Shoot A Cyborg, Ski An Alp...

Hollywood is scrambling to build entertainment complexes that are both theme park and video arcade

No one likes a good arcade game more than Steven Spielberg. He has them throughout his home in Los Angeles, and his favorite games are fixtures in the lunchroom and meeting areas at his company, DreamWorks SKG.

But Spielberg is no longer content to play games designed by someone else. He's designing his own, and he wants an ET-size blockbuster. His breakthrough game, Vertical Reality, gives new meaning to the video-game command, "advance to the next level." Four players strapped in moving seats shoot it out with evil Cyborgs, advancing story by story up a 24-foot video image of a skyscraper. Take a hit, and you fall back to ground level. The payoff? A 24-foot free fall for the game's winner.

Part carnival ride, part video game, Vertical Reality debuts on Feb. 20 in Seattle with the opening of GameWorks Seattle. The 30,000-square-foot mega-

arcade is a joint venture of DreamWorks, Universal Studios, and Japan's Sega Enterprises. It's just the first of more than 100 such entertainment centers that the venture, Sega GameWorks, plans to open over the next five years. Each is expected to cost as much as $20 million.

Sega GameWorks may be the first and splashiest studio-backed foray into so-called location-based entertainment, but it's hardly alone. On Feb. 21 in Thousand Oaks, Calif., Walt Disney Co. will open the first of perhaps 100 Club Disneys, aimed at young families with children aged 4 to 10. Also in the works is a chain, tentatively called Disney Quest, with rides and interactive games aimed at young adults. Viacom Inc. and Hilton Hotels Corp. are developing Star Trek entertainment areas in Hilton-owned casinos. And Sony Corp. is building a mammoth "urban-entertainment center" in San Francisco that is scheduled to open next year.

HUGE POOL. All of these attractions cater to those who yearn for safe entertainment outside of the home. And if arcades seem penny ante, consider this: Americans spend $8 billion a year on video games and jukeboxes at some 5,000 arcades, many of which are decidedly unslick, mom-and-pop affairs. The new high-tech arcades are often near a theater megaplex and a high-profile restaurant such as Planet Hollywood or Hard Rock Cafe. "They're trying to appeal to the broadest cross-segment of the population," says entertainment analyst Paul C. Marsh at Cowen & Co. in New York.

Take GameWorks. Vertical Reality is at the entrance, along with other main attractions, such as an eight-person virtual-reality shoot-'em-up that displays each player's picture at the bottom of the screen. At GameWorks' 70,000-square-foot Las Vegas site, opening in July, there's a 70-foot-high climbing game. Other games, such as Alpine Racer and Wave Runner, simulate sports thrills with built-in faux snowbanks and ocean waves. There are more generic video games in the Loading Dock, where winners' pictures are shown on big video monitors. There's also a Starbucks coffee shop and a microbrewery. "We want to create an environment for repeat visitors, part of the list of places you want to go when you go out at night," says Sega GameWorks President Michael Montgomery.

Although execs may not want to admit it, GameWorks and its brethren are aping the concept of Dallas-based Dave & Busters Inc. The 15-year-old chain has nine bar/restaurants with huge gaming areas. Costing $11 million apiece to build, each Dave & Busters is a virtual money machine. More than a million people visit each location annually, spending as much as $15 million at each site. About half of that revenue is spent on games, which have 90% margins.

No wonder big entertainment companies want to play, too. Disney set up Disney Regional Entertainment to develop these mini theme parks last year. It's hoping baby boomers will pay $8 apiece to visit Club Disney, a playground where they and their kids can make their own animations, star as Buzz Lightyear in their own dress-up play, or hold birthday parties in private rooms. Club Disney is designed to draw customers from a 30- to 40-mile radius, says James A. Rasulo, senior vice-president at Disney Regional Entertainment. "And if it works in these small trading areas, there's no reason [why] we couldn't have more than 100 nationwide, and no reason [why] we couldn't take it worldwide." Beyond Club Disney, the company is also developing a chain of ESPN Sports Cafes and a chain of Disney Quest arcades featuring traditional video games and specially created virtual-reality games for young adults.

LIVING BOOKS. Sony's plans are even more elaborate. Sony's San Francisco venture is a 350,000 square-foot, four-story entertainment complex that features a 15-screen theater plus a 3-D IMAX theater. A 45,000-square-foot arcade will have virtual reality and simulator rides and video games that are being developed from scratch by Sony. The children's area is stocked with characters licensed from Where the Wild Things Are author Maurice Sendak. A separate science area is based on the David MacCauley book The Way Things Work, and there will also be themed restaurants and retail stores. Sony plans to put them all over the country.

With all the millions that the big entertainment companies are pouring into the concept, you'd think they couldn't lose. But several similar grand-scale entertainment sites have failed miserably in recent years, though they didn't feature the same hybrid of video game and thrill ride as the new breed does. Blockbuster Entertainment Group's Block Party arcades haven't taken off, and its once popular, low-tech Discovery Zone youth centers filed for bankruptcy protection last year.

Then there is Iwerks Entertainment Inc., which planned to build 50 Cinetropolis sites--360-degree theaters that doubled as dance clubs at night--and ended up with two; one has since closed. "We raised $50 million but blew through it pretty fast," says Vito Sanzone, Iwerks' vice-president of marketing. Its ambitions trimmed, Iwerks is now installing its simulator rides for free at sites such as Dave & Busters for a share of the take. Those failures aside, Hollywood remains undaunted, figuring it has no peers when it comes to separating kids from their quarters.

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