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My understanding is that an important consideration at the time was that it is very far from New Jersey.

Edison had a lot of early patents for film, and wanted to monopolize the industry.

Film makers in California were far enough away that it was inconvenient for Edison to sue them, both because it required sending people there in person, and because the district courts were favorable.

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The irony here being that Netflix is currently in a massive layout to build a studio in NJ (like, 20 minutes from the old Bell Labs). Almost feels like giving that troll the finger!
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A hundred years ago they were practically giving away land in LA. The real estate value has flipped.
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Why Hollywood?

Because Edison and Patents in New York which was the original centre for filmmaking in America.

https://en.wikipedia.org/wiki/Motion_Picture_Patents_Company...

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