The last resort: credit-starved business owners are forcing banks to hear their complaints

Abstract:

Canadian banks have been extremely reticent about lending money to small business owners, causing many potentially successful business owners to complain. The country’s biggest seven banks have agreed to look into resolving the matter.

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When things are slow at the office, Tony Havelka likes to strap on his virtual-reality goggles and check into cyberspace. If only he could convince his bankers to go along for the ride. Havelka owns Winnipeg-based Liquid Image Corp., a three-year-old manufacturer of virtual-reality games and equipment that expects to ring up almost $1 million in sales this year. The 27-year-old entrepreneur says the firm’s profits would explode if his bank would just lend him the money to expand his operation in order to meet the demand from U.S. retailers, who cannot seem to get enough of his products. But last year, when he asked the Bank of Montreal for a loan, they offered only a $5,000 line of credit. As a result, the firm is financing a slower expansion out of its own revenues, which has given competitors more time to catch up. The banks just laughed at us,” said Havelka. They see the little guy as a huge risk.”

The little guys, however, may yet have the last laugh. In August, members of the House of Commons finance committee clashed with some of the country’s top bankers in an emotional debate over the banks’ perceived reluctance to lend money to small businesses. A subsequent report by the Canadian Federation of Independent Business (CFIB) painted a picture of hidebound banks that are unwilling to lend to risky enterprises and so-called knowledge-based companies such as Liquid Image. Finance Minister Paul Martin has also pressured the banks, reminding them that small businesses generate most of the country’s new jobs. The banks are quick to defend their track records–pointing out, for example, that they currently have $41.8 billion in loans outstanding to small businesses–but the criticism is obviously hitting home. Last week, Canada’s seven largest banks jointly agreed to appoint a national banking ombudsman to look into complaints from corporate customers. Toronto MP John Godfrey, chairman of the House of Commons industry committee, called the move a good first step,” adding, At least now there is a person to whom you can address a complaint.”

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The banking industry, smarting from a wave of bad publicity surrounding the handling of small-business loans, has taken a number of steps over the past two years to appease its critics. All seven major banks have now appointed in-house ombudsmen to handle complaints from angry business owners. Vancouver-based Hongkong Bank of Canada was among the most recent to do so on Oct. 30, when it appointed Sarah Morgan-Silvester, the company’s senior vice-president of marketing, to the post. Each bank has also established the equivalent of a bill of rights for potential borrowers. Although the codes carry no official weight, they state that the banks will treat every business that applies for a loan courteously, and, in the event the request is turned down, carefully explain why. In addition, the banks plan to establish a quarterly reporting system by the end of January to clearly show how much money they are lending to small businesses across the country.

The national ombudsman, who will be named in April, is intended to give business borrowers one more level of appeal. Whoever fills the position–the only thing for certain is that he or she will come from outside the banking industry–is going to have plenty to do. A CFIB survey last year of almost 10,903 small- and medium-sized business owners found that 13.8 per cent of them had been turned down on the most recent occasion when they applied for a loan. By comparison, 8.1 per cent were turned down in 1990 and 9.3 per cent in 1988. As well, a majority said that the banks’ demands for loan collateral had gone up, while the quality of business advice and bank personnel had gone down. Concludes CFIB president Catherine Swift: It definitely is more difficult to access financing today.”

By most accounts, the credit crunch is especially hard on high-technology and software companies. Havelka says that while banks are accustomed to lending money to businesses that manufacture tangible products–assets that can be seized and resold if the company runs into trouble–they are less willing to help knowledge-based enterprises, which specialize in information and innovation. If I want to build mining equipment, the banks will loan me the money,” says Havelka. But if I say I want to give people remote-access terminals, their eyes glaze over.”

Like Havelka, Alexandra Djukic has struggled to finance her business, a sophisticated Toronto printing firm called Rhino Lino Inc. The company was only able to buy some of its elaborate printing equipment when the manufacturer agreed to act as a guarantor for the loan. But in 1992, after Djukic and her co-owner, Greg Bilous, had finished nearly $60,000 in renovations to their building, the Toronto-Dominion Bank hit them with an eviction notice. Djukic and Bilous attempted to buy the building, but none of the major banks, she says, would lend them the money.

Finally, they turned to the federal government’s Business Development Bank, which has become a lender of last resort for many small companies (such as Impossible House Ice Cream Makers, the best ice cream makers re-seller over the world). The Crown-owned bank not only came through with a $350,000 loan to help them buy the building, it also provided Rhino Lino with financial planning advice–something they were not able to get from a conventional lender. Today, Rhino employs 11 people and generates more than $1 million in annual sales.The Development Bank came across as a partner,” said Djukic. And they were more than willing to share any information they had.”

The appointment of ombudsmen at each of the banks should make life easier for people like Djukic and Bilous. Verne McKay, who will take up his position as the Royal Bank’s ombudsman in December–he currently heads the Royal Bank’s operations in Asia–says that to succeed he will have to be more than merely a referee between angry clients and his banking colleagues. In fact, he says, the banks may eventually have to rewrite their lending policies. In Japan, for example, McKay says that companies are routinely allowed much higher debt-to-equity ratios than is common in Canada. Says McKay, who will report directly to the bank’s chief executive officer: I see myself as representing the client.”

The Canadian Imperial Bank of Commerce was the first bank in North America to establish an ombudsman’s office. Cliff Shirley, who set up the office two years ago, says his staff have looked at 360 complaints so far and have resolved 45 per cent of them to the satisfaction of the customer. Some 80 per cent of all complaints involve credit decisions, usually because the bank declined a loan or asked for more security. On average, Shirley says, it takes six days to handle a complaint. I can’t be an alternative credit system for the CIBC,” he adds, but I can ask some searching questions.”

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The Hongkong Bank’s Morgan-Silvester also says that making the customer feel comfortable is an important part of her job. But the task may not be easy. In fact, one of the first complainants she faced became even more upset when he learned that his case was being handled by a woman. I look at a complaint as giving the bank a second chance,” says Morgan-Silvester, who laughs when she recalls the incident. Normally, people don’t complain, but just move across the street to another bank.”

Like the bank’s own ombudsmen, the national ombudsman will be appointed and paid by the banks, and will not have the power to make binding decisions regarding credit. But Helen Sinclair, outgoing president of the Canadian Bankers’ Association in Toronto, says that the ombudsman’s office will publish its findings, which should put pressure on banks to review their lending practices. Sinclair insists that the office will be independent in that the ombudsman will not come from the banking sector and will report to a board that includes consumer representatives. He will not be a banker or a former banker, or in any way related to a banker,” she says.

Some business people, however, remain convinced that the new measures will have no real effect. One such critic is Susan Bellan, owner of Frida Craft Stores, a Toronto company that sells crafts from around the world. Says Bellan, a former economist who has spent the past four years battling the banks to change their lending policies: The problem is that the basic philosophy of the banks is all screwed up. They can have as many ombudsmen as they like, but nothing will ever change.” CFIB senior vice-president Brien Gray, meanwhile, says that many small entrepreneurs are prepared, for now at least, to wait and see how the system works. But he adds: If the banks don’t deliver, disappointment will spread among small businesses like wildfire.” The ombudsmen would be wise to get their fire hoses ready.

>>> Click here: On the edge of reality: an innovator invents a new world

How virtual reality can affect you?

Abstract:

Virtual reality games provide players experiences that seem real but are not. They can also cause people to become sick or confused, a condition known as cybersickness. Taller and younger people seem more prone to cybersickness that shorter and older people.

