Like many good ideas, New York’s Knitting Factory was born out of sheer desperation. At least that’s the recollection of Michael Dorf, who launched the transcontinental multimedia operation out of the simple desire to release an album by some friends from his native Wisconsin.

“I came to New York to break into the music business with this band I managed, called Swamp Thing,” recalls Dorf, who arrived in Gotham at the beginning of 1987. “That didn’t work, so I started a record label (the short-lived Flaming Pie Records), and after a few months, I needed to find a way to fund that, which led me to open the performance space.”

Over the past decade, the Milwaukee native has seen his initial $15,000 investment grow into a multinational operation with interests in all facets of the music business. The Knitting Factory label, which releases approximately 25 albums per year, is one of the most prestigious exponents of modern experimental music; the club of the same name presents more than 100 performances a month on its four stages; the more conceptual KnitMedia arm controls a booking agency, as well as the celebrated Texaco Jazz Festival (which just celebrated its 10th anniversary).

“The whole concept of the Knitting Factory is to be a conduit between artist and con-sumer,” says Dorf. “Anything we can do to facilitate that dialogue, we try to do.”

Much of the company’s efforts have been focused on distributing information. In 1993, Knitting Factory became the first club to institute a Web site — before the World Wide Web, as such, even existed. A separate label site was quickly added.

“I always heard the Internet would level the playing field, making us equal to Sony and Warner Bros. in this one area,” he says. “That was very compelling and, of course, untrue. But the Net has created new markets for us.”

The largest of those creations has been the Intel (formerly Macintosh) Music Festival, an interactive symposium that Dorf and partner Andrew Rasiej set up to fill the void left by the discontinued New Music Seminar. Over the past four years, the festival has grown in size, as well as in ambition, what with the addition of such innovations as transcontinental real-time jam sessions delivered over the Internet. “We’re clearly a niche music space, but when you can aggregate fans from all over the world, the niche is far more considerable,” says Dorf.

Niche growth accounted for the 1994 move and expansion of the Knitting Factory club, originally housed in a tiny Houston Street space that was (barely) converted from an Avon distributorship. Moved into new 15,000-square-foot Tribeca digs, the venue quickly established itself as a unique presence on the New York scene, with amenities including sound-proofed rooms, video monitors in outside bars and lavish 24-track recording facility.

The club now houses four separate performance spaces under its Tribeca roof — ranging from a 300-capacity main room to the intimate Old Office, which can pack in roughly one-fourth as many bodies.

But that aspect of the business is expanding as well, with Los Angeles and London locations being firmed up for a 1999 opening. “Both locations are critical to our expansion for different reasons,” says Dorf. “As a music center, London is very different than New York, with a lot more emphasis on world music, which is going to experience a huge boom. And by opening in Los Angeles, we’ll be able to interface more effectively with the visual side of the entertainment business.”

That crossover has already begun, to some degree. Next month, KnitMedia will host the first Digix Festival — a two-week “soundtrack festival” that will span stages in New York, Chicago, San Francisco and L.A., featuring live performances by such celluloid mainstays as Ryuichi Sakamoto, Carter Burwell and John Lurie.

In June, the company began providing content for Optimum Online, CableVision’s broadband arm, which is beaming “KnitTV” into 5,000 homes on Long Island. KnitMedia music programming has also appeared on Bravo over the past 18 months.

On a similar note, in association with NYNEX, the Knitting Factory used similar technology to produce KnitSchool, a virtual classroom of sorts that video-conferenced artists per-forming at the club to music classes at several Big Apple high schools. In recent months, the focus has shifted in large part to Knitting FactoryWorks, which has had a marked sales increase over the past year.

Label employee Heather Mount credits some of the upturn to a de facto segmentation of releases. “We generally do two or three releases at a time, and we’ve been grouping them so that they go together,” says Mount. “Earlier in the year, we had an avant-garde month, with James ‘Blood’ Ulmer and Hamlett Bluett. Right now, it’s hard guitar music, with Larval and Harriet Tubman, which has musicians who’ve played with everyone from Henry Threadgill to Henry Rollins.”

An Amsterdam office, opened in 1992, serves what Knitting Factory Europe head Margaret Murray calls “a ravenous demand” for the label’s product. Murray says KF Europe is working with distributors in more than 20 territories, with particular strength in Germany and former Eastern Bloc countries such as the Czech Republic and Poland.

“In Europe, our artists are perceived to be on the same artistic level as classical musicians,” says Murray. “It’s a cultural thing: I was flipping through TV Guide and there’s a huge article about Bill Ware, complete with a photo. These guys only get radio play on college stations in the U.S., and here in Holland they get a feature article in the TV Guide.”

The label’s mass-market penetration looks to be on the upswing in the states as well. Established artists such as Pat Metheny and former Living Colour mainstay Vernon Reid (now one-third of a new band called GtrObliq) have recently issued albums through Knitting Factory Works: In addition, the debut from downtown jazz-rockers Sex Mob will be the first release issued through a joint venture with Columbia. (A similar early ’90s deal with A&M was aborted relatively quickly.)

“The problem with independent releases is that people aren’t going to be able to find them in Wal-Mart or Kmart … even some Towers are a little skeptical,” grants Seth Rosner, the label’s sales director. “To that end, having Columbia’s name recognition will help.”

Rosner credits Koch, the exclusive distributor, with stellar service to mom-and-pop stores, but also notes that a hefty portion of its sales come through mail-order (more than 5% of the label’s consumer orders come in over the Net) or in-house sales (the club’s front bar is dominated by a large display of CDs from Knitting Factory Works artists).

The club/label synergy is being taken one step further in a new incentive program that awards a free drink ticket, redeemable at the club, with the purchase of any Knitting Factory Works CD.

“It’s a matter of synergy within the organization,” says Dorf. “But we also look at what we’re doing in terms of one-on-one communication with the consumer. The better we know what they want, the better we’ll be able to serve as a conduit for our products.”

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