Virtual Reality

BUSINESS PLAN

CineMedia Studios, Inc.

37404 Bedlington Park PI.
Bedlington, WA 56390

June 23, 1992

CineMedia Studios is an aggressive developer of unique virtual reality entertainment products. Catering to the intelligent user seeking a game with intellect, it is seeking additional capital to fund more projects in its already well-received line. Following is an outline of a progressive company plan that can provide insight into product development and marketing.

• executive summary
• present situation
• financial projections
• objectives
• management
• product/service description
• interactive movie marketing
• technology development & acquisition
• conclusions and summary

EXECUTIVE SUMMARY

In 1990, CineMedia Studios was formed to fill the void in the marketplace for intelligent, sophisticated, interactive entertainment. The studio has grown to create world-class, interactive multimedia software products designed to take advantage of the rapidly expanding market. CineMedia Studios follows an artistic vision of interactive storytelling and entertainment, defining new boundaries of personal involvement with computer-based cinema. It continually explores the territory of this new media, charting ways to bring together user interaction, video, text, graphics, animation, music and sound.

CineMedia Studios now intends to capitalize on the immediate opportunities for growth in this explosive market by building our business to the next tier, expanding our operations to encompass publishing as well as production, and significantly increasing the number of innovative titles we produce each year.

Background

For the last several years, this industry has been geared towards children, and sales of computer games and equipment have risen steadily. Unfortunately, parents have found it much more difficult to find computer software that will challenge as well as entertain. This trend will continue as the Nintendo generation grows up; one need only take a look at all of the computers being used in classrooms around the country to see the potential adult market.

CineMedia Studios believes adults are hungry for intelligent, interactive entertainment that takes advantage of the computer but jettisons the adolescent trappings of computer and video games. The advent of the large installed base of CD-ROM drives coupled with the increased sophistication of computer technology has now made the delivery of this kind of content possible. According to a new study done by Simba Information, Inc., the market for consumer-based CD-ROM titles is expected to double this year, generating over $300 million. With the increased penetration of CD-ROM drives leaving consumers searching for more diverse content, audiences are clearly ready for the titles that CineMedia creates.

In the past, CineMedia Studios has developed distribution arrangements in order to produce our interactive software. We now seek capital to develop our own titles, and to establish a publishing arm. This will solidify the future of our development, and is designed to capitalize on the enormous opportunity in this industry - one that, like the golden age of Hollywood, may never come again.

Our company developed The Lunacy of Ronald, which sold out of its initial run by the end of 1993. We have operated at a break-even position ever since because every dollar we make is immediately put back into the development of the company and additional software products. Revenue projected for fiscal year 1995 is expected to be $2,000,000. Annual growth is projected to be at least 50-60% per year through 1996. We are now ready to expand our operation to achieve maximum growth in the next five years.

Concept

CineMedia Studios' target market includes educated adults ages 18 to 45 who have the latest in computer technology available in their homes and a disposable income. This combines the current market of "early adopters" with females 21-40 and college-educated families with growing children.

Our strategy for dominating the competition is through the continued development of products, each as entertaining and technologically advanced as the last. Future products, will be strategically designed to chart a course for the market, and then follow up with products that will capture the interest of our audience again and again, building brand awareness and encouraging repeat customers.

Our work on CD-ROM has already broken new ground and will continue to lead the industry in interactive cinema. Our competition is just now entering the market and must develop the expertise and experience we already bring to our titles. The ability to develop award-winning interactive films from the ground up is unique to CineMedia. Our customers expect intelligent, engrossing entertainment and leading-edge technology when they reach for our products. Since our products take a completely different approach of the traditional computer game, we've found a niche others have not been able to capture.

We have just completed the development of Astral Gate: No One Sleeps Here, a full-length, interactive movie. The press we've received for this product has been voluminous, and our proprietary method of presentation, Absolute Cinema (patent pending), is setting the standard for interactive movie entertainment.

All products from CineMedia Studios are protected by trademark, copyright laws, and patents.

We are currently developing two titles, Astral Gate II and Gateways, an interactive movie theater environment that contains ten interactive films: six new films and four others that have already garnered multiple awards, including two Best of Shows at Quick Time™ Festivals.

In addition to our existing products, we have written treatments for another dozen software products that will build on the technology available and the demands of the market. We also have a project list of seventy other titles.

Other services include teaching and speaking engagements by our CEO and founder, James St. Clair. We are also beginning to involve other members of our organization in these capacities, including our resident composer, our computer programming team, and our award-winning digital architect.

CineMedia has been watching the movement of the interactive industry, and we have now decided to move into a strong growth phase, both to keep up with the sheer number of CD-ROM titles being distributed every year, and to capitalize on the current market opportunities for a company such as ours. This approach is generating a tremendous amount of interest throughout our industry. For example, CineMedia's recent signing with the Agency for the Performing Arts in Hollywood resulted in coverage on the front page of the Business Section in the Los Angeles Times Sunday edition.

Responses from customers and the press indicate that our software titles are enjoying an excellent reputation, and a shelf life that is far above average. Inquiries from prospective customers suggest a considerable demand. Relationships with leading retailers, manufacturers and other distributors substantiate the expectation of CineMedia Studios for rapid growth and accomplishment in our industry.

Objectives

Our current objective is to people the company into a prominent market position. We feel that within two years CineMedia Studios will be in a suitable position for even greater expansion or an initial public offering. To accomplish this goal we have developed a comprehensive plan to intensify and accelerate our marketing and sales activities, product engineering and development, and customer service.

We also intend to take on a strategic partner, either a distributor or a publisher, who can guide us into the future while providing us with some of the necessary services that CineMedia inherently avoids. We will implement a publishing division designed to bring unique, marketable titles to an expanding audience. Our partner will help get these properties into retail channels in a time when shelf space is becoming scarce, and will also help us achieve our goal of marketing our titles through innovative sales channels.

To implement our two-year plan, we require an initial investment of $2 million, followed by a second tier funding of $6-10 million for the following purposes:

• Develop ten new innovative, interactive software titles for the mainstream market.
• Solidify relationships with strong strategic partners/distributors, exploring innovative new sales channels.
• Hire and develop a small, focused publishing team that will bring in new products and collaborate with the marketing department to sell them through known or unique channels.
• Develop a campaign to promote our current products and services, in order to maximize sales, educating and exciting our customers as we go.
• Augment company staff to support and sustain prolonged growth under the new marketing plan.
• Increase Research & Development to create additional technologies as well as to further fine-tune our competitive advantages through our existing proprietary software tools.

Management

Our Management team consists of seven men and women:

James St. Clair , MFA, is our founder, CEO, and Artistic Director. His background consists of over ten years' experience as an award-winning actor, director and author combined with eight years' computer experience. He is now on the faculty of San Diego State University's Multimedia Studios Program and a coveted lecturer all over the world.

Evelyn Halistrom , President, has seven years' experience in sales and marketing and single-handedly propelled CineMedia from a two-person operation to the leading-edge growth company it is today.

Katherine Mailor , Executive Vice-President, serves as an integral part of the day-to-day management of the company, acting as both Director of Human Resources and Production Coordinator.

Jack Lockheart , Vice-President and Chief Marketing Officer, has fourteen years of sales and marketing experience in various arenas, including the Live Aid Concert where he raised over $20 million, the 1984 Los Angeles Olympics, and most recently, major motion pictures.

Diane Armstrong , Vice President and Chief Financial Officer, has seven years of financial, corporate development, management and systems consulting experience; in her last position, she worked with American General Life Insurance Company.

Thomas Calloway , Vice-President of Technology, has twelve years' experience in systems engineering and design, including nine years with NASA and other aerospace development companies.

Michael Peters , Vice President of Audio Production, is a musician with twenty years' experience in the music industry. He composed, arranged, performed, recorded, produced and engineered the complete soundtracks for both of our interactive films.

In addition, our Advisory Council offers outside management advice and consultation. This nine member council provides tremendous support for management decisions and creativity. A list of council members is available on request.

Marketing

Overall, our company can be characterized as a high profile producer of worldclass interactive multimedia entertainment.

The fundamental thrust of our marketing strategy in the short term involves reaching the audience searching for intelligent adult entertainment, through traditional software retail stores as well as untapped channels.

In the near future, we plan to lead the industry in the production of interactive movies for television and theater, and computer platforms. We anticipate a campaign aimed at filmgoers, and intend to reach this market segment by placing a variety of advertisements in industry publications and mailing a full-color catalog to retail outlets every three months.

A partial list of current customers incudes:

• Warner Music Enterprises, Inc. (client)
• Arthur Anderson Consulting, Inc. (client)
• Media Vision, Inc. (distributor)
• Micro Warehouse, Inc. (catalog distributor)
• Tiger Software (retailer)
• Educorp, Inc. (retailer)

Also, we are targeting Europe as a strong future market: a deal is being negotiated for distribution and localization of The Lunacy of Ronald throughout Japan and Australia, and 35,000 copies of Astral Gate I: No One Sleeps Here have already been shipped overseas, resulting in very favorable press.

Finance

Based on conservative estimates, CineMedia Studios' asset base approximates $3,000,000, including cash, receivables, equipment and the value of copyrights and patents pending. In just two years we will have grossed $28,000,000 in sales and our investors will be able to collect a return on investment within five years.

Vision

CineMedia Studios' long-term strategy is keyed to the future of interactive media. We are currently pursuing all possible trademarks, copyrights, and patents, in order to increase the value of our intellectual property and our technology. We are already negotiating to license the appropriate material to other companies who seek to duplicate our methods of interactive filmmaking and its related elements.

CineMedia is very aware of the changing face of the industry, and is constantly preparing for the future. For example, raw film assets are archived at the highest possible levels for repurposing in a future iteration of the medium. Possibilities might include a port to another platform, interactive television, and forms of new media that have yet to be invented. Our proprietary perspective-switching technique is ideally suited for feature-like films, delivered via interactive television, and Absolute Cinema is equally appropriate for virtual reality-based programs.

CineMedia Studios is a content producer first and foremost, and until a standard is established, will continue to work on whatever platform is exciting and commercially viable.

Conclusion

CineMedia Studios enjoys an established track record as a unique supplier of interactive entertainment to our audience. By carving the niche in the marketplace for interactive cinema, we intend to continue our advances in the multimedia marketplace with many more exciting entertainment products, geared toward a sophisticated, educated customer.

PRESENT SITUATION

Market Environment

This fledgling industry is only now beginning to be taken seriously by investors and market forecasters. Fortunately, we had already begun our groundwork over three years ago when interactive multimedia is just beginning to develop and digital video was not yet a reality for the desktop. CineMedia Studios is poised on the cutting edge of a rapidly changing growth environment, better positioned than other companies who are just now facing the challenges of this industry.

Products and Services

We currently have two titles on the market: the critically acclaimed interactive novel, The Lunacy of Ronald and Astral Gate I: No One Sleeps Here, the first interactive movie to take advantage of the technology of Absolute Cinema. (patent pending).

We have just completed work on a Macintosh version of Astral Gate, and by September will have finished. Astral Gate II for the MPC. We are developing an interactive CD-ROM version of Warner Music Enterprises' "rockvideomonthly," which will begin shipping in January, and will start work this fall on The Lunacy of Ronald Book II, which has just received a development contract. We also have twelve products in various stages of development, including four interactive movies. Written treatments for these products are available on request.

Product Life Cycle

Because our work is leading edge, our products have shown themselves to have a long life cycle. For example, The Lunacy of Ronald earned awards a full year after it was introduced and its sales reflected this.

Pricing and Profitability

Current prices are decreasing, but profits are rising far more rapidly. As price points continue to drop, market awareness and profitability will grow.

Customers

Current customers are using our products for their own entertainment; our titles have also been used by many professors as teaching tools. Our customers are requesting more of the same — intelligent titles with universal themes.

Distribution

Currently we make available Astral Gate I: No One Sleeps Here through a distributor that does not have right of first refusal on any new products we develop. We distribute The Lunacy of Ronald through various catalog retailers around the world and are about to ink a distribution relationship for this title (a letter of agreement has already been signed).

Management

Our management team is largely inplace. We have proven we have the right talent to develop world-class interactive cinema, and our business, simultaneously. However, as the studio expands, we certainly intend to bring on more strong, dedicated talent, including a COO.

Financial Resources

Current cash available is $55,765

Our Current Ratio is:

Assets/Liabilities=1.8:1

Our Quick Ratio is:

(Cash & Equivalents + Accounts Receivable +Notes Receivable)/Total Current Liabilities = 10:1

OBJECTIVES

The primary objectives of our organization are to:

• Continue to create world-class interactive cinema, literature and entertainment.
• Grow the company in two significant steps that will allow CineMedia to go public within two years, ensuring that investors receive a substantial return on investment within five years.
• Expand our technological and employee base as the market expands, exploring new arenas in the interactive multimedia frontier.
• Create a commercial niche as creators of leading-edge titles.
• Produce unique, highly-marketable products resulting in a library of titles that will drive this industry forward.
• Establish a marketing and communications model that exploits untapped new and existing revenue channels for multimedia titles.