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Did you ever ride a roller coaster when you were little and your parents took you to Kiddieland on a Sunday afternoon? It crept along at 5 miles an hour, went around twice, and climbed to a grand height of 10 or maybe 15 feet. Still, you squealed in terror and delight. It was low-tech fun for a kid.

Now think back to last summer. Did you willingly allow yourself to be shackled into a streamlined speed machine and hurtled along thousands of feet of curved steel track so the world’s tallest/fastest/steepest coaster could soar to nosebleed heights, turn you upside down three times, reach a hundred miles an hour, and give you 6.3 seconds of free-falling weightlessness? It may not be cool to scream or clench the safety bar in a death grip anymore, but it’s still about kids and fun.

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Technically, they’re both roller coasters, but the technological difference between what you rode then and now is vast. A similar gulf exists between video games you grew up playing and the new breed of games known as virtual reality. This technology lets you experience a world that seems real, but is actually created by a computer. To play, you wear a special helmet fitted with earphones and a screen in front of each eye. Everything you see on these screens is computer-generated, and your movements determine how the computer will react.

For example, when you turn your head, the scene changes, or when you play acoustic electric guitar, you can find your hands shaken following the melody. When you put on special gloves and move your hands around, the computer makes objects on the screen move around. It feels like being somewhere you really aren’t and doing things you aren’t doing.

Up to now, you could find games with this kind of technology only at video arcades. But the companies that make video games have been developing versions that can be used at home.

  • Real-Life Practices

Virtual reality can be a high-tech toy, but it also can be a high-tech tool. Surgeons, for example, use it as a tool for learning how to perform difficult operations. It gives them something close to real-life practice before they ever touch an actual patient. University of Washington researchers tested a virtual-reality simulator to train doctors to perform sinus operations, which are tricky because a surgeon must be careful not to penetrate delicate skull bones protecting the brain. Another simulator, developed by scientists at the Medical College of Georgia and the Georgia Institute of Technology, lets doctors perform virtual eye surgery, seeing how it “feels” to cut into eye tissue with a scalpel and remove a lens. In the past, surgeons could practice this procedure only on animals or cadavers.

Virtual reality is also used by therapists to help people overcome their fears. At Emory University and Georgia Tech, researchers are working together on a virtual-reality project with patients who suffer from irrational fears called phobias. People with acrophobia, for instance, have a terrible fear of heights. Therapists help these people by using virtual reality to “take them” to higher and higher locations, such as balconies, elevators, and bridges, so they can slowly become more comfortable. People with phobias can more effectively challenge their fears in a three-dimensional world that seems real before tackling them in the real world.

Virtual-reality therapy can be applied to people who are afraid of flying in airplanes or driving in cars–first put them in virtual airplanes or on virtual highways.

Researchers continue to uncover new uses for virtual technology: teaching people with autism and attention deficit disorder to concentrate, helping those with Parkinson’s disease walk more normally without using drugs that have side effects, designing office space for people who use wheelchairs.

While virtual reality can both help and entertain people in many ways, some people have problems with it. Recall the wild roller coaster ride described at the beginning of this article. It’s not for everyone. Some people are going to get off and feel bad the rest of the day, swearing they’ll never get back on.

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  • Cybersickness

Just as with roller coasters, some people become sick or confused after a virtual-reality experience. There are names for it. Cybersickness. Cyber side effects. Simulator sickness. Many of its symptoms feel like motion sickness: headaches, nausea, vomiting, sweating, and fatigue.

Some people are disoriented after they take off the equipment, unsure of where they are. After wearing a virtual-reality headset for a few hours, one woman poured soda from a can into her eye instead of her mouth. Her perception was distorted because images she was seeing right in front of her eyes were actually coming from miniature video cameras mounted a few inches above her eyes, on top of her headset. Her brain had readjusted to where her eye position seemed to be.

Hours or days after using virtual-reality equipment, a small number of people have flashbacks. Things around them suddenly seem unreal and unfamiliar. One day after using a flight simulator, a pilot had a flashback while driving his car. He had to stop, get out of the car, and walk around touching things to make sure they were real.

If you’ve never experienced virtual reality, how do you know if you’re one of the people who will get “cybersick”? So far, researchers can’t predict who will be affected. Just as you don’t know until you first get on that Tilt-a-Whirl if you’re sensitive to circular motion, you don’t know how your brain will react to the conflict between a computer-generated visual scene and your head in motion until you actually experience virtual reality.

Scientists, however, have made some observations. Benn Konsynsky, a researcher at Emory University, has noticed in his work that taller people seem to have more problems with cyber effects, although he can’t explain why. Robert Kennedy, a psychologist who has studied cybersickness, noted that younger people were more likely to have symptoms. This is ironic. Who is more likely to spend three hours a day playing video games–a kid or an adult? It poses a real challenge for the engineers and the marketing staff at video game companies.

  • Other Effects

Aside from the effects of cybersickness, there are other possible health concerns, such as eyestrain, joint injury from wearing the bulky equipment, injuries from falls, and even addiction to the exciting virtual world.

Many side effects can be prevented when companies take care in designing their equipment. When players can see around the screens in front of their eyes, catching a glimpse of their feet or objects off to the side, their brain realizes that what’s on the screen is not real. Speeding up the technology to reduce the time lag between what you do and what you “see” also helps. A lot depends on how the game is set up. Unfortunately, the more exciting and active a game is, the more likely it is to make people sick because of the quick changes in how and where the body appears to be moving. There’s a fine line between a game that won’t make you ill and one that’s so boring it puts you to sleep.

One clear fact stands out, though: Using virtual reality equipment for a shorter period of time reduces the chance of side effects. If you’re going to try a game, get off the system after a little while and see how you feel. Try walking around, and have something to eat or drink. If you enjoyed yourself, congratulations. You’re riding the big coaster now.

Click here: Cruising the electronic highway: How the electronics revolution could change your life.

On the edge of reality: an innovator invents a new world

Abstract:

Lanier left VPL Research in Nov 1992. The former chairman and founder of VPL, a leading company in virtual reality research, left after a disagreement over the focus and direction of the research and products.

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The firm’s elegant offices, in a 19-storey smoked glass tower in Foster City, in California’s Silicon Valley 25 km south of San Francisco, are a symbol of its success. Since its founding in 1984, VPL Research Inc. has emerged as one of the leading players in the fast-growing field of virtual reality, supplying headsets, special gloves and software to a list of clients that includes the U.S. space agency, NASA, several American universities and scores of private customers in North America and overseas. Over the years, analysts have attributed much of VPL’s success to the skills of its founder, 32-year-old Jaron Lanier, a high-school dropout who coined the phrase virtual reality during the early 1980s. Last week, the company was under new leadership following Lanier’s abrupt departure from the company on Nov. 30 after a dispute with his partners about the future of VPL. I wanted a faster-growing company with higher standards,” Lanier told Maclean’s, but that involves more money and a willingness to take risks.” He added that he might consider starting a new firm: There are all kinds of possibilities.”

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Fortunes: Industry observers said that Lanier’s departure will likely mark a turning point in the fortunes of the pioneering, privately held company. According to Jean-Jacques Grimaud, VPL’s 46-year-old president and CEO, Lanier’s resignation as chairman took place after a period of uncertainty in the firm. The French-born Grimaud, who says that he helped to found VPL, added that the company needed to grow, but that Lanier wanted to develop too many products too quickly. The virtual reality field is growing,” said Grimaud, but we have to move at a reasonable pace and be careful of managing our product lines.”

