Yahoo! embracing Hollywood scene

LOS ANGELES — Yahoo!, making good on its aggressive bid to become a force in the entertainment business, has agreed to lease part of a Santa Monica office complex for up to $100 million, one of the largest commercial real-estate deals in Los Angeles County in the past year.

The Silicon Valley-based Internet giant will lease up to 256,000 square feet for 10 years. Chicago-based Equity Office Properties owns the complex.

Yahoo!'s headquarters will remain in Northern California, but the vast expansion in Santa Monica splits the company's center of gravity between Hollywood and Silicon Valley.

Yahoo!'s new media group, headed by former ABC television network Chairman Lloyd Braun, will be housed in the complex.

The move will allow more Yahoo! executives to rub elbows with Hollywood deal makers over meals and at cocktail parties, without having to fly in from Northern California, investment banker Gary Adelson said.

"It's certainly an advantage to be close to these guys," said Adelson, managing director of media, sports and entertainment at investment bank Houlihan Lokey Howard & Zukin. "At the very least, you're in the know."

A Yahoo! spokeswoman declined to discuss details of the lease, but real-estate experts estimated the company will have enough room for 1,000 employees.

Some will be relocated from Sunnyvale and New York, and two existing Yahoo! offices in Los Angeles will be closed by 2006.

Yahoo!'s courtship of Hollywood began in 2001, when former Warner Bros. co-Chairman Terry Semel took over as chief executive. At the time, Yahoo! was losing money and struggling amid the dot-com crash.

Semel turned the company around, in part by green-lighting key acquisitions such as the online advertising company Overture Services and persuading the world's biggest advertisers to boost online spending.

Last year, Yahoo! earned $840 million on sales of $3.6 billion, both records.

With the company in sound financial shape, Yahoo! is deepening ties with the entertainment industry.

Last November, it hired Braun to run the new entertainment unit. While many software engineers will stay in Sunnyvale, Yahoo! said most other employees in Yahoo!'s movies, finance, sports, news, games and music teams would relocate to Santa Monica.

Yahoo! said it plans to fill the space through such consolidation and by aggressive hiring of media experts in the Los Angeles region.

Entertainment content will become increasingly important as more people access the Internet by high-speed connections, Yahoo! said.

The goal is to strike more deals with television, music and movie producers, such as the recent collaboration with Mark Burnett Productions to promote "The Apprentice" and "The Contender" on Yahoo!.

The company also gained exclusive rights to show short political satire films by JibJab Media.