Gamers at Work

Gamers at Work
Stories Behind the Games People Play
Morgan Ramsay
Gamers at Work: Stories Behind the Games People Play
Copyright © 2012 by Morgan Ramsay
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For those whose lack of faith
never failed to push me forward.

v
Contents
Foreword ...............................................................................................................................vii
About the Author............................................................................................................viii
Acknowledgments............................................................................................................. ix
Preface ................................................................................................................................... xi
Chapter 1:  Trip Hawkins, Founder, Electronic Arts...................................................... 1
Chapter 2:  Nolan Bushnell, Cofounder, Atari...........................................................17
Chapter 3:  Wild Bill Stealey, Cofounder, MicroProse Software...............................37
Chapter 4:  Tony Goodman, Cofounder, Ensemble Studios.......................................59
Chapter 5:  Feargus Urquhart, Cofounder, Obsidian Entertainment .............................79
Chapter 6:  Tim Cain, Cofounder, Troika Games...........................................................93
Chapter 7:  Warren Spector, Founder, Junction Point Studios................................107
Chapter 8:  Doug and Gary Carlston, Cofounders, Brøderbund Software..........121
Chapter 9:  Don Daglow, Founder, Stormfront Studios..............................................133
Chapter 10: John Smedley, Cofounder, Verant Interactive.........................................169
Chapter 11: Ken Williams, Cofounder, Sierra On-Line...............................................193
Chapter 12: Lorne Lanning, Cofounder, Oddworld Inhabitants.................................209
Chapter 13: Chris Ulm, Cofounder, Appy Entertainment.............................................251
Chapter 14: Tobi Saulnier, Founder, 1st Playable Productions...................................261
Chapter 15: Christopher Weaver, Founder, Bethesda Softworks.........................281
Chapter 16: Jason Rubin, Cofounder, Naughty Dog....................................................297
Chapter 17: Ted Price, Founder, Insomniac Games.....................................................315
Index........................................................................................................................329

vii
Foreword
The worldwide video-game industry is ina state of enormous flux. Vast
budget opuses, such as Activision’s Call of Duty, sit alongside mobile phone
games created by tiny two-man teams. Wework in an industry that is more
diverse than ever—an industry that is appealing to an ever-broadening and
growing mass market. Could we see a day when people interact with computer games as much as they do with television? Could we see a day when
the framework of a game helps us cross a cultural divide? These thoughts
would have seemed crazy five years ago, but they now appear certain to become realities. Video games are in the most exciting place they have ever
been right now.
I have been lucky enough to see this industry go through many, many
changes, starting with those early days at Bullfrog Productions, when two of
us created a game called Populous on a shoestring, through to setting up
Lionhead Studios and selling the company to Microsoft. Along the way, there
have been many good times and a few bad ones, too. Therefore, I could
really empathize on a personal level with the experiences and stories documented in this book.
As I read this book, I realised that thisis the first time that a history of the
video-game industry has been told through the personal stories of the entrepreneurs who pushed the business forward. Many of the people featured
came from humble beginnings with onlypassion to drive them. Most experienced highs and lows, while all had their shares of good and bad luck. What
incredible journeys we all have had! No mountain is too high to climb. Every
challenge can be overcome.
Gamers at Workis a critical resource for new and experienced business
leaders—for anyone who feels unprepared for the demanding and seemingly
insurmountable trials ahead of them.
—Peter Molyneux
Creative Director
Microsoft Studios Europe
viii
About the Author
Morgan Ramsayis a serial entrepreneur and author whose companies
have served the defense and entertainment industries. Currently, he is the
founder, president, and chief executive officer at Entertainment Media
Council, the first and only association for entrepreneurs, C-level executives,
and senior managers in the video-game industry.
For seven years, Ramsay was the founder, president, and chief executive officer at Heretic, where he led initiatives that recognized men and women of
the armed forces on behalf of the President of the United States of America,
and launched technologies and services for clients ranging from the nonprofit and small business to the Fortune Global 500.
