Manhattan Turns Into `Silicon Alley'

It's a warm January evening, and a hip gallery called Here is brimming over with creative minds from software, publishing, media, and the arts. The chatter centers on opportunities in "new media": using digital technology to create new forms of interactive "content" for CD-ROMs, film, or online delivery. Silicon Valley? Seattle? Hollywood? Guess again. This is Manhattan, and the cutting-edge crowd is here for "cybersuds," a monthly get-together hosted by the four-month-old, 500-member New York New Media Assn.

It's true: Manhattan is emerging as the gritty breeding ground for new media, earning it the dubious title of Silicon Alley. Sure, the rents are high, the subways harrowing, and the taxes crushing. But new-media businesses are flourishing. Why? "New York has the deepest and most diverse pool of intellectual capital anywhere," says Brian T. Horey, a general partner at the New York venture-capital firm of Lawrence, Smith & Horey. "That's the primary ingredient for new media."

But New York has more than the painters, poets, musicians, and filmmakers now piling into new media. It's the U.S. headquarters for communications, advertising, media, and publishing conglomerates such as Time Warner, Sony, Hearst, and Bertelsmann--all clustered in mid-Manhattan. "This is where the power is," says Stan Winsten, chief operating officer of R/GA Interactive, a digital-media production house on the edge of the garment district. And those giants are thirsting for new-media hits to reverse the slowdown in growth caused by softening in print and broadcasting. "Multimedia is one of the opportunities to change that," says Peter B. Yunich, president of Simon & Schuster Interactive, one of a dozen new-media units set up by the midtown giants.

ARTSY DOWNTOWN. The proximity of scores of ambitious startups and artists to deep-pocketed corporations in need of content makes New York a new-media mecca--rivaling such West Coast enclaves as Seattle and Hollywood. Now, city planners and new-media proponents are trying to raise Gotham's profile as a multimedia center. The New York City Partnership, a business and civic group, has teamed up with IBM, Nynex, and Consolidated Edison to lease a 35,000-square-foot building near Wall Street that will serve as a "shared-tenant incubator" for multimedia and software development. It will provide affordable rent and cut-rate services and equipment to some 50 software companies. Office and conference facilities will also be available for people working out of a home or loft. The partnership hopes the center will act as a catalyst for the burgeoning new-media industry--and in the process help reinvigorate the downtown economy.

The new-media boom is clustered in artsy neighborhoods such as Tribeca, SoHo, and the Flatiron district. "Three years ago, you could count on one hand the people trying to make money off this," says Bryan Mc- Cormick, president of BAM! Software, a multimedia production company located on Tri-beca's Franklin Street.

The downtown scene began in the mid-'80s with pioneers such as Byron Preiss Multi-media, which created some of the industry's first multimedia titles, and Music Pen, a company founded in 1987 by Yee-Ping Wu, a child prodigy pianist and onetime concert performer turned software developer.

But the scene has really taken off in the past two years. In 1993, Robert Stein moved his multimedia publishing company, Voyager, from Santa Monica, Calif., to SoHo. Last year, United Digital Artists, an outgrowth of the now-defunct Kodak Center for Creative Images in Camden, Me., set up shop in lower Manhattan. The new-media talent agency and training center represents more than 400 local artists and programmers. Robert De Niro, who has a film center in Tribeca, recently formed an interactive division, Tribeca Interactive. Even Microsoft Corp. and Apple Computer Inc. have dispatched staffers to New York to work with local developers.

So what are all these new-media entrepreneurs up to? Preiss, who founded his multimedia company in 1992 and took it public in May, 1994, is cranking out everything from an interactive Seinfeld screen-saver for Time Warner Interactive to The Ultimate Frank Lloyd Wright, a CD-ROM about the architect's work for Microsoft's Home line. Preiss's stock, issued at $2 a share, now trades in the mid-teens.

Music Pen, located in Union Square, just south of Preiss's Flatiron digs, is turning out a steady stream of edutainment titles. They include Lenny's Music Tunes, a series distributed by Viacom/Paramount, and The Magic School Bus Explores the Human Body, produced for Microsoft.

There's also Take 2 Interactive Software, founded a little over two years ago by Ryan Brandt, the scion of the New York publishing clan that publishes Interview, Antiques, and Art in America magazines. Brandt, 23, has so far focused on entertainment--games such as Hell, a CD-ROM thriller starring Dennis Hopper and Grace Jones. Take 2 has development deals with Apple, Viacom, and Gametek.

DIGITAL DUET. New York is even giving Hollywood some competition. R/GA Digital Studios, a production house that did special effects for films such as Clint Eastwood's In the Line of Fire and Woody Allen's Zelig, earned a reputation as the Lucasfilm Ltd. of the East. R/GA's early bet on digital technology in 1987 has paid off. Like neighbors such as Curious Pictures, it's now a leading producer of digital ads, including such ground-breaking work as the Diet Coke spot that paired Gene Kelly and Paula Abdul in a digital duet.

Today, R/GA is making interactive ads for Chrysler Corp. and the U.S. Postal Service to be tested on Time Warner Inc.'s experimental Orlando cable-TV network. R/GA's Interactive unit, formed in 1993, is working on original content, including two upcoming CD-ROMs, Gear Heads and City Golf, that are now being produced for Tribal Media, a joint label with Philips.

While lots of multimedia programming has been little more than "shovelware"--a term for simply cramming print or other "old media" content onto a disk--New York's new-media upstarts pride themselves on being on the creative edge. "The sensitivity to content is a hallmark of New York," says Preiss.

Such creativity has been rewarded with big contracts from the software and media giants that have the resources to fund development and pay for marketing and distribution. But starting this year, some of New York's most talented developers--including Music Pen, Take 2, and R/GA Interactive--plan to publish under their own labels, rather than distributing through Microsoft or Time Warner. If they achieve new-media stardom, they could really put Silicon Alley on the map.

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