Silicon Scouts.

INTERACT IS CASHING IN ON THE INCREASING DEMAND FOR NEW VIDEO GAMES BY REPRESENTING A NUMBER OF THE ARTISTS AND ENGINEERS RESPONSIBLE FOR THOSE WILD CYBER-ADVENTURES

SEVERAL years ago, Paul Cunningham was buying parts for fighter planes. Now his recruiting company, Interact, locates teams of engineers who might build such planes--not in reality, but in computer animation for war-action video games.

El Segundo-based Interact provides recruiting services and talent-agency-style representation for the video-game industry. The company has benefited from the growing demand for games that work on high-profile consoles such as the Sony Playstation and Nintendo 64, and it now sees lots of opportunities for growth in the Internet.

Cunningham was feeling restless while working at Hughes Electronics Corp.'s radar division as a subcontracts administrator -- buying parts for radar used on F-16 and F-18 military jets. Itching for a job in sales, he contacted a headhunter, only to learn that the recruiting firm did not place people in sales jobs. He was, however, asked to interview for an open position at the recruiting firm itself; and got the job.

For a year and a half, Cunningham read stacks of resumes and placed software engineers at jobs for major companies including Oracle Corp., Macromedia Inc. and Microsoft Corp. It was during this job that Cunningham met co-worker Jeff Brunner, with whom he would ultimately found Interact.

Brunner and Cunningham realized that software engineers were getting significant attention from headhunters, while video-game engineers were getting next to none. So they started Interact in 1993.

While Brunner started off by targeting primarily software engineers, Cunningham focused on recruiting individual video-game engineers and programmers, getting them contract jobs with major publishers like Electronic Arts and Activision Inc.

"I'd call somebody up, a programmer or an artist, and they'd have no idea headhunters existed in that industry," Cunningham said.

After about three years, the partners decided there was so much activity in the video-game industry and so much demand from programmers that they would drop software and focus solely on games.

Cunningham himself prefers to play sports and racing video games over shoot-'em-up action titles, but the games themselves were not what attracted him most to the industry.

"I was interested in being in the high-tech arena, and the video-game industry was the sexiest way to show off technology," he said.

But focusing exclusively on headhunting lasted only so long. Over the past few years, the entrepreneurial bug has bitten more video-game engineers, than Cunningham can count, and Interact has responded by adding a second business to its mission.

Meeting a new demand

It's not uncommon for a team of video-game programmers. hired on a freelance basis to complete a project, realize they worked well together, and decide to found their own video-game development company.

At the same time, major game publishers like Electronic Arts and Activision have been swamped with demand for games that operate on major platforms. As a result, those companies have increasingly been outsourcing major portions of projects. Small development studios have been sprouting up to fill that void.

Because these trends have picked up over the past three years, Interact has stepped in on behalf of boutique game designers. "They'll say, 'We're going to quit and start our own company. Will you represent us?"' Cunningham said.

Just as a Hollywood agency would broker deals between creative talent and producers, Interact serves as an intermediary between video-game development companies and the major video-game publishers and console makers, from Microsoft to Sony to Activision.

For each deal, Interact usually snags a 10 percent broker fee, both on the total cost of the deal and any future royalties paid to the video-game development team.

Longtime video game programmer John Zuur Platten recently co-founded a development company targeting the action-adventure game genre, and went to Interact for representation.

"We needed somebody to represent us, who had contacts in the business and was well-respected in the business. I felt it was really important to have someone who has been successful in setting up other teams in the past," said Platten, whose company EngineX last week got an offer through a meeting set up by Interact.

"What's very smart about Interact is that they realized there was a need," Platten said. "They have, for a while now, positioned themselves as representatives of interactive talent, which is something a lot of people walked away from."

In both its main business missions, Interact has benefited by keeping up relationships throughout the industry. Those relationships with individual programmers have led to referrals to other programmers, and the company has been able to build a solid brand name.

"Over time it's gotten more crowded, but because we've been doing this for seven years, the business follows us," Cunningham said. "We know where all the individual talent is, and we know what they want to do."

Another emerging trend is expected to provide yet another boost to Interact: games on the Internet.

Because demand for good programmers is high, and programmers see great possibilities in the Internet, Interact expects to see rapid revenue growth over the next few years.

"People are watching less TV and connecting to the Internet," Cunningham said. "That's where (programmers and animators) want to be. That's the future."

Spotlight

Interact

Year Founded: 1993

Care Business: Recruiting and representation for video-game programmers

Revenues in 1998: $1.5 million

Revenues in 1999: $2.3 million

Revenues in 2000: $3 million (projected)

Employees in 1998: 6

Employees in 2000: 15

Goal: To be the largest worldwide recruiter and agency for the video game industry as it grows to accommodate demand for content on the Internet

Driving Force: Convergence of interactive media