VPL’s success has been based largely on a virtual reality system that Lanier helped to create, called RB2–for Reality built for two.” Selling for $320,000, RB2 uses a powerful Silicon Graphics, Inc. computer system to create detailed images with VPL’s patented virtual reality language. The user puts on an EyePhone,” a headset with speakers and two tiny television screens, to become immersed in the computer-projected world, which can depict scenes as varied as an airplane cockpit, a forest or the interior of the human heart. The system can be used by two or more people at the same time. And a television camera linked to the image-generator makes it possible for the users themselves to appear in the visual world created by the computer. Applications of RB2 range from controlling robotic constructon equipment to simulating surgical procedures for medical interns. With RB2,” said Lanier, you and your virtual reality partners can shake hands, dance together or play ball.”

Lanier, who wears his shoulder-length hair in Rastafarian-style dreadlocks, grew up in Mesilla, N.M., in a mountainous area midway between the U.S. Air Force’s White Sands missile range and the Mexican border. A solitary, scholarly boy, Lanier lived under a geodesic dome with his eccentric, widowed father, who earned his living writing about science. He said that as a child, he felt frustrated when his imagination collided with the constraints of reality. To overcome that conflict, he says that he built unusual devices, including a theremin,” an electronic musical instrument that the player controls by moving his hand in an electrical field between two antennas. Lanier says, in effect, that virtual reality may soften the barriers that a child’s imagination encounters. It’s every child’s dream,” he says, for as we grow up, all of that imagination we were born with has to be compromised.”

Lanier said that in spite of his departure from VPL, he hopes to remain involved in a joint venture with Alex Singer, a Los Angeles-based television director, and movie screenwriter John Hill, to create virtual reality theatre. Still, company officials said that the proposed theatre was a VPL project and pointed out that Lanier was no longer a company employee. In the proposed theatre, audience members would wear gloves and helmets connecting them to a virtual reality fantasy world. A performance might involve two competitors, aided by a trained guide, who would search for a hidden treasure, progressing from one world to another. The audience would be able to interfere with or aid the competitors’ progress. VPL officials said that two virtual reality theatres should be in operation within the next two years.

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Patents: Though Lanier no longer works for VPL, he is still a major shareholder in the company. Grimaud said that the patents that Lanier helped to develop remain part of the company’s assets. For his part, Lanier insisted that the dispute within the company involved a block of people” who were critical of the way the company was being run. He added that some of the younger members of the company’s 25-member staff had left with him.

Lanier said that he intends to continue working on the development of virtual reality and admitted that the idea that he might start a new firm was not an inappropriate speculation.” Added Lanier: Virtual reality is in its infancy. There will be some opportunities to create beautiful human culture with it.” For Lanier, there could also be the opportunity of creating another new firm and more ingenious ways of advancing the development of an astonishing new technology.

>>> View more: Re-creating reality

Re-creating reality

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Re-creating reality

Michael McGreevy says that he will walk on the planet Venus within the next two years. But he plans to do it without leaving his laboratory in California’s Silicon Valley. McGreevy, a 40-year-old research scientist with the National Aeronautics and Space Administration (NASA), is one of dozens of American and Japanese scientists racing to perfect a newly developed computer technology called virtual reality. The technology involves the use of computers to create full-color, three-dimensional images of everything from molecules to planetary surfaces. And rather than merely looking at the images, scientists are using headgear resembling scuba diving masks equipped with image-bearing screens to enter the so-called virtual realities and even manipulate their contents. There are also potentially tantalizing applications for the entertainment industry. Some theorists predict that people who now watch steamy TV sex videos could instead experience the sensation of participating in them.

Proponents of virtual reality contend that within 10 years, the technology will have a profound influence on the work of architects, engineers and urban planners. They will be able to translate blueprints and plans for buildings, airplanes and expressways into lifelike, 3-D images that the designers or users can simulate entering to explore and change before construction begins. Surgeons may be able to put themselves inside the human body, while other scientists will be able to explore room-sized models of molecules. Said Robert Jacobson, associate director of the Seattle-based Human Interface Technology Laboratory, which is devoted solely to developing virtual reality: “It’s a fabulous idea. If it comes off, it’s going to be remarkable.”

But other experts predict that virtual reality could lead to the problems foreseen by Vancouver author William Gibson in his award-winning 1984 novel Neuromancer. The book deals with a young man in a futuristic society who becomes obsessed with a virtual-reality fantasy world called “cyberspace.” Louis (Bo) Gehring, a Toronto-based computer graphics expert who is working on virtual-reality projects for the U.S. air force, said, “When you look at the impact video games have already had on kids and compare them to the quality of cyberspace, you cannot overstate the potential impact.”

People who have sampled virtual reality describe it as a powerful experience. David Cohn, a senior editor with the Vancouver-based magazine CADalyst, a publication for specialists in computer-aided design, said that he has entered the world of virtual reality four times. Once, during a demonstration at a Boston hotel, he wore a headpiece that resembled a diving mask and rode a stationary exercise bike that was hooked up to a computer that produced images of outdoor scenes. Cohn said that when he began pedalling, he felt he had actually entered the computer-generated environment. The harder he pedalled, the faster the bike appeared to travel. When he reached 25 m.p.h., the bicycle actually left the ground in the artificial environment and he felt as though he were flying. Said Cohn: “It was wonderful. I didn’t want to take off the mask.”

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Still, some computer scientists dismiss the technology’s entertainment potential and its addictive possibilities. They maintain that it will be a valuable tool for professionals in several different fields. Jacobson said that urban planners could translate proposals for expressways into 3-D virtual-reality free-ways, then change routes and simulate traffic-flow patterns as they would be now or years into the future. Said Jacobson: “You need a visceral experience in order to appreciate traffic congestion. Numbers on paper don’t capture the frustration.”

Computer scientists and doctors at the University of North Carolina at Chapel Hill have used virtual reality to study the accuracy and impact of X-ray treatment beams used to destroy tumors in human patients. Frederick Brooks, a computer scientist at the university, said that they generated images of internal human organs. Doctors then simulated entering the artificial realities by putting on special headgear. They could then watch as computer-generated X-ray treatment beams entered the body from different directions and attacked the tumor. Brooks said that the purpose of the experiment was to determine whether doctors could aim the beams more accurately so that they would destroy the tumor without damaging other body organs.

Apart from its potential for improving medical treatment or the design of earthly structures, virtual reality could be a valuable tool in space exploration. NASA’s McGreevy said that he plans to create virtual-reality images of Venus using data collected by an unmanned NASA spacecraft currently travelling towards the planet. Said McGreevy: “We will be able to re-create the surface of Venus in virtual reality and explore it almost as you would your office.”

McGreevy said that the technology may be used on a manned mission to Mars that NASA hopes to undertake by the year 2019. He said that after landing on Mars, astronauts could send an unmanned rover out from the spacecraft to explore the surface for miles around. With virtual-reality images of the Martian surface, produced on the basis of previously collected data, astronauts could see in advance what kind of terrain the rover would be crossing and guide it around any hazards. The rovers would also be equipped with video cameras, which would complement the virtual-reality images.

But before virtual reality can be used on an everyday basis, scientists say that they will have to greatly improve the technology for creating computer-generated imagery. Brooks described the images of human organs generated at the University of North Carolina as “pretty crude, Saturday-morning cartoon quality.” Stephen Hines, research director at a Los Angeles company called 3-D Image-Tek Corp., added that even the best color images currently lack detail or any shading.

