The young computer-graphic artist in the multimedia authoring lab is feverishly sketching out a grotesque monster, then transfering the image to a computer screen where it roars vividly to life via the latest 3-D modeling software. The artist is “prototyping” an “interactive fiction” project set for release on a CD-ROM disc later in the year, and working closely with a creative team that includes an interactive designer, producer, software developer and writer.Of course, this state-of-the-art digital creation is taking place within a small start-up company in an anonymous sun-baked building somewhere in the Silicon Valley. Wrong. It’s a freezing February day and the interactive production team is working for a major media company — Viacom — on the 31st floor of one of the tallest buildings in Times Square. They’re in New York because the CD-ROM project will be based on a show from Viacom’s Nickelodeon cable channel, and is being overseen by a “creative council” drawing on programming, marketing and promotion execs from a variety of Viacom Entertainment Group divisions. Viacom is hardly alone. It turns out New York is headquarters for the interactive multimedia divisions of more than a half-dozen major media conglomerates and home to a score of new media electronic publishing units as well as a growing number of cutting-edge CD-ROM publishers and digital software developers. Corporate giants headquartering their interactive multimedia companies in and around New York City include no less than Sony Corp. , Time Warner, Viacom, Philips, IBM, AT&T, Nynex, Hearst Corp. and the Newhouse family’s Advance Publications. Established publishing companies funding new digital divisions here include Random House, Simon & Schuster (Paramount), HarperCollins, Bantam Doubleday Dell, Macmillan, Penguin Books, Ziff-Davis and the New York Times Co. Prominent among cutting-edge independent CD-ROM publishers in Manhattan are Bob Stein, a highly regarded pioneer in multimedia development who moved his Voyager Co. from Santa Monica, Calif. to Soho; and Byron Preiss, an innovative book and software packager who is shifting gears to acclaimed CD-ROM titles. Why put up with the hassles of New York and not bask in the sun near the film business of Hollywood or the computer brain power of the Bay Area? Simple, says transplant Stein:”New York offers a richer creative environment.” Michele DiLorenzo, Viacom New Media’s executive VP, elaborates: “Just look at the very word multimedia and then look at what New York has — more types of media are represented here than anywhere else in the world: books, theater, art, film, video, graphics, fashion and advertising.” Other corporate execs stress New York’s strategic location. “We made a very deliberate decision to headquarter in New York,” says Philips Media CEO and president Scott Marden. “We see New York as a global epicenter — the intersection of content, technical expertise, distribution and capital for this business.” Olaf Olafsson, president of Sony Electronic Publishing, says, “We do a lot of business in California and Europe, and we wanted to have our business, marketing, legal and communications staff in the middle. And our sister companies on the film and electronics side are right next door.” Time Warner’s Interactive Group will be building a digital production facility in New York, says Terry Hirshey, the group’s president. “It’s important to be here,” she says. Interactive multimedia’s voracious appetite for content will make New York “Silicon Valley East,” argues CD-ROM publisher Byron Preiss, New York University’s Interactive Telecommunications program chairman Red Burns says New York is flourishing as a multimedia center because “the Silicon Valley has the computer science techie types — but they don’t have anything close to the kind of artistic talent you need in interactive work, and that you can find in this cultural environment.” Not everyone paints such a glowing picture. One multimedia publisher says its difficult finding software developers to work on interactive titles in New York; others note the usual litany of New York negatives — high rents and other costs of doing business. But both the city and state governments are beginning to try to build up local multimedia work. The city’s Economic Policy and Marketing Group says multimedia firms will also be aided by a new Software Center, set to be developed by the city and private development, and a planned Advanced Technologies Venture Capital Fund. Among the multibillion-dollar corporations in New York with new media interests, Viacom, Philips and Sony have been the most aggressive in stoking business. Viacom Entertainment Group has an “interdisciplinary task force” that pulls in-house executives and creative talent together from various Viacom divisions to create interactive programming. Sony Electronic Publishing, which already has several dozen CD-ROM titles in its catalog, plans to issue approximately 20 more this year. “Interactive movies,” which use sets from big-budget Sony Pictures films, are SEP’s showcase product. Last year SEP released “Bram Stoker’s Dracula,” and this year’s big title is “Frankenstein,” using sets from the Sony summer film starring Robert De Niro. SEP has also announced deals with ESPN to produce “interactive sports” discs using ESPN announcers; with ABC News Interactive to produce current events titles on PC software; and with Houghton Mifflin to produce interactive educational programs. Philips Media, backed by Dutch-based parent Philips Electronics, N.V. ($ 31 billion in revenues last year) is aggressively attempting to become “a very serious player” in new media, says CEO and prexy Scott Marden. Marden, an investment banker from Bear Stearns who took over Philips Media last summer, wants to strengthen the revamped division’s presence as an interactive publisher and distributor, and to seek out partnerships, IBM’s foray into the consumer interactive multimedia market is being spearheaded by its Fireworks Partners unit, headed by Robert Carberry and Paul Loftus. While software developing is centered in Atlanta, Fireworks’ headquarters is solidly anchored in the corporation’s suburban White Plains, N.Y., offices. Fireworks’ sources say the division also hopes to build up a strong CD-ROM distribution system, drawing on IBM’s strength in the personal computer market. AT&T’s multimedia efforts, while headquartered in Basking Ridge, N.J., have a strong presence in lower Manhattan with its “Downtown Digital” project. Working out of AT&T’s corporate headquarters, engineers are developing applications for interactive programming and services that are being tested in Castro Valley, Calif., with Viacom; Mannasas, Va., with GTE; and in Milpitas, Calif., with Pacific Telesis. And regional Bell operating company Nynex is also beginning to make its interactive presence felt. In October, Nynex — the largest cable TV provider in the U.K. — invested $ 1.2 billion in Viacom, and has a two-year window to form a strategic alliance with the programmer and cable systems operator.