Business Goals

The business goals of CineMedia Studios, in order of their importance are as follows:

• Quality Products. CineMedia is in the business of producing the highest quality products. This is our number one priority and our greatest strength.
• Profits/Customer Satisfaction. We must remain profitable to sustain the company in this rapidly changing industry; with our software products, we are fulfilling a customer demand that others in this field have not been able to meet.
• Growth. We realize the vital importance of growth at this phase in the marketing cycle in interactive multimedia products. We would like to take CineMedia Studios public within two years -our interim plan includes employee and market share growth to accomplish our goal of producing at least ten titles each year.
• Management. Up to now, our company is been self-managed, but we recognize the need for a special type of developer management structure as growth takes hold. When small developers are purchased by large distributors, we have often witnessed the unfortunate drop in product quality; the management paradigm is entirely different, and developers cannot operate within the confines of a traditional corporate management structure. We, therefore, intend to add additional strong management personnel to allow us to remain selfmanaged within a more non-traditional structure.
• People. The people who work for CineMedia Studios are the best in their fields, and we not only utilize their specific industry skills, we incorporate their special talents into our company's vision.

Rationale

Based on our previous work and the talented management of this company, we are poised to create inroads in the technology of this medium, where others are just now learning the basics. Our work is innovative and marketable because we have the industry experience, technological innovation, and creative content, combined with marketing and management savvy to stay on the leading edge in a rapidly changing business.

The New Market

The market for interactive cinema will be comprised of the "early adopters" of new media, and traditional moviegoers who are open to new forms of entertainment. These will include both men and women, both game-players and computer neophytes. Just as the home market is expanding to become the fastest-growing segment of computer users (Multimedia News, June, 1994), so is the market for interactive cinema growing to accommodate users who now have something intelligent, innovative, and engaging to purchase.

Interactive cinema is certainly not designed to replace linear film. With the advent of Hollywood, movies did not replace the traditional theatre, which remains a worldwide form of entertainment after seventy years of filmmaking. However, movies became a distinct, profitable venture, and found overwhelming acceptance despite the early years of nay-sayers and the now apocryphal stories of people running screaming from the theater because they thought the locomotive would run them down. When people have something to watch, they will begin to embrace interactive film as an alternative, and even an enhancement, to traditional movies; the positive international attention CineMedia has received for its work only endorses this theory.

Position for Growth

• Understand customers, competition and industry
• Develop product/channel/customer congruency, & new revenue channels
• Achieve short-term goals while strategically planning for long-term
• Monitor and manage product life cycles
• Monitor growth by fields of interest
• Balance people/management/business goals
• Transition from single-point to distributed management
• Hire the best people
• Grow to 50 employees
• Continue to develop our vision

Within the next year, we will ally ourselves with a major motion picture studio or a major name director, in order to fiirther facilitate the acceptance of interactive films as true entertainment. Also, we will take on the first portion of growth capital as CineMedia charts its course for the future.

We expect to develop a market niche dominated by CineMedia Studios, Inc. We will sign at least one strategic partnership with a distributor this year, in addition to finding distributors for specific products. We will work with various companies as we search for a distributor who understands and believes in our family of products and the company vision.

FINANCIAL PROJECTIONS

Projecting Returns in a Growth Industry

According to a study completed in June 1994 by Frost & Sullivan, an international high-technology research firm, the U.S. market for multimedia hardware and software will more than quadruple from $4.9 billion in 1993 to over $22 billion by the end of the decade.

"End-users are increasingly aware of the impact multimedia can have on arange of applications prominently including training and education, business presentations and home entertainment," Frost & Sullivan note. "And multimedia's ability to bring together sound, animation, motion video and still images together with text on a PC or workstation will eventually make it the dominant form of computing."

In this type of growth industry, financial projections can be difficult to make. The urge is to be optimistic, and in the short history of multimedia, not unfounded. A long-term track record has not yet been established, although all signs suggest massive growth.

With the success of the video game markets and sales in the billions of dollars, the potential profits into the year 2000 are very lucrative indeed. All of this movement in the industry by hardware developers is excellent for CineMedia Studios. The demand for content to fill the vacuum established by better hardware is already a familiar cry; the need for more entertaining and unique software to run on these machines will soon be overwhelming.

Use of Funding Proceed

CineMedia Studios has developed a line of interactive multimedia software products that is entertaining, leading-edge, and unique, pioneering its own niche in the industry. In order to service the identified target markets and the potential markets with these exceptional products, significant capital infusion is required.

Specifically, the required $2 million will be allocated appropriately to:

Financial Reports

The following pages contain historical financial information, current figures (as 4/30/94), and projections. These reports are included:

• CineMedia Studios Balance Sheet 1992, 1993
• CineMedia Studios Balance Sheet as of 4/30/94
• CineMedia Studios Income Statement 1992, 1993
• CineMedia Studios Income Statement (month of 4/94)

Balance Sheet

Balance sheet

As of 4/30/94

Income and Expense Statement (1992-1993)

Income Statement 4/1/94-4/30/94

Income Statement 4/1/94-4/30/94

MANAGEMENT

"Generally, management of many is the same as management of few. It is a matter of organization."

—Sun Tzu, The Art of War

How We Started

CineMedia Studios was founded in 1990 by James St. Clair. He was joined by Evelyn Hallstrom, Michael Peters, Thomas Calloway and Sarah St. Clair, who formed a general partnership in 1992 after realizing the work they were doing in interactive multimedia was unique and marketable.

On October 1, 1993, the partnership incorporated into a C corporation. This was the most appropriate move for the company given its growth potential and current exposure.

Founding Partners

Of the twenty-three people who make up the company staff, there are four founders who hold the following positions:

James St. Clair, Artistic Director and CEO
Evelyn Hallstrom, President
Thomas Calloway, Vice President of Technology
Michael Peters, Vice President of Audio Production, Composer

Of the five founders, each has been provided with a percentage of the original stock issue. Sarah St. Clair serves on our advisory council, but is not involved in the day-to-day operations of the company.

Management Team Overview

Three other members of our staff, while not among the original founders, are an invaluable part of our management team.

Katherine Mailor, Executive Vice President
Diane Armstrong, Vice President of Finance, CFO
Jack Lockheart, Vice President of Marketing, CMO

The founders and key managers of CineMedia Studios have combined experience exceeding forty years in the artistic, computer and business industries.

The strength of the CineMedia management team stems from synergistic expertise in artistic, management and technical areas. This has produced outstanding results over the past two years.

The leadership and alignment characteristics of CineMedia Studios' management team have resulted in broad and flexible goal setting, to meet the ever changing demands of the fast-paced marketplace requiring our products. This is evident when the team responds to situations that necessitate new and innovative solutions.

Responsibilities

James St. Clair , CEO and Artistic Director

Conceiving, writing, directing and producing all interactive films completed by CineMedia. Managing artistic side of organization.

Evelyn Hallstrom , President

Strategic and organizational planning and management, organizing, actuating and controlling business side of organization. Point person for new business ventures and company growth.

Katherine Mailor , Executive Vice President

Managing all human resource functions for company, coordinating all aspects of production, acting as liaison between Artistic Director and production teams, President and employees. In charge of special projects as requested by Artistic Director and/or President.

Thomas Calloway , Vice President of Technology

Managing all product technology development, including quality control, product design, new product development improvement, and improvements on existing products.

Diane Armstrong , Vice President of Finance, Chief Financial Officer

Managing working capital including receivables, inventory, cash and marketable securities. Performing financial forecasting, including capital budgeting, cash budget, pro forma financial statements, and external financing requirements.

Jack Lockheart , Vice President of Communications, Chief Marketing Officer

Managing market planning, advertising, public relations, sales promotions, and merchandising. Identifying new markets (including foreign markets), corporate scope and market research.

Michael Peters , Vice President of Audio Production

Composing, arranging, performing, recording, producing and engineering all soundtracks and music for CineMedia Studios' interactive films. Managing all sound production and editing for films, as well as other employees in sound department.

Outside Support

Our Advisory Council, including highly qualified business and industry experts, assists our management team in making appropriate decisions in order to take the most effective actions.

Board of Directors

Our Board of Directors is made up of the original founding partners and our Chief Financial Officer.

People/Talent We Require

CineMedia Studios' development team recognizes that additional staff is required to properly support marketing, sales, systems administration, and support functions.

Currently, CineMedia is composed of twenty-three people; a total of up to fifty will be required to meet the demands of the projected market over the next five years. Our company expects to expand in the following direction:

Government Regulations

CineMedia Studios is operating in the multimedia/film industry, and we are under regulation of the State Licensing Bureau, Incorporation law, the IRS, and the Screen Actors Guild.

Currently, all appropriate legal requirements have been met, and all appropriate licenses, patents, and copyrights have been applied for and are in the process of being granted. When we prepare our initial public offering, licenses with the SEC will be processed.

PRODUCT/SERVICE DESCRIPTION

Proprietary information pertaining to product proposals is available to investors upon signature of a Non-disclosure Agreement.

Our principle product, interactive multimedia software, currently includes The Lunacy of Ronald, Astral Gate I: No One Sleeps Here (MPC & Macintosh), and IMAGIN action: the Art of Storytelling.

Under production at this time is the sequel to Astral Gate, called Astral Gate II: Incubus. Also in production is an interactive cineplex theater called Gateways that will feature ten films, four of which have already garnered multiple awards including Best of Show, Best Narrative Film, and Best Other Film at the First Annual Quick Time Film Festival; Best of Show and Best Interactive at the Second Annual Quick Time Movie Festival; Best Narrative at the second Quick Time Film Festival, and an Award of Merit at the 1993 In Vision Multimedia Awards.

All of our current and future titles offer intelligent, stimulating entertainment for a mainstream audience prepared for something besides the traditional computer game.

Interactive movies work in many ways, but all allow the user to affect the movement and experience of the story/movie. Your choices ultimately determine the outcome of the story, or in Absolute Cinema, the reactions of the characters you encounter. This individual control is a capability unique to Virtual Cinema and is greatly enjoyed by our customers.

Current Products/Services

The Lunacy of Ronald Based on the story of a knight in the service of Charlemagne, this interactive novel is told through several different points of view through which the reader can move at will. Each character tells their own, often contradictory, version of the story. Ronald uses 256-color paintings, animation, Quick Time video, original music, professional "radio theatre" narration, hyper textual links and a complete soundtrack to transport you to the world of Charlemagne's France.

The Lunacy of Ronald is the winner of numerous awards including Top 50 CDROMs (#12) Mac User Magazine; Best Interactive, Quick Time Movie Festival, 1992; Best Interactive, Quick Time Film Festival, 1993; and Best of Show at the Dot. Pixel. Image National Graphic Design Contest, 1993.

Astral Gate 1: No One Sleeps Here In this interactive science fiction story world, the viewer assumes the perspective of Drew Griffin, a young medical student stationed on an alien planet. Earth's armed forces are there, at least officially, to protect a vital mission: to mine material needed to counteract terrible ecological damage, wrought by centuries of mankind's destructive use of technology. As Griffin, the viewer interacts with complex characters in situations that demand a search for truth far more sophisticated than virtual reality (VR) battle suits and seemingly dangerous aliens might suggest.

Astral Gate was named a Business Week Best Product of the Year the month it was released, and has gone on to win a silver medal for Best Interactive Movie at the 1994 In Vision Multimedia Awards, and a Multi Media World Reader's Choice Award for Best Interactive Movie.

IMAGIN action: the Art of Storytelling The first product developed by CineMedia Studios, features interactive fiction, art, political satire and music in a magazine format. Winner of numerous awards, including Editor's Choice for A+/In Cider Magazine and the Mac User Top 100. This product is on hiatus until resources can be devoted to its production needs, but will return as a formidable contender in the newly emerging interactive magazine format, where it was the first pioneer.

Work For Hire CineMedia now accepts work for hire on a project-by-project basis, as a way of expanding our horizons and bringing in additional funds. Our current project is "rock video monthly" for Warner Music Enterprises, a monthly CD-ROM that will ship in up to five different formats. CineMedia has planned the interactive interface design from the ground up, and will also perform the work each month on the CD-ROMs, which will be shipped to an installed base of CD-ROM owners for a nominal fee. CineMedia has already been approached by two other companies to perform similar tasks for them.

Pay Back

For most customers, our products pay for themselves immediately in terms of hours of sophisticated, exciting entertainment not previously available. Our software is robust, requiring minimum maintenance, and customers are beginning to see a brand name identity they can count on in CineMedia's titles, and are starting to anticipate a certain quality of product from us — an expectation we encourage.

Key Benefits of All Products/Services

The major benefit for customers of our Absolute Cinema products is entirely entertainment-based: complete immersion into the story worlds we create, while allowing the user freedom to experience the story in their own personal way. Our titles offer true interaction with filmic experiences that are world-class, entertaining and exciting.

Product/Service Life Cycle

Our products have been on the shelves for a relatively short period of time, but judging by the continued press coverage for Ronald, and its recent new distribution deal, the life cycle for our software is three to five years. This is mostly due to the fact that nothing else like it exists currently. Over the next few years, many other developers will attempt to produce products to compete with ours, so this shelf life may decrease.

In the meantime, we are developing at least four titles or ports by the end of the year, and we will continue to produce many new products each year to keep ahead of the competition. By bringing on a significant amount of capital by the end of the year, we anticipate being able to grow the company to achieve this level of commitment to the industry.

Planned Products

CineMedia Studios plans to continually develop new products and enhance existing products. New products currently being developed include Gateways and Astral Gate II: Incubus, plus ports of Astral Gate I and Gateways to other viable platforms. The Lunacy of Ronald has just been ported to the MPC platform, and the new, hybrid MPC/Mac version of the product will include Quick Time 2.0 for the Macintosh, complete with full-screen video and MIDI sound.

Concepts for our next generation of interactive products include a ghostly western, Western InSpecter; a swashbuckler, Barbary Coast; a "Three Musketeers" film, Sword & Saber; a hard-hitting modern action film called Mission; and a rock music flight simulator game called RockFlight. A complete listing of our more than seventy project ideas is available on request.

