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How to get a Bite of the CD-ROM action

David Harrington on the commercial steps to the CD-ROM platform.

David Harrington is a consultant with McKinsey & Co. specialising in multimedia.

With Microsoft CEO Bill Gates and the Pope in Sydney at the same time in January this year, inevitably comparisons arose, with one newspaper declaring that “the Pope is here and God is too”. But while the Pope beatified Mary MacKillop, Gates preached a new religion of digital information.

Paul Keating ratified Gates’ vision in his Creative Nation statement, by committing $84 million to supporting the development of indigenous CD-ROM and on-line information services. But how can individual Australian developers take advantage of the multimedia hype and successfully build and market their own CD-ROMs or on-line information services?

Given that multimedia developers typically fall into two camps, the technoheads and the artists, the first challenge is marrying creative with technical and software skills. Here, the internet or physical bulletin boards of universities and colleges can help. Also useful could be Microsoft’s “Multimedia Jumpstart”, a CD-ROM developer’s kit, and Interactive Multimedia Development Guide, a free publication on how to develop CD-ROMs, available from Microsoft.

The second challenge is getting access to funding to develop your concept commercially. It can cost up to half a million dollars to successfully develop and market a CD-ROM globally. Commercial information services can cost similar amounts.

There are five main development phases for multimedia: market analysis and development of a proposal, including the business plan; scripting; prototyping; production; and marketing and distribution. There are several possible avenues to secure funding for each phase:

• Friends wishing to take a share of your business. Many small high tech companies begin this way.

• Small business loans from the bank, difficult to get if you are a sole proprietor, and do not have four or five years of business success under your belt.

• Australian or overseas multimedia companies that may want to invest in your title. All global multimedia companies have departments to assess acquisition or investment in start-up companies. New on-line information gateways being established in Australia such as On Australia, the joint venture between Telecom and Microsoft, may also be interested.

• Venture capital funds in Australia or United States. Depending on their assessment of your business plan, market forecasts and management ability, these companies take a share of your business in return for providing funding. • Federal arts or small business loans and grants. The Australia Council, Film Australia and the soon to be established Australian Multimedia Enterprise (AME) fund a variety of multimedia and will generally review your business plans in a similar manner to the venture capital funds.

Distribution is the third big challenge. With the flood of CD-ROMs coming onto the market there will soon be a ‘shelf space’ problem, where smaller independent publishers will have difficulty selling their products because the majors will dominate the shelf space for CD-ROM sales. The most successful approach seems to be negotiating a licensing or distribution deal with one of the majors, such as Microsoft or Brodurbund.

Independent developers will also need to rapidly acquire new skills in the field of user interface design. If Microsoft’s success in developing icon-based graphical user interfaces is any indication, the multimedia titles that are most intuitive for users will also be most successful.

When AME is established in March this year, its mandate will include providing advice to new Australian developers seeking multimedia project finance. This will go some way to creating a much needed information node and coordination point for the multimedia industry in Australia. It could be a useful starting point for you if you require advice about how to take your multimedia idea one step further towards commercial development.

David Harrington is a consultant with McKinsey & Co. specialising in multimedia.

RealTime issue #5 Feb-March 1995 pg. 27

© David Harrington; for permission to reproduce apply to [email protected]

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