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COLUMN ONE : Joining the Multimedia Gold Rush : Artists and executives give up their day jobs hoping to make ‘the big score’ in the fledgling CD-ROM industry. The promise of creative freedom lures many into enduring the craziness.

TIMES STAFF WRITER

From Apple Computer and Silicon Graphics and Walt Disney Co. and a host of lesser-knowns they come, ambitious computer programmers and creative professionals determined to be part of the birth of an industry. They are working 16-hour days, shouldering the indignities of start-up company life, telling themselves it’s all OK because they are doing something big.

They are multimedia entrepreneurs, and they are out there by the thousands. In one- and two- and 10-person companies with names such as Rocket Science and Da Vinci Time & Space, they are gambling their life’s savings, struggling to master a new medium that combines pictures, sounds and the latest computer technology in to entertainment, education and information products.

They have got more than a little attitude, even a bit of hubris: They are going to build this business their way, thank you very much, venture capitalists and media conglomerates and business school principles be damned. So what if there is hardly a market for the products? So what if they have to bridge the yawning culture gap that separates Hollywood creative types from Silicon Valley computer jocks?

“This is a unique time in history where people who are creative don’t need to have some big conglomerate take their product to the box office and share in the proceeds,” said Jim Myrick, who earlier this year founded the Berkeley-based multimedia firm Big Top Productions with his brother John using credit cards.

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“It’s like a rock band being able to put out their own records, or writing a novel and publishing it yourself,” Jim Myrick said. “We don’t need to wait around. We’re the ones doing the magic part, we’re the ones making the cool killer titles, and we’re going to do it on our own.”

Well, maybe. There are an awful lot of people out there hoping to be the Bill Gates of the multimedia era--including the Microsoft chairman himself.

Moreover, there is lingering uncertainty as to how soon there will be a mass market for the CD-ROM discs and interactive television programs and other products of the multimedia revolution--and how big a market it will be. A recent survey by the Dataquest consulting firm found that of the nearly 20,000 multimedia development companies that have sprung up worldwide--most in the United States--half recorded less than $100,000 in sales last year.

And the big media and communications conglomerates are circling like vultures, ready to swoop in. Several multibillion-dollar merger deals between cable and phone giants, aimed at building a futuristic information superhighway, have collapsed recently, but that has only heightened interest in the small, innovative--and easier to acquire--companies that make info-highway content .

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Those who have seen it all before--especially in the form of the personal computer industry’s genesis during the late 1970s and early ‘80s--are amused by the pretensions of some of the newcomers.

“They go through this period where they all want to share cleaning the bathroom,” said venture capitalist Ann Winblad, whose Bay Area firm has invested in several multimedia start-ups. “I guarantee you, they’ll grow out of it.”

Still, like Pac-Men chasing blinking ghosts, hundreds are pursuing the multimedia dream--the adrenaline rush apparently worth the risk of losing it all.

For computer programmers who have spent years in servitude to the betterment of business productivity software, the new industry gives a glimpse of glamour and a chance to showcase their talents in a mass medium.

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For video game designers limited by the 14-year-old boy market and the shoot-and-scroll technology of yesterday’s game machines, it opens the possibility of incorporating story, humor, character and, yes, even social significance into their work.

For producers, directors, writers, actors and technicians ranging from cinematographers to set designers, multimedia offers a wide-open field free of the snobbery and rigid social codes of the traditional entertainment industry.

And for everyone involved, there is the lure of what is known in Silicon Valley as “the big score"--the tens or even hundreds of millions of dollars that can be made when a successful start-up is acquired or begins selling shares to the public.

Many of the multimedia entrepreneurs are veterans of computer industry start-ups that have grown into multinational corporate bureaucracies. They remember how IBM, king of the industry in the 1970s, was pushed aside as innovative new firms such as Apple, Compaq and Microsoft came to dominate the personal computer market. And they believe the pattern is about to repeat itself.

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This time around, though, there is an additional challenge: melding the often-incompatible cultures of the computer business and the entertainment industry.

Peter Barrett, the 26-year-old Australian computer wizard who heads Palo Alto-based Rocket Science Games, was once employee No. 4 at Supermac Technology Inc., a Silicon Valley-based high-tech firm that now has nearly 500 on its payroll.

