L.A. AREA RANKS 2ND ON U.S. HIGH-TECH LIST; STUDY CITES ENTERTAINMENT INDUSTRY'S ROLE.

Byline: Jason Takenouchi Staff Writer

The entertainment industry helped make the Los Angeles metropolitan area the nation's second-largest high-tech region last year, trailing only the Silicon Valley, a study released Tuesday showed.

The report by the nonprofit Milken Institute said the Los Angeles-Long Beach metro area accounted for 5.11 percent, or better than $1 of every $20, of the nation's output in the high-tech sector.

The first-ever study asserted that Los Angeles' high ranking resulted from growth in multimedia entertainment, including special-effects companies serving the film industry, television, video games and other industries.

Los Angeles also ranked an impressive third among so-called ``Tech-Poles,'' the institute's name for areas with high concentrations of and output from high-tech industries such as computer services, drug manufacturing, motion picture production and aerospace. The San Jose metro area, which includes Silicon Valley, also earned first place in that category while Dallas ranked as the second-largest Tech-Pole.

``I think it's really positive news, because we were really lagging behind five or six years ago,'' Los Angeles Mayor Richard Riordan said of the study results. ``We've really come a long way since then.''

The Los Angeles-area numbers are somewhat inflated because not all motion picture production and services use advanced technology, according to Ross DeVol, the institute's director of regional and demographic studies and primary author of the report. But he noted that the numbers boded well for the area's economy.

Considering the decline in aerospace work, he said, ``it's remarkable how much high-tech activity remains in the Los Angeles area.''

A large part of that continued success, DeVol said, is the proximity of top-flight universities and research institutions and a pool of talented workers in high-tech service areas such as computer programming.

Motion picture production and services were included in the rankings to reflect emerging technologies such as computer animation and digital-audio sound effects. But even without the motion picture segment - which the report estimated at about 4 percent of the area's total economy - Los Angeles-Long Beach would rank seventh in the country.

In its 123 pages of rankings, charts and economic analysis, the Milken Institute study - titled ``America's High-Tech Economy: Growth, Development, and Risks for Metropolitan Areas'' - argued that high-tech industries have spearheaded the economic growth of both the United States and its metro areas.

The study claims that annual growth in high-tech products and services averaged 20 percent over the past three years, ``directly elevating'' the overall U.S. Gross Domestic Product by 1.5 percent a year.

The report also listed ways that government investment contributes to, and can further support, the industry. Key areas include lifelong learning programs, tax incentives, minimizing regulations and the role of research institutions and universities.

The information is particularly important to city governments, DeVol said.

``If they don't address these critical factors, their residents risk being left behind in the new economy,'' DeVol said.``Their standard of living is going to be directly related to how well they do in these high-tech industries.''

But the institute's report said the rising importance of the high-tech industry will bring risks as well as benefits.

Part of the report simulated the effects of a ``1990-91 style recession,'' concluding that ``high-tech manufacturing industries would experience a substantially more severe decline than the overall economy and could even exacerbate the overall decline in the economy.''

The report also said the high-tech industry, particularly the computer and office-equipment segment, is reacting more in line with changes in the overall business cycle.

Analysts agreed that any embrace of the high-tech industry should be a cautious one.

``Everybody wants what the Silicon Valley has,'' said Tom Lieser, executive director of the Anderson Forecast at the University of California, Los Angeles. ``The question is, as the industry becomes more mature and more cyclical, it poses a risk.''

Growing social tension is another risk.

Besides an influx of immigrants and a dramatic economic shift, the high-tech industry can contribute to income disparities and tension, DeVol said, adding that the government needs to play a problem-solving role in that area.