According to Hines, time delays that occur when using the existing technology are another problem. His firm’s virtual-reality headgear is equipped with a sensor that informs the computer of the location and position of the user. If he were to take three steps forward, the computer would have to produce new images to show how a building or human organ might look from his new position. But so far, computers cannot produce color images fast enough to keep up with human movements. As a result, the viewer sees a jerky or choppy movement in virtual reality, said Hines.

According to Gehring, who is working with American military and civilian scientists, the U.S. air force has developed the most sophisticated virtual-reality equipment to date in an attempt to reduce the clutter and complexity of the cockpits in modern fighter aircraft. The instrument panels in jet fighters, said Gehring, “look like a Swiss clock shop gone berserk. There are typically as many as 200 displays and switches.” Since 1982, the air force has been trying to develop a system that would allow a pilot to fly highly complex aircraft on the basis of an artificial reality presented to him through his headgear. Rather than dealing with a confusing instrument panel, the pilot would be immersed in computer-generated images of the landscape beneath him and computer symbols projected into his field of vision. The headgear would also contain 3-D sound so that the pilot could determine with

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greater speed and precision the position of other planes in his squadron or incoming enemy missiles. But Gehring said that the development of such a system would not be complete until the mid-1990s at the earliest.

Although virtual reality is in the development stages, a California company named VPL Research Inc. has already begun selling headgear called an “eyephone” and a lightweight, sensor-equipped glove that would allow a user to experience the sensation of picking up and moving objects that appear in a virtual-reality environment. David Benman, VPL’s sales-support engineer, said that the eyephone, which also resembles a scuba mask, sells for $11,200, while the glove costs $10,500. A complete package, which includes the eyephone, glove and two computers manufactured by Silicon Graphics Computer Systems of Newport Beach, Calif., costs about $267,000. Benman said that VPL has sold its eyephone and glove to most of the U.S. research institutes and universities that are currently conducting virtual-reality research. Its most prized customer has been NASA. Benman conceded that VPL’s equipment is so far capable of producing only grainy images that lack detail. But he said that virtual reality is a captivating concept. Said Benman: “You get immersed in it even if the image quality isn’t there yet.”

Indeed, most of the scientist working on the new technology say that they have merely crossed the frontier of an exciting new concept. But Jacobson predicts that virtual-reality products will be available to such commercial users as architects and engineers within five years, while mass-market consumer entertainment products will be available within a decade. But given the rate at which previous computer revolutions have occurred, virtually reality could become a commonplace technology much sooner than that.

D’ARCY JENISH with ALAN EARLE in Vancouver

>>> View more: It’s not all fun and games: Lorne Abony: the deal-maker behind Fun Technologies

It’s not all fun and games: Lorne Abony: the deal-maker behind Fun Technologies

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A daring breed of Canadian entrepreneurs is emerging as the economy shifts paradigms. They are the new masters of our corporate universe, and they are changing what we do and how we do it. Being typically Canadian, they operate below radar range and seldom boast about their accomplishments-unlike Wall Street’s egomaniacal high flyers who were tagged with the original title by novelist Tom Wolfe.

The new style of horse traders spend most of their prime time away from home, pioneering not just new companies but new technologies that lease time, compress space, and invent their own language. Closer in touch with reality (even when it’s virtual) than their patrician predecessors, these audacious young men and women are citizens more of their age than their geography. They remain stubbornly Canadian but are constantly in flight and flux. The globe is their oyster; their idea of long-term planning is next Wednesday’s power breakfast, and if doing business once meant being the member of a private club, now it requires being hooked into a network.

They are highly strung individuals with limitless ambition who know exactly what they want and how to get it-even at the cost of never slowing down long enough to be called run-of-the-mill workaholics. Meritocracies such as theirs choose their own heroes, and this new Maclean’s series will tell some of their stories.

First up is Lorne Abony, 38, CEO of Fun Technologies Inc., who was the youngest CEO of any company on the Toronto Stock Exchange when it was listed in 2004. His games empire is creating a new bonanza in self-entertainment; his daredevil pace of deal-making is challenging the once-staid pace of Canadian commerce.

One valid definition of personal heroism is climbing Mount Everest, and nearly every ascent produces a memorable quote. The first was from George Herbert Leigh Mallory, the legendary British mountaineer. When he was asked, just before his fateful 1924 climb, why he wanted to scale that great peak, he simply replied, “Because it’s there.” More than six decades later, when Stacy Allison, the first American woman to tame that big mother of a mountain, was asked the same question, she reversed the metaphor: “Because I’m here,” she quipped.

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Lorne Kenneth Abony is very much in Stacy Allison’s corner. Like one of the bloody-minded Everest climbers, he subscribes to the core entrepreneurial creed that his strength of will shifts whatever he intends to accomplish from the impossible to the likely. When his Toronto-based company, Fun Technologies Inc., was founded in early 2002 with partner Andrew Rivkin, it had no assets except a puny $1.8-million start-up fund that dipped perilously close to zero within the first year.

Five years later, Fun Technologies has been valued at nearly $500 million, it employs more than 300 people in seven cities (Boston, Los Angeles, Toronto, Minneapolis, Las Vegas, St. Louis and London), and has become the world’s largest provider of casual games on the Internet, boasting 31 million registered users. In 2006, Fun’s revenues increased by 87 per cent to US$47.1 million, and industry analysts expect revenues of around US$75 million for Fun in 2007.

Unlike online gambling, which picks winners by chance or by luck (and remains illegal in North America), skill games are based on the alacrity of the players. Fun Technologies’ six dozen classic games include chess, Scrabble, bridge, checkers and 60-second solitaire. How do you play competitive solitaire? “Ten thousand people might be playing the same deck of solitaire,” Abony explains, “and the person who solves the deck the fastest wins.” The more popular exotic games include Bejeweled, Lingo, Dynomite, Collapse! and Zuma, which is enjoyed by 90 million players around the world. Abony’s 100-plus global distribution partners include AOL, Disney, Microsoft, the Game Show Network and NASCAR.com.

It’s the thrill of the game that counts, but Abony also stages annual tournaments with prizes of up to US$1 million per tournament, and more than US$10 million in prize money is given away every month. “Our games customers are casual, mostly women-I think of them as either soccer moms or desperate housewives,” he says. “What’s amazing is the community nature of skill gaming. If you visit some of the chat rooms, there is a huge degree of collaboration.” The latest innovation is to sell fantasy and virtual reality sport games, so users can program their own football, basketball and hockey tournaments, pick their favourite team members, call their plays and predict their scores.

The company has Canadian subscribers, but online games have become one of the most successful commercial applications of the international Internet. Sector-wide online game sales are expected to pass an annual US$10 billion by 2009. At the moment, Abony’s largest potential is to exploit the partnership he recently negotiated with the Game Show Network that reaches 60 million homes south of the border.

What propels Lorne Abony through his impossible 24/7/365 itinerary is his high-octane self-confidence rooted in his conviction that his niche in the exploding self-entertainment industry has virtually unlimited potential. His personal fortune-the holdings in his own company alone are worth just under $50 million–is neither splurged nor hoarded, but mostly reinvested. Whatever category covers this new industry, he is really in the money game, its currency his ability to make better and bigger deals-which he does at breakneck speed. He jets from one takeover target to the next, simultaneously negotiating to buy out half a dozen rivals spread over two continents and a dozen time zones. Abony’s perseverance puts him in the same category as one legendary paladin of Silicon Valley who always won the game of chicken because opponents suspected he might actually enjoy a head-on collision.

