Developing a CD-ROM? Israel's Got the Talent, Location, Lower Costs

IT was a coming-out party for Israel's multimedia industry.

An Ethiopian Jewish choir sang peace songs, and fireworks exploded overhead. More than 160 computer buffs, critics, and distributors this month attended the screening of "Pathways to Jerusalem," the latest CD-ROM product of Jerusalem multimedia developer SuperStudio Ltd. and New York-based software publisher Future Vision.

With some 70 firms doing about $50 million in business, Israel has become one of the hottest developers of CD-ROM software outside the United States.

The products are an eclectic, international array ranging from Superstudio's 1994 CD-ROM "Leonardo the Inventor" to Tel Aviv-based Pixel Multimedia's "Sports Illustrated 1994 Multimedia Sports Almanac," which the New York Times rated one of last year's best packages.

"One of the aspects that characterizes the members of the Israeli multimedia industry [is] an almost desperate need to express themselves in as many ways as possible," says Israeli writer Margo Lipschitz Sugarman. For instance, a growing number of products are being produced for Jewish and Christian markets.

Judaica publishers were among the first to condense on personal computers basic Jewish sources such as the Talmud. Now, independent publishers aim to produce interactive programs for the US market on such topics as the Jewish Sabbath.

SuperStudio, a graphic-design firm founded three years ago by Seth Altholz and Shelly Abrahami, has exploded into a $3 million-a-year company with an international staff of 65. It recently merged with Future Vision, whose founder and CEO, Harry Fox, in 1989 introduced the first CD-ROM upgrade for a PC.

Mr. Fox was one of the first multimedia producers to discover Israel's talent in 1992. He found a young, multilingual work force - largely American-born - boasting computer talents drawn from top US universities and Israel's high-tech industries, and a hefty supply of world-class musicians, graphic designers, and writers.

Israel's location is a plus. "It's just as expensive for me to travel from here to Singapore as to New York," Mr. Altholz explains.

Israel's lower-wage scale makes the formula even more attractive for US multimedia publishers. CD-ROMS such as "Pathways to Jerusalem," which cost about $300,000 to produce locally, could cost $1 million in the US, Mr. Sugarman says.

Still, the label "Made in Israel" is rarely seen on US shelves. This is because most firms here function largely as research and development arms for US publishers. With marketing costs for a CD-ROM today reaching $1 million or higher, many Israeli firms are happy to leave marketing and sales to US-based distributors.

Israelis were among the first nationalities to appreciate the interactive potential of multimedia, Sugarman says.

Today, however, Israeli multimedia pioneers are facing competition from other new development centers in Europe, the Far East, Australia, and the US.

The competition is likely to weed out many smaller Israeli companies, while larger organizations hook up with distributors and publishers abroad.

"Marketing abroad, this is the lifeline," Sugarman says. "The smaller Israeli companies are at a disadvantage unless they are on the shirttails of some of the bigger companies from abroad."

Says Altholz: "It used to be that, if you spent $300,000 on development, you'd spend $150,000 on promotion. Today, if I spend $300,000 developing a product, I'll spend $1.5 million promoting it."

And as multimedia products become more sophisticated, production costs rise. SuperStudio's product InfoPedia - which is seeking to compete with Grolier's 1995 Multimedia Encyclopedia, Microsoft Encarta 95, and Competon's Interactive Encyclopedia 1995 - has won kudos for graphics and animation. But technique is not enough to sell it. Altholz estimates the encyclopedia, which cost $1 million to develop, will cost $4 million to promote.

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