INTERACTIVE MOVIE MARKETING

Advertising & Promotion

CineMedia Studios' titles are vastly different from the traditional CD-ROM games. This presents a marketing challenge, approached by highlighting the unique product features, for example, interactive movies and Absolute Cinema. To illustrate, CineMedia's campaign for Astral Gate I & II, which will be presented as true interactive movies, is outlined below. This includes all publicity and marketing efforts.

Distributors often encourage collaboration with us, because they recognize that the emerging market niche of interactive movies requires unique marketing techniques. As detailed below, we will guide our distributors in defining an aspect of their publishing division as "interactive movies."

General Positioning Ideas For Astral Gate (Mac) and Astral Gate II

• Highlight interactive movie features and Absolute Cinema
• Overcome consumer expectations of Astral Gate being game through initiating a movie image campaign
• Create hype over Absolute Cinema as a hook for publicity and consumer attention
• Add marketing and publicity milestones to title production to properly and completely develop our CD-ROM titles

Promotion

• Conduct interactive movie "screening" promotions in conjunction with national retailers

Design & Advertising

• Design all product packaging and advertising to reflect movies, not games
• Offer distinctive product packaging

Publicity

• Launch publicity campaigns for each title as if they were movie
• Produce electronic press kits for national distribution, just as if this were a feature film

Bundling

• Bundle CineMedia titles with the distributor hardware (if possible), then spotlight the benefits of true interactive movies playing well on new home entertainment multimedia systems

At CineMedia, we are already moving forward with many interactive movie marketing strategies. We have created an electronic press kit (EPK) and seen immediate success, with segments airing on national and local broadcast media. Publicity events focused on "the movie" and Absolute Cinema angles have earned us great attention. Also, we have conceptual designs for packaging, and overall promotional program ideas that will affect the thrust of "interactive movies" in the industry.

We know distributors and other publishers recognize the success of emphasizing the movie marketing angle from traditional linear films. CineMedia offers strong design, advertising development and communications services for all products and seeks financial support program ideas that will affect the thrust of "interactive movies" in the industry.

We know distributors and other publishers recognize the success of emphasizing the movie marketing angle from traditional linear films. CineMedia offers strong design, advertising development and communications services for all products and seeks financial support for these efforts as a part of the complete development of CD-ROM titles.

A complete plan of marketing and communication milestones is under development for inclusion as a part of our future product development. This will be presented to the distributors and publishers of all CineMedia products. This plan will add additional revenue and advantageously position CineMedia and its products in the marketplace.

Selling Tactics

The following is an outline of an interactive movie screening promotion to be sponsored by the distributors and publishers of CineMedia Studios products.

Objective

Identify and introduce qualified multimedia users (including prospective system buyers) to the distributor's interactive movies and other CD-ROM titles. Also, offer them incentives for purchasing all the distributor titles (especially CineMedia interactive movie titles), as well as other products, through cosponsoring retailers. Additionally, establish the distributor as specialists in publishing interactive movies. The number one selling point for both movies and CD-ROM titles is word-of-mouth. Nothing accomplishes word-of-mouth better than preview screenings and product sampling.

Program

On a first come, first served basis, our targeted audience is invited to a facility for the distributor's Interactive Movie Premier Screenings. The evening consists of door prizes, limited refreshments, one-night only product sales discounts, sales coupons, and a 90-minute preview of one or more of the distributor's interactive movie titles. This may include an opening of 60-second spots (like coining attractions) of other titles, or new hardware product announcements from the distributor.

Overview

• Multimedia screening nights sponsored by the distributor & national retail chains
• One or two interactive movie titles by the distributor are partially screened
• Initial test held in top ten or limited nationwide markets at retailer sites, nearby movie theater, or college campus
• Screening of new (and current) interactive movie titles published by the distributor
• Complete direct-mail, promotion, publicity & advertising campaign in each market

Promotion & Publicity

• Press release distributed nationwide with saturation at local screening markets
• Electronic press kits for feature title(s) distributed to screening market media
• Press representatives on-site at each event stocked with review copies and publicity materials
• Distributor & co-sponsor announcements will be made before the film begins
• Developers attend and demonstrate as appropriate
• Distributor uses passes and event as an incentive to area distributors and local sellers

Promotional Materials

For each screening:

• All materials include the distributor and retailer logos
• Screening passes (mailed, or picked up at participating retailer)
• Survey cards with limited market research question for the distributor & retailer
• Movie programs with the distributor advertisements listing several titles
• Ad posters posted around participating retailer and screening facility
• Movie posters distributed

Advertising

• Cooperative local print and radio advertising campaign
• Direct mail including:
  • Databases from registered owners of the distributor & multimedia buyer's club
  • Purchased lists
  • Print advertising response cards
  • 800 number responses
  • Retailer's consumer databases
  • Online announcement inquiries
  • User Group memberships
  • Databases of developers whose titles are previewed
• Event site & point of purchase signage

Coupons & Giveaways

• Distributor gifts, door prizes, interactive movie title merchandise, and coupons will be distributed at each event
• Distributor CD-ROM sampler given to guests as they return a completed survey card

Distributor & Coming Attractions

• A medley of movie trailer-style CD-ROM previews by the distributor are run before the main features

Next Step

Develop a proposal for the most appropriate retail chain (e.g., COMP USA) for co-sponsorship participation. This entire program may be sponsored exclusively by a single publisher (e.g. Viacom Interactive, Electronic Arts) as a vehicle to solidity distributor and retailer relationships in addition to publicity and consumer awareness. After approval in concept, the screening markets would be identified, followed by the selection of a third party promotional agency for implementation.

"Image" Advertising & Limited Sales

Select Print Advertising Campaign 1/3 page size column ads highlighting all current and announcing upcoming releases. Specifying the distributor's 800 number to buy product, CineMedia number for general info; also identifying new project deals, major trade shows and speaking engagements, awards, and company vision. A few possibilities:

• Multimedia World
• New media
• Wired
• Compute
• Specialty publications

On-line Services Places listing with opportunity to communicate, buy or call us for CineMedia tides and list company vision in every possible area, then keep track and respond promptly!

• America Online
• CompuServe
• AppleLink
• Genie
• User Groups

Special targeted advertising efforts and discounted product offers would be made to reach user groups.

Direct Mail Continue to build major database for quick response for moving announcement, new product releases, company vision, CineMedia product owner communique, etc.

Mailings will include

• Reader response cards from print ads and publicity "bingo cards"
• The Lunacy of Ronald registration cards
• Rented mailing lists

Direct Sales

• Catalog sales of The Lunacy of Ronald on a limited basis.
• Response card sales from direct mail
• Sales at trade shows to offset expenses

Trade Shows & Speaking Engagements Several select shows a year. Since James often presents or conducts seminars, shows can easily be chosen to coincide with speaking engagements for maximum exposure.

CineMedia Newsletter One major full-color piece produced bi-annually with an occasional two-color smaller version distributed (four times annually). Distributed to our entire collective database of media, industry, customers and prospects.

Advance Product Demos, Teasers and Broadcast Video For each title we will produce teaser footage and demos to be included into our internal milestone schedule. The distributor will provide demos if they have an installed base of kiosks to be utilized.

Demo & Video Plans

• Video version montage e.g., movie fast-cutting teaser trailer
• Actual title demo 2-3 months in advance to create retailer pull-through

New Business Development

• Music business
• New major projects based on our project proposals
• Greeting cards
• Monitor interactive advertising pursuits
• Entertainment Agencies

Communications

Milestones

Our CineMedia Studios titles must be presented as interactive movies to consumers, the industry and especially to our publisher. We have repeatedly discovered that we are the best source to introduce titles properly. Therefore, the production/milestone schedule will include communications and marketing elements. This involves incorporating both simple and involved steps into our production schedule. We will schedule steps and projects that will generate abundant resources for advance publicity, market anticipation and ultimately sales.

Press Releases

We will create a schedule for press releases corresponding to product news, shipping releases and all major media events.

Publicity

A wide variety of publicity materials is available and constantly updated. This includes screen shots, publicity skills and candid shots, sell sheets (one sheets), a standard press kit, and an electronic press kit. The most effective way to maximize the current buzz surrounding multimedia is through personal accessibility and making an abundance of publicity materials available. CineMedia also holds regular media days on the set while shooting our interactive films. These are an integral part of CineMedia's successful publicity campaign.

E.P.K. - Electronic Press Kit

Created in standard feature film publicity format, highlighting Absolute Cinema, the purpose is to stimulate broadcast media and print coverage.

Items for inclusion into title development milestone schedule:

• Product photography
• Media events surrounding production phases
• Main title/logo design
• Step by Step "making of screen captures and PICT files
• Newsworthy software usage, Beta testing (e.g., Adobe, QuickTime, etc.)
• Advance screen shots for 35mm slides
• Demo creation (kiosks, promotional videos)
• Electronic Press Kit development (for each title)
• Copy prepared from storyline for all materials
• Trade show, conference title preview preparation
• Packaging/carton design
• Jewel case insert
• Registration card
• Print advertisement full page layouts
• Suggested Standee, poster, and POP design

Customers

CD-ROM buyers are expanding to include computer users of all ages, and even those most familiar with games are reaching out to widen their spectrum. Consumers brought to computer entertainment through Nintendo have grown up, and are starved for something more. This consumer demand added to the exploding installed as of CD-ROM drives leaves an open niche for interactive movies.

Currently, the new media market is broken in to four distinct segments; business, home user, education, and professional. The new media home user markets primarily consist of productivity, entertainment, education, and home business applications.

At the end of 1992, multimedia market share was dominated by the professional market, followed by business, education, and home computer use. By 1996, the home computer user market will be the largest segment.

CineMedia's customers are familiar with movies, demand more intelligent content than the market currently holds, and expect innovative technological artistry. Our studio satisfies these needs.

Competition

Some developers claim they create interactive movies as a selling point. But often the claim of "movie" is where the resemblance to interactive films ends. They produce games with little or no story content. In fact, their addition of video elements, live actors, and a movie declaration typically detracts from what their products really are: games. Though other developers are beginning to come on the scene who are following our lead, CineMedia is the definitive leader in the creation of interactive movies, as exemplified by our recent awards. This is the niche we have created and defined, as we educate consumers about a new type of entertainment. Now it is our intention to own and dominate this niche, evinced by CineMedia's recent signing to a major Hollywood agency, The Agency for Performing Arts. These extensive efforts will lead us to the peak of CD-ROM sales and into interactive TV and beyond.

TECHNOLOGY DEVELOPMENT & ACQUISITION

Responsibilities of the Technology Division

The charter of the Technology Division of CineMedia Studios is:

• To provide the computer-based framework of our interactive titles.
• To provide and maintain the computer environment necessary to build our titles and run our business.
• To provide and implement the strategic plans for positioning our company at the technological forefront of the interactive film niche.

The type of entertainment products that CineMedia Studios creates relies on powerful technology. For the purposes of explanation, these are divided into three primary areas that correspond to the division's charter:

Area 1

Develop and maintain the software portion of our products.

Develop the software systems that drive our titles This includes building/using proprietary software engines, using third-party title authoring tools and building/using hybrids (generally third-party tools with sections of proprietary software linked in). A large part of this area involves working with the artistic director to define realms of feasibility for envisioned artistic goals.

Testing our products Alpha testing is the responsibility of the Technology division. Beta testing can be handled by the title's distributor (e.g., the Astral Gate series), or can be done on a formal basis with a number of industry contacts who have the necessary skills to beta test.

Maintenance and customer technical support In-house maintenance of title support software is performed in order to build a better foundation for new titles. Any patch-maintenance of title software required to solve current user problems falls under the domain of customer technical support. For our current set of titles, Media Vision has responsibility for full customer support of the Astral Gate series, and Gateways. CineMedia has responsibility for The Lunacy of Ronald, which averages approximately three technical support questions per month, each one resolved without additional software support.

Area 2

Management of software, hardware and data:

Software tools Used to build our titles, including asset authoring tools, project administration tools, and miscellaneous proprietary tools: the technology division recommends appropriate toolsets and makes purchases after reaching consensus with planners. In some instances, proprietary tools may be developed for in-house use if they cannot be found elsewhere.

Hardware systems Used to build our titles, including computer workstations, networks, video and sound equipment: the technology division recommends appropriate platforms and makes purchases after reaching consensus with planners.

Configuration and maintenance of hardware, software and data Includes data backup, archiving and cataloging, as well as software upgrade and license management. These tasks make up the jobs of system, network and data administration, and are performed in-house.

Maintaining vendor relations Acquire media used by our daily operations, including floppy disks, write-once CD-ROMs and data cartridge tapes. Other video and audio media used by the company are the responsibility of the various departments that use them.

Area 3

Research and development of enabling and supporting technology.

The early stage of this industry forces developers to explore many of their own methods, to build the technology that enables these methods and supports the final project.

Planning the proper use of our development resources (striking the proper balance between "make versus buy"). It is important for a company of our size that the investments we make in technology development give us what we cannot buy from a third party, and not waste valuable time developing technology that is readily available to us elsewhere.

Maintaining knowledge regarding the state of current software and hardware architectures and development systems. This informs decisions on how to shape our development environment, as well as the plans described above.

In all of these areas, the technology that we develop is designed for internal use only. However, we are open to consider licensing technology to interested parties who may initiate such negotiations. We have already been approached regarding our Absolute Cinema technology. This is very worthwhile for us, as the act of licensing a technology to at least one other agent has the effect of increasing the value of that technology, and thus the value of our company.