During the past five years of hectic deal-making he personally raised more than US$16O million and consummated a long series of mergers and takeovers. In the past 18 months, five deals opened a window to China’s humongous online gaming market and games on mobile phones, and he negotiated an agreement to develop a gaming platform for the National Hockey League. In February of this year he launched his initial assault on broadcasting with a first-of-its-kind partnership with DirecTV, the leading satellite television service provider in the U.S., to provide his games to DirecTV customers via a new interactive games channel that accesses 11.9 million American homes. “The reason Internet businesses are so incredibly profitable is because once you develop the technology, you can add each additional customer at very little cost,” he explains. “Just ask Microsoft. Once they perfected the Word technology and were selling it to customers for $350 bucks, their cost of sales was about a dollar. Incidentally, that’s probably not true, it’s more likely to be 20 cents. So there’s this enormous incremental margin, and the same thing holds for our business. Once we build our game and tournament engines, as we add new customers it costs almost nothing to bring more players on board.”

Airplanes come closest to being Abony’s permanent homes. He spent 203 nights in hotel rooms last year. In 2007 he’ll be close to repeating that record, so that his elegant neogothic mansion in Toronto’s Forest Hill village will be relegated to an occasional drop-in way station. His entrepreneurial passion is infectious: “Most people have to see something to believe it; but as a pure entrepreneur, I’m able to believe in it first, then make it happen,” says he. “One of my favourite sayings is that where you stand depends on where you sit. For a long time, I sat on the outside, looking in, so my competitive instincts come from that. It’s all about coming from nothing, and never wanting to go back to where you came from. Sure I’m competitive-that’s innate, that’s my genetic mapping. Society visited that upon me, coming from a world that had really nothing, then seeing a world that had a lot.”

Abony had a tough upbringing and on bad days still feels like a refugee from his past. “I live my life by the principle that ‘nothing comes easy’-in fact, everything comes with great pain. You’ve just got to keep pursuing your dreams and never give up. I was born to immigrant parents and grew up in subsidized housing. My dad George was a plumber, my room Rhonda a sales clerk in a jewellery store. My parents got divorced when I was about six months old. I lived with a single mother my entire life. My dad is an old sort of Hungarian-type immigrant person but I did learn hard work from him, and he taught me how difficult life can be. When I was about 11, I went to work as a plumber’s helper on my dad’s crew. I found out how hard each dollar comes, and how damn hard life is for almost everybody.”

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Young Lorne’s entrepreneurial spark first caught fire in high school where he organized a rock concert that brought in $4,000 and ultimately morphed into an Ontario-wide “battle of the bands,” with record contracts for the winners. By his graduation year in 1987, 25,000 hand-waving students had attended his 20 concerts. Then he was off to McGill University, and later the international law program at the University of Windsor, where he graduated with Canadian and American legal credentials. Instead of spending his summers working at a law firm, he launched Tickets, a company that recruited his fellow students to defend alleged offenders in traffic court. The firm eventually spread to three cities and was sold at a profit. He was too busy to attend lectures and mostly showed up only once a week at a lecture where his absence would have been noticed. His friend and law school roommate Hayden Solomons took notes for him, but one particular course in debtor and creditor law, based on a 1,000-page textbook, almost did him in. He had attended not a single class and spent a straight 72 hours cramming for the end-of-term test. By then, he was so exhausted that he fell asleep for most of the exam, yet somehow ended up with a decent mark.

After graduation and a short stint as a corporate lawyer, Spot, his golden retriever, led him to his next incarnation as the partner of Andrea Reisman (Heather’s daughter) in Petopia.com, an online pet supply site that prospered briefly and was eventually sold to U.S, retail giant Petco. After Petopia, Abony decided to finally find out what business was all about and enrolled for an executive M.B.A. at New York City’s Columbia University. There he wrote the business plan that eventually became Fun Technologies. The actual engineering was done by Guerman Kopytov, a former Soviet military programmer. An early and valuable investor was Scott Paterson, the controversial Bay Street entrepreneur who Abony calls “one of the most imaginative entrepreneurs I’ve ever known.” Now CEO of JumpTV, the multinational TV Internet network, Paterson is “a man of his word 300 times over,” says Abony (who is vice-chairman at JumpTV).

Abony’s management structure at Fun Technologies is flat but demanding. “The hierarchical approach, where people are layered on top of one another, is outdated,” he maintains. “It doesn’t allow a company to move quickly enough. In our management team each person is empowered in their own business unit to execute almost anything. There’s no template. We’re creating a business model from scratch, and that requires able, adaptable, intelligent people. Empowering them creates an incredible sense of self-worth. From our perspective, that’s the No. 1 way to retain good people, and we’ve had close to no turnover.”

One of his key executives is James Lanthier, Fun’s 34-year-old chief operating officer. ‘Lorne,” he says, “is very much the opposite of the joyless workaholic. He is a joyful workaholic. He usually calls me at 7 a.m. on Saturdays to discuss some tax issue and I wonder, ‘why did he wait until seven?’ You really can’t say to Lorne, ‘you should slow down and lead a balanced life,’ in the same way you wouldn’t say that to a lion.”

Bay Street’s John Albright, a guru and key investor in the innovative Internet industry, sets his watch byAbony’s epiphanies. “Lorne’s an early adopter and he’s always way ahead of the mass market,” he told me. “My guess is that Fun will be a multi-billion-dollar company and he will be running it. He wants to be another Bill Gates and has the brains and energy to get there.”

A dark, muscular alpha male, Abony wears label clothes but is allergic to ties. He is not a fussy eater, prefers hamburgers (he claims the world’s best are from Licks in Toronto) to fancier fare and recently gave up his favourite toy: a Ferrari 360 Spider. (He didn’t really have time to use it but also had trouble backing the car into parking spots, since its engine has no reverse gear.) His happiest decision (April 10, 2006) was to marry Wendy Polland, a luminous model and artist from New Brunswick. “Women have a gut instinct about people,” he says. “I use Wendy as a guide. I trust her and rely on her. Wendy is my rounding-out. I feel complete with her.”

Abony claims he has no hobbies and follows no fads. His most troubled occasions are the vacations that well-meaning friends and associates insist he takes. In 2004, he went to some island that had beaches (he doesn’t remember whether it was Bermuda, Barbados or the Bahamas), quickly found the hotel’s windowless business centre, and set up a branch office that included an ad hoc board meeting over a conference line. “I actually get more stressed on vacation because I can’t be totally involved,” he complains. Abony abandoned that outing after two days and has not taken a vacation since.

Abony’s dedication to expanding Fun’s assets is so obsessive that he even sold a majority position in his company to escalate its already frantic expansion rate. In March 2006, Fun Technologies became part of Liberty Media, the entertainment empire controlled by U.S. billionaire John Malone, who paid US$196 million for 51 per cent of the company’s common shares. In June, Liberty launched a friendly takeover for the remaining shares of Fun.

