By LARRY KANTER Senior Reporter Kenny Small is not a pornographer, but his livelihood depends on pornography. The Reseda-based graphic artist designs boxes and promotional materials for videos including adult videos. And thanks to an insatiable demand for sexually explicit material, Small’s tiny six-employee shop, Art Attack Design Studios, now churns out as many as five new boxes a day and its calendar is booked solid for the next three months. Although Small still has clients from Hollywood’s mainstream, he has pretty much cast his lot with the adult side of the industry which provides him with some 75 percent of his sales. “It’s endless; the business comes in like clockwork,” says Small, a bearded, 37-year-old father of two, pausing briefly to inspect the proofs for a video called “Professor Mike’s Freshman Fantasies #4.” “In the real world, it’s more feast or famine,” he says. “If you have the right clients in the (adult) business, they really have the money to pay the bills.” Much has been made of the San Fernando Valley’s status as the pornography capital of the world. And the enthusiastic response to New Line Cinema’s recent film “Boogie Nights” an exuberant epic about the Valley’s porn industry in the 1970s is likely to cement that status even further. But despite its seedy reputation, pornography these days is big business and perfectly legit. As Small’s experience demonstrates, the explosive growth in adult videos helps support a range of businesses not generally associated with the sex industry and may in fact constitute the Valley’s least likely economic engine. Billion-dollar industry Last year, Americans spent almost $4 billion renting or purchasing adult videos, according to Adult Video News, an industry trade publication. An astonishing 7,852 new hard-core titles hit the market in 1996 a 40 percent jump from the 5,575 released in 1995 and a 515 percent increase from 1990. An estimated 75 percent of those films come from Los Angeles County and the majority of those are produced in the adult dream factories tucked away incongruously in placid, middle- class neighborhoods like Van Nuys, Canoga Park and Chatsworth. The Valley currently is home to 104 of L.A. County’s 152 manufacturers and distributors of hard-core videos, according to Adult Video News. That has meant a steady source of commerce for all manner of local businesses, such as videotape suppliers and duplicators, equipment rental shops, photographers, musicians, artists and printers the majority of whom also work on mainstream productions. Not surprisingly, very few of them care to broadcast their double life. But industry sources from both sides of the divide say the crossover is considerable. “Everyone uses the same suppliers,” says Stephanie Hershey Liner, a spokeswoman for the L.A. Film Office, which grants permits to film and video producers seeking to shoot on location in the city. “If (adult productions) have needs for lights or cameras, they go out and rent it just like everyone else.” Adds Susan Yannetti, director of marketing for Van Nuys-based Vivid Video, one of the largest producers and distributors of adult videos: “I don’t think any of our vendors could make a living just doing adult stuff. They have to do mainstream work as well.” It’s a fact that even the industry’s opponents are willing to concede. “I definitely am not pleased to have the adult entertainment industry headquartered in the Valley,” says L.A. City Councilwoman Laura Chick, who represents the West Valley and has been a strong advocate for women’s issues. “But I don’t have any grounds to challenge what they’re doing. These are legitimate businesses and many of them support a variety of businesses that have nothing to do with adult entertainment.” Graphics goldmine Kenny Small certainly never intended a career in the porn business. Small was a struggling student at Cal State Northridge when he took a low-paying job in a Van Nuys warehouse operated, it turned out, by a producer and distributor of hard-core films. When a manager noticed that he possessed computer skills, Small was moved to the company’s design division. Within 18 months, he was earning $60,000 a year as the firm’s production manager. Now he runs his own shop in Reseda, creating artwork for both hard-core and mainstream films. His handiwork hangs on the walls of his studio posters for B- and C-grade movies like “Riders on the Storm” and “Virgin Among the Living Dead” hanging alongside far raunchier work with titles like “Beach Bum Amateurs” and “Man Eaters.” Small has seen a number of years when he had no adult clients at all. But these days, his 21 hard-core customers account for the bulk of his nearly $1 million in annual sales. He wouldn’t have it any other way. Working with mainstream studios usually means haggling with a team of art directors, who often demand as many as 20 revisions of a project before finally deciding on a final version. Hard-core producers, on the other hand, are far less finicky. “It’s steady, stable production,” he says. “From our standpoint it’s a better business, to be able to get onto the next project.” Canoga Park artist Michael Bushler, owner of Phase One Graphics, agrees. Half of Bushler’s business is with hard-core clients. And while he charges them only about two-thirds what he charges mainstream customers their standards of quality are far less demanding, he says the quick turnaround provides him a steady stream of revenues to invest in new computer equipment and keep his eight-employee shop afloat. In Hollywood, Bushler says, “everything is done by committee, and I just can’t take it.” Industry’s growth The crossover between mainstream Hollywood and the adult entertainment industry is a far cry from porn’s early days in the 1960s and ’70s. Back then, the hard-core business was largely underground, with the majority of producers churning out low-quality, eight-millimeter loops that played primarily in coin-operated peep show booths in adult book stores. That changed with the advent of video in the late 1970s. Suddenly, hard-core moved out of the peep shows and into the living room. It was at about the same time that L.A.’s porn community, wary of high-rents and weekly police raids in Hollywood, found they could escape into industrial parks located in the Valley’s quiet suburban neighborhoods. Besides, they needed the warehouse space to store the growing number of videos they were shipping to distributors, retailers and mail-order customers. As video technology became increasingly inexpensive, scores of would-be porn moguls in the Valley discovered that their backyards and turquoise-blue swimming pools were perfect locations to shoot hard-core films, as well as attractive alternatives to the pricey sound stages in Hollywood. Indeed, a porn video could be shot for several thousand dollars and, if properly marketed, earn as much as 30 times that amount. As the profits surged, so did the Valley’s status as the industry center. By the mid-1980s, the region had become the undisputed porno capital of the world. Subsidiary businesses But it’s not just videos that fuel the Valley’s hard-core economy. The