L.A. Multimedia Pioneer Sells Out To Conglomerate.

One of Hollywood's older multimedia companies has been sold to a startup technology conglomerate in Connecticut, claiming industry competition was too much.

Canned Interactive, a nine-year-old designer of Web sites and DVDs, was bought by Change Technology Partners Inc., a public company built in the past 10 months from acquisitions of other tech firms in the entertainment industry. The purchase amount was undisclosed, but Jay Papke, former president of Canned and new managing director of Change, said the deal was for $1 million in cash and "several million shares of Change stock."

The purchase makes Canned the first West Coast operation for Change, a little known, year-old public company.

Canned Interactive, located in the El Capitan Theatre building on Hollywood Boulevard, started out making CDs with enhanced features, such as interactive video games. The company was founded by Doug Textor, a graduate of Stanford University's graduate school of business. His partner, Papke, was a graphic artist who did graffiti backdrops for the 1988 MTV Music Awards.

Capitol Records became the duo's first big client when it hired the firm to make a video game for Frank Sinatra's "Duets" release. But it was Web site design work and packaging of DVDs that boosted Canned to an anticipated $2.7 million in revenue this year. Among its works is the interactive segment of Warner Bros. "The Matrix" DVD, Capitol Records' corporate Web site and the official Stanley Kubrick Web site.

That market is increasingly lucrative as consumers with broadband technologies ask for more entertainment product. But it's also fiercely competitive, especially for small-fry like Canned.

"The hardest part is that these companies are popping up every week, doing DVDs or Web sites out of their living room," Papke said. "They're able to sell the entertainment companies on these lower budgets, which makes us have to lower ours."

Canned tried to broaden its business to balance the low-budget entertainment work. But when it was unable to secure deals, the company started to look for financing. And that's when the economy turned sour.

Already with three acquisitions in its pocket, Change is shopping for small creative houses that can boost its entertainment business from 25 percent of revenues to one-third, said Matt Ryan, president and chief executive of Change. The company also provides technology services such as consulting, Web integration and code-writing. Among its clients are Hearst Corp., Lehman Brothers, Primedia and the Department of Veterans Affairs.

Revenues for the first quarter ended March 31 were $1.9 million.

Originally operating as Arinco Computer Systems, a public company based in Albuquerque, N.M., Change appointed a new board in March 2000 that included Ryan, president and chief executive of Ryan, Drossman/MarcUSA, an advertising and marketing agency. Ryan founded the firm about 20 years ago before selling it to Marc USA. In September, Marc USA became partners with Arinco, which had at that time changed its name to Change Technology.