Supermac was in many ways a typical computer start-up. But Rocket Science is very different, Barrett said, because it mixes Silicon Valley and Hollywood in a phenomenon he likens to the biological process known as heterosis: crossing two pure strains of plants to create a far stronger offspring. At Rocket Science, television producer Matthew Fassberg and veteran Hollywood set designer Ron Cobb are meshed with former Apple multimedia whiz Bruce Leak and video game programmer Brian Moriarty.

How well heterosis works in multimedia will be seen in the firm’s first game, “Loadstar,” due this fall. But it is already obvious that blending Hollywood and Silicon Valley is not as simple as crossbreeding corn.

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At Rocket Science’s live-action shoot for “Loadstar” in Los Angeles this summer, Fassberg had to rent several Sega game machines to help some actors understand why they had to shoot so many different endings.

“We had to explain that if someone doesn’t do well at this level (of the game), they die,” Fassberg said. “If not, they go on. So you need to record a whole lot of different outcomes.”

At Da Vinci Time & Space, technology whiz Carol Peters and her Hollywood film producer partner Jeff Apple wrestle with such language barriers as the definition of programming in their respective industries, and with the problem of devising a coherent production schedule when dealing with totally disparate procedures. Does “beta testing” come after “post production”? Does “hard type” come before “final edit”?

Other difficulties are a bit more prosaic. When she left computer-maker Silicon Graphics to start a firm devoted to interactive children’s programming, Peters was a widely respected senior executive known for creating the company’s best-selling machines--and was paid a salary she describes as “comfortable six figures.” As chief executive at Da Vinci, she was recently required to display several credit cards before managing to persuade the local Office Depot to give her an account.

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In an effort to conserve their $5 million in venture money, Da Vinci employs no secretary--all employees, including Peters, do their own copying.

Peters is not the only successful executive to quit her day job for the vagaries of start-up life. James Clark recently left the even loftier position of chairman at Silicon Graphics to start a firm aimed at developing software that allows easy access to the Internet computer network.

And Jim Gerard quit as chief financial officer of Disney Publishing to fill the same post at tiny PF Magic in San Francisco. “You reach a point where you really want to do something on your own,” Gerard said. “No matter what position you’re in at a company like Disney, at the end of the day you’re still part of a big machine. Here, every decision is crucial. You’re accountable for everything, and every employee has a stake.”

Some lessons are hard-learned. Minoo Saboori, co-founder of Eden Interactive in San Francisco, was thrilled when the first orders came in for her firm’s debut CD-ROM, “Greg LeMond’s Bicycle Adventure.” She was not as thrilled when, after a few weeks, retailers began shipping back unsold inventory, expecting reimbursement.

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“I was nauseous,” Saboori recalled, sitting cross-legged at her kitchen table, which doubles as Eden’s reception desk. A fugitive from a computer chip manufacturing firm, she nonetheless delights in her new ability to express herself creatively in her work.

Despite ever-sharper competition, there is still a belief among many of the multimedia start-ups that helping each other will help the industry. Drew Hoffman, whose firm is based in the area of San Francisco known as Multimedia Gulch, says he spends three hours a day giving business advice to developers trying to get started.

Business plans are not a strong suit for the majority of multimedia’s digital artistes. But as the market for their products expands--sales of consumer CD-ROM titles are expected to double this year--their growth threatens to overwhelm them unless they can transform themselves from a bunch of people in black turtlenecks with a cool idea into money-making enterprises.

PF Magic has doubled its staff in six months. La Crescenta-based Knowledge Adventure has trebled its revenues. The Los Angeles-based developers at Viridis have a standing agreement with their landlord that enables them to keep spilling over onto new floors.

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Hoffman, who has made a name for himself with his first CD-ROM title, “Iron Helix,” finally wrote his own business plan a few months back. He is taking the radical step of hiring someone to handle marketing--but he does not want to get too big.

“We want to put out a few high-quality titles a year,” said Hoffman, who starts work with a Diet Pepsi at 6 in the morning on the days when he has not spent all night tinkering at the computer. “This is the kind of environment where art flourishes. In a big company, that’ll be lost.”

