Game Developer - AprMay_1996.pdf

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april/may 1996
G A M E
D E V E L O P E R
M A G A Z I N E
G A M E
P L A N
G A ME
G A ME
Editorial Director
Senior Editor
Larry O’Brien
gdmag@mfi.com
Network Games
Nicole Freeman
76702.706@compuserve.com
Managing Editor
Editorial Assistant
Diane Anderson
dianderson@mfi.com
Jana Outlaw
joutlaw@mfi.com
N
etwork gaming will recreate the
computer entertainment indus-
try and revitalize the cartridge
market. Within a few years,
online gaming will be the domi-
nant form of computer recre-
ation. Normally, I preach the
“horizon of predictability”—
beyond which nothing can be said with
certainty—is an astonishingly short 14 to
16 months away. Anyone who predicts
beyond that is like a six-year-old on a
whale-watching expedition, shouting,
“There’s a whale,” and pointing randomly.
And network gaming isn’t going to be a
major force in the next 14 to 16 months
(although by the end of 1996, early
adopters will play exciting new games); it’s
more likely to happen within 5 years. But
we’re on the eve of adopting several tech-
nologies, which point to explosive growth
in multiplayer gaming.
First and foremost, the world is get-
ting wired. In other words, everyone will
be able to at least “get to” game servers.
Second, 3D chips will take the mar-
ket by storm. In the cartridge market, one
need only look at the new generation of
machines to be impressed, while the desk-
top video card market has been fairly bland
for several years as the limitations of Win-
dows 3.1 overshadowed improvements in
card technology, color-depth, and onboard
RAM. The past 14 months have seen an
unprecedented boom in the high-end of
the desktop 3D market—the technology
gap Silicon Graphics has enjoyed for years
has rapidly shrunk and, according to some,
disappeared in the low-workstation price
points. Consumer 3D technology is poised
to enter the market, and card manufactur-
ers will enjoy perfect timing as 3D graphics
upgrades become the upgrade of the year.
Third, network connections will add
voice capabilities. I don’t think DVSD and
ASDL modems will enjoy the explosive
growth I predict for 3D video boards, but
they’ll become popular with niche, moti-
vated buyers. Initially, this motivation will
come from network-based telephony and
multiplayer gaming of existing games.
More importantly, ISDN should fill out
the niche without jeopardizing bandwidth.
ISDN, however, remains a technology
with a considerable barrier to entry. Most
people will wait for the big news. Which
will be high-bandwidth connections, cable
modems or ATM-to-the-curb.
This is the fourth, and furthest out
element prepping us for an online gaming
explosion. I can’t predict whether to buy
stock in cable companies or ATM manu-
facturers, since widespread availability of
these technologies is years away. The
bandwidth numbers of these technologies
are incredible—more than enough to make
believable the wildest ideas of network-
based applications. If these technologies
are really able to deliver and transmit sever-
al megabits per second, a revolution as
profound as the arrival of the desktop PC
will follow.
Finally, why did I say that network
gaming will revitalize the cartridge market?
Let’s talk about the Java terminals comput-
er magazines say have no market. They’re
right to say people won’t download word
processors and work on their resumes with
an Internet terminal rather than their
$3,500 home PC; kids will download the
latest version of “Java Warriors,” to their
cartridge machines. Sun’s second-tier
MicroJava chip is scheduled for the first
quarter of 1997, with a unit price of $25 to
$50. Can an Internet terminal be built for
$500? Let’s see—a Java game cartridge,
hooked up to a cable modem, on a Sony
PlayStation or Ultra64. Do you think it
would sell?
s
Larry O’Brien
Editorial Director
Contributing Editors
Alex Dunne
76702.1142@compuserve.com
Barbara Hanscome
bhanscome@mfi.com
Chris Hecker
checker@bix.com
Mike Michaels
mike@irvine.com
David Sieks
dsieks@arnarb.harvard.edu
Editor-at-Large
Alexander Antoniades
sander@mfi.com
Cover Photography
Charles Ingram Photography
Publisher
Veronica Costanza
Regina Starr Ridley
Group Director
Advertising Sales Staff
Western Regional Sales Manager
Steve Nikkola (415) 905-2256
snikkola@mfi.com
Promotions Manager/Eastern Regional Sales Manager
Holly Meintzer (212) 615-2275
hmeintzer@mfi.com
Susan McDonald
Marketing Graphic Designer
Azriel Hayes
Marketing Manager
Advertising Production Coordinator
Director of Production
Denise Temple
Andrew A. Mickus
Vice President/Circulation
Jerry M. Okabe
Circulation Director
Gina Oh
Kathy Henry
Group Circulation Manager
Mike Poplardo
Assistant Circulation Manager
Jamai Deuberry
Associate Circulation Director
Newsstand Manager
Reprints
Debra Caris
Stella Valdez (916) 729-3633
Graham J.S. Wilson
Chairman of the Board
Chairman/CEO
Marshall W. Freeman
President/COO
Thomas L. Kemp
Senior Vice President/CFO
Warren “Andy” Ambrose
David Nussbaum, Darrell
Denny, Donald A. Pazour, Wini D. Ragus
Vice President/Production
Andrew A. Mickus
Senior Vice Presidents
Vice President/Circulation
Jerry Okabe
Regina Starr Ridley
Vice President/
Software Development Division
Miller
& Media publication
Freeman
A United News
6
GAME DEVELOPER • APRIL/MAY 1996
http://www.mfi.com/gdmag
C R O S S F I R E
Applesauce
Alex Dunne
Those who do not
learn from history are
doomed to repeat it. At
Apple, Amelio‘s got his
work cut out. Let‘s
jump in the time
machine and look
back on Spindler‘s
reign.
