Forget stock options and cell phones. For Southern California's high-tech companies, the key commodity for 1999 will be bandwidth.
Many Southland companies produce it. Scores of others create content to take advantage of the technology that will accelerate people's Internet connections. That combination has the Tech Coast poised to become a driving force in the Internet economy next year.
"It is no longer the computer that matters, no longer the telephone or the TV that matters," said Jon Goodman, executive director of EC2, the Annenberg Incubator Project at USC. "Only two things matter: the network and the content."
There's plenty of both in Southern California. It should come as little surprise that the region made famous by Hollywood is leading the effort to turn the Internet, a onetime military research project, into a 21st century entertainment network.
Slow transmission speeds made early attempts at Internet entertainment--especially Web soap operas like "The Spot"--resemble comic strips more than television. But that bottleneck is disappearing as companies deploy enough bandwidth to make real-time transmission of audio and video files possible.
"New media is really going to come forward and mean something this year," said George Geis, an adjunct professor at UCLA's Anderson School of Management who teaches a course called "Strategy in the Digital Economy."
Among the companies that will benefit, Geis said, will be Launch Media, an Intel-backed Santa Monica firm that produces a CD-ROM music magazine and covers other music news on the Web. Users can set up customized versions of Launch's Web site to reflect their personal tastes and interests.
By the end of next year, users will be able to take advantage of the high-bandwidth networks to more easily download not only audio files, but hefty video files that currently slog through the network. That would be a boon to Intertainer, another Santa Monica company with Intel backing, which aims to provide movies, TV shows, online shopping and other entertainment on demand over the Internet.
The movie studios--Walt Disney, Warner Bros. and Sony--are widely expected to pour more resources into their online entertainment divisions in 1999.
"Disney is going to become a more significant player in the Internet arena," said Bill Manassero, executive director of the Software Council of Southern California. "It's already very significant, but I think it's going to double or triple what it is now."
In addition to Disney's Web sites, which include ABCNews.com, ESPN.com, Blast Online and the Go Network portal site it launched with Infoseek, the Burbank-based media giant could take advantage of additional bandwidth to allow customers to bypass the video rental store and download Disney movies over the Internet, Manassero suggested.
The challenge for the studios will be to avoid the kind of linear, character-driven storytelling that works for film and television but has generally failed on the Internet, said Jim Dolbear, managing director of the Los Angeles New Media Roundtable, or Lawnmower. Instead, he said, they should focus on content that takes advantage of the Web's interactive strengths.
On that score, Sony Online Entertainment has done the best job by turning its popular game shows such as "Jeopardy" and "Wheel of Fortune" into single-player and multi-player games, Dolbear said.
More bandwidth will make graphics-rich Web sites easier to download, and that will create opportunities for companies that make software to produce realistic graphics, said Rohit Shukla, executive director of the Los Angeles Regional Technology Alliance.
Electric Image, a Pasadena-based maker of three-dimensional animation and rendering software, could very well get a boost, Shukla said. So could Culver City-based ModaCAD, whose 3-D rendering, modeling and virtual reality could spread out of its core fashion industry market, Geis said.
Greater bandwidth is also expected to boost online commerce. One of the Tech Coast's most promising e-commerce firms is eToys, a Santa Monica start-up whose sales grew more than 20-fold this Christmas compared to last year.
Another company to watch is Thousand Oaks-based RealSelect, which operates the National Assn. of Realtors' Realtor.com Web site for finding homes and real estate agents, said Massoud Entekhabi, a partner with PricewaterhouseCoopers' global technology group in Woodland Hills.
All of this activity will overshadow the more traditional Web site design work that has sustained much of the local new-media community thus far. Instead, Web design firms will continue a yearlong consolidation until the industry is dominated by a handful of large companies--such as USWeb/CKS and IXL--that can set up the less-glamorous back-office systems that power electronic commerce.