As the author of Gamers at Work, Ramsay has interviewed the world’s most
successful entrepreneurs in the video-game industry, including Atari cofounder Nolan Bushnell, Electronic Arts founder Trip Hawkins, and Sierra
On-Line cofounder Ken Williams. Gamers at Workwas introduced by Lionhead Studios founder Peter Molyneux OBE.
Ramsay serves as a member of the Business Council at the Poway Center
for the Performing Arts Foundation, and as a strategy, marketing, and technology advisor to the boards of directors at Coronado Promenade Concerts and San Diego Filmmakers. He has also served as vice chairman at the
International Game Developers Association of San Diego.
He holds a bachelor’s degree in Communication from University of Phoenix,
and also received education in nonprofit management; event planning; advertising, marketing, and merchandising; and retailing from Chapman University, San Diego State University, and Palomar College.
ix
Acknowledgments
I would first like to thank my father, an inveterate and pioneering hardware
engineer, for putting up with my enthusiasm for the entertainment software
business. Of course, I would like to thank my mother, a former professional
athlete and coach, for teaching me the importance of discipline, persistence,
and restraint; and my sister for showing me that compassion and idealism
are traits one should never lose.
A tip of the hat to the busy entrepreneurs who volunteered their time to
this project and shared their wonderful and often humorous stories with
me. I was privileged to investigate their ventures, as well as their personal
and family lives. I also want to specially thank Peter Molyneux for graciously
writing the foreword. In grand tradition, I wish them luck as they boldly
continue to break new ground. Without their support and commitment,
this anthology would have never been possible.
Thank you, Jeffrey Pepper, for going above and beyond the call of duty;
Steve Anglin, for giving a first-timer a chance; Michelle Lowman and Kelly
Moritz, and Rita Fernando, for keeping the project on track within its particular constraints; and the entire Apress team for the opportunity to address the challenges of entrepreneurship in this time-honored format.
I would recognize many people for their time, insight, and/or willingness to
make introductions: Al Lowe, Alan Wasserman, Andy Schatz, Brenda Brathwaite, Casey Wardynski, Cathy Campos, Cory Ondrejka, David Edery, David
Perry, Doug Whatley, Erin Hoffman, Gabe Newell, Genevieve Waldman,
Greg Zeschuk, Greta Melinchuk, Guy Kawasaki, Hal Halpin, Ian Bogost, Jane
Cavanagh, Jason Della Rocca, Jason Kay, Jeff Braun, Jim Buck, John Romero,
Joseph Olin, Justin Berenbaum, Kellee Santiago, Ken Dopher, Kristina Kirk,
Mark Friedler, Matt Shores, Megan Tiernan, Mike Capps, Mike Morhaime,
Nancy Carlston, Pam Pearlman, Randy Pitchford, Raph Koster, Ray Muzyka,
Richard Bartle, Rodolfo Rosini, Sam Ford, Shon Damron, Sue Coldwell,
Suzanne Goodman, Tawnya Barrett, and Tim Schafer.
I would also recognize the current and former members of the Board of
Directors and Advisory Group at Entertainment Media Council for their
support over the years: Adam McClard, Alexander Macris, Alyssa Walles,
x
Brandon Sheffield, Christian Svensson, Cindy Armstrong, David Cole, Geoffrey Zatkin, Greg Boyd, Matt Esber, Mia Consalvo, Michael Arzt, Robert
Stevenson, Steve Crane, Steve Fowler, and Terri Perkins.
Finally, I thank Laureen Minnich of Southern California Transcription Services for the wonderful work she has done for me; photographer Brandon
Colbert for bearing through our session; and Jessica Livingston, for writing
Founders at Work, which was my inspiration.
xi
Preface
Like many projects, Gamers at Workbegan life as something else. Like many
startups, as a first-time author, I made many mistakes. And like most people
in business, I had no idea what I was doing, but I lucked out.
When I started the project that became this book, I had founded a trade association, Entertainment Media Council, for business leaders in the videogame industry two years before. We had completed the initial recruiting and
planning cycles, and I was anxious to execute our plans.
We needed capital to proceed, but prospective investors, from the world’s
largest studios to leading universities, wanted to see that our little nonprofit
organization had actually done something meaningful.