Valley, for example, also is one of the world’s leading suppliers of rubber sex toys and novelty items, according to industry officials. Indeed, while much of the area’s manufacturing base has fled the area for cheaper environs in Asia and Latin America, the sex toy industry remains very much a home-grown phenomenon. At Vast Resources Inc. in the city of San Fernando, 500 employees work two shifts a day manufacturing everything from rubber genitalia, vibrators and blow-up dolls to less risqu & #233; items like key-chains and mousepads bearing the logos of Penthouse and Hustler magazines. The company also makes children’s toys, including flexible rubber Incredible Hulk and Tasmanian Devil dolls, which are sold by retailers like K-Mart and Toys R Us. Vast Resources is owned by Marty Tucker, a UCLA-trained chemist and former researcher at Douglas Aircraft. Tucker stumbled into the business 26 years ago when he purchased a small factory that made rubber spiders, snakes and other toys. He soon discovered that there was more money to be made in rubber goods of an entirely different nature. Now, he operates a 200,000-square-foot factory and boasts annual sales of about $30 million. “We’re supporting a lot of people,” Tucker says, citing his numerous vendors who supply services like packaging, injection molding equipment, petroleum products to make PVC and other polymers, as well as plumbers, electricians and other contractors. “Every single trade gets involved here,” he says. Indeed, there are scores of companies in L.A. that stumbled into the adult entertainment industry very much by accident only to find that porn producers can be very lucrative customers. That was the case with West Valley computer consultant Mark Levin. Levin was building his small business when a client gave him a referral for an entertainment outfit called Leisure Time Productions, which needed a new desktop publishing system. Arriving at the company’s Van Nuys headquarters, Levin was impressed by the disproportionate number of Ferraris and Porsches in the parking lot. Inside, the offices were clean and stylish, the staff professional. It was only when he turned on the computer that he realized “Leisure Time” was not a reference to golf or shuffleboard, but was one of the Valley’s largest producers of hard-core materials. The company fast became one of Levin’s largest clients, providing about 10 percent of his annual revenues. “It didn’t phase me. They had money to spend and they paid their bills on time,” Levin recalls. Unintended costs But others have found that leading that kind of double life can constitute a severe liability. In 1995, for example, Frank Barbarino, president of FB Productions, a Chatsworth printing plant, was forced to resign from a mayoral task force on the printing industry when it was discovered that a small portion of his business came from producing packaging for sexually explicit films. Since then, Barbarino has shed all but two of his adult clients, but he still sounds haunted by the incident. “It’s been tough for our (mainstream) clients,” he says. “The word gets completely spread out in the wrong direction.” But with the adult entertainment industry continuing its rapid expansion, with hundreds of new titles being released each month, Barbarino’s experience appears to be more the exception than the rule. “There are so many little businesses that feed off of the X-rated industry,” says William Margold, a former porn performer, director and talent agent who now serves as the industry’s unofficial spokesman. “It is a tree with many, many branches.”

COST-EFFECTIVE BORROWING: FACING THE NEED FOR MONEY Borrowing tips for small businesses from the San Fernando Valley Business Journal Your business plan is working and your company is growing. Now you realize that the second most important ingredient to fueling growth is raising capital. As a small business owner, here are some ways to manage your borrowing costs and obtain more loan funds. * Some of the more obvious assets you have may include your company’s cash flow, personal credit cards and your individual retirement account. In addition, you may also be able to borrow on the strength of your character, management experience and customer contracts. * The best way to cultivate a relationship with your local bank is to establish a rapport before you need money. That includes maintaining balances in your accounts, not overdrawing your checking account and not using uncollected funds. * Credit card loans are unsecured by the typical interest rate of 18%. * Your checking account may help you get a bank overdraft line of up to $10,000. This line of credit allows you to issue checks for more than you have on deposit up to an agreed amount. * Initially consider looking to friends and family members for loans. Loans from this group may carry a lower interest rate than commercial loans or no interest at all. * Next look to banks and finance companies. The small business community is the fasted growing segment of the financial market today. Nearly one-half of outside financing for small business comes from commercial banks. * Finance companies and banks usually require personal guarantees and collateral. A source of collateral for a loan is your home. The approval rate for a home equity loan is much higher than for the average business loan because of its lower risk to the lending institution. If you can’t repay the loan, the lender of a home equity loan could foreclose on your house. Interest on a home equity loan is tax deductible. * Credit grantors sometimes will grant a loan that is secured by a passbook or securities and a personal guarantee from the borrower and often the member of the family who may have control over family assets. * A credit grantor looks for a successful manager with a strong resume, a good credit history and a track record that is without negatives. This is called “Character” and is given more weight then the collateral which is usually required. * Another business source are economic development programs provided by state and local government devoted to the needs of smaller businesses. These agencies make millions of dollars available for loans and/or loan guarantees. Although most of the loans are made by banks, rather tan directly form the government agency, up to 85% of a loan is guaranteed by the Federal or State government. * In previous issues we discussed the LOWDOC program. Which is sponsored by the U.S. SBA and offers a simple quick approach to borrowing. * Recently there has been a surge in independent finance companies formed to provide asset-based loan and factoring to small companies. Asset-based lenders essentially make loans against accounts receivable, inventory or equipment that the lender can liquidate in the event of a default. For example, an asset-based lender generally extends up to 80% of non-delinquent accounts receivable and interest rates range from 14% to 50%. In summary, loans are based on character, managerial experience and collateral. Loans cost money, but look for the optimal combination of price and terms, to manage your borrowing costs wisely.