In addition, we use other technologies in order to bring our products to market.

Area 4

CD-ROM disc mass production; printing, cutting and assembly of product boxes; assembly of product with jewel case, product box and shrink wrap. The tasks performed in this area are not performed by the technology division—they are contracted out-of-house, and the distributor of our titles is typically in charge of negotiating and maintaining these contracts.

Develop Versus Acquire

In the first two primary technology areas, we decided whether to develop the system or tool using in-house expertise, or to acquire the system or tool from a third party. The technology division supports these decisions by analyzing costs of development versus acquisition, as well as benefits from owning versus licensing. We do not develop hardware; the decision is purchase versus lease; presently, much of our equipment is leased from an independent vendor.

Research and Development

The technology division supports decisions on hardware acquisition by providing technical and pricing information, but is not soley responsible for all equipment purchase recommendations. Such decisions are made jointly with the company's core team members who do strategic planning.

One of the technology division's primary responsibilities is in the area of longterm strategic planning of technology needs. Responsibilities include:

• Evaluating proposals for new titles to determine technical feasibility and resources required.
• Evaluating new technologies for appropriateness for current and new title work.
• Maintaining a library of software either developed or acquired by us to support title development.

New Titles Under Production

The following titles are currently in production. A document of base technology and enhancements to be developed to support these titles follows.

• Astral Gate II, Incubus for MPC
• Gateways for Macintosh
• Gateways for MPC
• Astral Gate: No One Sleeps Here for Macintosh (just completed)

New Titles Under Evaluation

The technology division is responsible for developing a document of baseline technology required for the following titles, and making recommendations for development versus acquisition when necessary. To illustrate, several examples are listed below:

Technology Base and Enhancements for Astral Gate II for MPC

Astral Gate II will use the same multimedia delivery engine as Astral Gate I. Some of the aspects of the story script require new capabilities to be created for this engine. Following is a list of the three primary features to be added - Ubernarrative, Dreamscape and evolving diary.

Ubernarrative

This term was coined to represent what is typically referred to as a drama's subtext. Here it is an active portion of the narrative that provides an arc over the whole piece, and joins all elements together. The unique aspect of the ubernarrative is that its essence changes in reaction to the viewer's choices, thus providing a subtext that echoes the viewer even as it draws them into the central character's experience — the central character, controlled by the user, is thus tailored to them.

This idea was conceived for Astral Gate I, but was cut from that project due to short development time. Since then, the concept has evolved, from the main character's voice-over thoughts into several new dimensions: colors, textures and music will all be tailored to reflect the user's choices. In addition, certain character interactions will be chosen, based on the current "Uberstate."

The mechanism driving the ubernarrative will be an external database/query system. This maintains a representation of the main character's emotional state, which is driven by the user's choices. Three extremes of emotion are chosen: angry, balanced, and secretive. Balanced is the "content" state, which exists between angry and secretive.

This technology will prove useful for many of our upcoming titles. The process of developing it is helping to bring Absolute Cinema to its full potential.

Primary support required by Ubernarrative: weighted average object functionality, and corresponding database of weights and thresholds.

Dreamscape

A new level of user interactivity will be introduced with the ability to move about a landscape of dreams. The viewer will find themselves moving forward through floating images that come to life when approached; if the user continues to explore the moving image, it will enlarge to become a full screen movie, which will play one of the main characters' dreams.

The technology used for the 3D battle sequence in Astral Gate I is being modified to accommodate this dream exploration mechanism. Primary modifications are:

• All current 3D and graphic objects (pyramids, friends, bugs, etc.) will be removed, and there will be no horizon, since the player is meant to be flying through the air.
• Dreams will appear as panels of various size and aspect ratio, above and below the viewer's perspective. This requires texture mapping a movie onto a flat plane in perspective, and has already been developed.
• The viewer will be constantly in motion; the mouse will control turning left/right and flying higher or lower, but there is no need to use arrow keys to initiate forward movement.

The video architecture used for the dreamscape technology will be Microsoft Video for Windows 1.1, which includes a very impressive full-screen full-motion mode that is suitable for the dream compositions.

Primary support required by dreamscape: texture mapping movies onto flat planes is perspective. This is nearly complete.

Evolving Diary

As the story proceeds, the main character's journal will grow to include text that recalls this encounters; the emotions underlying the text will be taken from the Ubernarrative database, and will match the user's style of interacting with the story. In addition, charcoal-like sketches of places and people will be included. These too will vary in nature according to the engine's perception of the viewer's mood: from heavy black rough strokes indicating a reading of anger to finer shadings for a more balanced interpretation. Finally, a sketch of the user's painted "imago" will appear if they choose to create one for themselves.

Primary support required by the evolving diary: true type font functionality; Ubernarrative functionality to select appropriate passages based on viewer's choices.

Technology Base and Enhancements Required for Astral Gate I for Macintosh

There were no significant changes made to Astral Gate I during its port to the Macintosh platform. We made two moderate changes to the video game segment in order to enhance playability. First, we modified the behavior of enemies so that there are fewer of them and they are more difficult to kill, with more interesting behavior for avoiding the player. Second, we reduced the load time of the game from 30 to 2 seconds. Neither of these enhancements added to the time required for porting the entire title. In fact, due to the dedication of the team involved in the work, the product was available for shipping one month ahead of its internal schedule.

Technology Base and Enhancements Required for Gateways for Macintosh

By far, the bulk of Gateways for Macintosh will be realized using existing authoring tools: Macromedia Director 4.0 in conjunction with a simple shell written using HyperCard 2.2 or possibly Super Card 1.6. There is one feature that will require additional software development support — "The Actor Variations" will provide a simple movie editing environment. Super Card is easily capable of programming such a tool, as is HyperCard with the addition of some third party XCMDs.

Technology Base and Enhancements Required for Gateways for MFC

The primary authoring environment for Gateways for MPC will be the multimedia engine developed and enhanced for Astral Gate II. The movie editing functionality will require further tool development, to provide multiple windows and an editing capability.

Development Environment

Currently, the technology division has the following computer platforms at its disposal for software development and testing:

• (3) IBM PC-compatible 486/DX2/66 with CD-ROM and external monitoring for code debugging.
• (4) IBMPC-compatible 486/DX2/66 with CD-ROM.
• (1) IBM PC-compatible 386/SX/33 for low-end platform testing.
• (1) Macintosh Centris 650 with CD-ROM and external monitor for debugging.
• (2) Macintosh Centris 650 with CD-ROM.
• (1) Macintosh Quadra 800 with CD-ROM and large external disks for file service.

The software platform used for development on the PC side is Microsoft Visual C++ with Code View for symbolic debugging and Microsoft Assembler. The code analyzers Bounds Checker and PcLint are used to assure quality. The Defect Control System is used to collect, track and manage errors.

The software platform used for development on the Macintosh side is Apple's Macintosh Programmer's Workshop (MPW) Development System with MacApp, MPW C++, MPW Assembler, SADE debugger, Source Server code control system, and other tools.

All of these computers are networked together using Apple's system 7 file sharing capability for Macintosh, and Farallon's Phone Net PC for IBM-compatibles. Phone Net PC makes a PC platform look and work like a Macintosh to the network, the only difference being that PCs are not implicitly visible to other computers and require the use of an additional program (Timbuktu) to implement direct communication between users. The network architecture is Ethernet, cabled as 10 base-T. We use 10 base-T hub architecture now, and as our network traffic grows, we may consider buying a router in order to split off some workstations that typically require high volume network transfers into a separate zone.

File service in general is handled by a set of distributed fileservers throughout our organization. The primary fileserver is a Quadra 800 with 6 gigabytes of external storage, to be used by anyone in the organization. Certain divisions within the company have reserved directories for their use. Daily backups are performed. Since the data are so voluminous, the backup plan alternates days; one part of the cycle covers the internal disk drives of all Macintosh programmer's workstations.

Other fileservers are:

• Primary graphics station; 1 gigabyte external; backups performed daily, including 500 megabytes on the secondary graphics station.
• Sound station; 2 gigabytes external; backups performed remotely from the movie conversion station on a weekly basis.
• Primary movie editing stations (2); each with more than 3 gigabytes external;backups performed as necessary.
• Secondary movie editing station; 4 gigabytes external; backups performed remotely from the main fileserver on a weekly basis.
• Movie conversion station; 2 gigabytes external; backups performed daily, including three other administrative stations on alternate days.

The E-mail system in place is Quick Mail, used by both PCs and Macintoshes.

Media required to support development operations are:

• 3.5" floppy disks, 1.4MB capacity (DSHD). Volume is approximately 50 per month.
• 5.25" floppy disks, 1.2 MB capacity. Volume is approximately 1 per month.
• 4mm data cartridge tapes, 90 meter length, 1.3 gigabyte capacity. Volume is approximately 20 per month. 120 meter length tapes are preferred, but are not yet manufactured for data quality tapes. These should be available in second-quarter 94.
• 5" write-once CD-ROM discs, 74 minute length, 680 megabyte capacity. Volume is approximately 25 per month.

Due to the nature of computer hardware and software, there are three types of maintenance that must be performed on a regular basis:

• Maintenance of software configuration of machines, including system software and applications. This also includes preventative maintenance of directory structures, which can become corrupted during system crashes.
• Maintenance of computer hardware, including internal components and peripherals. There are some in-house software applications that can solve some of the problems; other difficulties require repairs, and replacement of the part with a working substitute, if available.
• Maintenance of network hardware and configuration, including regular analysis of packet traffic speed and line transmission quality. This also includes maintenance of any individual or network modem hardware and software.

There is one area of simple hardware repair that is performed in-house when necessary: cable assembly offers an opportunity to cut back on a low level of cash flow, plus the time required to order specialty cables and have them delivered or picked up.

Software Quality

The robustness of the software we create and its ease of use (especially for PC installation software) is very important to the success of the title. Typically, two primary methods assure the quality of software: detailed design and extensive testing. However, due to the aggressive nature of our schedules, we are not afforded the luxury of long design or testing periods.

We rely quite heavily on the technical expertise of our software engineers to build code designs, structures and modules that are of high quality and performance. We evaluate progress on a very frequent basis, and strive to address concerns about performance, quality of presentation and compatibility with other platforms.

There are three forms of testing that we perform: unit testing, integration (alpha) testing, and beta testing. Our software engineers perform the unit and integration testing as they proceed, and also do a portion of the beta testing. Beta testing is performed chiefly by people who did not develop the software; other in-house personnel fulfill a portion of this role.

People

The positions that make up the technology division are:

• Director of Technology
• Senior Software Design Engineer
• Software Design Engineer (SDE)
• Systems Administrator

At present, there is one director (who also performs most of the systems administration duties), a co-manager, one senior SDE, and two SDEs. All have the bulk of their experience programming on the PC, and the junior SDEs are now programming on the Macintosh platform, using their experience on the PC to port the Astral Gate engine from there.

We are currently using other in-house personnel to asist with systems administration and will hire a full-time systems administrator as soon as a large development opportunity arises.

Conclusion

Like the company itself, the technology division is young, growing and learning. We have a good work environment that promotes satisfaction among the engineers who work here, and they do consistently good, often inspired, work.

In summary, the goals of this division are to produce high quality software to support title development, to equip and maintain the computer/working environment of the entire company, and to blaze trails into new areas of technology, helping us to deliver titles of unequaled satisfaction for the consumer.

CONCLUSIONS AND SUMMARY

CineMedia Studios is a promising, thriving company, ready to infuse growth capital into this business. In order to take advantage of our current market position and to continue to produce world-class, award-winning multimedia entertainment, we must obtain project funding.

Profits expected from this infusion of capital, already outlined in this plan, will allow our company to realize our vision; that is to:

Develop and pursue an artistic vision of interactive entertainment that defines new boundaries of personal involvement with computer-based media. CineMedia Studios will continue to explore the territory of this burgeoning growth market, charting ways to bringing together text, graphics, animation, sound, music, video and reader interaction to the complete satisfaction of ourselves and our customers.

VIRTUAL REALITY.

Virtual reality, a term that became popularized in the late 1980s with the advent of critical research and new technologies developed by Scott Fisher at NASA-Ames Research Center, has its roots in a broad and colorful evolution of art, technology, and communications. The creation of virtual reality is essentially concerned with the quality and experience of immersion, whether real or simulated. The idea of immersion in this sense is related to the artistic concept of "representation," in which the world is translated into visual form. Virtual reality often extends this notion of representation by engaging other senses as well, such as sound and touch, to bring about multisensory experience.

The first part of this essay is an overview of the leading pioneers in the arts and sciences who introduced new technologies, concepts, and artistic innovation that led to the contemporary definition of virtual reality. The second part focuses on artists and theorists who have chronicled new media and virtual reality and its impact on the social condition, revealing transformations in cultural norms and the psychological effects of extending our reach into virtual space.

Historical Overview

By 15,000 b.c.e. Cro-Magnon had evolved with a brain capable of modern intelligence. With this new intelligence, artistic renderings were installed deep in subterranean grottos in the Dordogne region of southern France, in caves such as the well-known Lascaux. This birth of drawing and painting was among the first attempts at representation, in the modern sense of the word, in which animal figures (bison, reindeer, horses) and coded shamanist scrawls and motifs were brought to life on the walls of the caves. This recreation of both the external world of nature and the inner world of magic in the immersive space and controlled atmospheric conditions of the underground cavern was an early attempt at artistic expression for the purpose of the preservation of culture. Here, in the prehistoric caves, the human concept of virtual reality began with the multisensory, totalizing experience that engaged sight, sound, smell, and touch—the first conscious virtualization of the physical world.

