The talk of the tomb: a British hit

INSIDE BUSINESS Roger Trapp reports on the firm behind a Christmas best-seller
THIS Christmas, homes will be filled with the unmistakable clicking sound of children playing computer games. It is also expected that at the top of the list will be Tomb Raider, an Indiana Jones-style archaeological adventure featuring an athletic, gun-toting "tank girl" sort called Lara Croft.

The game is licensed to Sony Playstation and could give the Japanese company a boost over Nintendo and Sega, the two other dominant players. But it has been developed by Eidos, a British software firm that last week announced it was raising pounds 22m through an offering of shares on the US Nasdaq market.

Although Eidos looks to be on to a winner, it has struggled to reach this point. In its current form it goes back only two years, to the summer of 1994, when Charles Cornwall, the South African corporate financier, became chairman and chief executive. Since then, a series of deals has put it in the forefront of the European entertainment field.

But the previous four years had been characterised by a failure to capitalise on its technology. The company started in 1990, when Simon Streater, a former Ministry of Defence software engineer, developed a method of compressing video film so that moving pictures could be replayed on a personal com-puter. This compression algorithm, later called Optima, was an impressive enough technology, but the company did not market it properly.

What Mr Cornwall did was to recognise that the technology had a use outside the research laboratory and that commercial opportunities would follow from forming partnerships. He was helped by the fact that at the time he made his move, the PC was beginning to be used in homes and models were starting to have the power needed to run the Optima technology.

The shift into the games field came with the establishment of a partnership with Domark, an established UK video games publisher. Last year Domark used Optima to put a video sequence into a PC game called Tank Commander and so make it more lifelike.

The success of the venture led Mr Cornwall to decide to buy a software publisher outright. So when Domark became available, he pounced. Although Eidos only enjoyed sales of just over pounds 250,000, the company raised pounds 13m to buy Domark and its studios, Big Red and Simis.

Nor did Mr Cornwall stop there. Earlier this year Eidos acquired first the post-production and digital effects company Glassworks, whose work has appeared in television commercials for such products as Fruitopia, and then CentreGold, the video games publisher.

As a result the company has leapt to a position as one of Europe's top multimedia publishers and developers. With a base in south-west London it employs 430 people, more than half involved in development.

The idea is that the company is structured loosely to allow technology to be transferred easily between the various parts. One related area that Mr Cornwall is said to be keen to develop is videophone technology.

But for now all attention is on the games division and Tomb Raider, which has achieved a rare 10 out of 10 rating from one of the specialist magazines.

Although the deals of recent months have helped the company by giving it a strong catalogue and the clout to influence the Christmas buying season, much is also attributed to the role of Ian Livingstone, the man installed by Mr Cornwall as chairman of Eidos. A self-confessed games addict, Mr Livingstone spent much of his spare time during the 1980s making up his own, chiefly role-playing, games with Steve Jackson, a flatmate. This led them into contact with the originator of Dungeons and Dragons.

The pair became the UK licensees for the game and eventually opened a chain of shops and a manufacturing plant as well as setting up a magazine dedicated to this and related activities. From there, the pair moved into interactive books, selling 14 million copies in 19 languages of The Warlock of Firetop Mountain series, before selling out at the end of the 1980s and retiring.

But Mr Livingstone, who has also invented a string of games with names like Judge Dredd and War of the Wizards, grew bored and formed a partnership with Mr Cornwall using his proven games nous to develop the market.

One of the plans for keeping the new products coming is to take minority stakes in small development companies with the aim of building up long- term relationships. The idea is that these firms gain access to Eidos's technology while retaining the motivation that would be lost if they were owned outright. If the companies are successful, they are sold off and "get 75 per cent of the upside".

As a lifelong player of Diplomacy Mr Livingstone admits to being drawn more to role-playing games than those requiring manual dexterity, which are more popular with younger people. And he accordingly points out how such games as Championship Manager, which predated Fantasy Football by allowing fans to fill the shoes of football managers, carry on that tradition. Nevertheless, he proudly demonstrates, for instance, the full range of gymnastic tricks that the almost lifelike Lara can perform.

In such a "hit-driven industry", in which 80 per cent of revenue comes from 10 per cent of the product, that is the sort of commercial attitude Eidos and its antecedent companies could have done with much earlier.