Housing Fever The San Fernando Valley housing market has gotten hot in recent months. The number of homes sold has been rising for four consecutive months and the median price is up nearly 10 percent from a year ago. But home shoppers are finding their options fairly slim the inventory of for-sale Valley homes is down 14 percent from a year ago. “It’s real dry out there,” said Maureen Steinberg, an agent at Re/MAX Realty in Encino. That’s forcing home shoppers to be somewhat wily. Some shoppers are putting bids on multiple homes, expecting most of their offers to be booted by higher bids. Others are arriving at open houses hours before they are scheduled to open for viewing. It appears Valley real estate is once again a competitive sport. ‘Life-Saving’ Proposal Santa Clarita City Councilman Carl Boyer wants the city to change its address system when it gets a new area code, which is likely to happen in 1999. Under the current system, Santa Clarita addresses are based on the distance of properties from downtown Los Angeles. Now that Santa Clarita is its own city, its addresses should be based on their distance from the center of Santa Clarita, Boyer argues. But opponents are saying that the address-change proposal, which is expected to reach the City Council this month, would be expensive. Shipments to businesses could be lost, driver’s licenses would have to be replaced and numbers on curbs would have to be repainted, they say. But Boyer fires back that by changing the addresses, “We could save lives.” That struck Cameron Smyth as odd. Smyth is the son of the Santa Clarita’s mayor and an aide to state Sen. William J. “Pete” Knight, R-Palmdale, who represents the area. “(Boyer) claimed that because the addresses aren’t sequential, people wouldn’t be able to find their way to the hospital,” Smyth said. “And our hospital is freakin’ huge. I don’t know of anybody who would drive by the hospital and say, ‘That’s not it.’ ” Image and Entertainment The Valley stands poised to get its biggest burst of media attention since the Northridge earthquake or at least since the release of the movie “Two Days in the Valley.” The occasion is this month’s release of New Line Cinema’s much-talked-about film, “Boogie Nights.” But it may be the kind of attention many Valley business leaders think the area can do without. The film delves into the sleazy underworld of the Valley’s adult entertainment industry during the drug- and disco-crazed late 1970s and early ’80s. The movie’s “hero” is a Torrance youth played by Mark Wahlberg, who finds both fame and fortune on the mean streets of the San Fernando Valley. The film is scheduled to be playing on some 2,000 screens nationwide by the end of October. So are Valley business-types at all concerned about what it could mean for the region’s image? At least one Chamber of Commerce leader seems to be taking it in stride. “We are the entertainment capital of the world,” shrugged Walter Prince, a longtime leader of the Northridge chamber. “So I suppose it’s only fair that we provide all sorts of entertainment for all sorts of people.” Waiting for El Ni & #324;o What special precautions are being taken by the city of L.A. to prepare the Valley for the arrival of El Ni & #324;o’s fury this winter? Apparently none. “Mother Nature will do whatever she wants and we’ll just have to contend with it,” said Dennis Moorfield, an engineer at the Los Angeles Department of Public Works. He adds, however, that the Valley already has the best flood-control system in the nation, and possibly in the world. “We are doing the same things that we have been doing for the last 40 years,” he said. That would primarily involve clearing debris out of flood basins and drainage channels. The Army Corps of Engineers, responsible for the strategic Sepulveda Flood Basin, has been stocking up on sandbags. “We have around 10,000 sandbags to shore up our core facilities for the first 72 hours of a flood fight,” said a spokesman. While able to provide technical assistance to local governments, the Corps will not be providing bags. “We can give them the numbers of sandbag manufacturers across the country,” he offered. Come On Down! Attention all aspiring game show hosts; here’s your big chance. The Game Show Network is holding an audition for game show hosts on Oct. 22 at the Northridge Fashion Center, from 7 a.m. to 9 a.m. and then from 3 p.m. to 8 p.m. Nine finalists will be selected to audition once more at the Los Angeles “Coast-to-Coast Search for a Host,” which will be held Nov. 1 from noon to 4 p.m., also at the Northridge Fashion Center. “Upon review by a celebrity panel of judges, the newly crowned game show host will be presented with a prize package worth more than $30,000, including a brand new 1997 Jeep Cherokee SE, $5,000 in cash, and the ultimate award a game show hosting opportunity on the Game Show Network,” states a press release. The network is a Sony Pictures Entertainment company. No Early Retirement Don’t anybody plan on moving into Michael Eisner’s office as the chairman of Walt Disney Co. The 55-year-old boss of the Burbank-based entertainment conglomerate isn’t stepping down anytime soon. Asked how long he plans to stay in the captain’s chair, Eisner said “forever” in an interview with PBS talk show host Charlie Rose last week. Rose persisted, asking Eisner if he planned to step down at age 65 or 70 or even 75. “What would I do?” Eisner said. “I am no good at gardening. If they want to wheel me in and let me look at a pilot, I’m there.”

