Everyone and his brother is trying to get their productions done (before the strike),” said Bud Aronson, an independent location manager. Aronson considered himself lucky to have stumbled upon a suitable space in Burbank for the television movie of the week he is working on. “Through the years, we’ve all worked at different places, so we know (the buildings that rent short-term space to movie crews),” Aronson said. “We were fortunate, but it’s very tough now.” Location scout Paulson is working on such a tight schedule, he’s been looking for space for two movie productions slated to begin simultaneously in mid-January. Typically, based on the start date, he would begin seeking out space around the first of January but, because of the crowded market, Paulson began his search in November. “I’m working on a show shooting primarily in the Valley, so we could go anywhere in the Valley, but production wanted to stay in the East Valley,” Paulsen said. “As it got tighter, we widened the search. The producer was willing to go as far as Sherman Oaks and Glendale.” Not only is there more competition for space, there are also fewer landlords willing to rent out their offices on a short-term basis. When the real estate market is soft, any tenant will do. But now that vacancy levels are so low hovering under 5 percent in Burbank, the preferred location for many of these film producers landlords are holding out for long-term prospects. “The amount of landlords that have space are numerous, but they don’t want to lease it to short-term tenants,” said Trevor Belden, a broker with Lee & Associates. “The other thing is, production companies are hard on buildings. They pack a lot of people into a small space.” Adding to the woes of those looking for space, their business is the lowest priority for real estate brokers. They earn commissions based not just on the amount of space rented, but also on the length of the lease. “When they call me, if I have it and I have a landlord (willing to rent to them), I take care of them,” said Rob Erickson, a broker with Cushman & Wakefield Inc. “Otherwise, they go down the road.” Erickson, who estimates that he’s received about 30 percent more inquiries recently from film production tenants than he normally would, doesn’t even keep a running list of the prospects. “Times are too good,” he said “All you have is your time, and you need to use it on larger consideration deals.” Vierheilig keeps a list of production-friendly landlords and faxes it out to production companies who inquire about space. The prospective tenants are left on their own to check out the space and determine whether it meets their needs. “It’s kind of a waste of time, so typically we try and put them in our own buildings because it’s not enough commission to split it with another broker,” Vierheilig said. “But there are certain people I’ve dealt with over the years that I will go out of the way for.” The brokers say they haven’t yet received any offers of cash under the table for space, but some of Vierheilig’s prospects have tried other enticements. “I’ve been invited to quite a few movie premieres,” she said.

A private collection of all things strange and unusual has turned into a must stop for those who care about the dark side of life Sue Howison grew up in New England with a fondness for old cemeteries and the stories the tombstones told. One of her ancestors was burned at the stake as a witch. Del Howison had a passion for horror movies. Together, the couple stoked their passion for the macabre into a thriving business. Since it was founded three years ago, Dark Delicacies, a Burbank book and collectibles store, has grown into a $200,000 business that has become ground zero for studios researching horror films and lovers of the genre from around the world. “I think people (interested in this genre) like to know the people with whom they’re doing business aren’t just business people, they’re fellow enthusiasts,” said Peter Atkins, author of the novel, “Morningstar,” whose screen credits include the classic “Hellraiser” films and “Wishmaster.” “It’s very clear to the customers that they are enthusiasts. We share this same strange obsession for things that go bump in the night, and that has to be 70 percent of their success.” Between them, the Howisons have read nearly every book on their shelves. The couple’s pair of dogs black, of course are named for the central characters from “The Addams Family,” Morticia and Gomez. And despite their business success, Del Howison says he still gets his greatest satisfaction from chatting up the authors who frequent the store. Even the store’s origins stem from the couple’s personal experience. When they married (you guessed it, on Halloween), the Howisons wanted their home’s decor to reflect their avocation, but couldn’t find the items they sought in mainstream retail outlets. “You could find lawn gargoyles, but that was it,’ said Del Howison. “We thought, maybe we’re not the only warped ones that enjoy this stuff. Other people must be wanting it too.” Del, a salesman in the garment industry, and Sue, who worked in the environmental affairs department at Nestle Corp., found a 1,300-square-foot store at Magnolia Avenue and Hollywood Way and opened shop with their personal collection of books and memorabilia and about $5,000. They took turns manning the store while holding down their day jobs. “She’d sell some of her books, and the people would leave and she would cry,” Howison said of that first year. “But we didn’t have an option. It takes something of a sacrifice (to start a