SHOWBIZ IN THE VALLEY; PAST TWO DECADES HAVE SEEN MASSIVE CHANGES.

Byline: Dave McNary Staff Writer

An anonymous four-story building a few blocks east of Burbank-Glendale-Pasadena Airport embodies the massive changes in Southern California's entertainment industry over the past two decades.

Building 90 used to produce top-secret supersonic planes; now it produces animated cartoons for Walt Disney Co.

Until 1994, the Thornton Avenue building was occupied by Lockheed Corp.'s Skunk Works division, which built the U-2 and SR-71 spy planes and the F-117A stealth fighter. But as military funding tightened, Lockheed pulled out of the San Fernando Valley and sold the building to developer M. David Paul.

By early 1997, Paul had renovated the building and added a three-story parking garage, a gym-restaurant and a theater and renamed it ``Skunkworks Studio'' in recognition of the new tenant, Disney's animation division. Disney subsequently named it the Feature Animation Northside facility.

That sort of transformation has taken place many times over throughout the San Fernando Valley, home to major parts of Disney, Warner Bros., Universal, NBC and CBS, along with hundreds of other businesses that perform the industry's nuts-and-bolts work. That work often takes place far away from the main show-biz corridor running through Studio City, Universal City, Burbank and Glendale.

In Canoga Park, what had been a Boeing plant and a Redken shampoo factory became Ray-Art Studios, home to ``The New Love Boat'' and ``Charmed.'' In Sun Valley, action film specialist PM Entertainment took over the vacant Cherokee clothing factory.

In a nondescript Simi Valley business park, Dream Quest Images created the destruction of Paris in ``Armageddon'' in less than five weeks before the movie opened. And in Woodland Hills, Panavision is designing lenses for the digital cameras George Lucas will use for his next ``Star Wars'' film.

Burbank, once best known as Johnny Carson's favorite punch line, has become the Valley's economic jewel. It is indisputably a worldwide entertainment power as headquarters of Walt Disney Co. and home to Warner Bros., the entertainment half of media giant Time Warner Inc., and NBC's West Coast headquarters.

And in a telling shift that underscores the erosion of New York's power in television, Disney is moving many of its key ABC administrators from New York and Century City next year to a new 10-story building at corporate headquarters in Burbank. The facility is being constructed next to the Mickey Mouse sorcerer's hat at its animation headquarters.

``Paramount is the only real studio left in Hollywood, so in terms of concentration of power, that corner of the East Valley is really it,'' said Jack Kyser, chief economist with the Los Angeles Economic Development Corp. ``There's a real critical mass with a lot of support services nearby.''

Burbank City Manager Robert ``Bud'' Ovrom said part of his city's ascendancy as a media center stemmed from ``pure luck.''

``Disney, Warner and NBC have been here for a long time and when we went into the rapid growth of the entertainment, those were the companies that really took off,'' he said. ``We can't really pat ourselves on the back that much.''

However, Ovrom noted, the studios generally found it easier to expand in Burbank once aerospace bailed out of the city.

``When defense spending bottomed out, we lost 20,000 jobs over two years and there was some desperation,'' Ovrom recalled. ``We were willing to embrace the studios. It took 20th Century Fox years to get a master plan through, but we processed each for Disney and Warner in less than 10 months.''

Economists also say the region's show business industry has managed to survive in a chameleonlike manner by being nimble and finding new ways to sell itself and its products.

Unlike aerospace, real estate and banks, show business never took a severe hit to its work force in the late '80s or early '90s. Occasionally, there has been some slight loss of jobs, first from the brutal economic downturn that hit between 1991 and 1995 and then the intensive efforts by hundreds of film commissions to lure production away from Southern California with tax breaks, rebates and discounts.

But economists point out that when traditional jobs have disappeared, they have been replaced by slots at start-ups in store fronts and garages.

``The local entertainment industry has been an area of strong growth even when Los Angeles had it worst recession in memory,'' said UCLA economist Tom Leiser. ``It was growing even while we were losing jobs in aerospace. When aerospace went down, it took a lot of things with it so a lot of space was available cheap for show business uses.''