By CHRIS DENINA Staff Reporter The Burbank-Glendale-Pasadena airport saw a nosedive in air cargo volume in August, according to this month’s Valley Econowatch. While the 22.8 percent drop from the like year-earlier period was largely due to the United Parcel Service strike, all other cargo carriers also reported drop-offs for August, compared with the year-earlier period. Year to date, air cargo volume at the Burbank airport is 9.76 percent below the like period of last year. “It is always a cause for concern when we see a decrease in an operation that generates a substantial amount of our revenues,” said Sean McCarthy, a spokesman for the airport. “We are in competition with all the other airports in the area for this service, and it’s up to the airlines and freight haulers to decide if it’s worth the drive to LAX or Ontario.” But McCarthy said the drop-off in cargo volume is not a point of great concern to airport officials. First, the airport’s revenues come from landing fees that are based each plane’s total landing weight, including the weight of the plane. So even dramatic drops in cargo weight do not represent significant drops in total landing weight. In addition, this year’s drop in cargo volume has been partially offset by a 123 percent rise in the volume of U.S. mail flowing through the airport, year to date. (U.S. mail volume is reported separately from cargo volume.) “The U.S. Post Office is in process of conducting an experiment to see whether mail can be moved more efficiently to its primary clearinghouse in Santa Clarita, rather than flying into LAX and dealing with the traffic,” he said. UPS air cargo volume through Burbank was just 602,397 pounds in August, a 64.2 percent drop from the August 1996 level. In August, UPS only had 18 flights out of Burbank, as opposed to 46 flights the month before. UPS accounted for just 10.9 percent of Burbank’s total air cargo volume in August, while in August 1996 it accounted for 40.8 percent of the airport’s total air cargo. Other airlines that experienced sharp drops in Burbank cargo volume in August included: Skywest (down 64.6 percent), American Airlines (down 56.3 percent), and United Airlines (47.0 percent). The Burbank airport’s overall inbound cargo plummeted to 2.1 million pounds, down 34.4 percent from August 1996. And outbound cargo dropped to 3.5 million pounds, down 13.8 percent.

By JEANNETTE DeSANTIS Contributing Reporter Right in the heart of the Valley’s “Technology Corridor” lies Westlake Village, where crime is low, the quality of life is high and the small-town feel makes it an ideal setting for a variety of high-tech, health care and biotech firms. Occasionally, it can even be too much of a good thing. Westlake Village’s high cost of living makes recruiting employees somewhat difficult, especially workers being recruited from lower-cost states. “The cost of living has been a problem for us,” said Robert Fischer, president of Optics I Inc., a maker of computer display terminal devices. “In our field of optics, we have to hire from across the country. One man living in a nice house in Knoxville, Tenn. found the cost of living too expensive here compared to where he lived and didn’t want to relocate,” he said. In Westlake Village, the average home sells for $395,000 and custom homes go for as much as $2.5 million. The average household income is $70,000 in the city, compared with $53,000 for California as a whole. But Lyn Perry, chairman of the Westlake Village Chamber of Commerce, said you get what you pay for. “Obviously someone who moves from New Jersey is in for some culture shock and will end up paying 50 percent more for one-sixth of the square footage,” said Perry. “But when you move to Westlake Village, you have one of the finest climates in the world. You are paying for the security and the high quality of life, in a community near the ocean, an hour from Los Angeles, which is near two airports, several theme parks, with some of the finest golf courses in the world. You are paying for location,” he said. “Just the name of Westlake Village has a very positive ring to it,” said Joseph Cabral, president of Chatsworth Products, a computer hardware company. That small-town feel is part of the draw for businesses in Westlake Village, located 38 miles west of downtown Los Angeles. “It’s a friendly community, there is easy access to the (Ventura) freeway and it’s within close proximity of the Valley,” said Cabral. “If we need certain components we can easily make the trip into the city in a day,” Fischer said. “And because we do business with the Hollywood crowd it’s important to be near them and have significant camera stores nearby.” While Westlake Village provides easy access to urban areas, it remains quintessential suburbia. “We get businesses to relocate here because it is very desirable to live and work in Westlake Village,” said City Manager Ray Taylor. “There is a certain ambiance here because we have very high standards for everything from our roadways to our schools.” Westlake Village is part of the Las Virgenes Unified School District, in which some schools have received the California Distinguished School and national Blue Ribbon awards. The city, with a population of 7,800, also has a highly educated pool of workers. About 44 percent of its residents have completed 16 years or more of schooling and half of all residents work in executive or professional occupations, according to the most recent Census data. The original master-planned community of Westlake Village actually straddles the L.A.-Ventura county line. So the city, which incorporated in 1981, is only made up of that half of the original master-planned community that lies in Los Angeles County. The half that lies in Ventura County is part of the city of Thousand Oaks. “When incorporation started, we really had no choice,” said City Manager Taylor. “Occasionally the boundaries do cause some confusion, mostly for new residents who are looking for city services.” Although Westlake Village is young (its oldest neighborhood is only about 30 years old), it is already almost fully built out, according to Taylor. Westlake North, a 130-acre area north of the Ventura Freeway, is about the only section of the city where more development will be allowed, under the city’s existing general plan. So far, the only completed structure in Westlake North is a 130,000-square-foot Costco store. Another 160,000 square feet of retail space is currently under construction there, and is slated for completion in June 1998. The city’s rapidly expanding retail base has done wonders for its tax coffers. In fiscal 1995-96, the city garnered $1.19 million in sales tax revenues, Taylor said. Costco opened in fiscal 1996-97, helping to boost the city’s sales tax revenues to $1.6 million. Taylor is projecting $1.7 million in the current fiscal year and $1.8 million for fiscal 1998-99, as the new retail space comes on line. In addition to the new retail space, 1 million square feet of office space has been designated in the general plan for the Westlake North area. “With that there will be little vacant land left in the city,” said Taylor. “Most land that is left is zoned to remain as open space.” The office space may be needed before long. Only about 6 percent of the 2.3 million square feet of office space in the city is vacant, according to Michael Slater, a broker with CB Commercial Real Estate Group. That makes Westlake Village one of the tightest office markets in Los Angeles County. Perry said the low vacancy rate is due to a joint effort between the chamber and the City Council to market the city as pro-business. “We try to be pro-business at all levels, for the small and large businesses,” he said. The Westlake City Council promotes itself as pro-business by pointing to its “fast-track” development approval process. The process is facilitated by the fact that the council handles planning issues itself without depending on a planning commission. The city also imposes no taxes on business licenses or business utilities. “We have corporations moving their headquarters here because of that pro-business philosophy,” said Westlake Village Mayor Doug Yarrow. “And because of that, we are in good shape financially, with $5 million in reserves in the general fund.”