business).” By the end of the second year, though, sales had doubled to about $130,000, and Del was able to join the business full time. Soon the company’s inventory burgeoned to include new and used books, everything from vampire novels to histories of the Inquisition and the Plague; monster jewelry and key chains; licensed toys from such movies as “The Grinch Who Stole Christmas;” along with collectibles and furnishings (the store sells a coffin-shaped wine cabinet that retails for $400), videos and old horror magazines. In the process, Dark Delicacies moved to its current quarters, a 2,000-square-foot store on Burbank Boulevard. Meanwhile, the movie studios had discovered the store. At first, Sue found she was fielding calls from researchers and providing them with information over the phone. But with her encouragement, they soon began coming to the store personally, sometimes buying out whole sections of books at a time to research a movie. About 50 percent of Dark Delicacies’ in-store sales now come from studios, but the Howisons have been able to cultivate an equally large base of avid fans buying for their own collections. There are avid followers of niches within the genre, collectors of such series as “The Nightmare Before Christmas,” “Buffy, the Vampire Slayer,” and a group of novels that developed from the highly successful “Halloween” film series. “When someone walks in, I can say, ‘Oh, the new so-and-so came in,” Sue said. “They know they’ll get called if a certain book comes in. They never have to worry about missing a book.” Dark Delicacies also recruits new customers with its regular book signings that have attracted authors ranging from Ray Bradbury to Atkins. “At least 95 percent of (authors and celebrities who deal in the genre) would rather sign with an independent,” said Del Howison. “They know these are the ones that push their books and our customers are more likely to give the books to a friend to read because they’re so excited about it.” Although the store’s d & #233;cor neo-spooky with dimly lit corners, spider webs and a life-sized model of a monster butler that greets shoppers at the door screams Halloween, the biggest sales days are Mother’s Day and Valentine’s Day. The vast majority of the shop’s customers are women who, the Howisons point out, have become such significant consumers of vampire fiction that publishers have begun designing the books in the style of bodice rippers with lusty women in the forefront and the specter of their desire, buffed out and blood thirsty, hovering in the background. “We get women coming in and telling us to tell (their husbands), ‘I want this and that,'” said Del Howison. “So we’re thinking about starting a registry for that kind of thing.” According to the Howisons, the interest in the horror genre is not unlike any other form of escapism. “It’s the analogy of going to Magic Mountain,” said Del. “You get on the roller coaster, and it’s going to scare you, but then the ride will be over. The scariest thing is reading a newspaper. This is a safe scare.”

Keeping a company’s bottom line in the black takes skillful management, creativity, foresight and occasionally a little detective work. Ron Feinstein, owner and president of All Valley Washing Services Inc., found that out several years ago. His 32-year-old Van Nuys firm installs commercial washers and dryers in apartment buildings, mobile home parks, government installations such as prisons and military bases, colleges and universities and some private residences. And one of the problems Feinstein encountered was complaints that his machines weren’t washing clothes clean enough. “After some investigation, we found out what was happening when people had others doing their laundry. The maid or their children were supposed to wash four or five loads of clothes, but instead were cramming them all into a couple of loads. They were overloading the machines and then pocketing the balance of the money. “The other problem was security in the buildings. The machines were being broken into for the coins. “Both of these problems created an excessive amount of service calls. When tenants complained the clothes were not getting cleaned, we kept going out to check the machines. And overloading can burn up belts, motors or transmissions. “When they break into the machines, there’s an excessive amount of damage: usually several hundred dollars per machine, plus the coins that were lost. We were spending well over a couple thousand dollars in vandalism repairs. It’s been cut to probably half of that now. “To combat these problems, we came up with a debit card. The [card-dispensing unit] is placed in a manager’s office where it’s secured. Tenants go in and put a value on the card. “We also use the debit card for a marketing tool. We tell owners we can put the building name on the card, and then they can go to businesses in the community and say, ‘I own 100 units, and if you’d like to promote your business by giving my tenants a discount if they present the laundry debit card.” “The building owner benefits by encouraging longevity in tenants. It’s also a good tool for communication: just a two-page newsletter and it’s easy to do, especially with computers and desktop publishing. They can scan in the business cards. “We have a couple hundred of our clients doing this. We print the debit cards with our name on one side and [the building owner’s] logo or colors and name on the other side. We send people in to do a presentation to the tenants on how it works, and generally put some value on the card to get them started.”

