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Located in the Pilsen neighborhood on South Halsted Street in a big old building that once housed a mission, the Bungie Software “lab” – full of state-of-the-art computer equipment and overworked programmers and artists – buzzes with enthusiasm even late at night as employees rush to finish Myth: The Fallen Lords, the company’s latest and most hotly anticipated computer game.

Combining a medieval fantasy setting, “Braveheart”-style battles, bloody animated realism, tactical war elements and a unique flying 3-D perspective, Myth has the computer gaming world in an uproar.

Though still being developed, Myth in June won Most Promising New Game at the Electronic Entertainment Exposition in Atlanta. Gaming magazine Next Generation wrote, “Easily the most innovative product at E3 was Bungie’s genre-bending 3-D fantasy warfare game.”

“The whole point of the game is the battle,” says Jason Jones, Myth designer, lead programmer and Bungie co-owner. “Our entire focus has been on visual realism – seeing every drop of blood that gets spilled on the battlefield.

“When a guy flies into little pieces, I think it’s funny. It looks cool. It makes the game entertaining. When a head bounces across the landscape trailing blood and gore – no other game does that. It seemed appropriate for this sort of game. The sad or the real fact is that most males in the age group we sell to enjoy that.”

Jones, 26, can be considered part of this age group – the mostly male Joystick Generation whose memories and perceptions have been shaped by Atari, Nintendo and Sega as much as by television.

Programming computers since 5th grade, the Dallas-bred Jones – a self-described computer gaming junkie – came to Chicago to study physics, math and, later, ancient Mediterranean history at the University of Chicago. He dropped out after joining up in 1992 with Bungie founder and fellow U. of C. student Alexander Seropian.

Seropian started Bungie during his senior year in college to distribute a game he wrote called Operation Desert Storm, which was developed on diskettes “borrowed” from the software company where he was an intern. “That’s pretty typical of the guerrilla tactics that brought Bungie success,” smiles Seropian, 27, who met Jones in an artificial intelligence class.

When Seropian heard that Jones had created a game, he was skeptical. “I was like, `Yeah, yeah, whatever.’ Then I saw it and totally freaked out. `You can sell this!’ I screamed.”

And so Jones’ game, Minotaur, became Bungie’s second release, and Jones became co-owner of Bungie with Seropian.

Being Macintosh computer addicts, Jones and Seropian developed and released games for the Mac rather than following the industry standard of releasing first for the PC. This decision, though not made for business reasons, brought them lots of attention.

Two years later, their Mac-based Marathon series of shooter games made them a top gun in the computer game world. Beloved by the Mac community, Bungie garnered adulation, awards and money. Bungie’s profits increased 500 percent from 1995 to 1996 and are expected to reach $15 million in 1997, Seropian says.

“Marathon was a hit because there weren’t a lot of games like it,” says Seropian, who is responsible for the business side of Bungie. “Our products differ in the story aspect. Game developers are not as intellectual as people that work here. Our background also shows through in design decisions that make the story more interesting.”

Myth: The Fallen Lords evokes a fantastical, J.R. Tolkien-like medieval universe to provide a context for the squirting blood, flying entrails and disembodied heads.

“Hopefully, if people want to look deeper, they’ll find a compelling story,” says Jones, who, as the main writer, says he put a lot of effort into the world of Myth.

“I went back to ancient mythology, as well as the legends of Charlemagne and Beowulf and Gilgamesh,” he says. “The dwarfs in Myth derive from the dwarfs of Norse mythology.”

The diarylike narration of Myth adopts the style of fantasy author Glen Cook, whose cult trilogy “The Black Company” also provided an inspiration for Jones. In Cook’s world, there’s little good, just various shades of evil.

Myth: The Fallen Lords strives for the same effect.

“We struggled and agonized over the story,” says Jones. “We want to make the game accessible to people that care to do more than waste the armies of their enemy. We want it to go beyond the superficial. We wanted it to be different.”

This attitude separates Bungie from many other gaming companies.

“Bungie has a reputation in the industry for continually pumping out innovative new technology,” says Peter Tampe, executive director of MacSoft, a Bungie competitor. “Myth, for example, brings a new game-playing experience into the market. Most strategy games are 2-D, with a fixed viewpoint; Bungie’s technology changes that from 2-D to 3-D and gives an orbiting, zooming perspective. It’s far more realistic and far more immersive.”

“We’ve spent a million dollars and a year and a half of people’s lives to make Myth,” says Seropian. “We’ve got everything on the line. Unlike other development companies, we also publish and distribute our stuff. We have control over our own destiny. We’re absolutely independent.”

For those sick of the normal rat race, Bungie provides an alternative career path. Among the staff of 20, many are fresh out of a technical institute or art school. Several abandoned higher-paying, 9-to-5 jobs to work at Bungie.

They view their jobs as fun.

“I graduated with a physics degree,” says soft-spoken programmer Jason Regier. “I got a job doing software for cellular phones. It was very boring — especially compared to making things blow up. After I punched out, I’d go home and work on computer games.”

Here there’s no whistle at the end of the day. Schedules are brutal but flexible as long as the work gets done. A dress code is non-existent. Work stations face each other in a large room so there’s none of the caged-animal isolation of corporate work spaces.

The process of finishing Myth requires that the three programmers — Jones, Regier and Ryan Martell, along with artists Rob McLees, Mark Bernal and Frank Pusateri — work on furthering the game or fixing problems during the day. At night everyone tests the latest development by playing against each other.

“Basically we discover through carnage and error,” says Jones. “Sometimes I’m astonished at what my creations do, but when they act stupid, it’s hard to watch.”

Jones screams maniacally at his monitor: “Why are you moving so slowly!?”

His screams mesh with the screams of his monsters being hacked up with meat cleavers. “Those monsters need some work,” he says.

Peels of laughter ring out from the other room where the victor screams in triumph. It sounds more like a video game arcade than a multimillion-dollar corporation.

“I love doing what I’m doing,” says Jones. “I believe everyone else here feels the same way.”

The game is almost finished. The first two levels will be available for free on the Bungie Web site (www.bungie.com) by the end of September. The full version has no release date other than “well before Christmas.”