Is it the ultimate game platform? Is it the next Apple, Microsoft, and Nintendo rolled into one? Is it too good to be true? Joe Flower finds out.
What’s a 3DO?
- A box on top of your TV. Like a VCR? Like CD-I? Or Nintendo? All three. Sort of.
- “It will be more stimulating to the human mind than any new technology since printing.” – Trip Hawkins
- A digital Interactive Multiplayer. (Huh?)
- An idea, a set of specs, an intellectual property, a virtual corporation. A $300 million company that’s never shipped a product.
- A tale spun by Trip Hawkins.
Do you remember, toward the end of Peter Pan, when the bit of bright vapor named Tinkerbell is dying? Tink will survive only if enough children around the world clap and say, “I believe.” 3DO is only a bit of bright vapor, but a lot of children are clapping; children with names like Spielberg and Masaharu Matsushita; children in clubs named AT&T;, Time Warner, MCA, and Panasonic. The vapor grows brighter. Think of the graphic power, the realism, the emotional involvement of movies. Think of the interactivity, instant connection, and ease of use of the telephone. Add the computer, with its data-handling, info-surfing, tele- networking capabilities. Think of the marketing power of such worldwide standards as VHS, or audio cassettes. According to its boosters, 3DO, based in San Mateo, California, is the first high-octane attempt to bring all these things together.
Or picture this, maybe two years from now, into 3DO’s second generation: You have, on top of your television, a box that’s bigger than a CD player and smaller than a VCR. You’ve decided to kick back and play the 3DO, but first you have choices to make. Depending on what CD you pop into it, you can:
- listen to a new CD
- watch a music video, with full digital sound – look at a photo CD
- watch a movie (if video compression has by now made possible whole films on CD)
- play a videogame that has an astonishing level of realism – maybe your favorite, the Jurassic Park game, or one of the others that use actual footage from popular films
- get into a sophisticated simulation -fly a Stealth bomber, call a play for the 49ers, ski Mont Blanc – all with cinematic realism
- connect the 3-D headset for an even deeper level of realism
- play an interactive movie: help create characters, shift the story line, change the situation, watch something different happen each time – cable in the VCR and edit your home videos
- play an interactive “edutainment” title – a learning game – with your kid
- consult an encyclopedia, info-surfing hypertext keywords
- go online and have a simulated boxing match with somebody who lives across town or across the country; hook up the keyboard and start a conversation about cooking with a chef in Reno; log onto a virtual reality graphic MUSE (multi-user simulation environment), put on an identity, interact with the other people in their roles, all as real as Star Wars
- connect to online databases, find the fact, image, or sound that you are looking for, and save it to a memory card to use later
- hook up your MIDI keyboard and write a new song.
That’s the 3DO vision.
Just add the idea that everybody has these, that they become as common as boom boxes and VCRs, that the software for them becomes as multitudinous as videotapes, as audio cassette tapes, as magazines. Is it real? Will you be able to go out and buy all this soon? Or is it just clapping and vaporware? The short answer is: The basic box, expected in October from Panasonic (and maybe others) will do most things mentioned above. Add-ons will do more. A few pieces (like online graphic role- playing) are still twinkles in Hawkins’s eyes – but they are part of the 3DO vision.
It’ll Never Work
“And outside there will be the weeping and the gnashing of teeth.” All right, okay, is this thing really the stairway to heaven, “the next VCR,” the new standard, the next wave that will carry us all far up on the techno-beach, as well as make lots of people very rich? Or is it another bowl of hype, a vapor-box with air programming, an artifact of a lot of loose cash looking for a lot of greater fools? The nay-sayers are legion, and they include everyone from potential rivals to developers and would-be developers of 3DO software, and even old colleagues of Trip Hawkins. Herewith: a handy-dandy table of charges, questions, assertions, and answers to the question of whether this river does, indeed, run to the sea.
Nattering Nabobs of Negativism
It will cost too much. You can’t sell a $700 game box. Forget it. Major dumb idea. “It doesn’t stand a ghost of a prayer of a chance of being cheap enough,” says Glen Edens of Interval Research, the man who brought the mouse and GUI (icons, windows, and trashcans) out of Xerox PARC to Apple, and the man who wrote the business plans for Lisa and the Apple LaserWriter with Trip Hawkins.