Stuart H. wolff turned a floundering realty web site into a company with annual sales of $178 million Stuart H. Wolff laughs as he tells a visitor that he engineered the first Internet turnaround. He is only half joking. Less than four years ago, the chairman and chief executive officer of Homestore.com took a failing Web site run by a realtors’ association and turned it into the premier online real estate company with annual sales of $178 million. Homestore.com provides listings on homes for sale and apartment rentals, along with a variety of information on home improvement, financing, decorating and e-commerce. But the key ingredient to the company’s growth has been its ability to lock in exclusive relationships with realtors and realty boards, deals that resulted in some 1.3 million home postings on the Web site. With more listings than any of its competitors, Homestore.com has been able to attract the lion’s share of visitors to its site. The strategy has also helped the Thousand Oaks-based firm improve its cash flow. Considered on a pro-forma basis (excluding certain charges ordinarily included in net income computations), Homestore.com landed in the black for the first time in its history in the third quarter ending Sept. 30, with a net profit of $554,000, or 1 cent a share, according to Wolff. Not that Homestore.com is out of the woods yet. Far from it. The tech wreck on Wall Street and a Justice Department investigation launched last spring into Homestore.com’s business practices could sharply curtail the company’s further progress. When Homestore.com’s stock price was hovering at $130 a share, there was no shortage of companies willing to trade exclusive rights to their listings for shares. With stock prices now in the mid-$20 range, that may no longer be the case when many of those deals come up for renewal. At the same time, the Justice Department has launched an investigation into the company to determine whether the exclusivity deals with realty companies amount to unfair competition, although no charges have been brought against Homestore.com. Wolff expresses little concern over the latest developments. The future of Homestore.com, he says, is not in its exclusive relationships with realtors, or even its listings. Rather, he says, the company’s destiny is tied to its ability to develop the kind of sophisticated technology that will take Homestore.com from a Web site where buyers can peruse homes for sale, and real estate agents can advertise their services, to a place where real estate transactions everything from finding to buying a home can take place electronically. Question: How do you think recent events on Nasdaq will affect your business plan? Answer: Anytime you have any kind of relationship, if it’s totally based on economics, it’s a pretty lame relationship. Hopefully, (the listing arrangement) is a relationship that is beneficial to (realtors). I think there’s a misperception that we’re a company built on exclusive agreements. I think people are selling us short if they think we’re a company based on exclusive agreements. Value is created by people. Ultimately, you’re betting on horses. You either believe in the management team or you don’t. Q: How has the Justice Department probe into your business practices affected the company and how will it change your business model if you can’t continue to build these exclusive listing arrangements? A: First of all, we don’t think we’ve done anything wrong, and they haven’t brought any charges, so we’re not in the Microsoft situation. To my understanding, Cisco, Yahoo, a lot of companies have been (subjects of investigations like ours). So we’re totally comfortable with that. We’re also confident we don’t have any problem, so changing our business model is not part of our thinking. Q: Still, isn’t the key to the company’s success the fact that you have been able to garner more listings than competitors? And isn’t that situation in jeopardy with the Justice Department investigation and the decline in the stock price? A: That was back in ’97. As an example, all the technology (we are currently developing) has nothing to do with listing new homes. There’s a lot of great people involved in various aspects of our company. If we’re a one-trick pony, shoot us. You won’t hear me making excuses around DOJ or the stock price. Q: Why is the recent quarter’s result with respect to your pro-forma earnings an accomplishment, given that the company continued to lose money for the period on a net