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Features

3DO: Hip or Hype? Part 2



By Joe Flower


(continued from _3DO: Hip or Hype? Part 1_)

January 1, 1982

When New Year's Day, 1982 rolls around, Hawkins decides to do it. At Apple he realizes that software designers are artists, the creative engines of the business. So a software company should not be put together like a manufacturing company. It should look more like a record company or a studio, with artists and producers. Does it work? In time, Electronic Arts, his new company, becomes the top publisher of educational and game software.


Dunphy Hotel, San Mateo, 1985

It's an Electronic Arts Symposium. The audience is EA software designers. Trip Hawkins comes armed with a projector. The lights dim, the machine whirs, and there on the screen is Atlanta, burning. Scarlett fights through the fleeing crowd, pushed this way and that. Grim Rhett, on a buggy, forces his maddened horse through the screaming mob and scoops her up. Burning timbers fall in the street, blocking their path. The horse rears and plunges. A whole fa
ade gives way and roars tumbling into the square. The clip ends. Lights go up. Hawkins faces the audience and says, "That is what we have to do. We have to involve the emotions of the audience as strongly as that."  It's a stunning idea for the developers. They are used to games with bricks and balls, mazes, treasure hunts, games with awkward, jerky cartoon figures, lines and symbols. "For the player," says Trip Hawkins today, "it didn't feel like play. It felt more like doing surgery."


1993: The Long Strange Trip

It's show-time, boys and girls. By early 1993, the company has made its splash at the Consumer Electronics Show. The press has raged and raved. The company has grown from a handful to more than 100, and is still hiring rapidly. The day I drop in, four new hires are interviewed and signed on. 3DO, the company, "would appear megalomaniacal," says Interval's Glen Edens, "from the outside." Indeed. By this point, Hawkins has done something amazing. He has pulled Universal Studios into the same bed with Warner Brothers, and AT&T with Matsushita. But the hardest bump in the road was his own people. "The Electronic Arts board and management team made it a whole lot harder for me than it had to be.... It's a real drain having to wade through the doubting Thomases. It almost becomes a test of loyalty. When people don't agree with me about something I am really sure about, I get persistent, and I lose my temper. I play my trump card, which is to say, 'This is who I am. This is my track record.'"

At 3DO he has surrounded himself with believers. His office is an open carrel, like everyone else's, just a skosh bigger. Everyone talks to everybody. "In this company," he tells new hires, "you cannot get fired for speaking your mind. You can get fired for stifling free speech."

Lanky, with a planar face and a self-deprecating sense of humor, he runs the Friday-afternoon company meeting like a stand-up routine, with the loping pace of Carson. He reads profuse praise from several industry newsletters. One ends with, "Gutenberg, Newton, Hawkins - you've seen one genius, you've seen 'em all." This gets a big laugh, then a second wave, a kind of "ooooh" that seems to say, "hey, hotshot!" "Yeah, well," he says, "all this hype is kind of like being rated number one in the pre-season. It's great, but you still have to get out there and play like hell."


The Virtual Corporation, The Real Deal

The deal is unusual, to say the least - some observers have dubbed it "Alliance-ware." 3DO itself will never make a box or write an application. It just establishes the standard, works out the technology, and licenses it to everyone else.


The Partners

3DO has seven partners: Matsushita, AT&T, Time Warner, MCA, Electronic Arts, venture capital firm Kleiner Perkins Caufield & Byers, and the New Technologies Group, who designed most of the 3DO technology. This partnership is as important to 3DO as anything inside the box, since it brings to the table the skills of the world's largest consumer electronics manufacturer, the world's biggest and oldest telecommunications company, the film libraries of Warner and Universal, Time-Life Books, and Time Warner's cable network, the second largest in the United States.


Level Playing Field

Everybody gets the same deal - the partners pay the same as outsiders. 3DO's software licenses are less expensive than usual. Hardware licenses are free, and include a kickback from the software. And with the license, developers get a vast "content library" from the partners - 170 CDs carrying 111 gigabytes of music, sound effects, photos, film clips, clip art, and text references, all available to knit into their work.


3DO Plans to Make Nothing But Money.

