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Gameboy

Forbes Magazine, Entrepreneurs, 15th May 2000

by Michael Maiello

When Sony's much-ballyhood Playstation 2 rolls out this fall, U.S. videogame fans will be treated to a more lifelike computer universe. With a 300 megahertz CPU, the games console will have the computing power to display 3D flying shrapnel, ricocheting bullets- even jiggling breasts on curvaceous heroines.

All this, thanks to enhanced game physics that break down the action into a series of complex, algorithmic 3D simulations. Until recently realistic animation via Newton's laws of motion - force equals mass times acceleration, and the like - hasn't applied to videogames. Indeed, designers have had to draw a series of animated sequences to approximate any action, much the way TV cartoons are created. There are now some half-dozen companies licensing physics enhancers to game designers. They include Ipion of Munich and Telekinesys of Dublin.

One of the best-known players is MathEngine, based in Oxford, England, with an office in San Francisco. Alan Milosevic, its founder and chief executive, is a Welsh-born former math teacher and computer programmer. With MathEngine technology a designer can have a 600 pound bad guy sock a dwarf in the jaw and make it look realistic. The software tells designers how far the dwarf files, how often he bounces and whether he lands on his head or arm. "I see a future where everything from games to the Web will be delivered in a realistic 3D format, " says Milosevic, 44.

Sony is a big MathEngine booster. The electronics giant is encouraging 300 of the world's best game designers to license MathEngine's software. That endorsement seems to be getting results: Milosevic expects revenue to total $3 million this year, up from less than $300,000 in 1999. Atlus, a Japanese game designer, is using MathEngine for a game called "Primal Image", which lets users manipulate a realistic human body as a digital model for an imaginary fashion photo shoot. More sophisticated games are in the works. A mystery-and-adventure game called Actor, which relies on MathEngine, is in development by Vivid Image, a game architect in Oxford. It will be released for Playstation 2 next year.

Back in 1997, when Milosevic launched the company, British investors weren't impressed. He managed to lure one venture capitalist, who ponied up $400,000 - for 25% of the company. A bit better luck the next year, when 200 investors put up an additional $5 million and got 30% of MathEngine.

Finally Milosevic caught a break. In 1998 Intel's educational division hired MathEngine to perfect a computer simulation of a medieval catapult, a demo for young history students. That deal helped Milosevic raise $10 million from 70 investors, including Fidelity Europe, in 1999. He spent $3 million in cash and equity to acquire Montreal-based Lateral Logic, another 3D simulation software company, with a renowned team of 15 engineers. (Milosevic holds only a bachelor's degree in mathematics.) He convinced them to stay by offering more them a combined 2% stake in MathEngine. With now more than 300 venture capitalists and investors, Milosevic owns just 25%. He hopes to raise additional money in an initial public offering later this year. But development costs are expensive, and the company need $10 million in revenue before it turns a profit.

That's not Milosevic's only challenge. MathEngine doesn't come cheap. It licenses its software for fees ranging from $50,000 to $100,000 - plus a 1% to 2% royalty on each unit sold. Most of its rivals don't demand royalties. Ipion, for instance, charges a flat $55,000. The there's the issue of performance. Some game designers, like Mark Caldwell, a vice president of New World Computing (its parent, 3DO, makes the Army Men series), claim that Ipion is easier to use, eats up less memory and runs through more calculations per second than MathEngine. Other designers are working on their own physics-based models.

For now, Milosevic may have an advantage. But this is one game that's far from over.