basis? A: Pro forma is a reflection of how business is performing. It means we took in more than we paid out. A lot of us had cheap stock options and it gets amortized over a couple of years and shows up on the earnings (contributing to the net loss), but that’s not truly reflective of the performance of the company. Q: Give us your assessment of the company’s recent performance. A: I think it was a great quarter. I think we’ve had five great public quarters, but to be a great company we have to do it for another 10 or 20 years. General Electric has been doing it for 100 years. Sun, Oracle, Cisco, they have all been doing it for years. We’re in the category of, we just made the playoffs. But we’re not a three-time Super Bowl champion. A return champion is a real champion. Q: What are the challenges to becoming a return champion? A: As you have success, your competition becomes more focused. You have internal issues, ego issues. When you’re in a garage building up, everyone is so focused on getting out the public offering. Most companies get through the IPO, but they don’t have the sustaining power. We did that. Now we’re in the playoffs. We have to do what we (already) did three times in a row. We need five or 10 years of that, and it’s damned hard to do. Q: How do you plan to build the company from here? A: We’re building out a suite of applications for (realtors and agents) and that continues to be a big focus for 2001. The real focus in ’01 is to become a technology company and build technical products. In Silicon Valley, you can point to Sun and other companies (that have achieved a high level of technology.) We would like to be one of the first great technology companies in Los Angeles. There’s a lot of commitment to media here, but there isn’t as much commitment to great technology. If we can do that, I think this company can get to the next level. Q: Will the focus on developing your technology require another large capital infusion? A: A lot of the heavy lifting on the cost side is in place. We have a lot of servers. We’re one of Dell’s biggest customers. Q: Why did you decide to go to work for TCI without any pay? A: I’ve always done what I wanted to do. Follow your passion. Follow your dreams. I do what I like to do. I wanted to be at TCI. I thought they were changing the world. I saw the beginning of the Internet and I wanted to be part of that. Q: A number of your initial investors seem to have cashed out in October. Does that represent a loss of faith in the company? A: The (initial venture capital companies), except Kleiner Perkins Caufield & Byers, are gone. They frankly weren’t adding any value and, in some cases, I was happy to have some of them move on. You have a transition in shareholder base as a company moves, so you’re constantly changing your shareholder base. My goal is to get to be a large cap company (with a different investor base).

The Roscoe Boulevard exit of the San Diego (405) Freeway looks like a lot of other freeway ramps: The chances are good you’ll see an occasional panhandler, a couple of runaway shopping carts and litter lining the street. That is exactly the kind of unsightly image San Fernando Valley leaders hope to get rid of with a beautification project that will spruce up Roscoe with palm trees, colorful bougainvilleas and native plants. “When you look at some of the off and on ramps, there are some that look absolutely terrible,” said Bruce Ackerman, head of the Economic Alliance of the San Fernando Valley, which is working with state Assembly Speaker Robert Hertzberg (D-Van Nuys) on the Valley Gateway Project. The idea for the project came about a couple of years ago when the Alliance and Hertzberg were simultaneously, yet separately, discussing ways to improve the look of the Valley’s freeway ramps. It has actually taken all that time to work out details with the California Department of Transportation. Ultimately, Caltrans cannot afford to plant and maintain landscaping along freeway ramps. But private businesses can, with Caltrans supplying the water, said Margie Tiritilli, Caltrans spokesperson. “We want to work with the community any way we can to help beautify the area,” Tiritilli said. “We not only plan to do the private landscaping, we plan to maintain it,” Ackerman said. Caltrans can then “take the money they would save and put it right back into the water, because it will take more water to maintain a new project.” The project is expected to break ground by the first of the year at ramps off the 405 