It’s High-Tech Playtime : Entertainment: Virtual reality is a hot new market. Tim Disney’s company is betting its future on game centers. Another company, Iwerks Entertainment, sees virtual reality games as a mainstay for theme parks.

The lunchtime crowd at the Virtual World game center in Walnut Creek is gearing up to do battle. A guide briefs the virtual reality pilots on their mission: to annihilate each other’s computer-simulated humanoid tanks.

A novice player, code-named “Bruin,” enters a simulated cockpit. On computer screens in the cockpit appear images of enemies manning the other tanks, “Speed,” “Malik” and “Tardio.” Ten minutes and $9 later, after launching a battleship’s worth of artillery while maneuvering around a computerized desert landscape, Bruin emerges triumphant, claiming three kills. Never mind that Bruin was killed three times in turn.

Back in the lounge, David Ashburn--code-named “Ash” because “that’s what I turn my opponents into”--sips a drink. Ashburn, 38, explains why he spends lunch breaks from his banking job playing Virtual World’s BattleTech and Red Planet games. “It’s great, it’s exhilarating. I like pretending I’m on another planet, obliterating the competition.”

Other players are no less enthusiastic, and that’s good news for Virtual World Entertainment Inc., the Burbank company behind the center. Virtual World is a pioneer in the fast-emerging field of virtual reality entertainment, a big step up from Nintendo and Sega video games in both price and technology. The machines can cost several hundred thousand dollars.

These virtual reality games use computers to create simulated, three-dimensional scenes--sometimes on a par with flight simulators--in which players can manipulate at random the images they see.

Virtual reality, a hot new buzzword, holds promise for fields ranging from architecture to medicine, but right now the push is in entertainment.

Tim Disney, 32, Walt’s grandnephew and Virtual World’s chairman, has just opened a second virtual reality game center in San Diego and is hoping to score big with other centers across the country, along with spinoff movies and merchandise.

“I absolutely believe we will succeed, provided we keep our quality standards high,” says Disney. Walt Disney Co. is not involved in Tim Disney’s business, but he has been a film and TV producer for Walt Disney and co-wrote the animated movie “Oliver and Company.”

Now Tim Disney’s Virtual World is one of at least three dozen companies that are rushing virtual reality products to market. Among them is another Burbank company with past Disney ties, Iwerks Entertainment Inc. For seven years Iwerks has designed special-format movie theaters for theme parks, and now is trying to sell its first virtual reality attraction, Virtual Adventures, a multi-player game involving a rescue operation to save the eggs of the Loch Ness monster.

Iwerks, led by Chairman Stan Kinsey and Chief Technical Officer Don Iwerks, both former Disney executives, hope to sell Virtual Adventures to theme parks and include them in the urban entertainment centers it plans to develop. “You’ve got this Sega-Nintendo generation that wants to be more interactive when they go to a theme park,” Kinsey says. “This is the first interactive ride done on a large scale.”

Virtual World and Iwerks are widely regarded as two of the more promising entrants in the virtual reality entertainment field, which some hype as a future billion-dollar industry. Both companies’ computerized images are considered impressive by today’s standards. And both firms are well-financed--Tim Disney with his share of the family fortune, and Iwerks with the $54-million proceeds of its recent initial public stock offering.

The Virtual World and Iwerks products stand out among so much junk now being passed off as virtual reality, says Ben Delaney, publisher of CyberEdge Journal, a Sausalito-based virtual reality magazine. “I’m willing to approve of them because they’re really virtual reality,” he says. “I like them because they’re fun.”

But with all the overblown publicity surrounding virtual reality, some observers see a danger if consumers expect images in virtual reality games to match those in the movie “The Lawnmower Man” or TV’s “Star Trek: The Next Generation.”

“There could be not only disappointment, but a backlash,” warns Harvey Newquist, president of Relayer Group, a Tucson computer consulting firm.

That’s why Leslie Lodestro, marketing director at Magic Edge Inc. in Mountain View, says she shies away from the virtual reality tag for that company’s flight simulator games, which it hopes to set up in entertainment centers that would compete with Virtual World. Lodestro worries that virtual reality may become like artificial intelligence, another hyped technology that hasn’t produced the hoped-for commercial results. “As quick as (artificial intelligence) became hot, it became cold,” she says.

Another problem is that the industry is still arguing over what exactly qualifies as virtual reality, as opposed to simply a souped-up video game. Some companies insist that true virtual reality games require players to wear elaborate headsets for total immersion in an artificial environment.