Multitudes of obituaries have been written prematurely for the region's show business industry amid the specter of fast-changing tastes and technologies, soaring production costs and cut-throat competition. ``I'm impressed with the resilience of the industry,'' Leiser said. ``It has been adaptive and shown a strength that I did not see.''

Two decades ago, the outlook for show business seemed grim.

``One of the most dramatic things I recall is that in the late '70s, there was a lot of commentary that the movie industry was dead and that video rentals really spelled doom,'' said William Boyd, a veteran commercial real estate broker in the Glendale-Burbank market. ``But the industry took off by the mid-'80s and so did its appetite for commercial real estate. Wholesale leases of 100,000 square-feet were commonplace.''

Experts cite five key factors that have elevated the Valley's business of show business during the past 20 years:

The growth of Disney from a sleepy second-tier studio with $2 billion in annual revenues when Michael Eisner arrived in 1984 to the entertainment colossus with $25 billion in annual revenues it is today. ``The key to the Valley's ascendancy in entertainment was when Disney became re-energized,'' Kyser said.

By 1995, Disney had acquired enough clout to buy Capital Cities/ABC for $19 billion.

Explosive growth of cable television, which was still pretty much a novelty in the early 1980s, and nontraditional networks.

``No one took cable networks like HBO and Showtime seriously at all back then,'' recalls former TV executive Lani Daniels, head of the Entertainment Institute at California State University, Northridge. ``The three TV networks had a tremendous oligopoly. People also thought Rupert Murdoch was out of his mind when he started the Fox Network in 1986.''

Surprisingly strong demand for American movies and TV programs in overseas markets. ``The business just took off internationally during the last 20 years,'' noted economics professor Shirley Svorney, head of CSUN's Center for the Study of the San Fernando Valley. ``What we created kind of turned out to be advertising for ourselves.''

The stunning success of amusement parks such as Disneyland and Universal Studios, which whetted the world's appetite for entertainment theming by retailers, casinos and restaurants.

``Walt Disney went to the theater and motion-picture industries for the talent to expand the Disney parks and when those projects ended, those employees started their own places,'' recalls Peter Chernack, president of Burbank-based theme-park designer Metavision. ``The industry has made a transition over the last 15 years to other areas like retail and dining. These artisans have been recruited into all kinds of other industries.''

So whatever the industry's future is, the Valley will likely have a major role in telling those stories.

``With show business, you have to keep your eyes open for a lot of stuff like `The Blair Witch Project,' '' Kyser said. ``If you want five-star quality product, the major studios are still going to be the place to do it. But it's such strange business because you don't know what's going to catch the public's eye.''

1982

Universal and Steven Spielberg release ``E.T.

The Extra-Terrestrial,'' with outside neighborhood scenes filmed in Porter Ranch, and interior shots in a Tujunga house. ``E.T.'' will remain the most successful domestic grosser for 15 years until the re-release of ``Star Wars.''

1984

Disney moves to the mainstream with the release of ``Splash,'' its first film from its Touchstone label. It also hires Warner Bros. executives Michael Eisner, Jeffrey Katzenberg and Frank Wells.

1985

Universal releases ``Back to the Future.''

Rupert Murdoch buys half of 20th Century Fox Holdings, leading to the launch of the Fox television network in 1986 and the start of foreign ownership of major U.S. studios.

1986

Encino-based Mann Theaters closes the single-screen La Reina in Sherman Oaks after years of losing business to a nearby sixplex, and developers convert the property into a mall.

1987

Disney opens its first Disney Store at the Glendale Galleria; 12 years later, there are more than 720.

Warner Bros. releases ``Lethal Weapon,'' its most durable of all films.

1988

Disney's ``Who Framed Roger Rabbit'' marks the revival of the studio's animation division and a landmark in mixing animation with live action.

Movie and TV writers stage a 22-week walkout that delays the start of the fall TV season.

1989-90

Warner Bros. releases ``Batman,'' its most lucrative film ever.

