03/04/96 DIGITAL DOMAIN: A STAR IS MORPHED

DIGITAL DOMAIN: A STAR IS MORPHED
The ambitious company's special effects outgrow the movies
When this year's Oscar nominations for visual effects were handed out on Feb. 13, little-known Digital Domain Inc. grabbed center stage. The company nabbed its second nomination in a row, for the effects in Apollo 13. So realistic was the movie's Saturn 5 launch sequence that even some astronauts mistook it for file footage.
In just three years, Digital Domain has zoomed to the top ranks of Hollywood's special-effects biz, where it now vies with leader Industrial Light and Magic (ILM). Feisty Digital Domain, though, is just getting started. On Feb. 12, it showed its first CD-ROM, Barbie Fashion Designer, developed jointly with Mattel Inc. The product allows kids to design and make doll clothing. Then, on Feb. 21, Cox Enterprises Inc., the nation's fifth-largest cable-TV operator, announced that it will pay an estimated $50 million for a one-third stake in Digital Domain.
The two events signal Digital Domain's intent to branch out. Until now, special-effects houses mainly have done contract work on movies and commercials. But Digital Domain hopes to become a ``content provider,'' creating and selling its own products and characters --a business it thinks will soar with the advent of interactive entertainment via home PCs and TV sets. Hooking up with Cox, says CEO Scott Ross, ``should put us out in front of the pack.''
Digital Domain is the brainchild of Ross, who formerly headed ILM, director James Cameron, who created the molten-metal man of Terminator 2, and veteran modelmaker Stan Winston, famous for Jurassic Park's dinosaurs. The fourth founder is IBM, which paid $20 million for a 50% stake; after the Cox deal, it will own a third.
ARNOLD, TOO. Digital Domain worked on a raft of movies due out this year, including the horror flick The Island of Dr. Moreau and a Keanu Reeves thriller called Chain Reaction. Its TV ad business also is booming. The computer-generated ants that make off with cans of Budweiser in an ongoing series of ads are Digital Domain's creatures. It's also doing ads for AT&T's Summer Olympics campaign.
Meanwhile, Digital Domain is churning out new products. For one, Terminator 2-3D, a theme-park show starring Arnold Schwarzenegger that opens May 15 at the Universal Studios Florida park in Orlando. And IBM commissioned two CD-ROMS, due for Christmas release. Lights! Camera! (Digital) action!
BY LARRY ARMSTRONG IN LOS ANGELES