Paramount Communications Inc. will make an equity investment in a top Silicon Valley videogame company, possibly as soon as next week.
According to sources, the Paramount Technology Group, a unit of PCI, will take a multimillion-dollar stake in Spectrum HoloByte Inc., the Alameda company that makes videogame software for the studio’s “Star Trek: The Next Generation.” The move could substantially increase the company’s $ 4 million in investment funding.
A Spectrum spokesman declined comment, as did Par.
Many in the venture capital community and Hollywood see the move as beginning a broader trend endorsing so-called multimedia, the merging of video, sound and text on compact discs or personal computers. Already, a surprising number of entertainment industry exex sit on high-technology boards, their entree smoothed by large sums of money.
The number is expected to grow. For one, software and computer hardware companies are anxious to tap into familiar film and TV talent, and the studios would like to leverage these assets for new revenues.
“We will see many, many more strategic venture start-ups and investments,” said Miles Gilburne, a partner with Weil, Gotshal & Manges in Menlo Park. “You’ll need collaboration. And it will continue at a serious clip, because no one knows which one will work.”
Often brokering these deals are venture capitalists who have forged relationships between an engineer with a bright idea and a studio exec.
“We’re paid to look for new things,” said Dag Tellefsen, managing general partner of Glenwood Ventures, which put $ 3 million into theme park simulation ride producer Iwerks Entertainment. “We typically don’t broadcast this. Unfortunately, the venture industry is like a bunch of lemmings. You certainly see a wave. It’s early, though.”
The relationship between Par and Spectrum is already cozy. Beyond the videogame license, Spectrum is producing the computer software for a virtual reality version of the space travel show that Paramount and St. Louis-based Edison Brothers Entertainment Inc. are mounting (Daily Variety, Sept. 25, 1992). Paramount will now share director seats with AT&T, Palo Alto venture capitalist Integral Partners and Stanford U.
The move is the first by Paramount since the group was created last December with a clear intent to make venture investments.
Paramount isn’t alone. In 1990, Time Warner Inc. stepped in as an investment partner in 3DO Co., alongside rival MCA. With the idea of building the next generation of multimedia players that offered high-resolution graphics, 3DO was quickly capitalized at $ 20 million.
One common thread in these two investments is the top-tier venture fund, Kleiner Perkins Caufield & Byers. The fund’s general partner Vinod Khosla spearheaded the formation of both companies, leading Kleiner Perkins to have a hand in a number of title developers. Predictably, Spectrum is producing titles for 3DO. Khosla, in Tokyo for an Apple Computer Expo, was unavailable for comment.
“Venture capitalists are clearly very much engaged in entertainment software investment,” said Mark Stahlman, head of New Media Ventures in New York. “Kleiner Perkins is the leader in 3D0, Spectrum and others.”
Expect to see more money being drawn from Hollywood, say venture veterans, especially in multimedia software that can use material from film properties. 3D 0’s first title, for example, will be Universal’s “Jurassic Park.”