IBM Launches Hollywood Special Effects Firm : Technology: The computer giant is teaming up with three movie industry talents on the new venture.

Hoping to exploit the enormous creative opportunities inherent in new digital technologies, IBM Corp. and three well-known Hollywood talents announced Thursday that they have joined forces to launch a special effects production company.

The new Los Angeles-based firm, Digital Domain, will use cutting-edge computer and video technologies to create the type of exotic visual effects popularized by “Terminator 2: Judgment Day” and other recent big-budget action movies.

In addition, the company aims to produce its own “multimedia” entertainment and education products for a variety of emerging electronic media.

The special effects arena once was a highly specialized niche dominated by relatively small companies, notably George Lucas’ Industrial Light & Magic. But now it is exploding as digital technology--which translates sounds and images into the ones and zeros of computer code--fundamentally alters the way films, television programs and advertisements are made.

Many in the film and computer industries see visual effects production as an important ingredient in creating next-generation video games, simulator rides and computer software programs, as well as new types of animated films.

In addition to the new IBM venture, Sony Pictures has established an in-house special effects company on its Century City lot. Lucas this week spun off Industrial Light & Magic into a new company called Lucas Digital Services. And R/Greenberg, the New York-based leader in video effects for television commercials, recently opened a Los Angeles office to expand its presence in the film world.

Digital Domain will be 50% owned by IBM, with the remaining shares held by Jim Cameron, producer and director of “Terminator 2”; Stan Winston, an Academy Award-winning creator of mechanical and animated characters for films, and Scott Ross, former head of Industrial Light & Magic. Cameron will serve as chairman of the new firm; Ross will be president and chief executive.

The principals emphasized that providing special effects services to the movie and TV industries would only be the starting point for Digital Domain. Over the long term, the company aims to develop its own library of digital images and take a central role in creating and marketing effects-based characters, such as the Cyborg in “Terminator 2” or the dinosaurs in the upcoming “Jurassic Park.”

“It’s my absolute conviction that we are doing something unique,” Winston said. “It’s not just a question of fighting over the small pie (of the traditional special effects business), but of expanding the market.”

Cameron said the company will also build new creative tools, such as an “interactive” animation system that will enable a movie director to manipulate directly the actions in an animated scene.

For IBM, the new company is part of a broader effort to expand beyond its traditional business computing operations into promising new fields. IBM recently launched a new unit, called Fireworks Partners, to build alliances with software and entertainment companies. The beleaguered computer firm is also searching for a cable television partner with which to enter the “interactive television” arena.

Because image manipulation requires an enormous amount of computer power and highly sophisticated software, it is seen as a major opportunity by the computer industry. But Digital Domain is not wedded to buying IBM systems. Indeed, most special effects companies now use workstations from Silicon Graphics Inc.