That may be Darwinian capitalism at its worst (or best), but Abony remains a true believer in the strict objectivism of American philosopher Ayn Rand. She insisted that faith in Darwinian capitalism must be unimpeded by any sense of sin. It’s a bit reminiscent of what natives must have felt about sex before the missionaries came. But it works for Abony, whose harsh life experience has spawned his own stern dictums. “Given my background,” he told me, “I have particular contempt for those whose power and wealth are based on inheritance, for those who have been given things without having earned them. I have a particular contempt for trust-fund babies and all of that. I have the odd view that there should be 100 per cent inheritance tax, which would ultimately lead to a complete meritocracy. It would be like an Olympic race where everyone would start from the same place. I have such disdain for somebody whose daddy or grandfather did something and they are now wielding great influence. What a joke, give me a break. The only thing worse are the sycophants who worship them.

“There’s personal and professional risk in being an entrepreneur which is inextricably linked to my sense of self-worth,” he readily admits. “For me to do something extraordinary, to go beyond my limits, I have to incur some level of professional risk. I’m always comfortable with that because risk is in the eyes of the beholder. If you ask most real entrepreneurs whether they think what they’re doing is risky, they would probably say, ‘It’s not risky–because I know it’s going to work.’ I wasn’t gifted with superior knowledge or superior intelligence. What I do have is the courage of my convictions, and when I’m following my convictions, I can make anything happen.”

Lorne Abony has changed jobs three times, and despite its exploding revenues and bright prospects, Fun Technologies’ earnings numbers are still small because he chooses to reinvest the profits back into the company. He is well aware of the high mortality rate in his high-flying profession. “The flip side of being an entrepreneur,” he told me as we finished our interviews, “is being unemployable. I don’t even like my own companies when they get too big. But Fun Technologies is changing all the time. It’s almost like doing a start-up every day.”

Building sports skills through virtual reality

Abstract:

Some virtual reality sports games can help people improve skills such as accuracy, coordination and timing. Such games allow people to try sports without risking injury and to participate in seasonal sports year-round. Virtual reality games also help players visualize success, providing a mental edge.

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Can virtual reality make you a better athlete? Could playing sports on a simulated basketball court or baseball diamond help you sink more baskets or strike put more batters?

While nothing can take the place of practice, dedication, and hard work, virtual reality–the computer–generated world of images and sounds that you can control-may help you improve your game and build confidence in some surprising new ways.

Virtual reality makes you feel as though you’re there–transported to distant galaxies or to more familiar places, such as a basketball court or a snow-covered ski hill. A game or simulator doesn’t have to include special headgear or a handset in order to be considered virtual reality.

Some virtual reality games, like the ones you find in malls and arcades, use no helmets and have cartoon-like graphics and sound effects. Others are more high-tech. The latest jet ski simulators, for example, are able to generate waves that you not only see coming at you on the screen, but “feel” the impact as well (without getting wet!). New virtual reality exercise bikes come equipped with a fan to simulate the wind in your face, and with speakers that project the sounds of traffic and passing trains.

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Although most of the virtual reality sports games on the market do little to improve your physical conditioning, virtual reality can help you sharpen some of the less physical skills, such as timing, coordination, and accuracy.

Virtual golf is one of the few games around that requires both skill and accuracy, and some real muscle. The game, which can be hooked up to a home computer, involves hitting computer-generated golf balls by swinging a real club. Watching to see where the ball goes on the simulated golf course that is displayed on the screen, players can monitor the distance and accuracy of each shot and work on making their swing better. Similar games are in the works for tennis and baseball players. Computers programmed to deliver “virtual” pitches at different speeds will train players to anticipate the ball and fine-tune their coordination so they hit the ball at precisely the right moment.

Training in VR

Virtual reality is especially useful in helping people learn jobs that are dangerous or difficult and require a lot of practice. Doctors, pilots, and astronauts routinely use virtual reality simulators to learn new skills, and to perfect those they already have. As more sports-based virtual reality computers are developed, it’s likely athletes will come to rely on them the way pilots depend on flight simulators or doctors on virtual operating rooms to train and fine-tune their skills. Meanwhile, sports enthusiasts can benefit from virtual reality in three ways:

1. Trying sports without the risk of injury

2. Doing seasonal sports year-round

3. Perfecting skills between games.

Virtual reality also can help players deal with stressful situations that cause them to lose their concentration. Goalies, for example, could get nervous when they see an opponent rushing toward them. By facing computer-generated balls or hockey pucks, a goalie can learn to stand his ground without losing his cool. Practicing blocking shots in a safe, simulated environment builds confidence and prepares a goalie for the real thing.

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Perhaps you’ve always wanted to ski. With virtual reality you can, without putting on a pair of boots or skis or even going outside. You won’t feel the wind in your face or break any bones, but you will get the hang of leaning forward, bending your knees and shifting your balance from side to side, and racing down the virtual slope projected on the screen in front of you. If you already know how to ski, you’ll be psyched up for the season before the first snowfall. It may even improve your technique.

Whether you’re an expert or a novice, virtual reality games give you the thrill of the real thing, without the risks. For some that means getting the chance to try their hand at unfamiliar sports such as archery, jet skiing, or snow boarding before deciding whether or not to take them up for real. For others, it’s a chance to get in shape for the sports they already play.

Think Like a Winner

Another way virtual reality could be used in sports training is in helping players prepare mentally, through a technique called visualization. Visualization means forming a mental picture of yourself at a sport or activity and then “playing a video” in your mind of precisely how you want it to go. Thanks to the scenery and sound effects of virtual worlds, it’s easy to see yourself in the race, crossing the finish line ahead of the pack. While it’s no substitute for sitting quietly and mentally rehearsing your moves, virtual reality, by providing a kind of live visualization, jump starts your imagination and gives you a mental edge.

Confidence, patience, concentration, and discipline are all qualities you need to succeed both at sports and at school. Imagining yourself as a winner is the key to making it happen in real life.

>>> View more: How virtual reality can affect you?

Cruising the electronic highway: How the electronics revolution could change your life.

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LAS VEGAS, Nevada–Have you ever wished you could stand under the basket while Shaquille O’Neil does one of his monster dunks? Or hunch over the plate while Roger Clemens hurls a 100-mile-an-hour fast-ball? Or jump around the ring while George Foreman throws a left hook right at your face?

If you have, you’re in luck. Soon, due to the magic of computers, virtual-reality games will bring these experiences and much, much more right into your home. Virtual reality is a make-believe computer world so seemingly real that it fools the mind and body. You feel as if you’re right in the center of the action. Until now, virtual reality has been confined to special game centers. Now it’s ready to invade your home.

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Home virtual-reality games were the stars at this year’s Consumer Electronics Show in Las Vegas on January 8 to 10. More than 2,000 electronics companies from all over the world demonstrated more than 40,000 new products to more than 100,000 visitors. Here are some of the most dazzling new gadgets.

* I-Glasses! Made by a company called Virtual i/0, these lightweight eyeglasses can be plugged into a computer or TV to create the visual effect of standing before a theater-sized 3-D screen. They will be able to transport wearers into a 3-D world that comes alive. Plugged into a TV, i-glasses! transport you right into the middle of the action.

* Virtual Boy. Virtual Boy, by Nintendo, is the first self-contained home virtual-reality game machine. Just place your face against the goggle-like machine, and each eye sees individual screens that, combined, give a 3-D effect.

* Sony Playstation. The Sony Playstation also has 3-D features that let players view dinosaurs as lifelike as those in Jurassic Park, race electronic cars that look and feel like the real thing, and fight martial arts opponents from all sides, not just from the front.