Entertainment Media Council exists to advance the video-game business by
leveraging the collective wisdom and influence of business leaders, in order
to address the systemic, market-level, and corporate problems that make
video games such a volatile industry in which to do business.
I wanted to get people thinking about solutions, and get them involved with
us at any level. Most importantly, I wanted to learn more about the struggles
with which startups must contend. So, I had an idea: let’s profile the challenges of entrepreneurship by blogging interviews with successful founders
that explore major video-game companies at every stage.
Feargus Urquhart, cofounder of Obsidian Entertainment, and Chris Ulm, cofounder of Appy Entertainment, were the first two to sign on. While planning their interviews, I realized that posting interviews with such prominent
entrepreneurs on a blog that had zero visibility would not do their stories
justice. I would be wasting their time and mine.
On my desk, I saw a copy of Founders at Work. I thought, “It’s a long shot,
but I could write a book. Who’s the publisher?” I reached out to Apress,
and pitched them on a series of At Workbooks, with my book as the second
in the series. They were interested, of course, because they were already
xii
developing a series. Coders at Workhad been published not more than a
year before. Within a few weeks, we had a deal.
In this book, I have interviewed 18 successful entrepreneurs in depth. Some
are on their first company, others are on their umpteenth, and some are enjoying the retired life. I have tried to ask questions whose answers I wish I
knew when I started my previous two companies. I have also tried to elicit
answers that I thought I would want to know when someday I start a videogame company of my own.
Additionally, I wanted to illustrate the history of the video-game industry
through the perspectives of the developers and publishers who played a key
role in its shape. In these interviews, I aimed at having each founder tell
their story from the time before their startup had taken form on the horizon to the end of their journey and the start of their next.
As a serial entrepreneur and former consultant, I believe that I should know
which are the best questions to ask other founders. However, as you will
discover when you read these 17 chapters, experience does not make one
an expert.
Indeed, experience and expertise should not be conflated. Experience
merely provides opportunities to learn and practice. Assuming that we have
taken advantage of those opportunities, remembering our lessons and how
they can be applied across problem domains can remain difficult, especially
when we are immersed in the day-to-day.
Trip Hawkins, who I greatly admire as a business leader, spent years and
years planning Electronic Arts, eventually working at Apple alongside the
late Steve Jobs to learn the ropes. Despite that rigor and care which undoubtedly contributed to his phenomenal success, Trip excitedly spun off
3DO on a relative whim in 1991, and that company declared bankruptcy 12
years later. Meanwhile, Electronic Arts exists today as one of the world’s
most powerful publishers of video games.
The excitement of the day-to-day can be impairing. We turn to advisors,
consultants, and trusted colleagues because they are third-party observers,
sufficiently removed from our labors, who can pierce through the noise and
clarify problems. Similarly, we look to magazines, books, and other publications for insight that gives us pause, or perhaps a simple diversion, that allows us to think clearly and critically.
I hope Gamers at Workgives you such a reprieve. I expect the stories shared
within this tome will impart valuable information that you might have never
xiii
obtained elsewhere. I hope the storytellers entertain you with their delightful anecdotes as they have entertainedme. Finally, I encourage you to use
this book as a reference, which you can revisit from time to time when you
would like to remember how those who have gone before you confronted
the myriad obstacles along the road to success.
—Morgan Ramsay
Founder and President/CEO
Entertainment Media Council

C H A P T E R
1
Trip Hawkins
Founder, Electronic Arts
Trip Hawkins left his position as director of product
marketing at Apple Computer to start Electronic Arts (EA) in
1982, which continues to operate today as one of the largest
publishers of video games in the world. EA has since produced
many foundational games, suchas Pinball Construction Set
and M.U.L.E., and best-selling franchises, such as The Sims,
Rock Band, and Madden NFL. In addition, many early
employees are part of the company’s evolving legacy, and they
are now recognized as leading figures in the video-game industry.