By FRANK SWERTLOW Staff Reporter In a book world dominated by supermarket-sized discount stores, the Samuel French Theater & Film Bookshops has found a quiet niche in the Studio City. Located near the CBS Studio Center, the store is frequented by aspiring screenwriters, directors, actors and makeup artists, as well as by people already in the industry who need to pick up a script or reference guide. “There is a huge demand for this information,” said Gwen Feldman, who manages the store at 11963 Ventura Blvd. “Everybody wants to get into the business.” Among the more popular titles are “Back to One: The Movie Extra’s Guidebook,” by actor-author Cullen Chambers and “LA 411,” a reference guide that helps film and TV producers find everything from sound stages to location caterers. The store also has “Zen and the Art of Screenwriting” by William Froug and classics on acting technique by Lee Strasberg, Sanford Meisner and Uta Hagen. “Michael Jackson likes to come in and buy stacks of books on Disney and film production,” Feldman said. “The last time I saw him he was wearing surgical clothes with a mask. He orders books and has an account with a code name.” Much of the trade is in scripts, however. “Laurence Fishburne comes in,” she said, “so does Kevin Spacey, Faye Dunaway and Shelly Winters. Everyone uses us if they want a copy of a play or a published script.” Samuel French Inc. first opened its doors in New York in 1830 and is the world’s largest copyrighter of theatrical plays. Its clients have included Neil Simon, Anton Chekov, Samuel Beckett, Maxwell Anderson, Edward Albee, F. Scott Fitzgerald and James Agee. Community playhouses, high school productions and dinner theater operations all pay royalities to French in order to stage a French-licensed play. “People have the idea that copyright is meaningless,” Feldman said. “They don’t realize that copyright is a playwright’s life blood.” French, which operates bookstores in London and Toronto, came to L.A. in 1929 to monitor theatrical productions in the Western states. The Sunset Boulevard location opened in 1947 and the Studio City shop in 1987. “I think the feeling was that people on this side of the hill didn’t go over to the other side,” Feldman said. Feldman admits that she is amazed at some of the requests she gets. Not long ago, she said, a man called from Russia saying he did not have enough money to buy a batch of plays. He asked if he could borrow the scripts for a few weeks and mail them back. Feldman took a pass. “Someone recently called and asked for ‘Ed Opus by Rex,” chuckled Feldman, who was able to discern that the caller really wanted the Greek tragedy “Oedipus Rex.” Feldman says she and her colleagues have to remain vigilant against poachers who rush to the photocopy machine and run off dozens of copies of a play they want to produce. To monitor unauthorized productions, she and her staff scrutinize local papers throughout the Western United States. Her counterparts in New York and Toronto do the same for the East Coast. If they find a rogue production, they take swift action. “The copyright police go out and we start writing letters,” she said. “A lot of people also don’t realize that if you license a play you have to follow the script and don’t make any changes. If they do, the authors come down on us.”

