YEAR IN REVIEW 1995 : PRIVATE LIVES: HOME ENTERTAINMENT, FAMILY ACTIVITIES : The Myth of a Tech Revolution : Despite all the hype, the promise of digital technology creating genuinely new formsof entertainment has yet to be fulfilled.

Steve Blank, chief executive of San Francisco-based Rocket Science, has no choice but to eat a little crow. His young company was supposed to be in the vanguard of an entertainment revolution, one that would marry the creative talent of Hollywood with the technical wizardry of Silicon Valley to create a completely new genre of interactive entertainment.

Instead, less than 18 months after he and his co-founders were labeled “the first digital supergroup” by no less august an authority than Wired magazine, Rocket Science is reeling from poor sales and is frantically trying to re-create itself as a plain old video-game company.

“The marriage between technology and entertainment is much harder than people thought,” says a chastened Blank. “The technology people didn’t understand the end result, the product. And the entertainment people didn’t realize just how hard this is.”

Blank can take some comfort in knowing that he has plenty of company. For 1995 was the year it became resoundingly clear that for all the hype to the contrary, digital technology has as yet done little to alter the fundamentals of mass entertainment. While computers have become powerful and versatile production tools for film, television and recorded music, the promise of genuinely new forms of entertainment has not yet been fulfilled.

Indications of the disappointing development of the new interactive arts were everywhere this year. Next-generation video game companies such as Rocket Science, Crystal Dynamics and 3DO--who promised to use real video and Hollywood-style storytelling and production values to create products with far broader appeal than the Nintendo games of yesteryear--are now reverting to “twitch” games targeted mainly at young males. (Times Mirror Co., the parent company of the Los Angeles Times, holds a minority equity stake in Rocket Science.)

Similarly, the hundreds of companies that have leaped into the computer CD-ROM business and churned out thousands of interactive entertainment products on everything from undersea exploration to the history of cinema, have had an extremely rough time. Consumer purchases of multimedia computers with CD-ROM drives have exceeded all expectations, but they’ve mostly turned up their noses at everything other than a few hit entertainment titles like Myst and educational programs for kids.

The big Japanese electronics companies that took the Hollywood plunge on the premise that technology and entertainment were natural soul-mates are now looking most unvisionary: Matsushita Electric Industrial Co. sold most of MCA Inc. for about what it paid five years ago, and Sony Corp. was forced to take a humiliating $3.2 billion write-down on its movie studio operations. MCA also placed a bad bet on 3DO, and while Sony’s new video-game machine, the Playstation, has been a modest success, efforts to develop software and other types of interactive entertainment were a bust.

In another, closely related realm, the telephone and cable companies that had been promising to build fancy interactive television systems--by which consumers might shop, or peruse information databases, or even control the camera angles of the sporting events they watch--spent most of 1995 beating a retreat from their grand plans. The most ambitious of the interactive TV trials, Time Warner’s experiment in Orlando, Fla., has become a case study in just how hard it can be to implement unproven technologies on a broad scale, and most of the other trials have been similarly disappointing.

To top it all off, the entertainment mega-deal of the year--Disney’s pending $19-billion acquisition of Capital Cities/ABC Inc.--had absolutely nothing to do with new technology. While the most important development of 1994--the formation of DreamWorks SKG--had a crucial technology dimension and featured the involvement of Microsoft co-founders Bill Gates and Paul Allen, its 1995 counterpart was the brainchild of an executive--Disney Chairman Michael Eisner--who is a legendary curmudgeon when it comes to computers.

Says Robert Kavner, the former AT&T; executive who joined Creative Artists Agency in 1994 as something of a digital apostle: “The convergence [of technology and entertainment] is happening, but not in the way people thought it would.”

What accounts for the stunted progress of the interactive revolution? The easiest answer, of course, is that it’s more properly thought of as an evolution rather than a revolution, and thus fundamental changes are mainly a matter of time. The promise of new technologies always outruns the short-term reality, and thus it was never rational to think that a new genre would take hold overnight.

The many interesting artistic innovations now taking place in digital media may have a narrow audience today, but surely it will broaden tomorrow.

But there is a deeper issue involved as well. Movies, television and music as we know them are essentially passive forms of entertainment, in which consumers sit back and absorb a linear story that’s created from beginning to end by professionals.

Interactive entertainment, as the name suggests, proposes a very different dynamic. The premise is that people want to take an active role in shaping their own experience, that they want to become, in effect, directors and producers of their programming. And that remains an unproven theory, at best.

“I’ve been a little suspicious of the idea that the general audience is interested in something other than passive entertainment,” says Jim Morris, president of Lucas Digital, the umbrella company for Industrial Light & Magic and Skywalker Sound. “Convergence has been more about making conventional entertainment more exciting than changing the nature of entertainment.”

Certainly, computer and communications technologies have more than proven their worth in this respect. The success of “Toy Story,” the first film to be created entirely with computer animation, shows just how powerful digital production tools can be--even though all agree it is was the characters and the storytelling, not the computers, that made the film a success.

In special effects, in film editing and post-production, and in recorded music production, new technologies have had an immense impact. Characters and images and sounds that were once impossible have become possible, and the efficiency of many processes has been vastly improved.

Indeed, the new tools together with the new distribution methods that are made possible by technology may yet ignite a creative revolution by breaking the big entertainment conglomerates’ stranglehold on the means of production. But such breakthroughs remains some years away.

A more immediate--though ultimately closely related issue--is the rise of the Internet, whose incredibly rapid development was clearly the technology story of 1995. Hollywood studios have been aggressive in exploiting the Web as a new means of publicizing movies, and record companies have also been out front.

The question again, though, is whether the Internet will breed something new, or simply become another tool for doing things that are done already. There are a few signs that it could be the former: a Los Angeles Web site called the Spot is pioneering the interactive drama, in which the audience participates in shaping the story line.

And one of the more interesting phenomenon of 1996 promises to be the development of online “virtual worlds,” in which people assume the identity of a animated character--or avatar--and interact with others in a computer-generated, three-dimensional environment. Here again, though, the question of whether these new forms will have anything resembling mass-market appeal remains unanswered. And it’s certain that the Internet mania of 1995 will result in lots of Internet disappointments in 1996.

Along with the Internet, the other big technology-and-entertainment story of 1996 is likely to be the fall launch of the digital videodisc. DVD, as it is known, will in the first instance be a new medium for watching movies at home--but the compact disc-like machines and discs will offer better pictures and better sound than the VCRs of today.

But even more important in the eyes of some observers is that DVD will also serve as an alternative to the CD-ROM and the video game disc--but with much more storage capacity and much higher speed. That means that some of the technical limitations of both personal computer CD-ROMs and the newest game machines--such as the Playstation--will be eliminated.

Lee Isgur, an electronic entertainment analyst at Jefferey & Co. in San Francisco, says this year was “the lull before the real thing happens.” DVD, he predicts, will be adopted more quickly than any other consumer electronics product in history, and will finally provide the underlying infrastructure for the interactive revolution.

Of course, such forecasts are a very tricky matter. Sony and Sega each predicted they would sell between 1 million and 1.5 million of their new video game machines this year, says Isgur, but in fact Sega managed only 300,000 to 400,000 units and Sony did twice that at most.

In the end, much will still depend on the creativity of those who are trying to develop new forms, and perhaps that one big breakthrough product or service that shows the way to a new era. “It only takes one game to change the dynamics of this industry very quickly,” contends Randy Komisar, president of Crystal Dynamics. But changing the nature of the industry will take a lot more.