Hollywood and technology ... a kiss?
There was friction at first, but the two industries are learning to love each other.
By Fred Vogelstein, FORTUNE senior writer

LAS VEGAS (FORTUNE) - When you jam 150,000 people into a couple of square blocks, everyone is so busy waiting in cab lines, lunch lines and restroom lines, that it can be hard to think about anything more important than getting through the day. But as the hoards of gadget salesmen, geeks and technology executives head home from the giant four day Consumer Electronics Show in Las Vegas, one important theme is emerging: Hollywood and Silicon Valley are learning to get along.

For a long as anyone can remember, Silicon Valley and Hollywood have shared exactly three things: Their employees get to work on the same freeway (Highway 101), they vote for the same governor and their executives can't stop hating each other. Hollywood moguls are afraid that the tech wizards 350 miles to the North will make their music, movies and TV shows easy for their paying customers to steal. Silicon Valley titans think Hollywood wants to dictate how they design and manufacture products.

Things got so heated four years ago that Disney (Research) boss Michael Eisner and Les Vadasz, a top Intel (Research) executive, traded insults across a packed Senate hearing room. Eisner accused the technology industry of actually encouraging the theft of music and movies over the Internet. Vadasz said that Eisner needed to ''deal with the new digital world.''

But everywhere you turned at CES this year, it seemed a movie star or a Hollywood big shot was on stage with a high tech executive. When Intel CEO Paul Otellini took the stage last Thursday, actors Morgan Freeman, Tom Hanks and Danny DeVito joined him to lend their support to Intel's new entertainment chip technology - Viiv. Yahoo (Research) CEO Terry Semel brought out Tom Cruise and Ellen DeGeneres to tout the portal's ease of use. Sony (Research) CEO Howard Stringer brought out Hanks, the star of its new film the "Da Vinci Code," alongside its famous producers Ron Howard and Brian Grazer, to talk about the importance of copywrite protection. Microsoft's Bill Gates introduced pop star Justin Timberlake to promote the company's new music service. And Google co-founder and co president Larry Page brought out actor Robin Williams to, well, be Robin Williams.

What's behind the sudden love fest? Simple Hollywood and Silicon Valley increasingly need each other. Hollywood finally understands that the Internet is becoming a mass market entertainment medium so they are doing what they do best, following their audience. Meanwhile, Silicon Valley finally understands that Hollywood's great content can create a huge amount of new demand for hardware, software and website advertising. As a result, they are coming to realize that redesigning their products to salve Hollywood's deepest fears isn't such a bad thing after all.

For example, Google (Research) has become the hottest company on the planet by making all its search and software products available for free and supporting them with advertising. But its users increasingly want to search not just for information and entertainment in words and pictures, but in video. So it tweaked its business model to make that possible.

In return, Page was able to announce late Friday that Google users can now access, for a fee, hundreds of episodes from CBS and Paramount television from "Survivor" and "CSI" to old shows like "I love Lucy," "The Brady Bunch" and "Star Trek."

"Who would ever have thought those two brands would have met on the same stage at the same time? Pretty amazing,'' said CBS boss Les Moonves announcing the partnership on stage with Page. "But each of us need the other to take the next leap forward."

There are still tensions. Google may wind up in court on the issue of copywrite law with big book publishers over Google Print the company's project to scan all books and make their content part of Google's searchable index. And Google CEO Eric Schmidt said after Page's presentation that while Google is talking to every large media company about getting their content on Google, everyone is coming to grips with how to deal with the marriage of their content and the new world of technology at their own pace.

Movie studios are particularly reticent. They still make a lot of money from having consumers go to the movies or buy DVDs. While both categories have been weak in recent years - as the video game business has cut into audiences - they are still loathe to give up on them. The business model is still unformed and the technology to download anything but music and short TV shows is still too kludge.

But with Hollywood and Silicon Valley now looking at each other as partners instead of enemies, the chances of convergence - the merging of the equipment in our TV/stereo cabinet with our PCs - happening sooner rather than later have increased markedly.

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