Psst! Wanna Buy Some Concept Stock?
In mid-March, 3DO plunged into the stock market with an initial public offering (IPO) that values the entire company at around $300 million - before anybody has made the first box or the first CD. Yet as good a salesman as Hawkins is, investment bankers are notoriously resistant to snow. The suits responsible for putting the deal together wrote out the risks, chapter and verse. A "red herring" copy of the prospectus lists no less than nine pages of "risk factors" for investors to consider before forking over very real money to a very virtual company: "There can be no assurance that the chipset can be commercially manufactured...that Matshushita will be able to manufacture the 3DO Interactive Multiplayer...that any titles will be developed...that 3DO will ever successfully complete development of its technology." 3DO is the kind of offering that investment gurus like to call a "concept stock." Like biotechnology offerings, "concept stocks" are offered by companies with no products, just a concept and a hope it will pay off. Sometimes there's no there there. Hawkins previously has suggested that an IPO might take place this summer at the earliest. But he and his market-wise advisers decided that the time is right to get on and ride a bull market in new technology IPOs - part of the "Clinton bull" that has been pitching and jumping upward since late last October. "It's not bad timing given that the market for technology stocks is high," said analyst Walter Miao, vice president for technology at New York-based Link Resources. "But I am very surprised that it came out this early." According to Miao, 3DO's quest for public cash might signal a savvy business move, or that its investors are getting cold feet and are unwilling to step up with any more cash until Trip proves he can turn his dream box into a hot seller.


Sex!

Got your attention. It got a lot of attention for VCRs in the beginning, also: Suddenly you could watch filthy movies without going to filthy places. Will "adult-oriented material" give 3DO the same boost it gave VCRs? Mike Saenz of Chicago's Reactor, which developed the best-selling interactive Virtual Valerie (available on CD-ROM for the Mac), says, "Adult material helps sell any new hardware device. I expect it will have an important role to play, just as it did on the VCR." Sex software developer Dave Biedny of ICFX (who has yet to make up his mind about 3DO) points out, "The opening market for these devices is identical to the market for men's magazines: 18-to-35-year-old males with money for consumer products." In fact, sex was one of the hidden factors that allowed VHS to beat the superior technology, Sony's Beta: Sony attempted to impede people who wanted to use the format for graphic adult material, and Matsushita did not. The "X" market was then, and still is, a major part of the video market. In the developing CD-ROM market, most of 3DO's potential rivals, such as Sega, Nintendo, and Sony, hold tight control over intellectual content, and refuse to allow sexual material. 3DO, though, "has no restrictions," according to Hal Josephson.


It will never be a standard.

Sure, some people will buy it. Some people bought Quadraphonic. Some people bought Sony Beta. Industry consultant Glen Tenney says, "There will be an interactive multimedia standard sometime. But I don't think this is it." Glen Edens says, "It won't become a standard. It's too early on the technology curve. There are too many variables. It's a real dynamic time. Hollywood is ruthless. They will ride whatever horse will get them there."


"You have to start somewhere," says Tompane.

"I don't think it's too early," says Hawkins. "The technology is good enough to take a sufficient leap forward at a reasonable price. There has never been a jump in performance of 50 times like this; there never has been a partnership like this; and there never has been such a level playing field for anyone who wants to get involved. "I know it's going to work. Just in the last few weeks, I have begun to have this feeling like, 'I've got a secret.' Two things got me over the hump. When AT&T came in, I saw that, with at least two hardware guys, it will become a standard. Then the reaction from the press and the industry after the Consumer Electronics Show told me that we have clearly been able to rise above the noise level."


That's a very weird business model.

"Nobody's got this business model,"
says Broderbund founder Doug Carlston. "It's a neat way to avoid risk," says Sega's Kalinsky, "get the other guy to carry the inventory."

It's a revolutionary model!

A model with the sole purpose of introducing an industrywide, worldwide standard, officials say, something no one has ever deliberately set out to do before.

Who's going to develop for it?

