Dressing up DVDs.

CANNED INTERACTIVE, ONE OF HOLLYWOOD'S EARLIEST MULTIMEDIA FIRMS, MAKES MOST OF ITS MONEY THESE DAYS PUTTING CONTENT (LIKE GAMES) ON DIGITAL DISCS

IN the beginning, there was Canned Inter active.

Founded in 1993, CI is a veritable dinosaur in its field, an "old, new media company," said CEO and Creative Director Doug Textor.

The old/new motif is woven throughout the company's image and operations. Its 6,500-square-foot offices are in the El Capitan Theatre building on Hollywood Boulevard -- an old Art Deco building that was recently renovated. Its stock-in-trade is new technologies, but operations take a bricks-and-mortar approach.

"We're not a 4 a.m., pierced-kids-eating-candy-bars-and-potato-chips company," Textor said. "We work a normal business day and respect the fact that people have outside lives."

It may seem odd that a company formed just seven years ago is considered an old-time veteran, but that's why they call it "new" media. Today, Canned Interactive designs Web sites (mainly on behalf of entertainment companies), produces video games and packages DVD movies -- which means it creates all the content on the disc except the movies, a considerable undertaking on most current releases.

That's a big change from the company's business in 1993, when partners Textor and Jay Papke landed their first big client: Capitol Records, which hired CI to produce an interactive video game to complement Frank Sinatra's "Duets" release.

CDs on the computer

In those days, such "enhanced CDs" were on the cutting edge of new media. Record companies released music discs that also contained content that could be read on a computer's CD-ROM drive, such as extra liner notes, games and other stuff. Enhanced CDs never really caught on with consumers, and while they are still being released, they no longer make up much of CI's business.

The Web and DVD have more than made up for the disappointment of enhanced CDs. From $300,000 in revenues in 1997, the company jumped to $2 million last year and is on track for $3 million in 2000.

CI switched its focus to online projects as early as 1994. Capitol hired the company again to design its corporate Web site, and from there CI started to land Hollywood studios looking to promote their films online.

It hasn't always been a lucrative business. After developing a Web site for New Line Cinema's "Lost in Space" release that contained a number of interactive features, the studio offered CI a mere $1,000 to put those features on the DVD release, and CI bit.

"We've accepted lowball offers to get our foot in the door," Textor said.

Now, a DVD job can generate anywhere from $10,000 to $200,000, depending on the complexity of CI's assignment. All the work is done on a flat-fee basis, meaning CI doesn't collect a percentage of any DVD sales.

Textor sees a crossroads ahead for CI. "Once broadband is reality, we'll have to choose between the road to entertainment or advertisement. Investors like to hear advertising, but I could go either way."

CI has made a profit every year since its inception, Textor said. Key to that profitability has been its realization that Internet, broadband, and DVD technologies are useless without a little old-fashioned creativity. "You're not going to use them to change what people like, you're just going to give it to them 'cooler,"' he said.

A graduate of Stanford University's graduate school of business, Textor also has a background as a poet, playwright and filmmaker. Papke is a graphic artist who did graffiti backdrops for the 1988 MTV Music Awards. And that's important, Textor believes, as the company goes about its business of converting two major film titles a week to DVD. The point person on each product is a creative director, not a technologist -- "a conceptual thinker who can apply old-media ideas to new-media formats," Textor says.

Games and a movie

As an example, he points to the DVD that CI produced for the Warner Bros. film "The Matrix." This DVD, the best selling in history at 3.5 million copies, contains a robust interactive menu. Among its features are a game called "Are You the One?" in which users try to beat the clock while answering questions about the movie. If users need help, they just click and refer back to the movie with an option that calls up the relevant scene.

Another feature conjures up the director's elaborate pre-shoot storyboard to the original script. (Scenes are normally drawn up by hand before being filmed.)

"They've really worked with us to push the envelope on DVD-ROM and Web 'enablement.' With their help, we've brought the power of the personal computer into the entertainment experience with DVD," said Paul Hempstreet, director of programming for Warner Home Video, who worked with CI on "The Matrix," "You've Got Mail," and the upcoming DVD for "The Perfect Storm."

For Textor, who is continually looking for ways to improve the product, the next step is to get more cooperation from the creative talent involved in making the movie that he's translating for DVD.

He expresses frustration over the fact that the point of business contact between CI and Hollywood studios is usually the marketing or publicity department. He thinks it needs to be the film's director. He points to the famous "Blair Witch Project" success to illustrate the point.

"That was a Web site on which the director provided background material that led you into the movie," he said.

With more involvement from a film's creators, he believes his company could create much richer DVD content

Regarding the company's growth, he has a clear picture. "It depends upon our ability to home-grow or find creative directors. That's the scarcest resource."

Canned Interactive

Year Founded: 1993

Core Business: DVD formatting and Web-related services

Revenues in 1997: $300,000

Revenues in 1998: $2 million

Revenues in 2000: $3 million (projected)

Employees in 1997: 3

Employees in 2000: 25

Goal: To offer the most innovative solutions in interactive entertainment, advertising and marketing

Driving Force: Demand for experienced, creative marketers for DVD and Web entertainment