The Gothic Cathedral of Notre Dame in Chartres, one of the greatest of the European Gothic cathedrals, was built in central France beginning in the late twelfth century. With its magnificent rose windows and stained glass, resonant chambers, vaulted ceilings, and sacred labyrinth, the sanctuary transposed the virtues of the church by transporting the individual through the experience of immersion. The cathedral served as an architectural canvas for the depiction of the scriptures, figures from the Old Testament, and the narrative of the Crucifixion, as told through the elements of light, sculpture, glass, sound, and stone. The enigmatic labyrinth inlaid on the floor of Chartres invites the viewer to navigate its complex pattern as a spiritual exercise. From the interior of the space, the great height of the cathedral evokes the ascent of heaven. The immersive and totalizing depiction of religious life invites the visitor to consider virtual reality as a mystical realization and transformation from the material to the immateriality of human existence.

German composer Richard Wagner's (1813–1883) Gesamtkunstwerk (total artwork), as implemented at the Festpielhaus in Bayreuth, Germany, in 1876, illuminates our understanding of the artistic impulse behind the creation of virtual worlds as it corresponds to the theatrical environment. Wagner understood the power of virtualization through music theater, and he mastered techniques of sensory immersion in order to heighten the audience experience of the "suspension of disbelief." The composer employed a powerful articulation of this age-old theatrical device to render stage action "believable," which has been used as long as humanity has employed the artifice of live performance to represent, recreate, and transform reality—transcending the notion of the sole possibility of the things that "are," replacing them with what "might be." Wagner used the mechanisms of the theater, as the computer would be used in the early twenty-first century, to transport the viewer's mind, emotion, and senses to an otherworldly virtualization where reality is reconfigured. As he stated in his essay "Artwork of the Future," "the spectator transplants himself upon the stage, by means of all his visual and aural faculties." This illustrates Wagner's desire to construct a totalizing experience through the narrative of music drama, one that fully engages the viewer's consciousness. The composer's invention of such theatrical devices as darkening the house, hiding the musicians in the orchestra pit, and reintroducing Greek amphitheatrical seating to orient audience perspective directly to the stage all contributed to the powerful illusion that takes place within the frame or "interface" of the proscenium arch—the portal to the imaginary space of the theatrical stage.

In the late 1940s, MIT scientist Norbert Wiener founded the field of cybernetics (derived from the Greek word for "steersman," or "governor") to explore the sociological impact of communications between human and machine. This research is critical to an understanding of the impact of virtual reality, as Wiener opened the door to the study of human relationship to technology and the cyberborgian (cybernetic organism) nature of the symbiosis of the two. Wiener describes an increasingly technological society reliant on machines, and he explains how the nature of those interactions affects the quality of life. The design of virtual reality technologies that extend our reach, such as tele-robotic devices (the control of robots at a distance), is informed by Wiener's research in cybernetics and his concern with the nature of sending messages and the reciprocal feedback inherent in those systems.

The virtualization of reality and the simulation of human consciousness by engaging the full range of the viewer's sensory mechanisms is illustrated by cinematographer Morton Heilig's claim in the 1950s that the cinema of the future—a medium already transformed by such innovations as the panoramic perspective of Cinerama—would "no longer be a 'visual art,' but an art of consciousness … [a] simulation so lifelike that it gives the spectator the sensation of being physically in the scene" (p. 250; emphasis in original). The experience of "being there" has since been a paramount quest in the development of virtual reality. Heilig's Sensorama, for example, a nickolodeon-style arcade prototyped in the 1960s, immersed the viewer in a multisensory excursion through the streets of Brooklyn that engaged all the senses through the synchronization of media using the technology of film.

In the mid-1960s, the engineer Douglas Engelbart conducted critical research at the Augmentation Research Center at Stanford Research Institute, which resulted in the invention of the computer mouse, hypertext, and other interactive information technologies. For the first time, one could virtually navigate information space as an alternative to the linear methods of earlier forms of computing. The mouse pointer (cursor) and keyboard in conjunction with the visual display extended the intellectual reach of the individual. Engelbart believed that this intuitive and cybernetic approach to information processing would lead to the "augmentation of human intellect," by engaging the individual in new methodologies of complex problem solving, far beyond the scope of previous tools.

Computer graphics specialist Ivan Sutherland, the first scientist to bring real-time graphics simulation to the computer screen, advanced the possibilities of reality construction, claiming, "the ultimate display would, of course, be a room within which the computer can control the existence of matter … a bullet displayed in such a room would be fatal" (p. 256). At the University of Utah in 1970, Sutherland introduced the first head-mounted display (miniaturized graphics display) that enabled the superimposition of low-resolution computer graphics in the physical environment. Expressing the spirit of Lewis Carroll's Alice in Wonderland, Sutherland believed in a new mathematical wonderland that transformed the abstract nature of mathematical constructions into virtual objects and imaginary worlds.

The defining development in virtual reality was carried out in the late 1980s at the NASA-Ames Research Center in northern California by the artist and scientist Scott Fisher, who sought to render virtual worlds even more closely coupled to our sensory mechanisms. Fisher oversaw the creation of the VIEW system (Virtual Interactive Environment Workstation), the first virtual reality (VR) system that integrated the head-mounted display, dataglove (sensing device worn as a glove), voice recognition, and three-dimensional (3-D) audio, which enables the listener to experience the location and movement of specific sounds more realistically than the two-dimensional stereo field of left to right. As a result of this research, Fisher established the field of telepresence, in which one could virtually transport oneself to another place, real or imaginary, experiencing remote spaces and controlling objects at a distance. According to Fisher, virtual reality's potential was now as limitless as reality itself.

In the early 1990s, Daniel Sandin, along with his colleagues Thomas DeFanti and Carolina Cruz-Neira, developed the CAVE System (Cave Automatic Virtual Environment) to project interactive, computer-generated 3-D imagery and audio into a physical space defined by multiple projection screens and a surround-sound system. The immersive nature of CAVE was intended as an allusion to Plato's Cave, evoking the shadowy presence of the representation of reality. The CAVE System also returns full circle to the earliest attempts at virtualization and multisensory experience, as practiced in the prehistoric caves of Lascaux, seventeen thousand years earlier.

Cultural Implications

While a graduate student at MIT in 1979, the artist Michael Naimark collaborated on the Aspen Movie Map, the navigable laserdisc tour through Aspen, Colorado. Using a touch screen monitor and interactive display, the viewer navigates the streets of Aspen, exploring the environment virtually by controlling the direction and speed of the video. The Aspen Movie Map was Naimark's first exploration into what he refers to as "surrogate travel," in which the viewer is transported virtually to another place. Naimark's research opened up new interest in virtual forms of navigation in real or imagined places, in which the possibilities for nonlinear storytelling and interactive experience might alter our perception of time and space.

The video artist Bill Viola has been concerned with the idea of "dataspace" since the 1980s as a means to record cultural history in electronic or virtual space, inspired by the "memory palaces" of Greek temples and Gothic cathedrals. Viola compared these ancient architectural vessels of knowledge to the contemporary personal computer with its capacity for storage and instant-access retrieval of information. According to Viola, the symbolic ornamentation, paintings, and stained-glass windows of the European cathedrals might serve as a model for the branching pathways and hypermediated environments of computer-controlled video works, resulting in what he refers to as "idea space"—the conceptual basis for recent virtual reality applications that employ 3-D simulation of information space.

William Gibson coined the term cyberspace in his 1984 science fiction novel Neuromancer. By adding this term to contemporary vocabulary, Gibson gave literary meaning to the wires, hubs, networks, and computers that constitute the material manifestation of the more abstract virtual information space. Gibson foresaw a habitable, immersive terrain that would become a new environment for the staging of narratives concerned with the far-reaching possibilities of cyber activity. This reconstruction of the material world through the emerging information technologies would, in Gibson's terms, spark an age of the "posthuman," in which utopian dreams and dystopian nightmares are imagined and realized in digital form.

The computer scientist Pavel Curtis developed one of the first multiuser environments at Xerox PARC (Palo Alto Research Center) in the early 1990s, entitled LambdaMOO, and designed as a text-based virtual reality. The purpose of his research was to explore social phenomena in real-time virtual space—the forerunner of the chat room. Curtis's observation of social behavior in cyberspace is fundamental to our understanding of the sociological implications of communications in virtual reality. His research also explored the new paradigms of anonymity, the fluidity of multiple identity creation, and the extensibility of world building in digital spaces, and how they might come to transform social interaction.

Marcos Novak, a digital architect, describes his 3-D designs as "liquid architectures," digital spaces that are composed to virtually situate the viewer into complex "fourth-dimensional" environments. He has conceived of these immersive spaces as "navigable music" and "habitable cinema," with their allusion to musical and narrative forms. Novak poetically describes his research: "liquid architectures … is an architecture without doors and hallways, where the next room is always where I need it to be and what I need it to be" (p. 259). In Novak's renderings, architecture need no longer be experienced as a fixed or finite space, but rather engages the viewer in the interactive, fluid, and transformational properties of digital media. He has created a vocabulary and set of paradigms for future architects who will no longer work within the physical constraints of solid materials.

In 1993, Virtual Reality: An Emerging Medium opened at the SOHO Guggenheim Museum in New York City, one of the first exhibitions to investigate new artistic directions in virtual reality. The show featured two virtual worlds by Jenny Holzer. The first, The Lost Ones, was inspired by one of Samuel Beckett's short stories. The second, Bosnia, offered a response to the violence against women in the Bosnian war. The observer enters and discovers a vast patterned desert of striking color: bright orange earth and deep blue sky. As one travels across the landscape, one reaches villages with block huts. Each hut harbors a different voice, and each village has a different story to tell. Bosnia points to a form of interactive storytelling in which the viewer virtually enters into and inhabits the "narrative space," where the narrative unfolds according to viewer's interactions.

The multimedia artist Laurie Anderson created large-scale theatrical works during the 1980s that integrated dance, music, performance art, and technology. In 1995 she explored the interactive medium, creating the CD-ROM Puppet Motel as a nonlinear sequence of scenes and vignettes based on previous theater pieces. Puppet Motel is a new form of performance art that takes place on the virtual stage of the computer desktop; the audience becomes the performer, controlling the flow of time and the movement of the narrative. Anderson's experimentation with interactive multimedia can be viewed as a new form of "digital Gesamtkunstwerk, " in which the theatrical "fourth wall" dissolves; the fourth wall is the mechanism that traditionally separates the audience from the stage to preserve the illusion of the stage. Here the viewer enters into, inhabits, and interacts with objects in an illusionary world conceived as theater in digital space.

The artist Char Davies has explored new ways to interface with the technologies of virtual reality: the apparatus worn by an "immersant" in her work Osmose (1995), which includes a head-mounted display and harness, incorporates breath and movement as a means for navigating a sequence of virtual environments. The viewer uses body motion similar to the scuba diver to negotiate the floating, meditative worlds of the artwork—the contemplation of self, space, nature, and sound, has a powerful effect in the evocation of otherworldly conditions. As Davies describes her work, "The medium of 'immersive virtual space' or virtual reality … has intriguing potential as an arena for constructing metaphors about our existential being-in-the-world and for exploring consciousness as it is experienced subjectively, as it is felt" (p. 295). Osmose reveals the potential for virtual reality to transform the inner being, similar to the effects of drugs or meditation to induce mind-altering or "out-of-body" experience.

In viewing virtual reality's historical evolution and cultural impact, we see the timelessness and cyclical nature of human expression—from the dreams and representations as depicted in the prehistoric caves of Lascaux; to the totalizing experience of the Gesamtkunstwerk ; to recent digital forms of immersive experience and altered states of consciousness. The Japanese curator Toshiharu Ito, describing conFiguring the CAVE, an immersive artworkcreated in 1997 by Jeffrey Shaw, Agnes Hegedues, Bernd Linterman, and Leslie Stück for the CAVE System at the InterCommunication Center (ICC) in Tokyo, Japan, refers to a fourth dimension that exists between the work and the viewer, a space in which the viewer's awareness and bodily experiences can be restructured and recreated.

In describing immersive forms, "we cannot," according to Margaret Morse, "fully anticipate what it means to experience that realm until we are inside." Virtual reality is experiential and sensory—one does not simply observe the object, one is the object. One is not merely a detached observer—one enters into and becomes part of the landscape. The medium of virtual reality functions as an extension of the self, a reconfiguration of identity, intellect, dreams, and memories—ultimately blurring the boundary between self and exterior, between the real and the imaginary.

See also Cinema ; Computer Science ; Landscape in the Arts ; Sacred Places ; Visual Order to Organizing Collections .

bibliography

Campbell, Joseph. The Masks of God: Primitive Mythology. New York: Penguin Books, 1991.

Curtis, Pavel. "Mudding: Social Phenomena in Text-Based Virtual Realities." In Multimedia: From Wagner to Virtual Reality, edited by Randall Packer and Ken Jordan. New York: Norton, 2001.

Davies, Char. "Changing Space: Virtual Reality as an Arena of Embodied Being." In Multimedia: From Wagner to Virtual Reality, edited by Randall Packer and Ken Jordan. New York: Norton, 2001.

Engelbart, Douglas. "Augmenting Human Intellect: A Conceptual Framework." In Multimedia: From Wagner to Virtual Reality, edited by Randall Packer and Ken Jordan. New York: Norton, 2001.

Fisher, Scott. "Virtual Interface Environments." In Multimedia: From Wagner to Virtual Reality, edited by Randall Packer and Ken Jordan. New York: Norton, 2001.