I
f you had been at Macworld in San
Francisco earlier this year, you prob-
ably wouldn’t have seen any overt
signs that Apple was auguring in.
More than 70,000 people attended
the show, you had to strong-arm
your way through the crowds, and
everyone seemed upbeat (even actor
Gregory Hines of “White Nights” and
“History of the World, Part 1” fame, who
I saw on the show floor). But the bustling
crowds and high energy at Macworld hid
a frightening fact: Apple is in serious
financial trouble, and despite Hines pres-
ence, there’s no white knight coming to
the company’s rescue.
The latest rumor before we went to
press was that Sun Microsystems was to
acquire Apple. Sun joins an illustrious list
of would-be suitors over the past few
years. Unfortunately, even if this merger
rumor had panned out, it probably would
have been too little, too late. Apple’s mis-
management has taken it to the brink.
Pursuits such as Newton, eWorld, Open-
Doc, Kaleida Labs, and Taligent have
drained the company’s coffers and divert-
ed its attention away from its bread-and-
butter computer business, which has suf-
fered as a result.
Now it appears that the Wintel
juggernaut has more than enough
momentum to carry it past any would-
be competition. Looking back a few
years, it all seems so clear now how mis-
guided Apple’s strategies were. Let’s set
our way-back machine to the beginning
of 1993 and roll tape.
1993: Spindler takes over.
January.
Apple is enjoying outstanding
sales of the immensely popular Power-
Book notebook computers. However,
because Apple is cutting its hardware
prices to compete with the free-falling
prices of Windows-based computers,
first fiscal quarter earnings are actually
down compared to 1992.
March.
Second quarter results are
again flagging, again due to price cuts.
In response, Apple contemplates cut-
ting its operating expenses through
reorganization.
May.
CEO John Sculley announces
Apple is “shifting its focus away from
hardware and concentrating on the sys-
tem software that controls computers
and communications, and even online
information services.” David Coursey of
PC Letter
calls the company “immensely
confused.”
June.
Sculley steps down after a
ten-year stint as CEO, and the board
names president Michael Spindler to
take his place. Spindler is charged with
navigating the company out of its finan-
cial trouble and taking a greater hands-
on role in management. Sculley stays on
as chairman.
July.
Third quarter results send
shock waves through the industry. Apple
reports a whopping $188 million loss, its
largest-ever quarterly loss, due mostly to
a $321 million restructuring. On the
same day, Apple declares that 2,500
employees (over 15% of the company)
will be laid off. Analyst Doug Kass, pres-
ident of the Viewpoint Group consulting
firm, sums it up when he tells the
San
Francisco Chronicle,
“A well-run company
shouldn’t have to reorganize every couple
of years. To bring out a ground-breaking
product like the PowerBook and then
stumble leaves us with little confidence
http://www.mfi.com/gdmag
GAME DEVELOPER • APRIL/MAY 1996
9
C R O S S F I R E
that they can navigate a new market with
Newton. . . .” How prescient.
August.
At Macworld in Boston,
Apple unveils the Newton, its $700
dyslexic “personal digital assistant.”
Apple insists it is not betting the compa-
ny on Newton. Good thing.
September.
Apple announces it will
license necessary technology to other
companies interested in manufacturing
Macintosh clones, reversing a decade of
closed-architecture strategy. Donald
Strickland, Apple’s vice president for
licensing, hints to the
Chronicle
that a
big player in the hardware industry will
be among the clone makers.
October.
Robert Puette, president of
Apple USA, leaves a day before fourth
quarter results are announced that show
profits down 97%. Apple’s inventory of
unsold products stands at an unhealthy
$1.5 billion. Ian Diery, executive vice
president of Apple’s Personal Computer
Division, takes over for Puette. At Sey-
bold, Diery explains that Apple is central-
izing its forecasting procedures and moni-
toring aspects of sales to prevent product
shortages and overproduction. Sculley
leaves his position as chairman and is
replaced by Apple cofounder Mike
Markkula Jr.
