Giant Steps

Navigating the lessons of their separate wins-and losses-in the DVD authoring market, Giant Interactive’s David Anthony and Jeff Stabenau now developing for the Sony PlayStation Portable, head straight back to the top.

Let’s face it: For one reason or another, most production studios eventually go south, and more than most fizzle after years of successful projects and happy clients- which doesn’t make it any easier to accept or to recover from. But digital media is a shape-shifting, heartless beast, and time spent licking your wounds in this market is time lost to the competition. Sometimes, the best advice is to just swallow your pride and get right back in there, your sights set clearly on full-throttle success. When DVD-authoring pioneers and former competitors David Anthony and Jeff Stabenau- founders, individually, of the former DVD-based facilities Crush, Blink and Zuma Digital- launched Giant Interactive, in early May, they appreciated the irony in their new venture’s name. "It’s still a boutique approach we’re taking," says Anthony, sitting in the same building in New York’s Chelsea Market where his last business, Metropolis DVD, flourished and then folded. "We never tried to be giants in this business. We just always thought we had a good grasp of how the business was going to go." As the seven-month-young Giant Interactive, they’re betting that business will be built on cutting-edge applications such as interactive television, wireless media and the nascent UMD format for the Sony PlayStation Portable (see sidebar, page 38).

Stabenau, like Anthony, has deep roots in New York’s DVD scene: In 1996, after a stint as an editor at Unitel video post, he founded Crush Digital, one of the first independent DVD authoring facilities in the world. After Crush was acquired by Post Perfect (part of the New York Media Group), Stabenau continued at the helm for several years. His next founding move was Blink Digital, the avant-garde of new media production for multinational post-production giant Ascent Media, which would go on to use the Blink brand to launch authoring facilities in London and Los Angeles.

In 1997, Anthony founded Zuma Digital with Jon Silverman, the founder of JSM Music in Manhattan, where Anthony had interned and later worked after graduation from Bennington College (he earned the school’s first-ever media arts degree). A few years later, he headed downtown and created Metropolis DVD, a joint venture with audio mastering companies Metropolis, in London, and Sterling Sound, in New York City.

Hey, are both these guys suffering from career ADD? Or are they just mavericks shifting smartly with the technological tide? "The thing you have to remember," says Anthony, "is in 1996 there weren’t even any hardware players around. There was a lot of talk about DVD on the professional side, but it was really only,‘It’s coming!’ and little else. In 1996, there were still competing factions that would ultimately combine to create DVD. But this was the context in which both Jeff and I, independently, became interested in DVD." And it’s also why, because of this shared experience, they’re ready to begin again.

When Stabenau founded Crush Digital and Anthony started Zuma, beta-level authoring software from Sonic Solutions or Daiken, two of a handful of companies supplying such systems, cost about $150,000. Compression engines and other equipment pushed the initial investment for DVD authoring to over a half-million dollars. By 2000, Sonic Solutions had acquired its competitor, Daiken; Sonic was already on a new strategic course aimed at the lower end of the market. Software that once cost $90,000 soon had stripped-down versions available for $99.

Companies that got into the authoring game early also paid another price. "It was a double-edged sword," says Anthony. "You’re one of the first in and you’re automatically regarded as an authority and expert in the technology. On the other hand, it costs a lot to be first in, the tools are prohibitively expensive, and no one really knows what the technology does."

On the upside, both Zuma and Crush spent significant amounts of time and energy educating the potential customer base about a format they didn’t yet know they needed. But even after prospective clients were brought up to speed on DVD’s benefits, the market wasn’t ready, which meant that prior to 2000, not many companies would commit to it. Employees of the new authoring companies also required even more intense training than prospective customers since they were the ones doing the educating. Imagine running a studio where you have to do all this and keep up with a constant stream of new products and software. (Sound familiar?)

But wait, there’s more: Both of Stabenau’s ventures launched at the height of the dot-com boom. "I remember interviewing a graphic designer just out of school who was asking for $60,000 to start!" he says. "But that’s exactly what people were expecting in the middle of all that craziness. We were also trying to keep on top of all the new tools, and the need to do constant R&D on a new technology can slow a company down just at the point when it’s most vulnerable – when it has to spend more money than it makes."