Gibson, William. Neuromancer. New York: Ace Books, 1984.

Heilig, Morton. "Cinema of the Future." In Multimedia: From Wagner to Virtual Reality, edited by Randall Packer and Ken Jordan. New York: Norton, 2001.

Morse, Margaret. Virtualities: Television, Media Art, and Cyber-culture. Bloomington: Indiana University Press, 1998

Novak, Marcos. "Liquid Architectures in Cyberspace." In Multimedia: From Wagner to Virtual Reality, edited by Randall Packer and Ken Jordan. New York: Norton, 2001.

Sandin, Daniel, Thomas DeFanti, and Carolina Cruz-Neira. "A Room with a View." In Multimedia: From Wagner to Virtual Reality, edited by Randall Packer and Ken Jordan. New York: Norton, 2001.

Sutherland, Ivan. "Ultimate Display." In Multimedia: From Wagner to Virtual Reality, edited by Randall Packer and Ken Jordan. New York: Norton, 2001.

Viola, Bill. "Will There be Condominiums in Cyberspace." In Multimedia: From Wagner to Virtual Reality, edited by Randall Packer and Ken Jordan. New York: Norton, 2001.

Wagner, Richard. "Artwork of the Future." In Multimedia: From Wagner to Virtual Reality, edited by Randall Packer and Ken Jordan. New York: Norton, 2001.

Wiener, Norbert. Cybernetics; or, Control and Communication in the Animal and the Machine. Boston: MIT Press, 1948.

Randall Packer

Virtual Reality

The origin of virtual reality

Components of virtual reality

Applications of virtual reality

On the horizon of virtual reality

Resources

Virtual reality (VR) is a technology that provides users with an interaction with computer-simulated environments. It is a product of the evolution of the computer from an instrument that merely received input from a user to a machine that can adapt to the user’s cues to create an almost life like experience.

The term virtual reality was coined in 1989 by American virtual reality developer Jaron Lanier (1960–). Others have described the concept as artificial reality, cyberspace, and virtual worlds.

Virtual reality combines state-of-the-art imaging with computer technology to allow users to experience a three-dimensional simulated environment. It is this environment that was called cyberspace in a novel by American-Canadian science-fiction writer William Gibson (1948–).

Cyberspace is interactive. In other words, the user can alter the appearance of the image or the nature of the scene. This interactive medium incorporates powerful computers with video displays, sensors, electronic headsets, and gloves. With these tools, users can both see and manipulate a phantom environment that appears real. Virtual reality tools under development include a whole body suit, which, like diving into water, would totally immerse the user in a virtual world. Although virtual reality has been popularized as a new form of entertainment, it has applications in business, industry, and medicine.

The origin of virtual reality

The concept of virtual reality dates back to World War II (1939–1945). Then, piloting training for combat missions had need of realistic flight simulators. The technology of the day was insufficient to produce much beyond a rudimentary simulation.

By the 1960s, technology advanced to a point where virtual reality became possible. In 1966, American computer programmer and Internet pioneer Ivan Sutherland (1938–) conducted experiments with the first head-mounted three-dimensional displays at the Massachusetts Institute of Technology’s Lincoln Laboratory. Although the headset was extremely cumbersome, users were able to view a computer-generated three-dimensional cube floating in space. By moving the head, users could then inspect various aspects of the cube and determine its dimensions. Sutherland built the first fully functional head-mounted display unit in 1970.

American computer artist Myron Krueger (1942–) also worked on the infant science of virtual reality, first at the University of Utah and later at the University of Connecticut. His artificial realities used both computers and video systems. VIDEOPLACE, a virtual reality laboratory, was first exhibited in 1975 at the Milwaukee Art Center. Using video displays, computer graphics, and position-sensing technologies, Kreuger was able to create a virtual environment in darkened rooms containing large video screens. People in the room could see their own computer-generated silhouettes and follow their movements in the virtual world projected onto the screen. In addition, people in two different rooms could see each others’ silhouettes and interact in the same virtual world.

As is the case with other technological advance, much of the initial development of virtual reality was funded by the military. By 1972, the General Electric Corporation had built one of the first computerized flight simulators, using three screens surrounding the training cockpit to provide a 180-degree field of view that simulated flying conditions. In 1979, virtual reality technology was incorporated into a head-mounted display developed by the McDonnell-Douglas Corporation. Three years later, American engineer and research scientist Thomas Furness III, who had created visual displays for the military since 1966, developed the prototype Visually Coupled Airborne Systems Simulator. Donning a specialized oversized helmet, pilots were presented for the first time with an abstract view of flying conditions instead of a reality-based image. Since they were unable to see anything but the computerized cockpit’s field of view, pilots became totally immersed in the graphic representation.

While scientists like Sutherland and Furness concentrated on the visual components of virtual reality, American software engineer and computer scientist Frederick Phillips Brooks, Jr. (1931–) began experimenting with tactile feedback, or the sense of touch, in the early 1970s at the University of North Carolina. However, it was not until 1986 that the computer industry developed the tools to simulate tactile experience (i.e., sensing by touch). Brooks was able to develop his GROPE-III system, which used a specialized remote manipulator based on a device that mimicked arm motions to handle radioactive substances. Specifically, the GROPE-III system generated stereoscopic images of molecules and protein structures that could be felt and manipulated as though they existed in the physical world.

Components of virtual reality

Essentially, virtual reality systems consist of the computer and software—known as the reality engine—input sensors, and output sensors. The input sensors are the equipment to computer enthusiasts, and include the keyboard, mouse, knobs, and joysticks. Output devices include the printer and the video display monitor. In addition, virtual reality input and output devices include the head- and ear-mounted equipment mentioned above, and gloves for controlling the virtual world. Finally, the fourth sensory component is the user, who both directs and reacts to the chosen environment.

The reality engine

The reality engine employs both computer hardware and software to create the virtual world. Reality engines are based largely on the same components that make up a personal computer (PC), although much more computing power is required for the reality engine than what is available in a standard PC.

One reason for the increased computing power is the complexity of the hardware and software necessary to create a world that appears real. The images created by the computer and software are extremely complex, compared to the relatively simple line-based graphics associated with computer games. Virtual reality images are made with thousands of dots called pixels (or picture elements). The more pixels per given amount of area, the higher the quality of the image. Hence, an image will be more realistic. Creating realistic images that can be manipulated is known as realization. These images can be either opaque, in which all the viewer sees is the virtual world, or see-through, in which the virtual image is projected or superimposed onto the outer world.

The reality engine is also involved in bringing sound to the virtual world. Sound enriches the virtual world. For example, in a flight simulator, the experience of soaring through the air in a simulated cockpit is more realistic if the user hears the roar of the engines. Sound also enhances participation in the virtual world by providing the user with audio cues. For example, the user may be directed to look for another virtual airplane flying overhead.

To incorporate the total experience provided by the sight and sound cues, the reality engine can use what is known as haptic enhancement. Haptic enhancement utilizes the participant’s other senses of touch and pressure in the virtual world. Haptic enhancement is a complex process, and the hardware and software that are required increase the cost of the system tremendously. To date haptic enhancement is used mainly military and research applications.

Headsets

Head-mounted display (HMD) units use a small screen or a pair of screens (one for each eye) that are worn in a helmet or a pair of glasses. The HMD allows viewers to look at an image from various angles or change their field of view by simply moving their heads. In contrast, a movie is a passive experience, where the view of the audience is controlled by the position of the camera that recorded the scene.

HMD units usually employ cathode ray tube (CRT) or liquid crystal display (LCD) technology. The optical systems in CRTs reflect an image onto the viewer’s eye, creating an image of very clear and realistic image. CRT images can be semi-reflective. This means that the user can experience the virtual world while still being able to see the outside world. This permits the user to operate another machine or device while viewing the virtual world.

LCD technology has lagged behind CRT in picture quality. LCD monitors display two slightly different images to each eye. The brain processes and merges the images into a single three-dimensional view. However, LCD systems have the advantages of being slimmer, lighter, and less expensive than CRT systems. Thus, LCD is better suited to home entertainment. As the image quality improves, LCDs will find a lucrative niche in the home entertainment market.

Audio units

Sound effects in virtual reality rely on a prerecorded sound set. This aspect of the virtual reality experience is less prone to alteration.

The audio portion of virtual reality is transmitted through small speakers placed over each ear. Audio cues may include voices, singing, the sound of bubbling water, thud-like noises of colliding objects—in short, any sound that can be recorded.

While the sounds themselves cannot be changed from a recording, the presentation of the sounds to the user can be changed. Three-dimensional (omnidirectional) sound further enhances the virtual reality experience. Sound that seems to come from above, below, or either side provides audio cues that mimic how sounds are heard in the real world (e.g., footsteps approaching or a plane flying overhead). Three-dimensional sound is achieved through the use of complex filtering devices. This technology must take into account the delay in the detection of sound by the ear that is furthest away from the source of the sound (interaural time difference) and the tendency of one ear to hear a sound more loudly than the other ear (interaural amplitude difference).

The most complex human hearing dynamic is called head-related transfer functions (HRTF). HRTF accounts for how the eardrum and inner ear process sound waves. Factors that are influential in HRTF include the various frequencies at which the sound waves travel, and how waves are absorbed and reflected by other objects. HRTF audio processing enables the listener to locate a sound source and to focus in on a specific sound out of a multitude of sounds. (i.e., the sound of their name called out in the midst of a noisy party).

Gloves

A popular image of a virtual reality experience shows the user wearing gloves. The gloves allow the user to interact with the virtual world. For example, the user may pick up a virtual block, and, by turning their gloved hands, turn the block over and set it on a virtual table.

Virtual reality gloves are wired with thin fiberoptic cables, or have light-emitting diodes positioned at critical points over the gloves’ surface. The optics detects the amount of light passing through the cable in relation to the movement of the hand or joint. The computer then analyzes the corresponding information and projects this moving hand into the virtual reality. Magnetic tracking systems are also used to determine where the hand is in space in relation to the virtual scene.

Some gloves use haptic enhancement to provide a sense of touch and feel. In haptic enhancement, the reality engine relays the various sensations of force, heat, and texture that are experienced by the user to the computer software. The software can use the information to determine an outcome of the user’s actions, and relay the outcomes back to the user. For example, if the user closes a hand on a virtual squeeze toy, the software will alter the virtual image to show the toy becoming compressed. To achieve this two-way communication, virtual reality gloves may use either air pressure (such as strategically placed, inflated air pockets in the glove) or vibrating transducers placed next to the skin (such as a voice coil from a stereo speaker or alloys, which change shape through the conduction of electrical currents) to simulate tactile experience.

Tools under development

Many other virtual reality tools are in the phases of research and development. Remote control robotic or manipulation devices are being tested for industry and medicine. Already, surgery has been done by a physician located hundreds of miles away from the patient, by means of robotics and virtual imaging.

Special wands with sensors, joysticks, and finger sensors such as picks and rings will eventually be as common to virtual reality technology as microwaves are to cooking. The technology to control the virtual world through voice commands is also rapidly advancing.

Perhaps the most impressive technology under development is the whole body suit. These suits would function similarly to the gloves, creating a virtual body that could take a stroll through a virtual world and feel a virtual windstorm.

Applications of virtual reality

The potential for virtual reality as an entertainment medium is apparent. Instead of manipulating computerized images of two boxers or a car race, the virtual playground allows the user to experience the event. Disney World’s Epcot Center houses a virtual reality system.

Most entertainment applications of the present day are visually based. Virtual reality will allow players of the future to experience a variety of tactile events. For example, in a simulated boxing match, virtual reality users would bob and weave, and throw, land, and receive punches in return.

Virtual reality also has practical applications in business, manufacturing, and medicine. Already, the National Aeronautics and Space Administration (NASA) has developed a virtual wind tunnel to test aerodynamics shape. Virtual reality holds promise for discovering the most efficient manufacturing conditions by allowing planners to evaluate the actual physical motions and strength needed to complete a job. For example, the McDonnell-Douglas Corporation is using virtual reality to explore the use of different materials and tools in building the F-18 E/F aircraft. The study of people in relation to their environments (ergonomics) may also be revolutionized by trials in cyberspace. Engineers at the Volvo car company use virtual reality to test various designs for the dashboard configuration from the perspective of the user.

In medicine, virtual reality systems are being developed to help surgeons plan and practice delicate surgical procedures. Philip Green, a researcher at SRI International, has developed a telemanipulator, a special remote-controlled robot, to be used in surgery. A physician in Halifax, Nova Scotia, on a patient located hundreds of miles away, performed such surgery in 2002. Using instruments connected to a computer, the operation was performed cyberspace, while the computer sent signals to direct the telemanipulator. Because of the time delay factor for distances exceeding a few hundred miles (communications can travel only at the speed of light, which is still a crucial amount of time for surgeries), such remote surgery was not possible until about 2004–2005 when robotic surgery was able to be tested between the United States and Europe. The tests involved a dedicated broadband fiber optic cable connection that minimized the time delay to only 155 milliseconds. As bandwidth and next-generation Internet capabilities improves, such remote surgeries will become a reality around the world.

Virtual reality may even have applications in psychiatry. For example, someone with acrophobia (a fear of heights) may be treated by having the patient stand atop virtual skyscrapers or soar through the air like a bird.

On the horizon of virtual reality

Virtual reality will no doubt mirror the breath taking pace of development that is the norm for

KEY TERMS

Pixel —A word used for picture elements, or dots, that make up a computerized image.

