MULTIMEDIA GULCH

	July 20, 1999
	Spencer Michels reports on how a new high-tech industry is changing San Francisco.

SPENCER MICHELS: In a converted factory in a once blue collar neighborhood in San Francisco, a young puppeteer donned a costume of wires and sensors that linked him to a computer. He works for a four-year-old company called Protozoa. The firm's unique product is a motion capture, computerized system, a kind of performance animation that gives life to a digital cartoon figure whose movements are controlled by the dancing puppeteer. Just down the hall, a production team from the BBC uses Protozoa's high-tech equipment to create a children's television show. These sophisticated technologies plus new approaches to the Internet are examples of what is called multi-media, a revolution that is bringing great and controversial change to San Francisco. New companies and their highly skilled employees are moving into old industrial neighborhoods, raising rents and changing the culture and look of the city. Protozoa is renting space in a building that was abandoned a decade ago by the company that made Best Foods and Hellmann's Mayonnaise. Because the building was too expensive to modernize, the plant was closed and 120 workers let go. JOE ARZAC, Former Best Foods Employee: That's the cafeteria right up there. Right here used to be the dump station. SPENCER MICHELS: Joe and Lygia Arzac met and then married when they both worked at Best Foods. He started in 1963 making $2.12 an hour, a little below what high-tech workers in the building make today. JOE ARZAC: I started here when I was 19 years old. After six months they moved me up to the fourth floor where the processing was, more money also, you know. SPENCER MICHELS: Were you satisfied in those days? JOE ARZAC: I was very happy to get that. LYGIA ARZAC, Former Best Foods Employee: The first woman to have a men's job in here, and that was doing the forklift. I also mixed tartar sauce, mayonnaise. You name it. I did it from the basement to the fourth floor. SPENCER MICHELS: Like the factory building across the street, which has not yet been renovated, the old mayonnaise plant decayed. Developers Rick Kaufman and Curtis Eisenburger bought the building and they talked about it in a new cafe on the ground floor. RICK KAUFMAN, VP, Maripose Management Company: In 1995, if you had seen this building in that original time, there were thousands of dead pigeons, the building was a health hazard. It was seismically unsafe. CURTIS EISENBERGER, President, Maripose Management Company: This was considered a dangerous area. It wasn't a place that you came at night. When we came here, we saw a vision and we saw an opportunity. We had an inkling of the burgeoning of the multi-media industry in San Francisco. SPENCER MICHELS: They weren't the only ones. Throughout the industrial southern portion of the city, historic buildings have been snapped up for conversion to make space for tiny startups as well as larger companies capitalizing on the Internet. Look Smart, a company that categorizes and reviews Internet sites, was attracted to San Francisco because other multi-media firms had already started moving here. They had come because prices in old converted buildings were affordable because Silicon Valley, home of high-tech, was just an hour away -- and because prospective employees found the city, its culture and its tolerance for diverse lifestyles attractive. CEO Evan Thornly and his wife Tracy Elery moved Look Smart here from here from Australia. EVAN THORNLY: We're an Internet business. In the Internet world this is the center of the universe, and so we have to be here. This industry is about deals. Deals get done here. So we moved the company over here. SPENCER MICHELS: Multi-media or interactive media, as it's sometimes called, uses both designers and engineers. It merges information technology, graphic arts, video, sound and print into products including video laden Internet Web pages and computer animation. San Francisco's multi-media related employment now around 30,000 jumped 70 percent in two years and is climbing rapidly. In the city alone, it's a $2.2 billion industry. Macromedia, a veteran company that began in 1992, is one of the biggest and the oldest firms with 550 employees, most of them here. NORMAN MEYROWTIZ, President of Products, Macromedia: It has audio, it has animations. SPENCER MICHELS: Norm Meyrowitz, president of products for Macromedia, demonstrated how his firm's software products enliven Web sites like this one from Volkswagen. NORMAN MEYROWITZ: So, let's say I'm really interested in what this looks like. I've only seen a view from the front. I can actually see a view from the side. Well, often when you see car brochures, you see a car in one color and you have paint swatches, I want to see what the car looks like in yellow; I want to see what it looks like in red; I want to see what it looks like in green; I want to see what it looks like in silver. SPENCER MICHELS: The people who build and market Macromedia's products are often young, well educated, well paid and sometimes a little off the wall, a culture encouraged in this industry and well tolerated by the city. 28-year-old marketing manager Kevin Ellis. KEVIN ELLIS: It's young, it's energetic. People like to have fun. They like to work hard but they like to play hard, too. SPENCER MICHELS: How hard to you have to work? KEVIN ELLIS: You have to work pretty hard, but it's actually enjoyable. I work somewhere between 50 and 65 hours on a normal week. SPENCER MICHELS: More than in many industries, multi-media workers who spend hours staring at computer screens hang out with each other at company-organized functions and at neighborhood spots. One favorite is South Park, a grassy, urban enclave in what has become known as Multimedia Gulch. Here workers can exchange ideas and even recruit each other. The park itself like the city has been transformed by the new industry, according to Mark Wolfe, who has a PhD candidate in city planning has written about the area. MARK WOLFE, Graduate Student, UC Berkeley: It was basically a slum, median incomes of its residents were well below the city's median. Property values and rents were well below the city median and over the course of I would say 1985 to about 1995, the entire neighborhood did a complete 180. And it is now one of the city's most expensive neighborhoods to live. It's one of the city's most expensive neighborhoods to rent office space in. It's one of the city's most trendy neighborhoods in terms of restaurants, bars, nightclubs, things like that. And I would say that the engine of this transformation is the multimedia industry. SPENCER MICHELS: Some people say that while multimedia has brought jobs to the city, it has also displaced residents and more traditional small businesses in Multimedia Gulch. Amelita Pascual is director of the South of Market Foundation which represents those interests. AMELITA PASCUAL: We support small businesses so that they can create jobs for low-income residents. SPENCER MICHELS: But according to Pascual, high-tech success has forced low-tech to move. AMELITA PASCUAL: They have had to leave because they can no longer afford the rents. We did a study two years ago and rents have gone up by 63 percent. And I'm sure it's more than that now. SPENCER MICHELS: When companies move, less skilled workers lose jobs. Individuals and families in once moderately priced neighborhoods have seen their rents skyrocket. In one district, hundreds of posters mysteriously started appearing calling for vandalism against upscale restaurants and vehicles. Mark Wolfe says the rent increases have triggered great concern that San Francisco is gentrifying and losing its low-income residents. MARK WOLFE: What it is doing is transforming the social and economic and demographic flavor of those neighborhoods radically. The city's housing market right now I think is the most prohibitively expensive of any city in the United States. SPENCER MICHELS: For San Francisco, a major challenge now is to train workers who may have been displaced by high-tech to participate in the multimedia boom. In the renovated mayonnaise plant, the Bay Area Video Coalition with grant from government and private companies is teaching new media, computers, graphic, programming to hundreds of young people -- among them, the daughter of former factory worker Lygia Arzac who want to join the multimedia revolution. It's a force that is transforming this city and causing other cities with unproductive neighborhoods to wonder if they, too, could join the party.