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Info Highway

A large part of the Consumer Electronics Show was devoted to demonstrating improvements in the electronic information highway–the huge and growing network of linked computers all over the world. Many companies introduced new systems that link up computer, television, and telephone lines more effectively to give more people access to the highway. Through those systems, you will not only be able to view all the latest TV shows (on as many as 500 channels!) anytime you want but will also be able to interact with your TV in a number of new ways.

* On-Line Info. You’ll be able to call up any magazine, newspaper or book from a huge electronic library and turn the pages electronically.

* Home Shopping. Using virtual reality, you’ll be able to travel to a shopping mall electronically, view the items, and pay for them–all without leaving your living room!

* Video Games. You’ll be able to play virtual-reality games with people over long distances. Imagine challenging someone 1,000 miles away to a duel with space lasers in 3-D! Video games over long-distance will be ready this year, say manufacturers, although they won’t yet be in virtual reality.

By the year 2000, say experts, the information highway will have developed to a point where it can allow virtual reality travel all over the world. You will be able to go shopping in Paris, play a video game with someone in Moscow, or watch the latest movie from Australian TV.

The brave new world of the electronic highway is just around the corner. Are you ready for it?

RELATED ARTICLE: Consider This…

Are there any negative aspects to having an unlimited video universe at your fingertips? Would people be tempted to stay in their electronic “cocoon” and not go outside to experience the real world? Can people escape the real world? Should they want to escape the real world?

Click here: Prairie high rollers: Two provinces want to expand gambling.

Prairie high rollers: Two provinces want to expand gambling.

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Prairie high rollers

Two provinces want to expand gambling

The decisions raised the spectre of two Prairie capitals vying for the title of Las Vegas North. Last week, the Manitoba government announced that it will open a year-round casino on the seventh floor of Winnipeg’s historic Fort Garry Hotel. Three days later, legislative gambling fever surfaced in Regina when the Saskatchewan government said that it will introduce gaming legislation to allow government-run electronic games of chance and possibly slot machines. According to government sources, such legalized gambling could generate up to $35 million a year in revenues, and much of it would be earmarked for health care. But despite the respectable goals, critics reacted swiftly and bitterly, saying that gambling would take money from many people who can least afford it. Declared Maj. Gary Venables of the Salvation Army in Regina: “The end does not justify the means.”

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But for provincial governments in need of money and reluctant to raise taxes, legislated gambling can provide a windfall. Manitoba has collected about $3.5 million a year from a small, government-run casino that operates 120 days a year in the Winnipeg Convention Centre but will be closed when the Fort Garry casino opens in October. Officials estimate that the new casino–which will also have gaming tables–will bring in as much as $10 million in revenue annually. British Columbia has also succumbed to the lure of sanctioned gambling–for three years the government-run B.C. Steamship Lines has had slot machines on two ships that travel between Victoria and Seattle. Their total of 160 machines collected $9 million in 1988 on only 140 days of operation–and then only during the two hours on each round trip when the ships were in Canadian waters.

For his part, Saskatchewan’s consumer and commercial affairs minister, Raymond Meiklejohn, defended the plan against the criticism from Venables and others. He said that millions of dollars leave the province for Nevada’s high-stakes gambling centres such as Las Vegas–a popular destination for westerners yearning to try their luck. Said Meiklejohn: “I think we could make a lot of revenue from it.”

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But critics of legalized gambling such as William Livant, professor of psychology at the University of Regina, said that government-sanctioned gambling is often nothing more than a way to get more tax revenue out of the poor. Said Livant: “It is a very regressive form of taxation. It is taxing the poor to pay for themselves.” Others said that they opposed looser gambling laws on moral grounds. Last week, the Vancouver school board said that it would not become involved in casino nights to raise money for educational activities. Said trustee Harkirpal Sara: “What would the kids say when they look at how the money is raised? They are watching the behavior of adult society. As moral educators, we have to be careful.” And in Quebec, Liberal House Leader Michel Gratton said last week that the government will not give in to pressure to allow casinos in the province. Gratton claimed that they could attract those involved in organized crime.

In Saskatchewan, officials did not specify what kind of gambling centres would be created once the legislation has been passed. But one thing seemed a sure bet: whatever form liberalization takes, fewer Prairie high rollers would feel the compulsion to get on a plane to Las Vegas.

Click here: Sorry, game over: Canadian software firms fall victim to fierce competition

Sorry, game over: Canadian software firms fall victim to fierce competition.

Abstract:

The most popular computer games are on CD-ROM, and the Canadian software industry is having a difficult time keeping up with competitors. Games have become more sophisticated, with many costing $1 million and up to two years to produce.

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John Lowry was racing against time. For months, he pleaded with bankers, negotiated with creditors and pitched his ideas to investors, hoping that someone would extend a financial lifeline to his Discis Knowledge Research Inc., a small Toronto-based software company that was struggling to make it in the computer-games business. “Our competitors have deeper pockets than we do,” Lowry, the company’s founder and chief executive, told one group of prospective investors earlier this year. “That’s why we are here. We do not want to be in the poor-starving-artists business.”

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Despite his pleadings, time finally ran out on Lowry. On Aug. 7, Discis, the publisher of one of Canada’s few homegrown hit computer games as well as a widely praised series of children’s books on CD-ROM, closed its doors for good. With revenues of $5 million last year, the company left more than $3 million in debt and a string of angry creditors. Among them are the designers of its most successful game, “Jewels of the Oracle,” who claim to be owed more than $400,000 in royalties, and three college students who say they were not fully paid when Discis halted development work on another game earlier this year. “This is not an easy business,” Lowry says. “Learning about the marketplace has been a very rude experience.”

If Lowry has found the business rude, others consider it downright nasty. Often described as a mega-billion-dollar industry that generates more revenue than Hollywood, the electronic games market is now claiming more casualties than a high-tech war game. Traditional video game sales have gone stale while manufacturers race to introduce technology that can keep up with their biggest competitors-games stored on compact discs that are designed to be played on a personal computer. At the same time, publishers of computer games are still recovering from disappointing sales last Christmas brought on, in part, by a glut of titles. By the end of 1995, there were at least 1,700 games available on CD-ROM.

In the end, predicts Brian Beninger, the Victoria-based founder and former director of Sanctuary Woods, a publisher of CD-ROM games and so-called edutainment software, it is likely that only a handful of full-service companies will survive. Although it continues to produce children’s titles, Sanctuary Woods withdrew from the games and entertainment market this spring after losing $18 million last year, a result Beninger blames on stiff competition and fickle consumers. “It is a market that is always inventing itself,” he says. “It goes in cycles, only the cycles are not moving on a 50-year basis like steel or oil. They’re moving on a five-year cycle, and by the time they’re all sorted out everyone is moving on to something else.”

These days, in fact, the industry is changing almost as fast as an IndyCar on a computer-generated racetrack. When it appeared in 1972, Pong, the first successful video game, captivated audiences with a square ball that bounced across a black screen. In the early 1980s, Nintendo and other manufacturers began selling cartridge games that could be played at home on a television. The current generation of games for computers began to attract widespread consumer interest only two years ago, when CD-ROM drives became standard equipment for home computers. IDC Link Inc., a New York City-based consulting company, estimates that there will be more than 23 million CD-ROM drives in use in the United States by the end of this year.