“It’s a noble effort,” says Tom Kalinsky, CEO of Sega. “Some people will buy 3DO, and they’ll have a wonderful experience. It’s impressive. But it’s a niche. We’ve done the research. It does not become a large market until you get below $500. At $300 it starts to get interesting. We make no money in hardware. It’s a cut-throat price market. I hope Matsushita understands that.”
The owner of another interactive company echoed Kalinsky: “It doesn’t make sense. Hardware companies like Matsushita are used to making money on hardware. Here they will be competing against companies that don’t care whether they sell their hardware at a profit or not. I don’t think it will work.”
“We know this market,” says Bill White, Nintendo’s director of marketing and corporate communications, “and it’s not there at $700. Half of the players and 65 to 70 percent of the software buyers are under fifteen. They save up their allowance money and their birthday money. In 1991 we brought out Super Nintendo at $200. It hit the wall. In 1992 we brought the price down to $149, or with no software at $99, and sales took off like a rocket.”
It’s not a game box.
“If we wanted to do a game box,” says Rick Tompane, 3DO’s chief technology officer, “we could have done it like everyone else: charge $100 for the box, then $50…for the cartridges. We want to change the economics. A CD costs $1 to produce. You can retail it at $10 to $30 – which is in the interests of both the publisher and the consumer, who will be able to buy many more titles. It won’t just be games. It will be audio CDs, photo CDs, video CDs, education titles, reference works, entertainment, games, simulations.”
“That’s the difference,” says Hawkins, “between a medium, which this is, and a business like videogames. In videogames, the software is expensive, there are no returns, and the publisher is risk-averse. A medium is like the newspaper business, like television or magazines. The cost of manufacturing an individual unit of the software – the cost of printing an individual newspaper, say – is extremely low. The price to the consumer is trivial. This is not just a new machine, it’s a new medium, so the economics are very different.”
“Anytime you get a big jump in performance,” Hawkins says, “a half million or so people will buy it, no matter what you do in terms of marketing and support. Look at the Atari ST – they did everything wrong, and they still sold half a million. When you add to that multiple, competing manufacturers, and good titles, you’ve got quite a market. Look at the Commodore 64. It was seen at the time as a game machine. In 1993 dollars, it cost well over $1,000. They sold 15 million of them.”
“We know this market, too,” says Hawkins, “because of our experience at Electronic Arts. And it’s not all allowance money. Sure, the average age of a kid playing an 8-bit game is eleven. But the average for a 16-bit sports simulation is eighteen or nineteen. These are people with jobs. The average for our flight trainer is 38. These are people with careers.”
Besides: “When the price drops below $500, which it will pretty quickly,” says Tompane, “then it becomes much more of a live product.”
There will be plenty of competition.
If it turns out that there is a high-end market for interactive machines, other companies can jump in swiftly. One rival executive said, “I am skeptical. When the MPEG [full-motion video] chip is available in a year or two, Nintendo and Sega will come in. Where is the sustainable competitive advantage?” Both Nintendo and Sega are working with Sony, whose business development gurus give 3DO a calculated yawn. Sony’s CD-XA technology will be incorporated into a Nintendo-friendly machine called the Play Station, which will probably debut within a year for less than $400. Nintendo’s Bill White: “We will be introducing 32-bit CD-XA architecture probably in early 1994.” “We could do a product like 3DO next month,” says Sega’s Kalinsky, “and we will if we think there is a market.”
It will take more than MPEG, a 32-bit architecture, and a CD-XA drive to compete with 3DO. It will take a major leap in performance, major hardware and software partners, and a major jump on the market – all of which 3DO has, company officials say.
No way, not by October.
Matsushita will never be able to produce enough boxes, quickly enough, distributed well enough, to make this a standard. And if it doesn’t become a standard, it’s doomed.
Feh! says Matsushita.
Or, to be more precise: According to Matsushita-Panasonic’s Bill Pritchard, “Matsushita is uniquely qualified in being able to deliver what they say they will. We have said we will produce the device in the fourth quarter of 1993, and we will.” In other words, they didn’t get to be the world’s biggest producer of consumer electronics by screwing up. Besides, says Hawkins, “by October we plan to have half a dozen manufacturers.”
Trip Hawkins Loves Games.