By HOWARD FINE Staff Reporter A San Fernando Valley mall recently opened its doors to the public and is now launching a full-scale advertising campaign to lure shoppers. But unlike the Sherman Oaks Galleria or the Topanga Plaza, you don’t have to worry about finding a parking place: This mall is in cyberspace. iMall Inc., based in Studio City, is an online mall offering shoppers the chance to browse through product and service offerings from its 1,600 merchants. The merchandise includes everything from Upper Deck sports cards to cat litter boxes to hotel and airline reservations, all under one “roof,” or home page on the Internet. “We are taking what has worked in retail and combining it with the power of the Web,” said iMall co-founder and Chief Executive Richard Rosenblatt. But the company, which was started three years ago by a then-25-year-old Rosenblatt as an Internet consulting firm, now finds itself at a critical crossroads. After building an Internet mall by adding to its list of merchants, iMall is focusing its efforts on getting shoppers online. iMall is a newcomer to the San Fernando Valley, having just relocated its headquarters from Provo, Utah in July to be closer to a major center of Internet commerce. The company still has some of its marketing operations and 60 of its 100 employees in Utah. Currently, there are dozens of “malls” or collections of merchant Web sites on the Internet, ranging from smaller niche directories of a dozen Web sites to Internet Mall, which has over 10,000 linked Web sites. iMall differs from most of these other malls in one area: It develops most of the Web sites for its merchant tenants and maintains those sites. Most other malls merely provide links to merchant Web sites. Although commerce over the Internet is growing, it is still in its infancy. Most retailers trying to sell their products and services over the Internet have not generated profits through that channel to date. “Everybody agrees there is money to be made through Internet commerce some day in some way. The real question is, Will the companies now entering the Internet market last long enough to make money?” said Jon Goodman, director of EC2, the Annenberg Center Incubator Project at the University of Southern California. “Right now, this is a developing market, and like television 40 years ago, it is a net user of cash, not a net generator,” Goodman said. iMall is no exception. For the second quarter ended June 30, iMall reported a net loss of $499,475, compared with net income of $483,987 for the like period a year ago. Revenue was $5.1 million vs. $4.7.million. Last year, iMall posted a gain of $101,000 on $16 million in revenues. Most of the revenues came from fees paid by retailers to get Web sites onto the iMall; that was supplemented by income from Internet seminars. Rosenblatt attributed this year’s second quarter loss to increased advertising expenditures and higher debt costs associated with two recent acquisitions: e.m.a.N.a.t.e. Inc., a Web site-design and Internet consulting company, and Inter-Active Marketing Group Inc., a company specializing in yellow-page advertising on the Internet. Rosenblatt said he expects iMall to hit break-even once again as the company shifts from recruiting merchants to recruiting consumers. The company, in its second-quarter earnings report, projected that operating revenues would be about $1.2 million a month through the rest of the year, while it projects capital expenditures to average about $1 million a month. “Our first two years were spent getting as many merchants as possible on the mall,” Rosenblatt said. “You need a certain critical mass of merchants to attract customers. From this point forward, our main focus is on people buying goods on the iMall.” Underscoring this change, iMall recently changed its fee structure: Instead of merely charging its merchants for Web-site maintenance and set-up, iMall is now taking a percentage of all sales on its merchants’ sites. That percentage, Rosenblatt said, will range between 7 percent and 15 percent. Under the former structure, typical set-up fees ranged from $300 to $5,000, depending on the Web page’s complexity and artwork. “We’ve had a positive response from putting our audiotapes on the iMall,” said Judith Sherven, who along with her husband Jim Sniechowski owns The Magic of Difference, a Malibu-based provider of self-help and relationship guidance audiotapes. “We’ve gotten calls from Australia, Indonesia and England, all of whom ran across us on our Web page on the iMall. It’s given us a lot of new leads for our new book.” Lori Friel, administrator of Internet services for Las Vegas-based Circus Circus Enterprises (which owns Excalibur and several other Las Vegas hotels), said more than 600 reservations have been placed via the iMall each month just for the Excalibur hotel. To help boost sales, Rosenblatt said iMall will launch an online advertising campaign this fall, to be followed by a more traditional marketing campaign next year. Initial funding for those campaigns will come from $500,000 in equity financing from Geller & Friend Capital Partners. iMall is still seeking additional funding, most likely in the form of a private placement. Meanwhile, company officials are preparing to put behind them a brief inquiry last year from the Securities and Exchange Commission over stock sales by shareholders of the public shell company that iMall merged with to become a public company. iMall counsel David Rees said the SEC’s suspicions of improper stock sales revolved around the removal of restrictive covenants on the stock issued by the shell company prior to its merger with iMall. Rees said that because there have been no depositions of iMall officials and no further questions from the SEC since Aug. 1996, mention of the informal investigation would be dropped from further SEC filings. An SEC spokesman said there have been no public documents filed regarding an investigation into iMall; he would neither confirm nor deny the existence of an investigation.

By LARRY KANTER Staff Reporter It’s a classic good-news/bad-news scenario. On the one hand, after years of recession, the L.A. region’s economy finally is on the rebound especially in the San Fernando Valley, thanks in large part to the entertainment and multimedia boom in Burbank, Studio City and North Hollywood. But on the other hand, have you seen the traffic lately? Increased highway congestion is the by-product of economic health. And as the Southern California economy continues along its upward trajectory, the morning and afternoon commutes to and through the Valley are likely to become even more vexing, transportation experts warn. “In the short term, the financial rebound is leading to increased trips and increased congestion,” explained Patrick Michell, principal transportation planner for the Southern California Association of Governments, which is completing a three-year study on how to improve the region’s road and highway infrastructure. “In the long term,” Michell added, “this trend is going to get even worse.” Statistics from state and local transit officials appear to