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Palace rolls out red carpet for cash

Big industry names invested in The Palace, a start-up that provides virtual technology.

A start-up company devoted to providing technology for virtual worlds on the Internet got a financial boost today after Intel, Softbank, and Time Warner's Warner Music Group announced plans to invest in The Palace.

Terms of the deal were not disclosed, but both Intel and Softbank made cash investments, and all three partners hold minority interests. Intel expects to license its network multimedia voice and video software to The Palace for a future version by early 1997.

Intel is sending a raft of executives to the new company, including Michael O. Maerz, formerly vice president of Intel's Internet and Communications Group and now president and chief executive officer of The Palace. Warner is also sending staff to the several months-old company, which is ramping up to develop and market so-called "distributed" multimedia software that will make it possible for users to participate in a graphically rich virtual world on the Net. The software relies on the use of avatars, 3D representations of characters that can move and converse with each other.

Since the company released its virtual world chat software in November, users have downloaded more than 100,000 copies of its client software. More than 1,000 commercial and home-based communities have been established within The Palace's Web site. A number of high-profile entertainment companies have created virtual worlds at The Palace, including Twentieth Century Fox, Fox Television, Capitol Records, Sony Pictures, and MTV. Others with Palace servers include The Net magazine, The Tunnel Nightclub, SonicNJet and Ralph Lauren Fragrances.

The sites were shown recently in a demonstration by Intel, where participants were led through a virtual tour of local microbreweries in Oregon. Here, the participants jumped to different locations on a map and visited the breweries viewing the physical sites through a series of high-resolution "slides" while they conversed with an Internet phone--in other words, everything but actually drinking the beer.

Intel is using this venture as a showcase for its concept of implementing responsive yet multimedia-rich Internet applications, even for users connecting via dial-up modems instead of broadband connections. To speed up these applications, data-intensive information will reside on the users's local storage, such as a hard disk drive or CD-ROM drive, while only the relatively small information updates will occur over the Net.

Intel has been collaborating on development of future releases of The Palace software, contributing new audio and video technologies developed at Intel's Internet Technology Labs in Hillsboro, Oregon. Intel is also in discussions with The Palace to license such network multimedia technology to the Palace under its investment agreement.

But The Palace is far from Intel's only such investment. Earlier Intel made an undisclosed minority investment in OnLive, a firm with a graphical environment that competes with The Palace. The company also owns 5.7 percent of CyberCash, an Internet commerce firm that went public earlier this year.

"This fits our general strategy, part of a continuing program to stimulate development of compelling content for the PC," Intel spokesman Tom Waldrop told CNET. Nine months ago, Intel created a content group that invests in the entertainment industry.

Softbank, a multibillion-dollar Japan-based firm, has also made its share of investments in Internet companies, both through its operating company, Ziff-Davis Publishing and a venture capital arm.