CAUSE OF EFFECTS; DIGITAL EDITING SMOOTHS FILM FLAWS : DIGITAL MILESTONES.

Byline: Dave McNary Daily News Staff Writer

Late in final editing for ``Jerry Maguire,'' writer-director Cameron Crowe saw something terribly wrong.

Tom Cruise was walking across a hotel lobby, his 50 or so co-workers applauding his audacious ``mission statement.''

Standing next to Rene Zellweger - who would soon become Cruise's love interest in the movie - was a little boy. The problem was, it wasn't Jonathan Lipnicki, the precocious tyke who electrified the movie.

Instead, it was the boy who had been replaced early in production by Lipnicki.

Until a few years ago, Crowe would have had three options: 1. Leave the scene alone and hope people didn't notice the wrong kid; 2. Cut the parts of the scene with the wrong kid in it; 3. Commit to the enormous expense of gathering Cruise, Zellweger and the other 50 actors again for a reshoot with the right kid.

But thanks to the advent of powerful graphics computers, Crowe instead had a fourth option: choose one of hundreds of digital-effects specialists in the Los Angeles area to insert a potted plant in front of the kid. These effects houses represent a booming element in the explosive entertainment industry, bringing special effects to even the lowest-budget movie, television show or commercial.

``Digital special effects is a hot area, but it's a tough industry,'' said Jack Kyser, senior economist with the Economic Development Corp. of Los Angeles County. ``There are a ton of these places right now.''

Crowe picked Janice Tso, senior artist at Hollywood-based Digital Rezolution, or DRez, who spent two weeks altering the ``Jerry Maguire'' scene using a $1 million Quantel Domino workstation.

``The industry is relying more and more on these kind of techniques,'' Tso said in a recent interview. ``The more producers know about them, the more they expect, which pushes us to do better work.''

``Additionally, people who go to movies and watch television have become more and more critical of special effects.''

The use of top-end computer technology goes back two decades to George Lucas' ``Star Wars.'' Use of computers for digital effects has become so pervasive they are now being employed extensively on low-budget films such as Live Entertainment's recently released $6 million production of ``Wishmaster.''

Quantel marketing executive Colin Ritchie believes Hollywood producers have lost much of their once formidable resistance to using digital special effects. ``The entertainment industry had been very technophobic,'' he said. ``What you're seeing now is effects becoming much more pervasive.''

The industry is not for the meek. Silicon Graphics, best known for creating the dinosaurs in the two ``Jurassic Park'' movies, has been hurt over the past two years by increased competition and the distraction of absorbing supercomputer builder Cray Research. Silicon Graphics' stock price is off 30 percent in that period.

The company, however, remains bullish on Hollywood. ``The special effects industry is still a very healthy business with very solid growth even though it's very fragmented,'' SGI spokesman Andy Sheldon said.

Sheldon said the industry has moved toward a ``fix it in post production'' strategy, noting that actors now include in contracts that their facial features will be digitally enhanced. ``What you see a lot more on sets is actors walking around with tennis balls to use as a marker for motion tracking to facilitate electronic post-production,'' he said.

Sheldon believes the presence of low-cost workstations - SGI now sells an O2 for $6,000 - has taken the creation of special effects away from major studios and into the hands of hundreds of smaller players. ``We're seeing effects created at all ranges, down to the local $2,000 cable ad for Ford dealers,'' he said.

At DRez, Tso worked six months to create 75 different ``invisible effects'' on ``Winter Guest,'' a low-budget production starring Emma Thompson and set for a Dec. 19 release by art-house specialist Fine Line. The script for the story, set in a small Scottish seaport, called for snow everywhere and the sea to be frozen, which would have meant shooting in Greenland at prohibitive costs.

Instead, Tso created the snow and ice on the Domino and used it to solve problems such as inserting sea gulls and keeping the lighting and cloud patterns consistent. That meant close collaboration with Steve Rundell, the film's visual effects supervisor, to approve, or ``buy off'' shots.

``The last three months were pretty intense,'' she said. ``I had to keep the atmosphere of the film consistent because it required a very specific mood.''

Quantel, a subsidiary of British conglomerate Carlton Communications, has sold Dominos to 31 sites worldwide, including half a dozen to Hollywood post-production houses. It has 22 people in its Los Angeles office currently.