freeway at Roscoe Boulevard and is intended to provide a “visual impact” to passersby, said Jeff Brazil of Caltrans. A major player is Galpin Ford of North Hills, whose owners have committed thousands of dollars to sprucing up the area. Also involved is Anheuser-Busch, across the freeway from Galpin. The project is estimated to cost between $100,000 and $200,000, Ackerman said, with Galpin and Anheuser-Busch, Inc. the major contributors. “The payoff is the satisfaction of having accomplished this project,” said Jane Boeckmann, who owns Galpin Ford with her husband, Bert. Money from Hertzberg Hertzberg is supporting the project with a contribution of $50,000, said Miriam Jaffe, Hertzberg’s chief of staff. “Speaker Hertzberg believes the on and off ramps are literally the gateways to our community,” Jaffe said. “He wants to make sure they reflect our community beautifully.” Galpin Ford occupies much of the land on Roscoe Boulevard east of the 405 freeway, all the way to Sepulveda Boulevard. Boeckmann envisions the beautification project as “a whole experience” in which passing motorists will find an array of colorful flowers, trees and other touches. The beautification is considered a prototype that will hopefully extend to other freeway ramps throughout the San Fernando Valley, said Bob Scott, vice chair of the Valley Industry and Commerce Association. “The goal is to do all the Valley ramps eventually,” Scott said. “Most are neglected areas. Interestingly enough, it’s the spot where people sit in their cars waiting for the light to change. It’s a great opportunity to make a positive impression for them.” Lawrence Moss and Associates, a Glendale-based landscape and architectural firm, is drawing up the final design, Ackerman said. From start to finish, the project is expected to take three to four months. Once implemented, the project’s ongoing maintenance costs will be covered by Galpin and other private businesses that wish to contribute, Boeckmann said. “We are committed to covering it,” she said. Ackerman said maintenance is estimated to cost between $1,000 and $2,000 a month. “We try to keep our business as beautiful as we can, but the ramps are just unattractive,” Boeckmann said. “(The project) will make people feel better about coming here. When you have things of beauty, it shows you care. We care about the Valley, and we want to show it.” Ackerman said, “We want to make sure that motorists coming off or going on the freeway have this feeling of, ‘This is nice, this is impressive, this is attractive.” The $50,000 from Hertzberg comes from his political election campaign. “You can donate campaign funds to legitimate charitable or legislative purposes this is actually both,” said Paul Hefner, Hertzberg’s press secretary. “The money is going to a 501 program.

Valley business leaders have applauded a call by a citizens panel for sweeping reforms of L.A.’s business taxes, but some question whether the Los Angeles City Council has the will or the gumption to institute real change. The problem is that Los Angeles is addicted to the $300 million it collects in business taxes each year, and secession may be the only way to force the city to go cold turkey, argued David Fleming, chairman of the Economic Alliance of the San Fernando Valley. “This is the Jesse James form of taxation. You take a gun and a mask and you make businesses pay,” he said. “The only true way (to reform the system) is through secession.” That reaction follows the recent release of a report called the “Blueprint for Business Tax Reform” by a task force created last year by city officials. In its report, the Business Tax Advisory Committee confirms what business leaders have been saying for years: the business tax is burdensome and complicated, and it’s driving companies out of Los Angeles. A recent example is Canoga Park-based Qualstar Corp., a digital tape storage firm that is moving into a new facility in Simi Valley next year. When President and CEO William Gervais went looking for room to expand his company, he decided it was easier to move to a city where business taxes aren’t an issue than to stay in one where they are. “The business taxes are lower,” Gervais said. “There are no utility taxes.” That’s not all. “The city of Simi Valley wants us,” he said, “and the city of Los Angeles doesn’t.” Jack Walker, the committee’s vice chairman, said, “The system is not well run. It’s not well funded, and it is not sufficiently coherent. It’s very frustrating and expensive for businesses