Can anyone doubt that Hollywood is the centre of the film universe? The tourists know it. You can go out onto Hollywood Boulevard every day and there they are - tourists from around the world, wandering up and down the street, gasping at it. Trying to find Ground Zero of worldwide movie fame.

Mostly, they are disappointed, but it is out there.

But in the modern era, there are really two Hollywoods. One is the one everyone thinks of and it exists, more or less, the way you think it does.

We might call that Old Hollywood. Old Hollywood consists of craftsmen and scoundrels working together to make deals, occasionally film things, cut and score those films, promote them, and distribute them.

Old Hollywood is the one the tourists wander around looking for; it's the one that blocks off the streets with lights and trucks to film on location. That's the one where actual stars go shopping or eat lunch, and locals come to work and compare "celebrity sightings".

In that sense, Hollywood is alive and thriving, and fun to be part of. I like that people give directions to their homes by using studios as landmarks, as in "turn right at Disney". It's fun to watch them set out the barricades and red carpet in front of the Chinese Theatre for yet another film premiere. But there is another side to this and that's New Hollywood.

This other Hollywood, is the digital one. It's the one that sank the Titanic and created Toy Story. But while the Old Hollywood is actually in Hollywood, or at least Los Angeles, the New Hollywood is really located somewhere else. In fact, it's located 300 miles from here in the San Francisco Bay Area.

Consider that in the Bay Area (a loosely defined region within, say, 30 minutes drive of San Francisco), you have Pixar, creators of Toy Story and employer of about 400 people. You have Pacific Data Images, also employing about 400 people and with a long pedigree but now known mainly for Antz! and the soon-to-be-released Shrek. There is Manex Visual Effects, 100-ish people doing film effects, and best known for The Matrix and What Dreams May Come.

There is Tippett Studios, doing both digital and "real" creatures. And, of course, the grand-daddy of them all, Industrial Light and Magic, employing upwards of 2,000 digital artists and film professionals working on more than 30 projects simultaneously.

There have been attempts to change this; in the 1980s Digital Productions set up in Los Angeles to do completely computer-generated features films. It got as far as The Last Starfighter, was taken over by a Canadian computer animation company (oh, the shame of it) and then both companies imploded. VIFX, a long-standing name in film effects, became reasonably large before it merged with Rhythm & Hughes (best known now for Babe and other talking-animal epics). And there are others, lots of them, also doing good work. Digital Domain, for instance, which did Titanic (with help from more than a dozen smaller shops subcontracting shots).

But none of these employs more than 150 people (though some have at one point or another), and many quite a bit less. None of them are doing a fully computer-generated feature, and most are struggling financially. Digital Domain is, in some sense, a breakaway from Industrial Light & Magic, which underlines my point more than it contradicts it.

There are other large digital teams here, but they are studio-based - Sony, Disney and Dreamworks all have in-house resources; in the case of the last two, those resources mostly support the traditional animation work (although saying that glosses over Disney's amazing work on Dinosaur and it ignores the fact that Dreamworks now owns Pacific Data Images, which somewhat muddies my thesis. I'm also ignoring the huge part that Disney played in the success of Toy Story - not just in securing talent and distribution, but also in knowing how to tell a story that would capture an audience. But my points are technical, not artistic.)

Finally, in perhaps the ultimate indignity, it is Industrial Light & Magic that is now sending people down to Los Angeles to interview and hire technical talent because it has too much work and Los Angeles, as a whole, has too little.

How did this happen? Partly, it must stem from the fact that George Lucas invested heavily in computer-animation research when he set up Industrial Light & Magic, and that meant that early talent gravitated towards San Francisco. Pixar, for example, is a company spun off from Industrial Light & Magic's original research into various aspects of computer-generated imagery, and it had a nice little business selling some of that technology (which is still going and is an industry standard) before Toy Story ever existed.

Maybe part of it is reinvention - Silicon Valley nerds and Bay Area artists are notoriously counter-cultural, and the whole Hollywood thing is so retro, man. All that shouting by overdressed, undereducated producers - who needs it? Better to hang out by the Bay and think great digital thoughts in your own way.

Will this change? Down here, we just lost Moon Crescent Productions, which was several hundred people toiling away to make a sort of modern Tron; most of the film would have been computer-generated 3D images. But the plug was pulled and with it the only fully 3D-computer-generated feature in production in Los Angeles. The struggle goes on; meanwhile, we do lunch. You can't take that away from the Old Hollywood.

Craig Zerouni was born in LA and studied computing at the University of California. He moved to London in 1983, where he set up and ran a computer animation company for many years. In 1987, he moved back to LA, where he is now directing the development of new software for film special effects. He has worked as an animator or programmer (and occasionally producer or director) on many feature films and several hundred commercials. He is a member of the IEEE and the ACM, and has written on computers and animation for several industry journals. He is also the author of the BKSTS reference chart on Computer Animation and Effects