But Tim Disney says that Virtual World doesn’t use helmets because most of those he has seen make the user dizzy and can impair vision during play. Iwerks decided to go without headsets because it wanted a game in which several players could share the same screen and work toward a common goal.

Virtual reality technology comes from aerospace flight simulators, and many of the companies now providing the technology for the games are offshoots of aerospace suppliers faced with declining defense dollars. Iwerks’ virtual reality attraction was developed with Evans & Sutherland, a Salt Lake City firm that helped pioneer flight simulation technology.

But virtual reality doesn’t come cheap. It requires powerful computers costing upward of $200,000. Software development is time-consuming. Other elements, such as sound and movement, add considerably to the cost.

The price is coming down and, before long, games could be driven by personal computers. And whereas some visual quality must now be sacrificed for quick response to player controls, such trade-offs won’t be necessary as the technology becomes more affordable.

Another worry is that technical advancements could also speed the development of home virtual reality games, like one just introduced by Sega that includes goggles with stereo headphones that bring 3-D video graphics and animation. Such products might siphon revenues from entertainment centers and theme parks.

Nonetheless, many believe that if anybody makes it in virtual reality, Virtual World and Iwerks will.

Virtual World was founded in 1987 by Jordan Weisman and Ross Babcock, two Chicagoans who in 1990 opened a BattleTech virtual reality center in Chicago. It was a hit, and the company licensed the concept to a Japanese consortium that opened three centers in Japan.

In early 1992, Tim Disney and fellow Walt Disney Co. veteran Charlie Fink decided to move into virtual reality. Disney, with a few other investors, acquired Virtual World for a reported $10 million to $15 million. Tim Disney is now majority owner.

Disney says neither his father, Roy E. Disney, nor Shamrock Holdings, the family’s real estate and media holding company, were involved in the deal--although other Shamrock executives bought stakes and are Virtual World directors. Roy Disney’s fortune is estimated by Forbes magazine at $540 million, but Tim Disney says his own money helped finance the acquisition.

After the deal, the company added the Red Planet game, which simulates a spacecraft race, and opened the two Virtual World centers at a cost of $1 million to $1.5 million apiece. Each center has 24 cockpits, with up to eight players competing in the same game.

The Walnut Creek center, east of San Francisco, opened in July and is expected to do more than $2 million in ticket sales--at $7 to $9 each--its first year. The San Diego center debuted earlier this month. Tim Disney hopes to roll out 25 more in three years, including one in Los Angeles.

The centers are furnished Victorian-style to support the theme of the Virtual Geographic League, a fictional group said to have been founded in 1895 by Alexander Graham Bell and dedicated to inter-dimensional exploration. Disney says the concept is helping broaden the audience for Virtual World: About 25% of customers are women, and the average age is 25.

Before a game, players watch a video featuring actor Judge Reinhold setting up the story line. After playing in the cockpits, the games are replayed on monitors and customers get printouts with play-by-play descriptions. Sample: At two minutes into the game, “Malik ejects as Bruin reduces Malik’s Loki VI to rubble!”

Tim Disney is now hoping to make a BattleTech movie, and has a five-picture development deal with New Line Cinema Corp., whose hits include the “Ninja Turtles” films. Virtual World also has begun selling merchandise ranging from postcards to $250 leather BattleTech jackets.

As for Iwerks, its Virtual Adventures players are also primed with a video, this one showing an actor posing as a scientist who enlists their help to save the eggs of the Loch Ness monster from bounty hunters. To play, 24 players divide into teams of six. Each team sits in chairs in an enclosed room that resembles the interior of an underwater craft. They face a large, 3-D video screen. Each team member assumes a role, such as captain, periscope operator or pilot, with everyone operating different controls as they search for the eggs while trying to immobilize crafts manned by competing teams.

Kinsey, 39, the Iwerks chairman, hopes that when Virtual Adventures is finished in the spring, it will appeal to theme park operators who rely on rides that quickly serve large numbers of customers. He thinks that feature will justify the price: $1.2 million for a Virtual Adventures ride.

It’s a bet that had better pay off for Iwerks’ investors.

After its public offering in October at $18 a share, Iwerks’ stock soared to $36. Even at its current price in the high $20s, the company has a market value of more than $150 million. This for a company that lost $1.5 million on $6.6 million in revenue in its fiscal first quarter ended Sept. 30.

Investors are obviously banking on Iwerks’ potential, and before long it will have to deliver. And that’s just plain, old-fashioned reality.