The market soon added even more to this mix when a slew of low-priced software begat a brand-new tier of authoring facilities. "When that happened, there was a segment of our business – the simpler, low-end project; the straight conversion stuff – that completely fell off," says Anthony.

Finding capital and business partners for new technology ventures is also problematic, and for an interesting reason: Rather than being simply baffled by a new format, backers and partners in this business tend to use what they already know as a metaphor for the next generation of technology. After Post Perfect became the owner of Crush, Stabenau found that he had to constantly persuade his new employers that authoring for DVD was not the same as post for linear video, a situation he encountered again at Ascent Media and Blink Digital. "I went into the partnership thinking that [New York Media Group’s] money would let me expand more quickly than I could on my own," he explains. "I also hoped we would be able to build some reciprocity between Crush and Post Perfect, that Post Perfect would become a client of Crush. The truth is, DVD is interactive, not linear. DVD is about distribution, which post production doesn’t necessarily have to think about in film and television."

Like post, however, DVD authoring is ultimately about talent. Says Anthony, "DVD is really about expertise first- a great menu designer, for instance- and technology second, as opposed to the mindset you once saw in post, which is finally changing, which was,‘We have this million-dollar Telecine room; oh, yeah, by the way, we also have this good colorist guy.’ Doing DVD is like being a building contractor- you need to have the right saws and other tools, but more important, you need to have organizational skills to properly handle the interactivity. It took a lot of people a long time to figure that out, no matter how often we told them."

Being in the heart of New York’s "Silicon Alley" made sense for emerging interactive concerns in the 1990s. Both Stabenau and Anthony saw a fertile field to cultivate DVD’s interactivity for the same sorts of commercial and industrial clients that were embracing the Internet. The reality, however, was that home video would be the first successful arena for the format. "And the home video business is based solidly in California," says Anthony. "It was difficult for New York-based companies to access those markets. Also, we were selling ourselves as a creative company; the film industry was looking for a [service] provider."

This situation got worse around 2000 when, as collateral to the consolidation of the top tier of large replication companies, such as Technicolor, the big guns began adding or increasing the scope of their own authoring services, casting beyond Hollywood for clients and often rolling authoring costs into service packages that included DVD replication, printing and packages. "Boutiques- which is what our companies were- cannot compete when the large replicators offer their authoring services for‘free’ as a loss leader," Anthony says. "The reality is, clients were paying much more for authoring; it was just being spread out in their replication bill and they didn’t know it."

Zuma had some notable successes, including one of its first projects, for carmaker BMW, a multi-source multimedia display for the 1997 VH-1 Fashion Awards show. Metropolis DVD also was an early participant in the burgeoning music video-on-DVD market, now the fastest-growing prerecorded music category listed by the RIAA. The company won awards for its work on the Rolling Stones’ 4 Flicks package and edgy style on Slipknot’s Disasterpieces DVD. Metropolis was also nominated for a Grammy Award in 2004 for the Nappy Roots DVD on Atlantic Records. But all that couldn’t compete with the larger economic trend at work- a four-year-long sales decline experienced by the music industry from 2001 to 2004- which caused some of the major record labels, particularly Sony Music (now Sony/BMG) to ramp up their own DVD music video operations. "And they are their own best customers," says Anthony.

Then there are the larger economic trends at work that, though they lumber along slowly, often can’t be foreseen until it’s too late. Stabenau says Crush Digital was ultimately done in by the financial dissolution of the New York Media Group and Post Perfect, which occurred just as Crush Digital was gaining traction in the market. Anthony has bought back all the assets in what he says had become an undervalued company due to corporate vision changes by his venture partners at Metropolis DVD. When the terror attacks of 2001 pushed further cutbacks in budgets for advertising and corporate marketing, Stabenau and Anthony, separately, suffered in two key business areas that non-Hollywood authoring companies typically bank on.