It is a philosophy that infuriates venture capitalists and other investors, who wish this budding breed of collaborative technologists would see the beauty of the economies of scale. Several attempts by investors to induce mergers among some of multimedia’s most talented entrepreneurs have failed.

That may be because the economics of multimedia start-ups do not necessarily require mass production. Joe Sparks, the ponytailed founder of CD-ROM developer Pop Rocket, estimates that he has spent about $200,000--including food and rent for four people, trade shows, legal costs and equipment--to produce his new title “Total Distortion.”

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It will cost about $4 to press and ship each unit ($1 for the CD itself, $1 for the box, and $2 for the manual, assembly and shipping). If he sells to retailers at $25 each, he will make nearly $2 million in profit if he can sell 100,000 units.

Someday, Sparks believes, multimedia could swell to be as lucrative as computer software, as huge a cultural force as the movies. His four-person firm could be the industry’s Paramount or its Microsoft. Or, at least, its equivalent of Steven Spielberg’s Amblin Entertainment--the enormously wealthy and artistically independent production company. (Amblin is the favored analogy among the techno-artists.)

Still, “the reason we’ve been able to get it out at this price is we’re, like, martyrs,” Sparks said. “I’ve worked 16 hours a day, seven days a week, and I have for the last three or four years. We can’t afford to keep doing this.”

He may not have to. After spending years in his basement writing computer code, Sparks has been besieged by a string of well-heeled prospective investors who appear at the entrance of his Haight-Ashbury cave to drag him, blinking, into the light.

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Recent guests include some of Silicon Valley’s premier venture capitalists, a string of Japanese industrialists and representatives from Robert De Niro’s film production company. As endless workdays get old, investors say, the developers will begin to come around.

Indeed, over the last year, dozens of small firms experimenting in interactive software have been gobbled up or lured into alliances as movie and TV studios, publishers, and phone and computer firms launched their own divisions in the genre.

Some have sought to be bought by a bigger fish that can offer them financial security. But the media monoliths are motivated largely by fear of missing out on the next big thing.

So the emerging entrepreneurs say they have something else going for them: They are the next big thing. And many of them are determined to maintain enough independence to become giants in their own right. For now, this embryonic industry seems united in a desire to thumb its nose at the big guys.

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“If I were trying to do a record right now, it would be a different scene, because it’s a mature industry, everybody’s got it down, everything’s already solved,” Sparks said. “There’s no mysteries, and you’ve got the coalition of giants that control it. But this is totally uncontrollable. And it’s unpredictable. And we’re really good at what we do, so we have a chance right now.”

But for all the potential of the medium, even its most fervent proselytizers concede that no one has managed to come up with a title that quite lives up to it. Developers compare the state of their craft to the days of the nickelodeon, when movies were silent, scratchy, black-and-white, and not terribly creative. Hollywood studios that assumed that movies-made-interactive would be instant hits found otherwise. Nor have electronic books proved especially popular, to the chagrin of some major publishers.

Multimedia entrepreneurs insist that interactivity is an art of its own, requiring original material, or at least a more creative approach than traditional media firms have taken thus far.

“Multimedia is a black art,” Hoffman said. “Big companies like Sony and Electronic Arts don’t make products because they love it. They make products to make money, and the quality always suffers.”

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But the start-ups, many of whom live on borrowed time courtesy of venture capitalists, feel the pressure to come up with a hit.

The realization is dawning on many that it is one thing to develop a CD-ROM title, and another to publish, distribute and market it. A sort of studio system is evolving, where developers sign on as “affiliate labels” with distributors who take care of getting their titles on store shelves.

It is at the retail level where the real money is to be made, and it is also where well-established software giants such as Microsoft and home entertainment giants such as Paramount have the most clout. Analysts say that more than two-thirds of the $600 million expected to be spent on CD-ROM titles this year will be taken in by the industry’s 20 largest firms.

But the battle over who will dominate multimedia will not matter unless the medium itself lives up to its promises.

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Rocket Science’s Barrett says: “With all this talent and all this enthusiasm and all this money we’re burning through, I’m going to be very ashamed if it doesn’t turn into something rather extraordinary. People’s expectations have been raised. The pressure is on.”


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