November.
Dell Computer, AST
Research, and Compaq allegedly are
approached about licensing the Mac OS
but all refuse Apple’s offer.
March.
Apple launches its line of
PowerMacs, which are driven by Motoro-
la’s PowerPC chip. The launch at Lincoln
Center in New York is the most antici-
pated event since Apple launched the
Macintosh a decade earlier. Oracle CEO
Larry Ellison considers buying Apple
with help from convicted junk-bond king
Michael Milken. Go figure.
April.
Gaston Bastiaens, head of
Apple’s Personal Interactive Electronics
(PIE) division responsible for the New-
ton, is fired because of the product’s dis-
mal sales. The Apple PIE division
employees reportedly break into cheers
upon hearing the news. Spindler blames
poor Newton sales on retailers who
weren’t doing enough to explain the
Newton to customers.
May.
Rumors fly that Apple is try-
ing to persuade IBM to produce Macin-
tosh clones. Ten years earlier, IBM was
portrayed as Big Brother in Apple’s
famous television commercial launching
the original Macintosh. How times
change!
July.
System 7.5 is launched. Ana-
lyst Bruce Lupatkin of Hambrecht &
Quist says the operating system is “a
nice, evolutionary extension, but there is
nothing dramatic about it.”
September.
Apple starts an aggres-
sive campaign to license its operating
system, targeting major U.S. companies.
October.
AT&T holds talks with
Apple about a possible takeover, accord-
ing to the
Chronicle.
Motorola is also
mentioned as a possible contender for
Apple. None of the companies com-
ment. Spindler reportedly talks with
IBM about securing an equity invest-
ment in Apple and possibly leasing the
MacOS.
November.
Apple, IBM, and
Motorola team up to design a common
machine. Two weeks later at Comdex,
IBM backs away from the alliance, citing
concerns from its corporate customers
who think IBM might be wavering in its
support for OS/2 by working closely
with Apple.
December.
Power Computing, a
company with only 20 employees, and
Radius announce that they will be the
first companies to sell Macintosh clones.
1995: The Downward Spiral
January. Information Week
reports that
Oracle, Philips Consumer Electronics,
and Matsushita are about to undertake a
hostile takeover of Apple. Oracle is
apparently interested in the MacOS and
Taligent software, while Philips and
Matsushita will split the hardware busi-
ness. All parties deny the rumor, and
Apple reiterates it is not for sale.
Apple posts record revenues of
$2.83 billion for the first fiscal quarter,
due largely to outstanding Power Macin-
tosh sales and cuts in operating costs.
February.
The Supreme Court
denies Apple’s appeal in a seven-year old
lawsuit against Microsoft. The suit
accused the Redmond company of copy-
ing the Macintosh graphical user inter-
face, dating back to Microsoft Windows
2.03. Apple dashes off a letter to U.S.
District Judge Stanley Sporkin, warning
Sporkin that Microsoft has bullied
Apple and can’t be trusted to abide by
the proposed antitrust settlement. Gates
chastises Spindler for Apple’s legal tac-
tics, and denies Apple’s allegation that
Microsoft threatened to stop producing
software for the Macintosh.
March.
Spindler acknowledges
Apple is having problems filling orders
for Power Macintoshes because of poor
planning and component shortages.
Salomon Bros. cuts its earnings esti-
mates as a result, lowers its rating on
Apple to underperform, and the compa-
ny’s stock drops 8% in one day.
April.
Spindler announces another
major shakeup at Apple. Four divisions
are merged into two, and veterans David
Nagel and Dan Eilers are given leader-
ship over the divisions. Ian Diery,
Apple’s executive vice president and
head of the PC Hardware division,
resigns.
Meanwhile, rumors swirl that
Canon Inc. is in talks with Apple about
acquiring the company.
May.
Apple Chief Financial Officer
Joseph Graziano states that Apple is not
for sale and that the impact of licensing
the MacOS will be “modest” during
1995. Radius announces it has to wait
until fall to ship its Macintosh clones in
large quantities due to a shortage of parts.
1994: Trimming Down,
But Losing Focus.
January.
Apple’s online service, eWorld,
debuts at Macworld in San Francisco.
Gary Arlen, a media researcher, quips,
“Unless Apple has something new to
offer, it’ll be tough to hold its own
against the existing players.” eWorld is
priced much higher than competing
online services, such as America Online
and CompuServe. Earnings for the first
quarter are down 75% by the ongoing
price war in the hardware industry,
despite record shipments of Macs.
February.
Apple unveils its own ver-
sion of a TV set-top box for delivering
movies and services like electronic shop-
ping. The box, which will sell at about
$300, gets shrugs from analysts.