``This is the most important market in the world for us,'' Ritchie said.

The world of special effects has become among the most competitive in the cutthroat business of entertainment production in Hollywood as dozens of new shops start up each month. Two major houses - Boss Film Studios in Marina Del Rey and Warner Digital in Burbank - closed down this summer, leaving 200 people without jobs, although industry insiders believe most were able to hook on elsewhere fairly quickly.

That's because the overall health of the production business is very good right now, said Kyser, the county economist. He said production should increase 8 percent over last year, and employment in the county will be up about 22,000 jobs on a base of 224,000.

``I would predict the effects business will see two or three years of turmoil before it starts to stabilize,'' he said.

Industry insiders insist the special-effects business is healthy as long as it focuses on product rather than empire-building.

``I suppose it's guys like me that have ruined it for the big outfits,'' said Kevin Kutchaver, president of Burbank-based Flat Earth Productions, a 2-year-old concern which performs CGI for ``Hercules,'' ``Xena'' and ``Timecop.'' ``I'm sure there are a lot of people wondering who are all these effects houses? What you're seeing is the same burst of new companies you saw after the `Star Wars' movies came out.''

Kutchaver, whose work in the business began at George Lucas' Industrial Light & Magic with ``Return of the Jedi'' in 1982, formed Flat Earth in March 1995 with industry veterans Doug Beswick and Kevin O'Neill. ``We named it Flat Earth because we feel like we've been around since the age of the dinosaurs,'' he explains.

Kutchaver, whose credits include ``Ghostbusters II,'' ``The Addams Family'' and the three ``RoboCop'' movies, believes that companies are deluding themselves to invest heavily in Dominos or Silicon Graphics Onyxes.

``When you buy a high-price machine, you create a beast that has to be fed to amortize the costs,'' he said. ``If you have a company that's built as a superstructure to do the effects for an event movie, you're sunk if you don't keep getting the work.''

Kutchaver believes Flat Earth can deliver what's expected simply by using the right people. ``On a TV show, it's always fast and furious in terms of when they want and how,'' he said. ``The type of machines we use are five times faster than they were two years ago anyhow, so I'd rather spend money hiring people.''

Flat Earth uses low-priced workstations and Apple Macintoshes for most of its effects work, which currently includes building a ``virtual set'' of the launching area in ``Timecop.'' ``We've been doing swords and sorcery for so long that it's kind of nice to be doing modern things like guns and explosions,'' he said.

Hollywood studios have been increasingly using digitalization, although Industrial Light & Magic is responsible for most of the industry's breakthroughs.

``Star Wars,'' 1977

Used motion control camera

``Star Trek II,'' 1982,

Featured a computer-generated scene

``Young Sherlock Holmes,'' 1985

Featured a computer-generated character

``Willow,'' 1988

Featured morphing, or on-screen transformation

``Terminator 2,'' 1991

Co-starred a digitally created character

``Death Becomes Her,'' 1993

Effects included computer-generated skin

``Forrest Gump,'' 1994

Mixed fictional and historical footage

``Jumanji,'' 1995

Computer-generated hair

``Star Wars Special Edition,'' 1997

Added scenes with a mobile Jabba the Hutt.

CAPTION(S):

7 Photos, Box

Box: DIGITAL MILESTONES (See text)

Photo: (1--Color) Quantel director of business development Colin Ritchie and DRez digital artist Janice Tso demonstrate the Quantel Domino system.

Phil McCarten/Daily News

(2--Color) Now you see him...

Tom Cruise in ``Jerry Maguire'' walks across a hotel lobby with Renee Zellweger. Sitting at her elbow is a little boy. The problem: it's a young actor who was later replaced by Jonathan Lipnicki.

(3--Color) Now you don't

Writer-director Cameron Crowe turns to digital-effects specialits who insert a potted plant. The scene is saved without the enormous expense of gathering the other 50 actors for a reshoot.

(4--Color) Tom Hanks in ``Forrest Gump.''

(5-6--Color) Top: Xena Warrior Princess battles Poseidon in a Flat Earth production. The digital effects house also creates creatures for shows like ``Hercules: The Legendary Journeys,'' at right.

(7--Color) Robin Williams in ``Jumanji.''