Four new units cover creative and business angles

Paramount Communications Inc., one of the largest publishing and entertainment companies in the world, recently made public the development of the Paramount Technology Group, a new operating unit based close to Silicon Valley, with a charter to explore and develop content for emerging technologies.

The group, which quietly set up shop this past November in Palo Alto, CA, is headed by Keith Schaefer, former CEO of Paramount’s Computer Curriculum Company (CCC) educational publishing unit. In addition to being named president of the Technology Group, Schaefer also has been named a vice president of Paramount Communications, the parent company. He will report directly to Paramount’s senior executives in New York, who he says are completely behind this new venture.

“The formation of the Technology Group was a vision that was shared by all our senior executives at Paramount,” says Schaefer. “We realize that technology will dramatically change the way content is developed, designed and distributed in the 21st century; it will create a whole new business. We felt that development couldn’t occur within the separate companies [under the Paramount umbrella]; it had to be centralized through Paramount Communications.”

THE NEW APPROACH TO BUSINESS: PLAY NOW, PAY LATER

The Technology Group’s mission is to research and develop multimedia titles, electronic books, interactive television programming, location-based entertainment and virtual reality installations for all of the different operating units under Paramount Communications, including Paramount Pictures, Paramount Publishing (at this point only Simon & Schuster), Madison Square Garden and Paramount Parks (Great America, among others).

To sweeten the pot further, the group will be funded by Paramount Communications and is not expected to bring “any great profit” immediately from its forays into digital media, according to Schaefer. (He was unwilling to discuss the group’s finances in detail.)

To help the group fulfill its charter, Schaefer says, Paramount structured four divisions within the Technology Group to cover all the creative and business aspects of developing new media. They include the Technology Council, Media Kitchen, Strategic Investments and New Ventures.

Roundtable discussions. The Technology Council “acts as a focal point for formalizing Paramount’s approach to technology,” says Schaefer. It includes a select group of senior executives from each of the operating units within Paramount Communications.

As part of its charter, the council plans to examine prospective movie and TV scripts as well as book projects for their potential to transcend Paramount’s traditional education and entertainment media, according to Schaefer. It will eventually license and produce future content specifically for digital media products.

“No deal will be made from this day forward without us trying to negotiate digital rights,” says Schaefer. “In some cases we will go back and get them. Also, we will actually look at a movie deal to see what are its chances to make it into the video game market or as an interactive learning title.” (For more on developing content for emerging technology markets, see Vol. 2, No. 7, p. 12.) “Starting now, entertainment and publishing companies must begin to look at how they can maximize and repurpose their investments in content,” says Schaefer. “Therefore whether we are looking at movie deals, books or a TV series, it is imperative to consider the possible digital media applications.”

The council also plans to research and publish its findings on technologies such as networking and virtual reality. For example, the group is currently evaluating the different HDTV standards to see which will best represent the diverse content from each of the Paramount operating units.

What’s cooking in the kitchen? While the council wields the power behind the scenes to direct Paramount’s technology course, the Media Kitchen is where new products and services for the various operating units within Paramount will be researched and prototyped.

“For instance,” says Schaefer, “if one of the divisions wants to see if we could make Entertainment Tonight interactive, then we will try it first in the Kitchen.”

The Media Kitchen is headed by Sueann Ambron, cofounder of Apple’s Multimedia Lab and former vice president of Paramount’s advanced media group. In addition to a full-time staff, including Doug Crockford, formerly of LucasArts Entertainment, Kathy Wilson from Bank Street College and Janey Fritsche, formerly a consultant to Apple’s Advanced Technology Group, the Kitchen will rely heavily on outside designers and multimedia producers.

The Media Kitchen will sponsor an artist-in-residence program under which new media artists, such as actor Shelley Duvall (whom Schaefer says he has been speaking with), will be invited to work with digital media.

Building partnerships. The new “strategic investments” division of Paramount Communications focuses on the business side of creating new media. Its function is to create alliances with — and offer financial support to — business ventures that exist outside of Paramount, but which share similar goals for the advancement of emerging technologies. According to Schaefer, this division will be conservative in its investments, but not in its alliances.

The group already has strong ties with Apple Computer, Microsoft and 3DO, agreeing to develop interactive titles for the Macintosh, Windows and the new 3DO game machine. (See story, p. 13.) Schaefer says this division is also looking at possible alliances with First Cities (see Vol. 2, No. 7, p. 3) and cable giant TCI, but has made no commitment to either.

“Our job is to pick the winners,” says Schaefer, “and that’s something I do really well.”

In addition, the strategic investment division has become a sort of clearinghouse for all of Paramount’s intellectual property and new media business negotiations. The group, headed by Bruce Churchill, former vice president of financial planning at Paramount Pictures, handles licensing agreements, joint product development contracts, joint ventures, acquisitions and investments for Paramount Communications.

‘The most enlightened.’ Schaefer says Microsoft chairman Bill Gates called Paramount “the most enlightened company in Hollywood” when he learned that it had created a single entity to handle these negotiations. (This must mean Microsoft has a big deal cooking with Paramount….)

In any case, the aspirations of the Technology Group are not limited to investing in outside companies and forming alliances. It is also committed to developing new businesses within Paramount under its fourth — and least discussed — division called New Ventures.

Though Schaefer was a bit sketchy on the details, New Ventures’ charter is to “incubate” companies in Palo Alto and then integrate them into existing operating units. “We will start a consumer business with a Paramount name on it,” he says. “A whole new program, for example, that will explore VR development.” (It makes sense that these small companies would develop in order to turn product prototypes created in the Media Kitchen into commercial reality.)

PLANS ARE GOOD, BUT LET’S SEE SOME ACTION

Right now much of what is going on within Paramount’s Technology Group involves a lot of talk. However, Paramount is the first major media company to make a corporate-wide commitment to new technology. Unlike Time Warner, which has taken a scatter-shot approach to new media, hurling several small niche companies out into the market to see if any of them hit on something big, including Warner New Media and the Quantum cable project in Queens, Paramount has a clear focus and a strong strategy that is being developed with the financial and visionary support of the parent company.

Paramount seems to understand that it is going to take time and money to uncover the real potential of these new technologies instead of using them to “repurpose” the company’s archives.

Equally important, the Technology Group holds the same corporate status level as Paramount Pictures or any of the other proven media entities under the Paramount Communications umbrella.

The ‘Show Me’ city. Skeptics in Hollywood, who wish to remain nameless, so far remain unimpressed. “I take all these announcements with a grain of salt,” says one Hollywood insider. “The world is becoming digital and the creative community is finally responding to it. But really, it’s the audiences [and consumers] who will determine who the major players are in this new market. And they want to see something, not hear about it.”

According to Schaefer, they may not have long to wait. He says the Technology Group plans to ship products with the Paramount name on them by the fall of 1993. The company will focus at first on the interactive learning market, since Paramount is the largest educational publisher in the world. “Our beachhead,” he says, “will be interactive learning… you can expect entertainment titles to follow.”

Janice Maloney