Three-dimensional —A visual representation in terms of height, width, and depth as opposed to a “flat” image that represents only height and width.

other computerized applications. Thus, what is state of the art now will be commonplace in decades.

Aspects of virtual technology that are just ideas now will become reality soon. For example, technology is being developed to use the retina of the eye as a screen for images that could be transmitted directly to the brain through the optic nerve. Virtual sight would become a replacement for natural sight in those blind people whose optical hardware was intact.

Also under development is technology to allow the remote operation of aircraft and other machines as though the user were actually in the machine. Traveling to France or Greece, including the experience of climbing the Eiffel Tower or basking on a sundrenched beach, may be as easy as donning a headset and body suit and plugging in.

Like most technological advances, virtual reality has social and psychological ramifications. Critics argue that virtual reality could cause some people to forego emotions and interpersonal relationships for the safe, controllable virtual world. But proponents say advances from the proper applications of this technology—both as a means of interacting with the real world and as an end of facilitating training and entertainment—far outweigh the potential for antisocial abuse.

Resources

BOOKS

Bartle, Richard A. The Designing Virtual Worlds. Indianapolis, IN: New Riders, 2004.

Dix, Alan J., Janet E. Finlay, Gregory D. Abowd, et al. Human-Computer Interaction. 3rd ed. Harlow, UK, and New York: Pearson/Prentice Hall, 2004.

Hsu, Feng-Hsiung. Behind Deep Blue: Building the Computer That Defeated the World Chess Champion. Princeton: Princeton University Press, 2002.

Sherman, William, R., and Alan B. Craig. Understanding Virtual Reality: Interface, Application, and Design. San Francisco: Morgan Kaufmann Publishers, 2002.

Vince, John A. Introduction to Virtual Reality. London, UK, and New York: Springer, 2004.

OTHER

University of Michigan Virtual Reality Laboratory. “Virtual Reality: A Short Introduction.” College of Engineering. February 10, 2004. <http://www-vrl.umich.edu/intro/index.html> (accessed November 6, 2006).

David Petechuk

Virtual Reality

BUSINESS PLAN

BUILDING AIDS INC.

123 Main St.
Simpson Grove, CA 37911

July 10, 1993

Building Aids Inc. is a new company formed to take advantage of virtual reality technology in its application to new home design and construction. The company will develop and provide virtual reality tours and "blue prints" of homes in order to assist both architects and prospective purchasers. The following plan outlines the company's structure, present and future goals, and need for capital.

• executive summary
• products and services - first year
• future products and services
• the market
• the competition
• marketing objectives and strategies
• production and distribution
• company structure

EXECUTIVE SUMMARY

The formation of Building Aids Inc. as aspecialized service company is the result of exploration of the high technological advancements of computer graphic design integrated with eighteen years of personal commitment to quality work for, in, and around various areas of the building industry. The initial goal is to provide home owners and builders, architects, designers, and related manufacturers and suppliers with the innovative concept of three-dimensional graphic designs integrated with virtual reality (V.R.) definition. The designs will be made available as real-time animations on computer discs and video cassette tapes. To date, no one has approached the home plan publications market with sales revenues in excess of three billion ($3,000,000,000) dollars with such a unique and affordable concept. With the assistance of the Hawaii Small Business Development Center, Building Aids Inc. will have the unique opportunity to participate in an Incubator Program, which will provide office space at little or no cost, at their EDIC Center located at 45 Maple Ln.

A major obstacle that exists for architects and builders as well as for the consumer is the difficulty to conceptualize the finished product. It is very difficult, if not impossible, to transfer a two-dimensional perspective into a three-dimensional one. In October of 1991 I began researching alternative solutions to this problem. By integrating computer software programs, I have created an application for three dimensional virtual reality (V.R.) animated movies.

Forecasters project that this technology will take years to become affordable to the public. Virtual Reality technologists and multimedia producers state, "within ten years the virtual reality market will be affordable to consumers with home electronic toys, games, and entertainment systems. It will be used in public attractions like rides, movies and exhibits. It will be an extension of the 'human computer' used in training, physical therapy, medical research, and practices of non-invasive surgery, by schools and universities."

The more advanced technology already exists and has been pursued primarily by government agencies (e.g. NASA) and corporations with the investment capital that can afford the high cost of the main frame data banks. Transferring data to video tape eliminates large capital outlays and minimizes resources, resulting in a high quality multimedia product with built-in flexibility for rapid change.

Inexpensive demonstration tapes will allow consumers to explore the three-dimensional realm of virtual reality by viewing custom home designs by "walking" from room to room. Plans would be available for purchase from the Building Aids library. These tapes will also demonstrate the capabilities of scanning a design or 2-D building plan with a computer and transforming them into a 3-D environment. It will allow one to walk around the outside and through the inside of their home before it is actually built.

The company's initial year will largely be an organizational one due to the high growth rates the company will undergo. It is essential that suitable systems and procedures be implemented at the onset to achieve the financial goals that have been established. To experience a successful start-up and ongoing development, funding in the amount of two hundred thousand dollars ($200,000) is necessary. This will allow for the purchase of equipment; initial operating costs, including but not limited to the consultation and contracting of an attorney, accountants, marketing, and sales; management team salaries; and debt service for the first year of operation.

The management team of Building Aids Inc. consists of highly specialized individuals with training in both the building and computer-aided design technologies. The General Manager will establish the company and its facilities, implement market and sales, and conduct research and design development. The Technical Operations Manager will assist in research, design/developments and production control. The Senior Engineer will make purchase recommendations and maintain and upgrade the equipment, as well as assist in the design and production of home plans. The Administrative Assistant will set up database programs for accounting, sales, and distribution of products, as well as maintain customer relations.

The company will have a limited number of competitors in its target market. Some of these competitors are larger than Building Aids Inc. and have access to more financial resources than the company, but these companies have not developed the interactive process to approach the market with the technical and marketing strategies of our company.

Marketing Strategy

Building Aids Inc. is a company providing the following services:

• Custom plans and designs to worldwide market of:
  • Do-It-Yourself consumers
  • Residential home owners and builders
  • Commercial developers
  • Industrial suppliers
• The marketing of these services will consist primarily of Computerized directories (e.g. Procurement Automated Source System (PASS))
• Direct mail
  • National Trade Associations of the U.S. and Canada
  • Professional Associations of the U.S. and Canada
• Telemarketing
• Newspapers and Periodicals
  • The Babson Entrepreneurial Review
  • Small Business Reporter
  • Wall Street Journal, New York Times
• Consumer Publications (e.g. Better Homes & Garden)
  • Home Magazine
  • Personal Computing Mac User, Byte
  • AI, Architectural Digest, Victorian Homes
  • Mac World, PC Magazine, PC Computing
  • Home Office, Amiga World
• Trade magazines
  • Builder
  • Fine Home Building
  • Architectural Record
• Newsletters
• Reprints to targeted audiences
• Trade Shows
• Visual Presentations
• Videos
• Computer Bulletin Boards
  • America Online, Inc.
  • GEnie
  • HouseNet & Prodigy Services, Co.
• Exhibit creativity and innovative solutions (not only within design and problem solving areas, but for use with others approach to marketing and client communications)

Management Team

Building Aids Inc. will be established as a Limited Liability Corporation.

• Principal Managers/Staff and their titles:
  • General Manager, Phil Orlando
  • Administrative Assistant, Carrie Green
  • Technical Operations Manager, Susan Selden
  • Senior Engineer, Linda Cardinale
• Objectives of the Management Team:

Building Aids Inc.'s initial year will consist of organizing and developing. Since the company will be providing office facilities, this eliminates one major activity in the company's development. After obtaining the start-up capital, efforts in the first year will be concentrated in the following key areas:

• Legal organization
• Purchasing and installing equipment
• Development of information management and design libraries
• Marketing and sales

Initial sales of the company will consist of demonstration tapes and custom designed homes. These sales will generate cash flow and establish Building Aids in the marketplace.

Financial Considerations

The projected Income Statement has been compiled from the 1991-92 editions of the following: Industry Norms and Key Business Ratios, published by Dun and Bradstreet; Thomas Register, Value Line, and International Economic Indicators, and The State of Small Businesses: A Report of The President. The sales forecast for the first year is a worse case scenario.

Operating expenses are based on the industry standards with minimum salaries for the management team, independent contractors, marketing and sales, expenses, and repayment of debt service beginning on the seventh month of operation as cash flow is being established. Positive cash flow appears in month ten with year end expenses exceeding total sales.

Second year sales will show a major increase with target market being extended to 80% of potential market. Operating expenses may fluctuate depending on needs and demands. Salary increases, along with other options, will be in proportion to productivity performance and achievement of individual goals.

Third year sales are still forecasted at conservative percentage increases based on actual economic indicators for the industry. Production and sales will increase as additional employees are added to the technical and design staff.

Anticipated profits for the first three years of operations are as follows:

Funds to be distributed:

PRODUCT AND SERVICES - FIRST YEAR

Computerized three-dimensional enhancements of home plans with a virtual reality walk-through beginning from the exterior of the home through the front door and into each room of the house. Virtual Reality presentations can be purchased as floppy discs or as a VCR video tape.

Additional Services:

• Energy calculations for specific geographical areas
• Cost analysis for geographical area regarding R-values of insulation, window and door comparisons, heating/air conditioning units and gas appliances by cost and efficiency.
• Interior design - scanned photo images of actual furniture, cabinetry, lighting fixtures etc.
• Material lists.
• Design alterations - change room dimension, etc.
• Landscaping presentations.

Product Costs (Suggested Retail Price):

• Demonstration Tape - $20.00 - examples of walkthroughs, three dimensional designs, marketing uses and sales presentations.
• Video/Floppy Discs - Starting at $250.00.
  • Energy Calculation - $85.00.
  • Complete Comparative Cost Analysis - $100.00
  • Design Alterations - $1.50/sq. ft.
  • Landscapes - $.75/sq. ft.
  • Scanned Images and Consultation - $50.00/hr.

FUTURE PRODUCTS AND SERVICES

• With five employees in the second year and inclusion of additional target market:
  • Design and Concept Development
  • Layouts and Computer Three Dimensional Graphics
  • Illustrations
  • Virtual Reality Presentation Material:
    Slides, Videos, Imaging, Posters, Large Scale Displays and Exhibits, Photo Imaging and Elevation, and Sectional Perspectives Renderings
• With seven employees in the third year, including expansion into commercial and industrial markets. Also offering franchises of information management libraries and technical support.
• Proprietary Features—will apply for:
  • Patents
  • Copyrights
  • Trademark

THE MARKET

$3 Billion Annual Growth

• Individuals
  • Home Owners
  • New Home Buyers
  • Retirees
  • Do It Yourselfers - Adding on or remodeling
• Professionals
  • Builders
  • Developers
  • Architects
  • Designers
  • Resources: American Institute of Building Design (AIBD) Sacramento, CA 95815
• Commercial/Industrial Companies
  • Building Supply
  • Home Improvement Centers
  • Industrial Suppliers
  • Manufacturers (doors, windows, heating, etc.)

THE COMPETITION

No direct competition exists at the present time.

• Existing Companies
  • Commercial Design\Graphic Corporations - $5M+
  • CADCAM, Inc - $5M+, Dayton, Ohio.
  • Circuit CAD Corp. - $1M+
  • CACI, Inc. - $50M+, Chesapeake, Virginia.
• CAD Designers
  • Turbo Scan International - $9M+, Coral Gables, Florida.
  • Willow Peripherals - (NR) $1M+, Bronx, New York.
• Residential Home Plan Books
  • Home Magazines-$20.00/plan book, $330 minimum, Newport Beach, California.
  • Better Homes and Gardens - $425 minimum, Des Moines, Iowa.
  • Builder (NAHB) - $350 minimum, Washington, D.C.
  • Custom Builder - $385 minimum, Yarmouth, Maine.
  • Princeton Plans Press - $330+, Princeton, New Jersey.
  • W.D. Farmers Homes - Planbooks - $69.00, Atlanta, Georgia.

Estimate sales and revenues with comparative products and services. No availability of three-dimensional virtual reality technology.

• Architects and Designers - charge on percentage basis of building costs. Average cost to build a 1400 sq. ft. house in 1991 = $117,000.00. Architect fee @10%-$l 1,700.00.
• Design Services (e.g. RCM Corporation, Columbia, Maryland). Three phase design services

MARKETING OBJECTIVES AND STRATEGIES

After extensively researching the Commercial and Private marketing opportunities, I have concluded that the most effective and efficient approach to initiate the marketing of products and services is by market segmentation and the use of direct as well as indirect methods of advertising.

The direct method will be aggressive. It will entail new product releases in key industrial/commercial as well as consumer publications, computer billboard announcements, together with sending out demonstration tapes to the architectural, design, construction, home improvement, and development industries. In addition, trade show attendance and participation will allow product introduction and overall industry awareness to take place. This extensive exposure with appropriate follow-up will generate an at-large industry demand. The indirect strategy will consist of identifying sales representative agencies, wholesalers, distributors, and retailers in key locations to nationally and internationally represent Building Aids Inc. Specially modified and custom demonstration videos will be prepared so that the indirect agencies are equipped to target market and be successful in their efforts. Creative and innovative agency training programs as well as compensation packages will be used to motivate the indirect sales force.