bear out that grim prediction. After largely flat growth in the first half of the decade, the number of vehicles on L.A. County freeways is on the rise again, according to the California Department of Transportation. Vehicle counts were up by 2.2 percent between 1995 and 1996 (the most recent figures available), the most significant jump since the late 1980s. By comparison, in each of the years between 1990 and 1994, the traffic count grew by, at the most, 1 percent. Traffic began to pick up again in 1995, when volume increased by 1.4 percent over 1994. Reflecting the region’s economic rebound, freeway interchanges throughout the Valley also are experiencing a big increase in daily traffic. The junction of the Ventura (101) and Glendale (134) freeways in North Hollywood, for example, has seen the average number of vehicles rise 8.3 percent over the past five years from 387,000 vehicles a day in 1991 to 419,000 in 1996, according to Caltrans. That’s the biggest increase in the Valley and it coincides with a boom in the entertainment industry located nearby in Burbank, Studio City and Universal City. Further west, the interchange of the Ventura and San Diego (405) freeways saw a 3.5 percent increase in average daily vehicles, from 518,500 in 1991 to 536,500 in 1996. And at the northern end of the Valley, the junction of the Golden State (5) and Simi Valley (118) freeways has seen a 4.2 percent jump over the same period, from 307,500 to 320,500. And it’s not just the freeways. According to the city of L.A.’s Department of Transportation, traffic also is on the rise at many of the Valley’s key surface-street intersections. The average number of vehicles traveling each morning through the intersection of Sepulveda and Victory boulevards, for example, went from 6,303 to 7,273 between 1995 and 1996 a jump of about 15 percent. In the afternoon, the average number of vehicles traveling through the intersection of Lankershim and Ventura boulevards rose from 3,292 to 3,834, an increase of more than 16 percent. Michell warns that the congestion will worsen, and not just because of an expanding economy. Southern California’s population, he said, is expected to increase by 6.7 million by 2020; the Valley’s population is expected to jump by about 500,000 over the same period. In the face of such staggering numbers, is there any relief on the way? While admitting that the problem is somewhat daunting, transit agencies are exploring a number of options that they say could ease the burden on L.A. commuters. Caltrans, for example, plans to add a carpool lane to all of L.A. County’s freeways by 2000, said Rick Holland, an agency spokesman. A recently installed lane on the San Diego Freeway through the Valley is credited with easing the daily commute at least for those willing to partner up with other drivers. The agency also plans to expand its so-called “smart freeway” program, which uses electronic message boards to inform drivers about upcoming traffic problems and direct them to alternate routes along city streets before they become ensnared in a full-fledged Sig-alert. By linking freeways with nearby surface streets, planners say they can capitalize on any excess capacity which may exist on parallel traffic arteries. On city streets, the Metropolitan Transportation Authority recently announced plans to synchronize traffic signals at 109 intersections throughout the east-central San Fernando Valley by 2000. According to a 1994 study by the L.A. Department of Transportation, such systems led to a 12 percent improvement in travel times, a 32 percent reduction in delays and a 30 percent drop in stops compared to traditional signal systems. Transportation planners also suggest a program of “smart shuttles” shuttle buses that would move commuters via dedicated thoroughfares to central business districts or regional transit hubs. While such suggestions may draw little more than cynical sneers from gridlocked commuters, SCAG’s Michell insists they can work. “We only have to get a small percentage of people into mass transit to handle the excess demand,” he said. “If people find it faster and more convenient, they’ll use it.” Meanwhile, a recent study suggests that the traffic infrastructure exacts a heavy toll on Angelenos and not just in lengthy delays and frayed tempers. According to the Surface Transportation Policy Project, a Washington, D.C. public policy group, L.A. drivers spend more on car repairs than drivers anywhere else in the country largely as a result of deteriorating road conditions. The study found that 45 percent of highways in the L.A.-Long Beach metropolitan area are in poor or mediocre condition. The average driver here pays an extra $1,831 over the life of his or her car due to tire wear, extra maintenance and reduced fuel efficiency caused by poor road conditions, the study found; the average U.S. driver, on the other hand, pays just $420 in such costs.

Vehicle traffic counts by the state Department of Transportation and the city of Los Angeles show that more cars are clogging the streets and freeways of the San Fernando Valley. A host of improvements from synchronized traffic signals to carpool lanes and commuter trains have been implemented to improve the situation. But the impact of these measures is open to debate. With the economy improving and more people working, The San Fernando Business Journal Forum asks: Is traffic getting worse in the San Fernando Valley? Frank Sheftel The Candy Factory Owner North Hollywood Yes it is. I thought I was one of the lucky ones. My business is on Riverside Drive near Coldwater and my home is off Riverside, so you’d think it would be very easy to get to and from work. I can’t tell you how many times I’ve had to find alternate routes. If there is an accident on the 101, the traffic goes on Ventura. I thought I had the system beat, but it beat me. Lea Yardum Model Studio City Yes, especially coming from the Westside going east, it’s unbelievably bad. I think it’s because there are more people. It’s gotten worse since school started. Over the summer it was all right. Jan Zlotowicz Vice President of Human Resources Health Net Woodland Hills I’d like to preface this by saying (Health Net) is part of the Valley shuttle service. We’re also part of other ridesharing programs. But clearly, the traffic has increased. Ben Shindler Ben Shindler CPA Sherman Oaks I don’t think so. I haven’t seen that it has gotten any worse. I even take my son to school in the morning and I really don’t find it any different. Joseph Molina President JMPR Public Relations Inc. It is getting worse, yes, but I love the Valley. The San Diego and Ventura interchange is the worst, that’s the Bermuda Triangle, the black hole of asphalt. Not only are you not getting anywhere but you get all these blips on your cell (phone). It’s like the black hole of the Valley. Mike Feuer Los Angeles City Councilman Fifth District Traffic has surpassed all other public safety issues. Clearly congestion is worse, both on the streets and freeways. That’s why it’s important to keep improving public transportation and encouraging more people to carpool.