Merger mania hits. Time and Warner Communications merge; Matsushita buys MCA; Sony buys Columbia and gives up the Burbank lot to Warner in order to hire producers Peter Guber and Jon Peters.

1991

Warner borrows the Disney Stores idea and opens its first Studio Store at the Beverly Center; after opening 170 in eight years, it pulls the plug on new stores in early 1999.

Disney releases ``Beauty and the Beast,'' the first animated film ever to receive an Academy Award Best Picture nomination.

1992

Johnny Carson leaves ``The Tonight Show'' after 20 years of broadcasting from NBC Studios in ``beautiful downtown Burbank.'' Successor Jay Leno has kept the show in Burbank.

Height of the California recession. Other states and countries begin successfully luring Hollywood producers.

1993

Disney buys Miramax, conferring mainstream status and marketing might on the independent film world. ``Pulp Fiction,'' made for $8 million, will gross over $100 million domestically the next year.

Universal opens CityWalk.

Universal and Spielberg release both ``Jurassic Park'' and ``Schindler's List,'' which will win the Best Picture Academy Award.

1994-95

Disney president Frank Wells dies in a helicopter crash and is replaced a year later by super-agent Michael Ovitz, who leaves Disney a year later with a $100 million settlement. Jeffrey Katzenberg, passed over for the job, allies with Steven Spielberg and David Geffen to form DreamWorks SKG.

``The Lion King'' becomes a blockbuster success for Disney; a year later, the studio scores an unexpected hit with ``Toy Story,'' the first fully computer-generated movie.

Merger mania, part 2: Viacom buys Paramount, Seagram buys MCA from Matsushita; Disney buys Capital Cities/ABC; Time Warner buys Turner Broadcasting.

Warner Bros. launches the WB network in Burbank, in direct competition for the youth market with the UPN network.

1996

AMC opens the Valley's first megaplex in Woodland Hills at the Promenade.

Pacific Theaters closes the Winnetka Drive-In, the region's last major drive-in theater. It levels the property and opens the Winnetka 21 megaplex in early 1998.

Warner opens ``Space Jam,'' its first feature-length animated film. It will be Warner's only successful entry in genre until Pokemon.

1997

Michael Eisner cashes out $550 million in stock options; analysts applaud, saying it is appropriate compensation for boosting Disney's stock price. The stock will pass $42 in May 1998, then slide under $24 in late 1999.

DreamWorks, based at Universal and Hollywood's first major new studio in 50 years, opens its first movie with ``The Peacemaker.'' It also opens an animation campus in Glendale.

1998

Warner Bros. is able to boost NBC's per-episode price for ``E.R.'' from $2 million to $13 million.

Warner Bros., celebrating its 75th anniversary, and Universal hit long dry spells at the box office with an array of high-priced flops like ``The Avengers'' and ``Babe: Pig in the City.'' Heads roll at Universal, which rebounds in 1999 with its best year since 1982.

Seagram completes its $10 billion buyout of PolyGram, making it the world's largest music company. A&M Records is closed down.

Live Entertainment leaves Van Nuys for Santa Monica, where it is renamed Artisan Entertainment. A year later, it will release ``The Blair Witch Project,'' the most profitable movie ever made.

A study shows the San Fernando Valley contributes $6.4 billion in annual economic activity to the entertainment industry.

1999

``Star Wars - Episode One: The Phantom Menace'' smashes opening day and week box office records.

On the eve of the opening of the disappointing ``Eyes Wide Shut,'' Robert Daly and Terry Semel resign from running Warner Bros. after two decades.

Jeffrey Katzenberg and Michael Eisner settle Katzenberg's bitter legal battle over his claim that Disney owes him $482 million.

Runaway production accelerates. One study estimates the loss amounts to more than $10 billion in economic activity and 20,000 jobs annually.

DreamWorks decides to stay in the Valley and pulls the plug on opening its new studio in marshland at Playa Del Rey.

- Dave McNary

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Photo

Photo: Outside neighborhood scenes of ``E.T. - The Extra-Terrestrial,'' were filmed in Porter Ranch, and interior shots in a Tujunga house.

Universal Studios