Nobody in their right mind would pony up this kind of money to develop software for a system whose technology is unproven and whose market is untested. "There's no installed base," as one rival put it. "Why move to a new proprietary platform? It's very expensive to develop something for a platform whose abilities are so specialized that you can't re-engineer the titles for anyone else. It is a trivial matter to convert titles to rival emerging systems, such as Sony's CD-XA. The developers will flock to them." "If Hawkins gets all 500,000 'early innovators,' as he hopes to," says Nintendo's Bill White, "that gives the developers a market one-tenth to one-twentieth the size of Sega or Nintendo's installed base. And what will it cost to develop for it? It costs from $300,000 to over $2 million to develop a title for 16-bit machines." "It costs us over $1.2 million per title," says Sega's Kalinsky, "and we already have the tools." "They'll get five or six really big companies to develop for them, plus Spielberg," says consultant Tom Hargadon, "that's all." "A lot has to happen for this to be a success," says consultant Glen Tenney. "Are you going to gamble on all of it happening in the right time frame for you?"

By late January, more than 100 companies had signed up, and the number was increasing every week. "We thought we knew everyone in the business," says Hawkins, "and we had contacted, and gotten interest from, the 200 major companies. After CES, we received inquiries from 800 more. "They can't afford not to be in on this," says Hawkins. "There's a big payback for being first on board with an important new format. It's the only way to get ahead in this industry. So the little guys have to do it to try to become big guys. And the big guys have to do it to stay ahead."


Where are the development tools?

"It's all vaporware," says consultant Tom Hargadon. Some software developers complain that 3DO has no higher-level tools equivalent to Macromedia Director, which allow developers to piece together large sections of computer code with relative ease. 3DO software is all being created in C or variations of it, line by line, the old-fashioned way.

It's too early for higher-level tools

"To write that kind of tool," says 3DO's Hal Josephson, "you have to have defined pretty exactly what kind of thing you are doing. We didn't want to limit people up front. People who are really fluent in C can do things that would not be possible in a higher-level programming language." "We would need more experience with the medium," says Ron Martinez, executive director of Spectrum Holobyte's New Entertainment Division, which is working on a "crown-jewel science-fiction title" for 3DO. "The graphic tools that 3DO is giving us are designed by people who are very aware of what they are doing, far beyond what you see with most new platforms." Besides, it would just take too long. According to Josephson, "It would take a couple of years to write that kind of tool. We don't want to wait."

There is no "killer app."

No one application that will make this a "gotta have" machine, as spreadsheets and word processing did for personal computers.

You don't need 'em.

The idea that you have to have a "killer app" is a fallacy. "The first people will buy it just because they want that performance," says 3DO's Rick Tompane. "They will use it to do games, simulations, and other things that they've done before, only now in a new, richer way. Once it becomes established, the wider range of uses will come to the fore."

It can't go online

The digital decoder that would allow the 3DO box to communicate interactively over the cable lines with computers, interactive broadcasters, or other players, will not be in the first generation. There's no keyboard. A joystick is a pretty small keyhole through which to manipulate the entire universe. There's no memory storage.

You'll be able to add these things.

Later versions will contain a digital decoder.
The first version will be able to connect to a modem.

Trip:

* "is incredibly driven," says Interval's Glen Edens. "When he talks, you have to listen. He is a very good salesman. I have a lot of respect for him. He is astute. He is bright. He does what he has to do."

* is not in it for the money. He says, "I've already got way too much money."

* "really believes in and cares about this stuff," says Lawrence Wilkinson of San Francisco's Colossal Pictures.

* is "not the most level-headed person. I'm one quarter Sicilian. I yell and scream," he says.

* "is smart, talented, and hard-driving," says Broderbund's Doug Carlston.

* is "aggressive, assertive, and controlling," by his own estimate.

* "has a track record," says Spectrum Holobyte's Ron Martinez. "There are a lot of people who talk big about multimedia with a drink in their hands south of Market [in San Francisco]. Few have walked the path. Trip has...I'll tell you three things I know about Trip. He wants to get to the essence. He wants help from people. And he wants to share the wealth."

* "is a hard-nosed type, looking out for number one," says consultant Tom Hargadon. "He gives a good speech, but he doesn't have a warm reputation."

* "is a fine human being," says Sega's Kalinsky. "I wish him well."



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Transmitted:  94-04-18 02:58:35 EDT