By JASON BOOTH Staff Reporter For two decades, Sherman Oaks Homeowners Association President Richard Close has taken on the powers that be. In 1978, he was a key figure in the campaign to pass landmark tax rollback initiative Proposition 13. Later, he organized the homeowner group opposition to expanding the Burbank Airport terminal and fought to limit development along Ventura Boulevard and in other parts of the San Fernando Valley . But Close may be playing his biggest role yet as co-chairman of Valley Vote, the group that spearheaded legislation AB 62 to take away the L.A. City Council’s ability to veto independent cityhood for the San Fernando Valley. As this issue went to press, the legislation was awaiting Gov. Wilson’s signature in Sacramento. If approved, Close and other secessionists will begin the petition campaign to put a Valley cityhood measure on the ballot. Close is a partner with the law firm Shapiro, Rosenfeld & Close in Century City, specializing in real estate law. Question: After years of working together with the Los Angeles government, why have you chosen to go against the system? Answer: Having spent 20 years working with the L.A. city system, I realize how important and necessary it is for the Valley to become independent. The City Council is inefficient, ineffective, and they really don’t care about the problems of the businesses and the residents. What they care about is the perpetuation of their positions. You only have to look at the condition of the roads, the response time of the police department, the graffiti that remains indefinitely. It is a bureaucracy that is not interested in making this a better city. The best example is if you stand on the border of North Hollywood and Burbank. You look at North Hollywood and you see graffiti, potholes, bars on the windows. Burbank is clean, safe no graffiti. Burbank takes care of its community, L.A. city doesn’t. I see a parallel between Valley secession and Prop. 13. Both are about people being frustrated, unable to get government to respond to their needs. So people go outside the system to structure a change. Q: If the Valley secedes, it is going to need a mayor. Would you be interested? A: Absolutely not. I like practicing law. I think that anyone who plays a leadership role on this issue should state unequivocally that they are not interested in any public office in the Valley. This should not be perceived as a quest for political position in the new city, so I will not run. Q: Have you received any pressure from downtown over your role in the secession movement? A: No, for a couple of reasons. I don’t work for the city, I don’t lobby the city on behalf of clients. There is very little they could do to pressure me. Secondly, they know that if they did pressure me I would plaster their names all over town. I would do all I could to let the public know who is pressuring and why. I have to say one thing about L.A.: For all its faults, nobody has ever tried to pressure me on any of these issues. Q: How did you get involved in the secession issue? A: When the Assembly passed the bill, meaning the Valley could secede, we decided we had to form a group to spearhead the legislation. I had a number of names of people from the homeowners committee I thought would be good to head the group, but as is often the case, I got hoodwinked into becoming co-chair. I was going to help set it up and walk away and let other people run it, but I ended up getting stuck. Q: How do you juggle a full-time career as a lawyer with your role as a political activist? A: It is called delegation. It is unfair that I often get the praise, as well as the criticism, for work that is really done by others. The key of what I do is the delegation of decision-making to other people. I don’t want power, just the opposite. I want to do as little as possible and have other volunteers doing it. I rarely do any of this activity during the day. If someone wants to meet with me it will have to be in the evening or the weekend, I have a law practice to run. Q: What does the Valley have to gain from its independence? A: I think the most important reason is that the public in L.A. has no control over its local government. Local government cannot serve 3,900,000 residents. Local government cannot be one council person for every 230,000 residents. People want to get back to basics, to be more like Burbank and Glendale, where if you have a problem you drive five minutes on a Tuesday night, maybe sit down with the City Council people, talk and solve the problem. In L.A., if you have a problem you can’t speak to your council member. If you want to go to the City Council you have to drive three hours round trip. You have to take the day off work because they only meet during the day, and they only let the public talk to them at the end of the meeting for a maximum of three minutes, when most of them are on the phone, having lunch or talking to their colleagues. People want to see a local government that is local. A lot of the dissatisfaction is due to cable television. For the last couple of years, Channel 35 has broadcast council meetings. For the first time people can see the quality of their local officials in action, and a lot of the people who watch it laugh at the childish games that take place at these meetings. It is an advertisement for the Valley becoming a separate city. I can envision having snippets from those council meetings as part of an advertising campaign for the Valley seceding. Q: Was there a single incident that made you decide that the Valley should secede? A: The Valley has paid about $1.3 billion in sales tax toward the construction of the subway. But all we are getting for our money is a single station in North Hollywood. As a separate city we will be able to go to Washington. That money will come to the Valley and stay in the Valley. This is an opportunity for the Valley to be the sixth largest city in the nation, to get its funding and solve its problems in a professional way that is not happening now. Q: How would secession benefit Valley business? A: Right now Valley companies pay a 10 percent utility tax. They don’t pay that tax in Glendale, San Fernando or Burbank. So right now we are at a competitive disadvantage. I anticipate that the utility tax would not exist if we seceded. It has also been documented that the L.A. city’s gross receipts tax is a tremendous burden to the businesses. If other cities in the Valley do not have such an extensive business license tax, I anticipate the Valley would also not have one. We might ask Valley businesses to put into the secession war chest one year’s savings from the utility tax and gross receipts tax. That’s why I anticipate a lot of business supporting this effort because they have an economic benefit besides good government. Q: What would you call this new city? A: Some people say North Los Angeles. A commonly used name is city of the San Fernando Valley. The problem with that is, there is already a city of San Fernando. Jokingly I often respond that the best name would be North Beverly Hills. That would certainly increase property prices. Q: So, if the Valley secedes, will you move your office over there? A: I would love to, but my clients wouldn’t like it. Anyway, I’m a big believer in cross-border trade.