But those kinds of experiences have made Stabenau and Anthony incredibly agile in the face of what promises to be a relentlessly multiformat landscape. Giant Interactive has already authored a few newly released titles for Sony’s new PSP game system on the brand new UMD disc format- and is preparing early release titles for interactive television series on the emerging HD DVD format. Other projects include authoring all 80 years of The New Yorker magazine onto eight DVD-9 discs, and a complex 12-disc interactive English language educational course for Disney, built on ABC News broadcasts and aimed at traveling business people and other adults.

In other words, business has never been better. "There are even more opportunities out there now than there were eight years ago," says Anthony. "More formats, more need for clients to look to us to help them decide among them. And things that might have worked against us back then work for us now. When you can compete purely on qualitative issues, it really is a level playing field." Well, not exactly: A combined 19 years of experience, plus a little luck and timing, has its advantages. "When it came right down to it, the sun, moon and stars were all aligned so that Jeff and I, once fierce head-to-head competitors, could finally work together," Anthony says. "The fact that we recognized that opportunity for what it was and took that leap to start a business together is the strategic part."

And does that persistent, nagging feeling that the bottom could drop out at any given moment still keep them up at night? "Creating a new partnership and a new venture is an incredibly scary proposition, because you’re going into territory that’s uncharted," he adds. "The fear, of course, is that you’re going to do this and it’s not going to work. Everybody has to deal with that; it’s just part of this business. If only somebody had told us,‘Hey, it’ll work – don’t worry!’ But you take that on faith, and you trust your gut and, even more important, your experience to move you forward."

If its time has come, a killer app will make its way into the world, no matter how it first stumbles on the path to monstrous maturity. Take small-screen, portable video. Though the PlayStation Portable’s UMD disc "is only for the PSP now," says David Anthony, "Sony’s hope, obviously, is that the format will take off." And that’s why he and Jeff Stabenau and the team at Giant Interactive are listening intently to their client and developing furiously as the market takes off. "It still caught everybody by surprise – I mean, who thought anyone would want to watch their videos on such a small-screen device?! Like the video iPod, video-viewing is not its primary use. Neither device relies solely on its main use to play portable video. But at this point, watching video on the PSP is one of its coolest."

As the only studio outside Sony to have authored and delivered finished PSP titles, Giant Interactive is in a unique position. "Technically and creatively, it’s been a roller-coaster ride, but in a good way," admits Anthony. "As with other formats we’ve worked with in the past that have emerged quickly, you have to jump right in and figure out how to do it, stay ahead of the curve while you get in there and create a new way of working – all at the same time." Recent projects include UMDs for World Wrestling Entertainment, MTV and the Rolling Stones.

The challenge, he says, is adapting proven authoring techniques for a whole new form factor. "The menu systems have to be adapted quite a bit, because they are 16:9 and, of course, the whole navigation is different." But therein also lies UMD’s charm. "UMD is really training wheels for authoring in HD," he adds. "It’s much more script-based and Java-based. And that’s where we’re headed here at Giant; we’ve got our sights clearly set on these next-generation interactive projects, which include a lot of highly interactive games that you play with a group on the TV." Could these be our next-generation parlor games? Absolutely, says Anthony. "Video games on a PC or PSP are primarily solitary experiences," he explains. "You against the computer or device. These family-room games, though, are inherently social, more like old-fashioned board games. We’re talking now about bringing a host of classic board games and game shows to DVD. And since Jeff has already worked with a lot of interactive TV companies, it’s a natural evolution."

Jeff Stabenau, president
David Anthony, vice president of creative development
Meri Hassouni, executive producer
Stephen Altobello, producer
Total of 15 full-time staff

TECHNOLOGY
Cinema Craft Extreme MPEG-2 encoder
4 Sonic Scenarist workstations
1 UMD authoring workstation with Sony UMD scripting/authoring software
1 UMD encoding workstation (with five parallel servers for processing UMD encoding)
3 Apple Final Cut Pro workstations with Blackmagic Design DeckLink HD Apple XRAID

Giant Interactive
88 10th Avenue, Suite 6W New York, NY 10011
ph. 212.675.7300
e-mail: info@giant-interactive.com
www.giant-interactive.com