Interactive Home Systems develops electronic imaging technology

MICROSOFT SPINOFF PROMISES A BRAVE NEW WORLD

June 29, 1992|By Knight-Ridder News Service

In a nondescript business park near downtown Redmond, Wash., a baby Microsoft is being born.

Behind a door labeled simply IHS, with the slogan "No Crybabies," the software keys to an electronic-imaging kingdom are being forged.

IHS, for Interactive Home Systems, is keeping the exact nature of its strategic planning under wraps. But backing it are the vision, intensity and financial resources of the man who co-founded Microsoft 17 years ago and is its chairman -- Bill Gates.

He may be embarking on a repeat act.

Already IHS has extended well beyond its initial charter of providing images for Mr. Gates' new home in Medina, Wash. Recently, it unveiled a pioneering digitized art "kiosk" at the Seattle Art Museum displaying 250 of the 1,000 museum works that Mr. Gates licensed last May.

IHS is negotiating similar arrangements with the National Gallery of London, the Smithsonian Institution and the Art Institute of Chicago. Representatives would not say how close deals are.

With 35 employees, IHS is about twice the size Microsoft was when, in 1979, the software company moved from Albuquerque, N.M., to Bellevue, Wash. IHS is hiring at a brisk clip, recently adding a British director, imaging-license specialist, image editor and an attorney specializing in intellectual property and technology.

Its new president, Steve Arnold, a former psychologist, was lured from Lucasfilm Ltd., where he specialized in interactive media, including video games and educational applications.

IHS' new talent pool suggests a broad scope for its future pursuits -- extending beyond still images to sound, animation and entertainment markets in multimedia computer technology. And that is where the deep pockets of Mr. Gates -- who remains the company's sole financial backer -- may have their ultimate payoff.

"The multimedia market has enormous potential," said Nick Arnett, president of Multimedia Computer Corp. in Santa Clara, Calif. Mr. Arnett ticks off a number of segments -- starting with the $2 billion K-12 education market, with a 30 percent annual software growth, as "the hottest arena right now."

Corporate training and education, estimated to be a $75 million business, is expected to reach $1 billion by 1995, Mr. Arnett said. Multimedia also is expected within a few years to reach billion-dollar levels in health care, the travel industry, business sales and marketing and entertainment, Mr. Arnett said.

When it began life as Home Computer Systems Inc. in September 1989 -- a name that lasted only a few days -- IHS aimed to develop "electronic systems for the home," as its

corporate license later stated.

Specifically, Mr. Gates' new home. Mr. Gates, who uses his home for many company-related events, envisioned the new 4.5-acre residence as an "estate-of-the-art" showcase that would dazzle technological and business leaders from throughout the world. Integral to the floor plan were yet-to-be-marketed, high-resolution, wall-sized, flat-panel color displays capable of showing lifelike digitized images of photography and art.

The point behind the technology was to allow the images to change depending on who was in the room and what their preferences were. In addition to its technological challenges, however, the scheme brought up new licensing and distribution issues.

In many cases, museums either own or control the works or reproductions of the works. Gaining even limited rights to convert them electronically can involve a multitude of agreements with museums, agencies and the artists themselves.

"It's a ton of work," said Bruce Miller, IHS project manager for the Seattle Art Museum undertaking, labeling the process "an aspect of multimedia that's slowing everything down."

Digitizing artwork also is an expensive procedure, Mr. Miller acknowledged. Neither Mr. Miller nor Mr. Arnold would say how much IHS has spent so far -- a figure that "would miss the point, anyway," Mr. Arnold said. "We're still basically in research-and-development mode, where costs are always high."

And the return -- for now, at least -- is minimal. Equipment needed to make such images commercially feasible is still expensive and, in the case of software, complex to develop.

"It makes sense for them [IHS] to be starting now on buying up rights," said Jesse Berst, publisher of the Windows Watcher newsletter in Bellevue. "But it's a gamble."

Financial risk is one reason IHS has absorbed the entire cost of the SAM exhibit, said Jay Gates, museum director, who is no relation to Microsoft's chairman. "If they hadn't picked up every cost, we couldn't have afforded it," he said.

One of the goals of Curt Blake, who left Aldus as general counsel to head up IHS' legal and business affairs, is to "identify the hot spots" in negotiations over digital rights, he said. Legal boilerplate could then be written to reduce "excessive negotiating time."

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