Cartooning That Could Draw a Suitor : Animation: A leading film colorizer says it has developed a high-tech alternative to traditional hand-drawn cartooning.

At American Film Technologies Inc. in the beach community of Del Mar, a movie character even more treasured than Sam Spade or George Bailey is getting a new coat of paint.

Mickey Mouse, who was seen in black and white in his formative years, is being recast in living color in the latest project undertaken by AFT, the nation’s leading film colorizer.

Company executives say the colorization of early animation is a major growth market. Yet AFT also has another service to offer: a computer animation process that is touted as a way to revolutionize the way cartoon characters such as Mickey will be drawn in the future.

The “paperless” animation, developed by AFT’s staff last year, is faster and cheaper than traditional hand-drawn cartooning and could be a real boon to a major studio looking to exploit the proprietary technology. With that in mind, AFT has placed itself on the block, hiring the investment banking firm Morgan Stanley & Co. to find a corporate sugar daddy.

“People have struggled with the concept of paperless animation for years, and AFT has broken that barrier,” said Morgan Stanley’s Charles R. Cory. “This should open the genre.”

Bets are that Morgan Stanley will line up a buyer by fall for the Wayne, Pa.-based company that reported revenue of $11.6 million last year. In anticipation, visitors to the company’s production facility just north of San Diego are being treated to an eye-opening display of the animation process, which is so new that AFT refuses even to explain how it works.

Samples of the new technology include a dinosaur roaming through a forest, its muscles rippling as a multitude of images flash by. There are also clips from a live-action/cartoon series proposal starring a precocious and cigar-chomping Baby Herman from the hit film “Who Framed Roger Rabbit?” in which Herman is actually more lifelike than some of the actors.

Barry B. Sandrew, a former Harvard University researcher who created the system, said it could cut labor costs by two-thirds. AFT’s technology also makes it possible for animators to store and reuse images. Most important, Sandrew maintains that AFT’s characters, which are drawn directly onto the computer screen by professional animators, are more lifelike than other computer-generated cartoons and superior to most of the animation now seen on television.

“What’s different is we can do this on a computerized system and retain the warmth of the characters,” said Sandrew, the company’s president of animation. “That’s what’s turning everyone on.”

Los Angeles securities analyst Paul C. Marsh, who has tracked AFT for Bateman Eichler, Hill Richards, said the animation process will easily boost the company’s worth.

In an April report, Marsh noted that AFT could generate revenue of $20 million to $30 million a year if it captures just 10% to 15% of the $200 million spent annually on new television animation. With its colorizing business thrown in, Marsh predicted that AFT could enjoy total revenue of $58 million and net income as high as $15 million by 1993. He said that the company should fetch $15 million to $20 million if it is sold.

Not everyone is as high on the technology. Other companies have similarly laid claim to computerized animation breakthroughs, and major studios such as Walt Disney Co. have quietly experimented with processes of their own for several years.

Peter Schneider, Disney’s senior vice president of animation, called the AFT’s inking and painting capabilities impressive but said the system still doesn’t approach the hand-drawn quality of Disney’s work. “There will be a breakthrough at some point in terms of animation with the computer and on the computer,” he said. “But Disney-style quality animation on computer won’t come for 10 to 15 years.”

Others have questioned whether the AFT system can eliminate the need for farming animation work out to Asian countries, a practice that cuts costs but also slows production.

Warner Bros., considered another possible suitor, refused to comment on the technology. However, the company is considering hiring AFT to colorize its black-and-white cartoons.

Despite Disney’s reservations, Marsh said AFT will almost certainly be snatched up by a company seeking to use the new technology, even if it’s just for televised cartoons. AFT also offers another benefit to the major studios: the ability to rescue old films from the public domain by colorizing them, which extends the copyright for an additional 75 years.

“A huge number of vintage black-and-white films from the ‘30s and ‘40s are close to losing their copyright,” Cory said. “Some could see this as a way to protect their investment.”

AFT’s impressive financial growth is another probable lure. The company reported first-quarter 1990 revenue of $3.5 million, an 84% increase over the previous quarter. AFT expects to earn $3 million on $18 million in revenue for this fiscal year, which ends June 30. That compares to $2 million in revenue and a $4-million loss just two years ago.

While colorization will continue to be a major part of AFT’s business, Chairman George F. Jensen Jr. sees animation as the key to the company’s future. “There’s a crying need for this technology and product, and the service that goes along with it,” he said. “We have come up with a better look, better shadows and shadings. . . . This is a major breakthrough.”

Jensen, 41, a former investment banker and television producer, founded the company in 1985 after being inspired by seeing a colorized version of the film “Miracle on 34th Street.”

With $3 million in start-up funds from investors, Jensen hired Sandrew to develop the advanced digital technology needed to improve on the early colorizations, which were often blurry and unnatural-looking. Robert L. Bartlett was hired as senior executive vice president to handle administration. Within its first full year of operation, AFT had landed the biggest catch in the fast-growing industry, Atlanta-based mogul Ted Turner, who was ordering up vast numbers of colorized films for use on his cable television channels.

Today AFT is far and away the leading colorization company. It controls 80% of the market and has a staff of 525 people working around the clock, seven days a week in futuristic-looking rooms lined with computers containing the images of screen stars.

A $50-million deal with Turner calls for AFT to colorize up to 36 films a year, for $300,000 a film. Projects have included “Casablanca,” “The Big Sleep” and “Bringing Up Baby,” and the company has a $60-million backlog of orders from Turner and other film owners.

In anticipation of its expansion into animation, AFT is building a Tijuana plant down the road from its Del Mar facility and expects to shift much of its workload there in a move that will save $3 million a year in labor. Now all it needs is a patron, much like the traditional cartoon heroes who can always be counted on to come to the rescue, to help it realize its goals.

“This company has the proprietary technology to open the door to much wider creative possibilities,” Cory said.