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Why Every Business Will Be Like Show Business

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One Day at a Time
How companies work in the network economy
Today Hollywood has constructed one of the most developed high-value-added production networks in the world. The large number of film, commercial, and television projects in Southern California provides enough work to support rafts of highly specialized individuals and companies -- something that wouldn't happen in other, less dynamic regions. As those practitioners enhance their expertise, the combined skills of the network enable them to generate unique products commanding enormous premiums in both domestic and global markets. That allows Hollywood to pay some of the highest production salaries in the world.

For entrepreneurs like Cinnabar's Jonathan Katz, association with Hollywood not only gives him a special cachet in world markets but also provides day-to-day contact with the most demanding clients in the world, virtually forcing him to remain at the forefront of his craft. And to meet the needs of those clients, he has to form new work teams almost constantly.

"Most people in the film business are organized only for a specific project -- a lot of them are just freelancers -- and you can't do that in Orlando or in Chicago," Katz says as he walks through the bustling lot near his Hollywood Center Studios office, where the movie The Player was shot. "We decide to do a film on Friday and have a team on Monday. You have to have the resources available."

It is the vast resources available in the region that give the industry -- and companies like Cinnabar -- the ability to put together a television or movie production more effectively and with more creative energy than anywhere else in the world. The complex nature of filmmaking, notes Katz, means each production faces a horrendous challenge in trying to pull together the necessary talent. The Hollywood network makes it possible to assemble and coordinate the best team with incredible speed.

Many people that now are key players in the Hollywood network began as craftspeople providing extremely specialized, in-house services for the large studios. But once they mastered a particular skill, they began to apply their knowledge outside the studios, founding their own companies and often becoming part of an increasingly complex network of producers who service entertainment and nonentertainment sectors alike.

"The industry puts all those contributions together as needed, packages the result, and distributes it through these gigantic distribution networks," UCLA professor Storper observes. "So in a sense Hollywood has the advantages every industry would want: flexibility and suppleness in what it produces and how it produces it, enabling Hollywood to be at the same time very innovative and still able to take advantage of scale when it sends products to market."

Katz, like many of Hollywood's entrepreneurs, knows the business from the ground up. In the 1970s, before founding Cinnabar, he parlayed his skill building floats for the Rose Bowl parade into a leadership position at Festival Artists, one of the country's top float-building companies. After five years working for Jerry Brown and the California Conservation Corps, he came back to L.A. and went to work at a Hollywood special-effects-scenery house.

Katz found the traditional effects-design business -- heavily unionized and encumbered by strict job categories -- was becoming too slow and uncreative to meet the entertainment industry's rising demands. "It was a technical company, but the managers couldn't talk on the same level as the producers who came to it with work," he recalls in his crowded office, which is packed with movie flotsam and arcane pieces of Americana. "I remember one producer saying to me, 'What is a nice Jewish boy like you doing making props? I'm used to rednecks in overalls.'"

Soon Katz decided to start his own company. Rejecting the old industrialized union model, Katz ran Cinnabar as a collection of skilled craftspeople. With an initial investment of $22,000, he has built it into a company with a permanent workforce of more than 100. Today the company works not only on movies like Free Willy II but for large numbers of commercial, television, and retail clients around the world.

"We bring in a combination of people who normally might not work together," Katz says. "We act as producers, creative directors. It's an entertainment model. You put together a different team for a Paramount theme park than you do for Pepsi. Subcontracting does not describe it -- we really are working with these people because on a project we are all part of the same process."

Inside all the best Hollywood businesses the challenge is much the same: how to marshal the skills of people who like solving novel problems on a daily basis. As customers' demands for creativity, quality, price, and speedy performance increase, entertainment companies have been forced to evolve corporate structures that adapt quickly to change.

On any given entertainment project, such as Free Willy II, Cinnabar becomes part of a network that can include as many as 50 companies and scores of independent contractors. Ruck Goldreyer, the Cinnabar project manager for Free Willy II, is a veteran of countless movie, television, and commercial shoots. On the set he supervises the creation of a whole miniaturized environment -- from an ersatz ocean floor to a one-tenth-scale model of a doomed oil tanker.