to comply with.” Because the tax is based on a company’s gross receipts, not its net income, the system can be especially unfair for startups or other companies that might have significant revenue but little or no net income. “That’s a big problem. It’s not a good policy to tax people just starting out,” said Walker. Confusing categories Businesses are taxed based on the type of work they do, but companies with several segments may end up paying in two or more rate categories, making it a nightmare to calculate their tax returns, the committee noted. In other cases, businesses are double-taxed. For instance, when a contractor is paid for completing a project, he or she is expected to pay taxes on the total amount even if subcontractors did a large chunk of the work. The city then expects the subcontractor to pay taxes on its share of the proceeds as well. Corporations, on the other hand, are taxed on revenue they book when they charge a subsidiary for accounting, legal or other services even though actual cash never changes hands. Those inequities, as well as the city’s slipshod approach to collecting the tax, may help explain why more than one-third of the businesses in L.A. don’t even pay the tax and many more underreport their gross receipts, the committee found. That’s costing Los Angeles about $60 million a year in back taxes, money that could be used to lighten the tax burden of companies that are following the law, Walker said. The committee made a number of recommendations for reform, but Walker conceded its aim is to make the system more fair and enforceable rather than provide tax relief. The committee recommended that the City Council: Expand the city’s Tax and Permit Division to make it more business-friendly and go after scofflaws. Extend amnesty to delinquent firms in 2001. Develop a Web-based filing system to simplify compliance and allow companies to pay their taxes using credit cards. Create an ombudsman to help taxpayers navigate the system. Make the tax rates uniform and fair, eliminating double taxation. Hire an outside economist to review the city’s tax rates. Not everyone is pessimistic Los Angeles City Councilman Michael Feuer characterized the committee’s work as “very promising” and said he’s optimistic the council will adopt many of its recommendations. Feuer, who chairs the City Council’s Ad Hoc Committee on Tax Reform, has proposed a series of reforms that mirror the committee’s recommendations. “We need to make it easier in L.A. for businesses to do business,” he said. Fleming is not holding his breath. “This (tax reform) always crops up just before an election, but then just goes away,” he said. “The way the city’s budget is set up, (the business tax) is where it gets its income. It would be too painful for the city to cut the tax.” The committee’s recommendations are a start, said Fleming, but until L.A. lowers its taxes, it will remain at a competitive disadvantage to other communities that have little or no business taxes such as Calabasas, Westlake Village and Glendale. Cathy Maguire, chair of the Valley Industry and Commerce Association, applauded the recommendations and was more upbeat about the chances of the City Council acting on them. “It just seems like the climate is such that it has a good chance of getting through,” said Maguire. Just simplifying the system will go a long way in satisfying many in the business community, she added. “A lot of businesses have to have lawyers and tax attorneys and everyone else to help them do their filings. It’s very expensive and time-consuming.” Walker promised that the 19-member committee mostly lawyers, accountants and taxpayer advocates will work hard to make sure the council acts on the recommendations. If the council reforms the business tax in a meaningful way, it could take some of the steam out of the secession drive in the Valley where the business tax has been widely criticized by business leaders. “I think it’s likely the City Council will enact many of our proposals,” he said. Richard Close, chairman of Valley Voters Organized Toward Empowerment (VOTE), said he’s willing to bet the City Council lets the tax ride. “The composition of the City Council is not business-friendly. They don’t understand the need to keep businesses, especially in the Valley,” he said. While VOTE can’t promise that leaders of a new Valley city would reduce or abolish the tax, Close believes residents would have more say over their own destiny. “The real issue is local control,” he said.

