MCA Buys ‘Significant’ Stake in O.C.’s Interplay

MCA Inc., the Japanese-owned movie and entertainment giant, said Thursday that it has purchased a “significant minority stake” in Interplay Productions Inc., one of Orange County’s largest video game publishers.

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Brian Fargo, president of Interplay, said the company was courted by all of the major Hollywood studios but decided on MCA, parent company of Universal Studios, because of its extensive entertainment holdings--from books and movies to records and theme parks.

“I’ve been in a unique position as one of the last independent, privately held publishers of a large size,” Fargo said. “My attitude was that it wasn’t about the money or hype, but the strategic partnership that counted.”

Fargo said his company would use the money for internal expansion and acquisitions of other game companies. Neither company would say how much money MCA invested.

Lee Isgur, an analyst at Volpe, Welty & Co. in San Francisco, estimated Interplay’s current market value at about $100 million and said MCA’s investment may be $30 million to $40 million.

This deal combines Interplay’s talent for producing interactive games and software with MCA’s library of movies, records and books--titles that can be converted into interactive entertainment.

For example, Interplay has published computer games based on Paramount’s original “Star Trek” television series. MCA’s Universal Studios, which produced the hit “Jurassic Park,” will likely work closely with Interplay on movie-related projects, said Skip Paul, executive vice president of MCA.

Other opportunities include producing interactive computer programs that use video and sound of musicians from MCA’s Geffen Records unit. Interplay recently produced “Xplora 1” for rock star Peter Gabriel.

The MCA-Interplay partnership is the latest in a series of alliances between Hollywood studios and video game publishers to create multimedia titles, or those that combine the interactive elements of video games with the visual and sound content of movies on compact discs known as CD-ROMs.

In the past year, Irvine-based video game publisher Virgin Interactive Entertainment raised $55 million from selling minority stakes to Blockbuster Entertainment Video and Hasbro Inc. And just this week, Virgin announced plans to issue stock to the public, which could raise an estimated $23 million.

“We have spent the last few years carefully studying the interactive software industry,” Sid Sheinberg, president of MCA, said in a statement. “We have looked at a number of opportunities in this area, but early on identified Brian Fargo’s Interplay as the ideal next step for MCA.”

Paul said MCA chose to invest in Interplay because of Fargo’s business style. He said Interplay, which may open an office on the Universal Studios lot, would be completely autonomous.

“He is an executive who manages the creative people and product with his own hands,” Paul said. “Sort of like a film studio run by a filmmaker. Everybody has been talking about Silicon Valley and Hollywood. That’s looking down the wrong freeway. They should have looked at Hollywood and Orange County.”

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Fargo, 31, founded Interplay 10 years ago as an independent publisher of computer and video games. Fargo was a whiz kid programmer from Corona del Mar who left college to pursue game design.

Mainly on the strength of its in-house game development, Interplay has grown to $60 million in annual sales and 140 employees with offices in London and Chicago.

As video games become more sophisticated, Interplay has hired a wide array of talent, including programmers, actors, musicians and special effects people. Consequently, Interplay’s Irvine headquarters resembles a movie studio more than a computer software firm.

New media such as the CD-ROM, or compact disc, read-only memory, allow computer games to store more than 600 times the data kept on a floppy computer disk. Such capacity allows Interplay to put more film footage, stereo sound, computer animation and text into its games. And that means the company must license more titles from Hollywood studios that own the rights.

“We’ve made it on our own for 10 years, and we’re trained well to survive because there are 100 failures for every success,” he said.

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The company’s top-selling titles include “Battle Chess,” “Mario Teaches Typing” of Super Mario Bros. fame; and “Star Trek: 25th Anniversary Enhanced CD-ROM.” Last Christmas, Interplay’s “Clay Fighter,” a parody of violent arcade games, was one of the top-selling titles for the Super Nintendo Entertainment System.

Under the arrangement, MCA is Interplay’s sole outside investor. MCA was also granted additional options to increase its minority position.

Fargo said the company expects to create joint projects with MCA, but declined to provide details. He said he intends to retain control of the company and operate as an entrepreneur under MCA’s wing.

MCA and Interplay Strike a Deal

MCA is purchasing a minority interest in Interplay Productions, an Orange County-based video game publisher. Details on the two companies:

INTERPLAY PRODUCTIONS

Business: Entertainment software and video game publisher

Headquarters: Irvine

Employees: 140

President: Brian Fargo

Product list: Includes DOS, CD-ROM, 3DO, Super Nintendo and Sega Genesis titles

MCA INC.

Business: Entertainment conglomerate; owns Universal Studios, Universal Studios theme parks in Hollywood and Florida, Geffen Records, Cineplex Odeon theater chain and USA cable television network

Headquarters: Universal City

Employees: 16,000

Chairman/CEO: Lew R. Wasserman

Source: Interplay Productions, MCA Inc.; Researched by JANICE L. JONES / Los Angeles Times