Production and Distribution Corporate offices will be located at 123 Main. The first six months will be spent organizing an information management library for immediate and direct access to designs and energy calculations. This will allow Building Aids to generate some "bread and butter" cash flow as it further invests efforts to get the direct and indirect marketing strategies underway. As part of reaching and informing the consumer, a composite demonstration video highlighting capabilities will be produced. Credit toward the customers' order will be made in the event that a custom design order is placed. The equipment required for development and production of virtual reality animations consists of three separate main computers with monitors, scanners, printers, plotters, GVP Impact Controllers, Processor Cards, Video Cameras, VHS & VCR recorders and controllers, modems, copiers, video monitors and relative software programs.

COMPANY STRUCTURE

Building Aids Inc. will be established as a Limited Liability Company incorporated under the laws of the state of Hawaii. The General Manager will be Phil Orlando. The two key management members will be Susan Selden and Linda Cardinale.

A quasi Board of Directors will be set up as an alternative to a formal Board of Advisors and Consultants.

Virtual reality

Virtual reality is a product of the evolution of the computer from an instrument that merely received input from a user to a machine that can adapt to the user's cues to create an almost lifelike experience.

The term virtual reality was coined in 1989 by Jaron Lanier. Others have described the concept as "artificial reality," "cyberspace," and "virtual worlds."

Virtual reality combines state-of-the-art imaging with computer technology to allow users to experience a three-dimensional simulated environment. It is this environment that was called cyberspace in a novel by Canadian science-fiction writer William Gibson.

Cyberspace is interactive. In other words, the user can alter the appearance of the image or the nature of the scene. This interactive medium incorporates powerful computers with video displays, sensors, electronic headsets, and gloves. With these tools, users can both see and manipulate a phantom environment that appears real. Virtual reality tools under development include a whole body suit, which, like diving into water , would totally immerse the user in a virtual world. Although virtual reality has been popularized as a new form of entertainment, it has applications in business, industry, and medicine.

The origin of virtual reality

The concept of virtual reality dates back to World War II. Then, piloting training for combat missions had need of realistic flight simulators. The technology of the day was insufficient to produce much beyond a rudimentary simulation.

By the 1960s, technology advanced to a point where virtual reality became possible. In 1966, Ivan Sutherland conducted experiments with the first head-mounted three-dimensional displays at the Massachusetts Institute of Technology's Lincoln Laboratory. Although the headset was extremely cumbersome, the user was able to view a computer-generated three-dimensional cube floating in space and, by moving his or her head, inspect various aspects of the cube and determine its dimensions. Sutherland built the first fully functional head-mounted display unit in 1970.

Myron Krueger also worked on the infant science of virtual reality, first at the University of Utah and later at the University of Connecticut. His "artificial realities" used both computers and video systems. VIDEOPLACE was first exhibited in 1975 at the Milwaukee Art Center. Using video displays, computer graphics, and position-sensing technologies, Kreuger was able to create a virtual environment in darkened rooms containing large video screens. People in the room could see their own computer-generated silhouettes and follow their movements in the virtual world projected onto the screen. In addition, people in two different rooms could see each others' silhouettes and interact in the same virtual world.

As is the case with other technological advance, much of the initial development of virtual reality was funded by the military. By 1972, the General Electric Corporation had built one of the first computerized flight simulators, using three screens surrounding the training cockpit to provide a 180-degree field of view that simulated flying conditions. In 1979, virtual reality technology was incorporated into a head-mounted display developed by the McDonnell-Douglas Corporation. Three years later, Thomas Furness III, who had created visual displays for the military since 1966, developed the prototype Visually Coupled Airborne Systems Simulator. Donning a specialized oversized helmet, pilots were presented for the first time with an abstract view of flying conditions instead of a reality-based image. Since they were unable to see anything but the computerized cockpit's field of view, pilots became totally immersed in the graphic representation.

While scientists like Sutherland and Furness concentrated on the visual components of virtual reality, Frederick Brooks began experimenting with tactile feedback, or the sense of touch , in the early 1970s at the University of North Carolina. However, it was not until 1986 that the computer industry developed the tools to simulate tactile experience (i.e., sensing by touch). Brooks was able to develop his GROPE-III system, which used a specialized remote manipulator based on a device that mimicked arm motions to handle radioactive substances. Specifically, the GROPE-III system generated stereoscopic images of molecules and protein structures that could be felt and manipulated as though they existed in the physical world.

Components of virtual reality

Essentially, virtual reality systems consist of the computer and software—known as the reality engine—input sensors, and output sensors. The input sensors are the equipment to computer enthusiasts, and include the keyboard, mouse, knobs, and joysticks. Output devices include the printer and the video display monitor. In addition, virtual reality input and output devices include the head- and ear-mounted equipment mentioned above, and gloves for controlling the virtual world. Finally, the fourth sensory component is the user, who both directs and reacts to the chosen environment.

The reality engine

The reality engine employs both computer hardware and software to create the virtual world. Reality engines are based largely on the same components that make up a personal computer (PC), although much more computing power is required for the reality engine than what is available in a standard PC.

One reason for the increased computing power is the complexity of the hardware and software necessary to create a world that appears real. The images created by the computer and software are extremely complex, compared to the relatively simple line-based graphics associated with computer games. Virtual reality images are made with thousands of dots called pixels (or picture elements). The more pixels per given amount of area, the higher the quality of the image. Hence, an image will be more realistic. Creating realistic images that can be manipulated is known as "realization." These images can be either opaque, in which all the viewer sees is the virtual world, or see-through, in which the virtual image is projected or superimposed onto the outer world.

The reality engine is also involved in bringing sound to the virtual world. Sound enriches the virtual world. For example, in a flight simulator, the experience of soaring through the air in a simulated cockpit is more realistic if the user hears the roar of the engines. Sound also enhances participation in the virtual world by providing the user with audio cues. For example, the user may be directed to look for another virtual airplane flying overhead.

To incorporate the total experience provided by the sight and sound cues, the reality engine can use what is known as haptic enhancement. Haptic enhancement utilizes the participant's other senses of touch and pressure in the virtual world. Haptic enhancement is a complex process, and the hardware and software that are required increase the cost of the system tremendously. To date haptic enhancement is used mainly military and research applications.

Headsets

Head-mounted display (HMD) units use a small screen or a pair of screens (one for each eye ) that are worn in a helmet or a pair of glasses. The HMD allows viewers to look at an image from various angles or change their field of view by simply moving their heads. In contrast, a movie is a passive experience, where the view of the audience is controlled by the position of the camera that recorded the scene.

HMD units usually employ cathode ray tube (CRT) or liquid crystal display (LCD ) technology. The optical systems in CRTs reflect an image onto the viewer's eye, creating an image of very clear and realistic image. CRT images can be semi-reflective. This means that the user can experience the virtual world while still being able to see the outside world. This permits the user to operate another machine or device while viewing the virtual world.

LCD technology has lagged behind CRT in picture quality. LCD monitors display two slightly different images to each eye. The brain processes and merges the images into a single three-dimensional view. However LCD systems have the advantages of being slimmer, lighter, and less expensive than CRT systems. Thus, LCD is better suited to home entertainment. As the image quality improves, LCDs will find a lucrative niche in the home entertainment market.

Audio units

Sound effects in virtual reality rely on a prerecorded sound set. This aspect of the virtual reality experience is less prone to alteration.

The audio portion of virtual reality is transmitted through small speakers placed over each ear . Audio cues may include voices, singing, the sound of bubbling water, thud-like noises of colliding objects—in short, any sound that can be recorded.

While the sounds themselves cannot be changed from a recording, the presentation of the sounds to the user can be changed. Three-dimensional (omnidirectional) sound further enhances the virtual reality experience. Sound that seems to come from above, below, or either side provides audio cues that mimic how sounds are heard in the real world (e.g., footsteps approaching or a plane flying overhead). Three-dimensional sound is achieved through the use of complex filtering devices. This technology must take into account the delay in the detection of sound by the ear that is furthest away from the source of the sound (interaural time difference) and the tendency of one ear to hear a sound more loudly than the other ear (interaural amplitude difference).

The most complex human hearing dynamic is called head-related transfer functions (HRTF). HRTF accounts for how the eardrum and inner ear process sound waves . Factors that are influential in HRTF include the various frequencies at which the sound waves travel, and how waves are absorbed and reflected by other objects. HRTF audio processing enables the listener to locate a sound source and to focus in on a specific sound out of a multitude of sounds. (i.e., the sound of their name called out in the midst of a noisy party).

Gloves

A popular image of a virtual reality experience shows the user wearing gloves. The gloves allow the user to interact with the virtual world. For example, the user may pick up a virtual block, and, by turning their gloved hands, turn the block over and set it on a virtual table.

Virtual reality gloves are wired with thin fiber-optic cables, or have light-emitting diodes positioned at critical points over the glove's surface. The optics detects the amount of light passing through the cable in relation to the movement of the hand or joint. The computer then analyzes the corresponding information and projects this moving hand into the virtual reality. Magnetic tracking systems are also used to determine where the hand is in space in relation to the virtual scene.

Some gloves use haptic enhancement to provide a sense of touch and feel. In haptic enhancement, the reality engine relays the various sensations of force, heat , and texture that are experienced by the user to the computer software . The software can use the information to determine an outcome of the user's actions, and relay the outcomes back to the user. For example, if the user closes a hand on a virtual squeeze toy, the software will alter the virtual image to show the toy becoming compressed. To achieve this two-way communication, virtual reality gloves may use either air pressure (such as strategically placed, inflated air pockets in the glove) or vibrating transducers placed next to the skin (such as a voice coil from a stereo speaker or alloys, which change shape through the conduction of electrical currents) to simulate tactile experience.

Tools under development

Many other virtual reality tools are in the phases of research and development. Remote control robotic or manipulation devices are being tested for industry and medicine. Already, surgery has been done by a physician located hundreds of miles away from the patient, by means of robotics and virtual imaging.

Special wands with sensors, joysticks, and finger sensors such as picks and rings will eventually be as common to virtual reality technology as microwaves are to cooking. The technology to control the virtual world through voice commands is also rapidly advancing.

Perhaps the most impressive technology under development is the whole body suit. These suits would function similarly to the gloves, creating a virtual body that could take a stroll through a virtual world and feel a virtual windstorm.

Applications of virtual reality

The potential for virtual reality as an entertainment medium is apparent. Instead of manipulating computerized images of two boxers or a car race, the virtual playground allows the user to experience the event. Disney World's Epcot Center houses a virtual reality system.

Most entertainment applications of the present day are visually based. Virtual reality will allow players of the future to experience a variety of tactile events. For example, in a simulated boxing match, virtual reality users would bob and weave, and throw, land, and receive punches in return.

Virtual reality also has practical applications in business, manufacturing, and medicine. Already, the National Aeronautics and Space Administration (NASA) has developed a virtual wind tunnel to test aerodynamics shape. Virtual reality holds promise for discovering the most efficient manufacturing conditions by allowing planners to evaluate the actual physical motions and strength needed to complete a job. For example, the McDonnell-Douglas Corporation is using virtual reality to explore the use of different materials and tools in building the F-18 E/F aircraft . The study of people in relation to their environments (ergonomics) may also be revolutionized by trials in cyberspace. Engineers at the Volvo car company use virtual reality to test various designs for the dashboard configuration from the perspective of the user.

In medicine, virtual reality systems are being developed to help surgeons plan and practice delicate surgical procedures. Philip Green, a researcher at SRI International, has developed a telemanipulator, a special remote-controlled robot, to be used in surgery. Such surgery was performed in 2002 by a physician in Halifax, Nova Scotia, on a patient located hundreds of miles away. Using instruments connected to a computer, the operation was performed cyberspace, while the computer sent signals to direct the telemanipulator.

Virtual reality may even have applications in psychiatry . For example, someone with acrophobia (a fear of heights) may be treated by having the patient stand atop virtual skyscrapers or soar through the air like a bird.

On the horizon of virtual reality

Virtual reality will no doubt mirror the breath taking pace of development that is the norm for other computerized applications. Thus, what is state of the art now will be commonplace in decades.

Aspects of virtual technology that are just ideas now will become reality soon. For example, technology is being developed to use the retina of the eye as a screen for images that could be transmitted directly to the brain through the optic nerve. Virtual sight would become a replacement for natural sight in those blind people whose optical hardware was intact.

Also under development is technology to allow the remote operation of aircraft and other machines as though the user were actually in the machine. Traveling to France or Greece, including the experience of climbing the Eiffel Tower or basking on a sun-drenched beach, may be as easy as donning a headset and body suit and plugging in.

Like most technological advances, virtual reality has social and psychological ramifications. Critics argue that virtual reality could cause some people to forego emotions and interpersonal relationships for the safe, controllable virtual world. But proponents say advances from the proper applications of this technology—both as a means of interacting with the real world and as an end of facilitating training and entertainment—far outweigh the potential for antisocial abuse.

Resources

books

Dix, Alan J., Janet E. Finlay, Gregory D. Abowd, et al. Human-Computer Interaction. 2nd ed. Upper Saddle River, NJ: Prentice Hall, 1998.

Hsu, Feng-Hsiung. Behind Deep Blue: Building the ComputerThat Defeated the World Chess Champion. Princeton: Princeton University Press, 2002.

Sherman, William, R., and Alan B. Craig. Understanding Virtual Reality: Interface, Application, and Design. San Francisco: Morgan Kaufmann Publishers, 2002.

other

University of Michigan Virtual Reality Laboratory. "Virtual Reality: A Short Introduction." College of Engineering. January 6, 2003 [cited January 17, 2003]. <http://www.vrl.mich.edu/intro/>.

David Petechuk

KEY TERMS

Pixel

—A word used for picture elements, or dots, that make up a computerized image.

Three-dimensional

—A visual representation in terms of height, width, and depth as opposed to a "flat" image that represents only height and width.