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AN EDUCATION IN GAME MARKET\33-year-old's magical touch has transformed passion for role playing\adventures into a lucrative reality.

Byline: Yardena Arar Daily News Staff Writer

Among the trolls, dragons and wizards of computer fantasy role-playing games, Jon Van Canegham has proved a durable monarch.

At 33, he's headed his own company, New World Computing, for well over a decade, taking it from his parents' West Hollywood apartment to an Agoura Hills office suite with 28 full-time employees and several external developers. In that time New World has published about 30 titles, including the popular "Might and Magic" series, for Macintosh, PC, Amiga, Sega and Nintendo.

Two years ago, New World merged with publicly held NTN Communications of Carlsbad in a stock swap valued at $10 million - a handsome return on a venture that had its roots in Van Canegham's twin passions for fantasy role-playing games (or RPGs, as they are known by players) and computers.

The RPGs came first. "I was always a gamer," recalled Van Canegham, looking like an affluent grad student in jeans and an expensive-looking sweater.

Like many young people in the 1970s, Van Canegham was particularly keen on Dungeons & Dragons, a game requiring several players who take on fantasy personas with various attributes that determine their success in assorted quests.

But gaming for years was simply a hobby, and Van Canegham went to UCLA expecting to follow in his father's footsteps by becoming a physician. His first encounter with an Apple II computer changed all that.

"I played a couple of games and was immediately hooked," he said. Van Canegham also quickly recognized the potential of computers to provide a satisfying RPG experience.

"You don't have to wait for five or six players to get together," he said.

He immediately switched majors from pre-med to computer science and immersed himself in the fairly primitive games of the era.

"Games were sold in Ziploc bags," he said. "You'd get a disk with cardboard backing and a piece of paper with instructions."

Computer science itself was mostly about large mainframes and punch cards. So Van Canegham taught himself how to program, and - inspired by such pioneering games as Sirtech's Wizardry and Ultima by Origin (the company now best known for its "Wing Commander" series) - set out to create a game of his own.

Doing everything himself, from the graphics and game design to actual coding, Van Canegham started in his senior year and founded New World in 1984 with $70,000 from an inheritance, his parents and a bank loan that they co-signed.

The project that turned into "Might and Magic" ended up taking 2-1/2 years, by the end of which Van Canegham had moved out and was no longer speaking to his parents.

Do-it-yourself succeeds

Van Canegham originally intended New World to be his development company, but changed his mind in late 1985 and early 1986 when he started showing his finished game to publishers who told him that as a newcomer, he could expect royalties of only $1 on a $50 to $60 retail price.

Disgusted, Van Canegham began reading up on running a small business and used his remaining capital to pay for a run of 5,000 games - the whole thing fit on two 5-1/4-inch floppies - packaging, an 800 number and a professionally prepared ad that ran in magazines for Apple users.

"I still remember the ad," Van Canegham said. "It said, 'Finally, a game that takes you seriously.' "

The campaign for the $55 game worked beyond his wildest expectations. "The moment the ad hit, the phone rang off the hook," Van Canegham recalled. "Within two months we'd sold all 5,000 units."

The publishers, who less than a year earlier had offered Van Canegham $1 a game, were now flying him and Ron Spitzer, a gaming buddy with some business expertise, around the country. But Van Canegham was no longer interested in keeping New World a developer only. "I thought it was more exciting to build a company," he said.

Instead, he and his friend - now a partner - struck a deal to become the first affiliate label of Activision, letting the larger Los Angeles-based company serve as his distributor. Initially, Van Canegham recruited friends to help fill orders as they came in from Activision to New World, now headquartered in Van Nuys.

"Our office immediately turned into Gamer Central after hours," he said. But when the orders started numbering in the thousands, he found his friends were no longer willing to assemble packages for pizza, beer and a place to play games.

So over the next few years, New World became a more serious company, developing new titles and adapting popular old ones to other platforms. The company left Activision for Electronic Arts in 1989, and since then has handled its own distribution through contractors.

Long hair to big bucks

Van Canegham is still astonished by the transformation he has seen, not only in his own company but the entire computer gaming business.

"I knew 'em back when they all had long hair and Ziploc bags," he said. "Now everyone's going public. Now all these companies are worth big bucks, which always amazes me because the assets go home at night."

Van Canegham admits the consolidation around him heavily influenced his own decision to sell to NTN, which operates a nationwide interactive television network best known for sports, trivia and other games in restaurants and bars.

"The main reason for doing it was that we couldn't continue to grow, and we were going to have a difficult time competing," he said.

Indeed, New World has found the going a lot tougher in recent years. A look at NTN's financial reports shows that software sales - which is basically the New World component - are down.

Van Canegham attributes this in part to recent changes in the fiscal year for New World, but also to a couple of games that simply didn't catch on, most notably the action game "Zephyr."

Terry Coleman, reviews editor of San Francisco-based ComIputer Gaming World, said New World stumbles when it strays from its niche-market roots and tries to score with the larger audience with games like "Zephyr."

" 'Zephyr' had some nice ideas, but when you look at the quality of the other action games that came out at the time - 'Tie Fighter,' 'WingCommander,' 'Magic Carpet' - 'Zephyr' was kind of a tame product," Coleman said.

But Coleman said New World still excels at strategy and RPGs, such as its currently popular "Heroes of Might and Magic," which got the maximum five stars from Computer Gaming World - and "Anvil of Dawn."

" 'Heroes of Might and Magic' is a wonderful fantasy strategy game, where you fight with orcs and trolls and gargoyles and dragons," Coleman said. "It's been done a million times before, but it's done very well."

Van Canegham acknowledged that "Zephyr" had made him wary of devoting internal resources to action development; his entries in that field now come from external developers.

However, he noted that fewer and fewer elaborate RPGs are being released, in part because of the rapid upward spiral of computer technology.

"We made games for Apple II's for eight years," he recalled. "Now, every six months the criteria for the machine changes." Because of the relatively lengthy development process for graphics-intensive RPGs, many are technologically obsolete by the time they reach stores.

Another problem is the increasingly hit-driven nature of the business.

"The early games would sell for three, four years," he said. "Now, if it's not selling in a month, it goes to the budget shelves."

Van Canegham also bemoans what he views as the increased importance of sales and marketing. "When I started, if you had a good game, it was going to sell even if it was in a brown paper bag under the rock. Today, the pendulum has swung. . . . Having a good game just doesn't cut it any more."

There's a future on-line

Van Canegham, who when not at his Agoura Hills home or Santa YneIz ranch may be found racing Formula Fords, has had other woes associated with his buyout. San Diego shareholder lawsuit specialist Bill Lerach has named him in a suit alleging insider trading over a stock sale in early 1995, a lawsuit NTN corporate counsel Laura Kass said the company was "vigorously defending."

But despite these recent headaches, Van Canegham is optimistic about New World's future as on-line gaming comes of age. He sees the on-line universe as having great potential to reinvigorate RPGs.

"With a packaged game, you ship it and it's done. With an on-line game, the game can actually evolve over time," he said.

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Photo (1--Color) New World's popular "Heroes of Might and Magic" game thrives. Tina Gerson/Daily News (2--Color) Jon Van Canegham, who first marketed "Might and Magic" himself, manages a 28-employee company in Agoura Hills.
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Copyright 1996, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:BUSINESS
Publication:Daily News (Los Angeles, CA)
Geographic Code:4EUUK
Date:Mar 11, 1996
Words:1459
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