“Trip is a game player.” – Doug Carlston, founder of Broderbund Software “Trip loves games.” – Glen Edens, former Apple employee “Trip is a game player, in every sense.” – Anonymous industry observer
- built his own major around gamestrategy at Harvard
- built his first business around a table-top football game
- is a San Francisco Giants season-ticket holder and goes to 30-40 Giants games per year has played in a baseball “Rotisserie League” with the same four guys for 17 years. (“You can’t believe how fierce it gets.”)
Why did someone tell me, “Never get into a softball game against Trip”? He sighs. “I would get into this really competitive zone. I would drag my team kicking and screaming to victory. There are situations in which it is socially acceptable to do that, and there are situations where it isn’t. When I was younger, I couldn’t tell the difference. In ’84, we scratched and clawed our way to the top of the San Mateo city league. And at the end of the season I had to tell myself, ‘Trip, this is a coed league. This is not appropriate.'” “So you mellowed out?” “No, I quit playing softball.”
He goes on, making the connection for me: “I look at business as a sport, with a set of rules – a code of ethics.
I respect people who play by the rules. For instance, when we started, Broderbund was our only significant competitor. But we never headhunted Broderbund – even though in the mid-1980s it got pretty hairy. ActiVision was a bloated company going downhill, so we picked off a few of their people. They got new management, and decided to emulate us by stealing our people. As soon as they started to raid us, we said, ‘This is war.’ We took delight in beating the crap out of them, cheering at our company meetings when our sales numbers were better than theirs – until they called to complain that it was hurting morale at their company.”
Steven Spielberg is among those preparing programming for 3DO. Other interested parties include AT&T;, Time Warner, MCA, and Matsushita. Colloquy
Spectrum Holobyte’s Ron Martinez is on the phone. We’re at the end of a long discussion of stories, new media, Trip Hawkins, 3DO, and art:
JF: Looks like big fun, but how could it make art?
RM: How could it fail to make art?
Bigger than a CD player, smaller than a VCR. Panasonic’s 3DO player is due out in October.
Santa Monica, 1975
Same as it is now: wide sand beaches, waves, muscles, palms. But Ford is in the White House, and computers are the size of office copiers, refrigerators, trucks. They cost more than a house. Trip Hawkins, 22, Harvard B.A., discovers The Computer Store – the first of its kind in the world. You can just walk right in and buy things, even rent time on terminals.
Three years before, in college, majoring in game strategy, Trip invented a board game – a sophisticated tabletop football game. He borrowed $5,000 from his father, got a few of the games manufactured, and sold them through the mail. People who bought them raved about them, but not enough people bought them, so he folded the business. It would have to wait until he had the right idea and the business smarts to make it work.
Here, in the first computer store in the world, Trip Hawkins has a vision. (People are always having visions in Santa Monica, but this was more particular than most.) He sees that the computer is the perfect way to run his tabletop football game. A computer could do all the calculations behind the scenes. People would soon have computers in their homes, and there would be a market for games you could play on them. It would be a whole new level of mental stimulation and interaction. The only question is: When? That afternoon in 1975, Trip decides that he will start a computer games company in 1982. Seven years ought to do it.
Newly-minted Stanford M.B.A. Trip Hawkins signs on as employee number 69 at Apple Computer. Finally, someone has put together a computer for the home. If Trip’s vision is to become reality, he had better help push that hardware out the door. He becomes Apple’s director of marketing, trying to sell the Apple II+ to businesses, contracting for business software such as Visicalc, working with the software people to develop the Lisa. One afternoon, without mentioning who he is, he drops into a store that sells Apples and asks about the product. When the salesman mentions the “motherboard,” Hawkins pretends and says, “What’s that?” The salesman gives him a look that says, “What are you doing in this store if you don’t know that?” And Hawkins suddenly gets it. He understands what he’s good for. It isn’t the M.B.A. stuff, the chi-squares and variance and present value. It is simply that he can talk about computers to both the engineers and the customers. He can communicate between them. A lot of people have good ideas. A lot of people have visions. Few people can communicate them to the customers, investors, staff people, board members, partners, and media people they should to make the visions real.
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 facade 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.
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.
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.
- “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.”
– by Joe FlowerJoe Flower ([email protected]) writes about change in people and organizations. Author of Prince of the Magic Kingdom: Michael Eisner and the Re-Making of Disney, and co-author of Age Wave, Flower has written as well for Esquire and The New York Times. He is the founder of the Change Project.
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