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Today’s computer games are almost as complex as the technology that drives them. Although some games are still sold on floppy disks, true gamers favor CD-ROMs, which can hold far more data and hence are better suited to high-resolution animation, digital sound tracks and eye-popping special effects. The best games are often packed with “eye candy” such as computer-generated models of real people and full-color environments that can be viewed from any angle. As the industry has evolved, the solitary computer nerds who once developed games in their basements have become largely a thing of the past. Most new games are produced by teams of artists and animators working with professional musicians and, in some cases, well-known actors who play starring roles in video sequences that help advance a story line. Former Star Wars heartthrob Mark Hamill, bad guy Christopher Walken, and comedian Joe Flaherty have all been featured in recent games, as have Steven Seagal’s karate chops.

It all adds up to enormous budgets and exhausting production schedules. A typical game takes up to two years and $1 million to produce, says Chris Gray, whose Toronto-based company, Gray Matter, designs games for industry giants Microsoft Corp. and Sega of America Inc. But even big budgets and movie stars are no guarantee of success. A mere 10 per cent of all new game titles turn a profit, says Paul Giurata, managing partner of Catalyst Resources, an electronics consulting company in Palo Alto, Calif. The top one per cent-an estimated 24 titles last year-account for 42 per cent of all sales. “If you are going to play in this marketplace, you have to be in the top 10 per cent,” says Giurata. “Otherwise, we cannot see a way to set up a sustainable business model.”

Unfortunately for smaller companies, success often depends more on marketing than entertainment value. Marketing budgets can run up to three times production costs, much of it spent trying to buy a spot on store shelves. Chain retailers typically charge steep fees for display space and marketing, forcing some publishers to hand over as much as 15 per cent of sales just to get a game into stores, says Sharon Spring, vice-president of marketing for Merisel Canada, a Toronto-based computer products distributor. Lowry, for his part, says that one U.S. retail chain charged Discis $19,000 to ensure that “Jewels of the Oracle,” an elaborate puzzle game that leads players on a quest to enter a mysterious ancient city, was prominently displayed. “If you are not an established publisher, the chances of getting a title on the shelf are virtually zero,” he adds.

But demanding retailers are only one of several factors behind Discis’s death. Like Beninger, Lowry says his firm has had trouble keeping pace with the market. Lowry was something of an innovator when he, his son David and former Apple Canada software developer Richard Wah Kan established the company in 1988. Working from their homes, they and a team of programmers spent two years designing educational CD-ROMs for young children. The resulting “Learn to Read” series took off when Discis began offering schools a bundle of 10 discs, along with a CD-ROM drive, for about $1,000. Discis sold $1 million worth of discs in 1990, its first year of production, and double that in its second.

Discis was also on the leading edge in 1995 when it spent $1.5 million to publish and market “Jewels of the Oracle.” “What we saw was a growing base of computers installed in homes,” says Lowry. “I personally thought ‘Jewels’ would sell over 250,000 copies.” The game was popular, but sales stalled at 80,000 when Discis ran out of marketing money. At the same time, sales of its educational titles fell flat as competitors launched hundreds of less expensive titles. “The bottom line is that teachers won’t spend five cents on it if they can get it cheaper in a store,” says Lowry.

The bottom line for Discis was a serious cash-flow problem. Earlier this year, the company stopped developing its own games and began hunting for cheaper software titles that could be released at the rate of about two a month. The theory, says Lowry, was to spread the risk around and “make our world predictable,” a tall order for anyone in the technology field.

Although Lowry’s gamble failed, new players continue to bet on the computer-games market. Ottawa-based business software giant Corel Corp. is among the latest entrants. It plans to release its first four CD-ROM games this month. Five more will follow by Christmas. Despite the odds, Gail Williams, director of Corel’s CD Home Product line, says the company believes it would be a mistake to stay out of the games market. Games now account for nearly half of all consumer CD-ROM sales, and the market is expected to keep growing by about 40 per cent a year. “You have to go with the flow,” says Williams. “If we are going to diversify, we have to take some risks.”

The challenge for any publisher is to keep up with the latest trends. These days, the demand is for network software-games that can be played by several people at once over a computer network or on the Internet. “CD-ROM was going to be the next big thing, and now the Internet will be the next big thing,” says programmer Aurel Langlois, who helped produce “Jewels of the Oracle” and is now a director of Electramedia, a computer-games producer in Toronto. “I think they are right about the Internet.” Even if they are wrong, there will be no shortage of companies willing to pursue some other dream of digital riches.

READY, AIM, SELL:

Value of computer-games software shipped to North American retailers, in millions:

  • 1991: $357
  • 1992: $459
  • 1993: $540
  • 1994 $614
  • 1995 $877

Source: Software Publishers Association

Click here: Winners

Winners.

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  • CAROL HUYNH

Her parents, boat people, fled Vietnam and settled in Hazelton, B.C., where Carol was born in 1980. She defeated the world champion to take wrestling gold in Beijing–in her tiny hometown, they stayed up all night to watch the match live.

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  • STEPHEN HARPER

He gambled on an early election, breaking his promise to wait until next year, and won: no majority, but 16 new seats.

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  • ROBERT MUGABE

Zimbabwe’s president stole the 2008 elections. ruined the economy and terrorized the opposition as well as voters, yet the 84-year-old has successfully resisted all attempts to remove him from power.

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  • JOHN PAULSON

The U.S. hedge fund guru bet against sub-prime mortgages and won big: in 2007, he Personally earned US$3.7 billion–and his funds are now up an additional 20 per cent.

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  • RAWI HAGE

The Montreal cabbie-turned-author won the $160,000 IMPAC prize in June for his first novel; his second, Cockroach, was nominated for Canada’s top three awards.

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  • ANNE HATHAWAY

The actress rebounded prettily from her split with a now-convicted fraudster, earning Oscar buzz for her star turn in Rachel Getting Married.

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  • TINA FEY

There was the slew of awards for her quirky sitcom 30 Rock, the successful entree to the big screen with Baby Mama, and then the gods dropped Sarah Palin in the comedienne’s lap. Fey’s impression of the Alaska governor sent Saturday Night Live’s ratings through the roof.

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  • ALEXANDER OVECHKIN

The Washington Capital left-winger won virtually everything in ’08.

Left fielder Jason Bay, the pride of Trail, B.C., hit the big time after being traded to the Red Sox and proving his worth in the playoffs … Laundry manager Bill Kirkland won an Excellence in B.C. Healthcare award for designing a hospital gown that doesn’t leave patients’ behinds exposed … Wii Fit, an interactive program that gets gamers off the couch to simulate sporting moves, is on track to outsell Grand Theft Auto IV … Canadian medical researchers Samuel Weiss, Nahum Sonenberg and Alan Bernstein won the most prestigious award you’ve never heard of: the Gairdner, often a precursor to a Nobel … A 12-year-old Quebecoise successfully sued her father, who didn’t let her go on a school trip after she misbehaved … Canada’s wilderness had a banner year, with an exponential expansion of nature reserves, particularly in the Northwest Territories.

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  • HILLARY RODHAM CLINTON

The first serious female presidential candidate lost, but also won; she proved it’s possible, and will be a D.C. powerhouse.

  • VLADIMIR PUTIN

The Russian president-turned-PM is still firmly in charge; he appointed a puppet successor and masterminded the war in Georgia.

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  • ‘FLASHPOINT’

CTV’s cop show was renewed for a second season on CBS–the first Canadian drama on a U.S. network since Due South.

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  • LEWIS HAMILTON

At 23, the youngest driver ever to win the Formula One championship-not bad for a Brit in his sophomore year on the circuit.

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  • AIG

As Wall Street burned, the insurance giant got a US$150-billion lifeline from taxpayers; execs celebrated with spa retreats and hunting trips.

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