10
GAME DEVELOPER • APRIL/MAY 1996
http://www.mfi.com/gdmag
C R O S S F I R E
June.
eWorld celebrates its first
birthday. With a subscriber base of only
80,000, prices slightly higher than com-
peting services, and no internet connec-
tions other than e-mail, the service is
described by one analyst as, “America
Online with nicer artwork, no content,
and no users.”
July.
Frank Seiji Sanda, the presi-
dent of Apple’s successful Japanese oper-
ation, quits unexpectedly. Apple’s third
quarter results fall short of expectations,
as earnings are down due to supply prob-
lems. Markkula sells 400,000 shares of
his Apple stock. Apple declines to
explain why.
August.
Apple tries to dismiss the
hype surrounding the launch of Win-
dows 95 with their “been there, done
that” slogan. Senior Apple executives
sell hundreds of thousands of more
shares of Apple stock. In two months,
Markkula has pared his stake in Apple
by $44.1 million.
Apple executives have quietly
drawn up “golden parachute” agreements
for themselves, entitling management to
large payments in the event they lose
their jobs or are demoted following a
takeover. Spindler’s payout alone could
be worth as much as three times his
salary and bonus, or around $3 million.
September.
In one day, the compa-
ny delivers a double-whammy of bad
news. First, it advises investors that its
earnings for the fourth quarter will be
“well below” Wall Street estimates. Sec-
ond, it announces that it has stopped
shipping its new PowerBook 5300
models, due to problems with their
lithium ion batteries that have a ten-
dency to overheat and ignite.
Following this announcement,
business columnist Herb Greenberg
slams Spindler. “Yesterday, Apple
appeared to be spinning out of control,
but Spindler was nowhere to be found.
On a day when he should personally
have been reassuring investors, the press,
and customers that all is well, he was out
of his office, and he wasn’t expected to
return until Monday. Terrible timing.”
Apple lays out plans to revamp
eWorld, by offering sections of the ser-
vice to users of the World Wide Web,
Mike Markkula, Chair
Photo courtesy of Apple Computer Inc.
Micheal Spindler, CEO
Photo Courtesy of Apple Computer Inc.
and allowing eWorld subscribers access
to the web from within the service.
eWorld, still lagging far behind other
services with only 115,000 members, is
in trouble.
An increasingly skeptical press and
analyst community speculates whether
Spindler is going to get the boot from
Apple. Markkula remains strongly
behind Spindler, however, and there’s
little chance that the board will act to
fire Spindler without the Chairman’s
say-so.
October.
Joseph Graziano, Apple’s
CFO for six years and a member of the
board, leads efforts within the board to
remove Spindler, reports the
Chronicle.
According to unnamed sources,
Graziano says, “Either Spindler goes
and the company is sold, or [I] will
quit.” Apple’s board meeting held there-
after produces no changes, and
Graziano announces his resignation, cit-
ing “differences of opinion” with
Spindler as the reason.
Commenting on Graziano’s depar-
ture, Kimball Brown of Dataquest tells
the
San Jose Mercury News,
“The most
dangerous job in high tech today is the
No. 2 spot at Apple, because Spindler is
not comfortable sharing power.”
Approximately a week later, Apple
undergoes another reorganization. In the
shakeup, the media group, which used to
report to senior vice president Dan Eil-
ers, now reports directly to Spindler.
November.
Dan Eilers resigns.
Apple and IBM’s joint venture, Kaleida,
shuts down.
December.
Apple announces it will
probably lose money in the first quarter,
citing its inability to meet production
demands and its shrinking profit margin.
Apple’s stock drops 15% in the two days
following this announcement, and as a
result Standard & Poor’s Corp. puts the
company’s debt on credit watch for pos-
sible downgrading.
Apple and IBM end their partner-
ship in Taligent, an effort to advance
object-oriented software technology.
Taligent becomes a subsidiary of IBM.
1996: Chapter 11?
Acquistion? Your Call
January.
A busy month indeed. At Mac-
world, Apple makes no major news
announcements and holds no news con-
ferences for the press. Spindler doesn’t
even make an appearance at the show.
Another exodus of Apple executives
takes place, as a stream of vice presidents
depart: Barbara Krause (VP of Corporate
Communications), Jim Groff (VP of
Education Marketing), Peter Friedman
(VP and General Manager of Internet
Sources), Keith Fox (VP of the Home
Division), and Don Strickland (VP of
Business and Government Sales). The
number of high-ranking executives that
have left in the past year stands at 14.
Apple reveals that it lost $60 mil-
lion during the traditionally strong
Christmas quarter and that its profit
margins have hit a record low of 15% —
despite further price cuts. Apple’s mis-
judgment of demand for the more pow-
erful Power Macintoshes resulted in a
12
GAME DEVELOPER • APRIL/MAY 1996
http://www.mfi.com/gdmag

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