North Hollywood caterer Ignacio Trujillo is busy, working as many 14- to 16-hour days as he can get on movie and television sets, serving meals to all the casts and crews he can find. Trujillo works so hard because he fears those long days might come to an end, should a writers’ and actors’ strike hit Los Angeles this spring. “If they go on strike for more than three months, we have to look for another job,” said the president of Big Picture Catering. “We might have to sell the business. A lot of small companies cannot afford to stay in business if they strike. If they go on strike, we will be suffering.” Trujillo, with a dozen employees, is one of more than 1,500 small behind-the-scenes business owners in the San Fernando Valley who could be dramatically affected if a walkout by members of the Screen Actors Guild, the Writers Guild of America and the American Federation of Television and Radio Artists takes place. A strike could come as early as May 1, 2001, when the writers’ contract with major companies and networks expires. SAG and AFTRA contracts expire July 1. Massive strike losses Should there be a walkout, the Los Angeles economy could face a loss of $1.8 billion a month, including everything from lost wages to lost production costs to meals that go uneaten in Valley restaurants, said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp. Lost revenue shortfalls to owners of production sound stages, rental equipment companies, trailers and other necessities associated with the industry could also result. Much if not most of that $1.8 billion monthly burden would fall on the Valley. “It’s going to have a huge impact,” Kyser said. Independent businesses would be “the victims of this. They have no part in their own destiny because it’s between the major studios and the three guilds.” Although the major studios typically dominate entertainment news, roughly 97 percent of all businesses involved in the motion picture and television industry have less than 50 employees, Kyser pointed out. “It’s an industry of small businesses,” he said. And an industry that has been, and continues to be, a major contributor to the economy of the San Fernando Valley. In fact, the LAEDC says there are 1,527 entertainment-related small businesses in the Valley alone. Valley production and distribution companies employ roughly 103,194 people a year with a combined payroll of $6.15 billion, research by the San Fernando Valley Economic Research Center shows. Working quickly ahead The threat of a strike has studios and other production companies rushing production to beef up inventory, which is also creating unusual business patterns, Kyser said. “Basically, what (small businesses) have to plan for is a dramatic drop in business around the end of May,” he said, “so they have to build up some financial reserves. They have to see if there’s other ways to generate some sales.” For Trujillo, these months leading up to a possible strike are crucial to building up that reserve. The caterer has been busy working overtime both locally and out of town in hopes his business can stay afloat if there is a dry spell. Should there be a strike, he hopes to cater private parties, weddings and birthdays to pay the bills. Of course, it’s hard to know just how many private parties and catered birthdays there will be among his clientele if a strike goes on very long. “Right now, we’re working every day,” he said. “We’re trying to save some money to get ready for the strike. If (the strike) lasts a few months, a lot of people will get hurt.” Ultimately, the impact on every business associated with the industry could be dramatic, added Cheryl Roden, assistant executive director of the Writers Guild of America West Inc. “We know from the 1988 (writers’) strike that the small businesses that serve the industry directly are dramatically affected by any prolonged work stoppage,” Roden said. “It can affect anything from dry cleaners to restaurants that’s because there are so many people in Los Angeles that work in the entertainment industry.” Though small businesses may be impacted especially if the strike goes on for a length of time Roden is hopeful. “We’re confident that we will be able to negotiate a contract without a work stoppage,” she said. Earlier strike just the beginning Scott Spencer of Scott Spencer for Hire, a lighting company, has worked in the entertainment industry for 30 years. Reflecting on the recent commercial actors’ strike, which took six months to resolve and affected a number of businesses associated with the industry, Spencer said it was a foreshadowing of what could come. “The strike that we’ve already been through drove a lot of work away from this town,” said Spencer, whose business is headquartered in the Santa Susana Pass, just on the outskirts of Chatsworth. During the commercial actors’ strike, Spencer said, producers and others he knows in the industry took their work elsewhere, such as South Africa, Argentina, Australia and, of course, Canada. “If we go through another industry-wide strike I see this having an enormous effect on those of us who are trying to make a living in this town,” Spencer said. “It makes me angry because I think we have the best facilities and we are the best (entertainment industry) workers in the world. This is the No. 1 industry in Southern California, and we’re basically giving it to other countries.” On the other hand, there are some who say a strike might be good for their business. Paul Young, a Woodland Hills-based literary and screenplay consultant for more than a decade, is one of them. Over the years, Young has analyzed scripts for hundreds of clients. Those numbers, he said, could very well increase in the midst of a strike. “In general, what most writers do during a strike is write,” Young said. “(A strike) doesn’t alter a writer’s creative capacity.” From a consultant’s point of view, “it will probably increase my business because the traffic in writing screenplays won’t stop,” Young added optimistically. “Everybody has desks full of material,” he said. “Those things don’t stop because you can’t go to work.”