In 1991, Hawkins pursued a strategy to provide the company with a direct path to
the consumer. The initiative was spun off as The 3DO Company, an independent
platform manufacturer and later a third-partydeveloper. Although initially wellreceived, 3DO was unable to secure a foothold in the highly competitive console
market and declared bankruptcy by 2003. Not one to be deterred by past failures,
Hawkins founded Digital Chocolate later that same year to develop video games
for mobile devices. Today, Digital Chocolate is a leader in the mobile-games
category, and controls a wide portfolio ofsocial, PC, and console games, including
Millionaire City and MMA Pro Fighter.
Ramsay: Take me back to before you started Electronic Arts.
Hawkins:As a child, I discovered that I was creative and loved to play
games. My favorite games were board, paper, card, and dice games that tried
to simulate something that I was passionate about: Strat-O-Matic Football
Chapter 1 | Trip Hawkins: Founder, Electronic Arts  2
and Baseball, Dungeons & Dragons, and Avalon Hill historical war games. I
even designed a football simulation of my own using cards, charts, and dice. I
noticed that many of my friends thought these games were too much work.
In effect, the player had to be the computer. My own game was a minor business failure, but I loved being an entrepreneur. I vowed to do it again, but to
be much better prepared the next time.
This was also the golden age of television, so my friends were basically telling me that they’d rather watch television, which was simple and offered
high fidelity. In 1971, I heard about computer kits and time sharing, and I
decided that the solution was to putthe game into the computer, and to
have graphics on the screen that looked like a television broadcast. From
that moment on, I was very consciously preparing to found EA in 1982.
In 1973, I purposefully spent two years convincing Harvard to let me have
my own special field of endeavor called “Strategy and Applied Game Theory,” in which I applied computer simulation to relevant social problems,
like organizational decision-making and nuclear-war prevention. During the
summer of 1975, I got a job at a Santa Monica think tank, Software Development Corporation, that was the computer spin-off of the RAND Corporation. A colleague returned from lunch one day and said he was at a retail
store where you could rent KSR-33 teletype terminals for only $10 an hour.
I said, “That’s great! This is the birth of home computing. I am going to
make games that people can play at home on these computers.”
My colleague, who had been at Dick Heiser’s The Computer Store, which
turned out to be the world’s first computer retail store, then told me that
another company called Intel had introduced the first CPU chip. I spent the
next hour trying to plot out how these advances would develop in the
home. I concluded that I should let the technology marinate and the hardware base accumulate for a few years, and that in 1982, I should found my
game software company. And that is exactly what I did.
Ramsay:What did you do until then?
Hawkins:I finished school and met another objective by working at Apple
from 1978 to 1982. My goal was to learn about how to build my own company by working for other entrepreneurs, and to simultaneously help build
the supply of computers in homes, since they would be my future customers. When I joined Apple, we had only 50 employees.
Between 1971 and 1982, I refined my ideas about how to make EA successful. I eventually had a pretty good trick bag. I’m a good creative guy, but I
also believe that “creativity is the rearranging of the old in a new way.” I had
Gamers at Work 3
seen how valuable it had been at Apple to leverage ideas from the consumer
electronics business into our fledgling computer industry.
Ramsay:Can you give me any examples?
Hawkins:One example was the strategic advantage of direct retail sales—
not using a distribution middleman. This became a key issue for Apple. I also
determined by 1980 that software developers and engineers were like artists, even like divas. My key reference point became Hollywood media, particularly records and books. I studied those industries and found that it had
been even more important for them to have direct distribution control and
to build strategic value in their sales pipeline.
In addition, I decided to pioneer the idea of bringing the leverage of the recording studio to game development sothat developers would have more
powerful tools, and so that we could more easily span publication across
more computing platforms.I introduced terms like “producer,” “director,”
and “affiliated label” to software engineering for the first time. I even went
so far as to mimic the record album inEA’s first games, a specific packaging
format that was imitated by 22 competitors later in the 1980s. These pillars
of strategy were the key founding principles of EA.
Ramsay:When did you start EA? How did you get funding?
Hawkins:I personally founded, funded, and incorporated EA on May 28,
1982. Initially, I worked out of my home and began recruiting artists, channel partners, advisors, and prospective employees. But I began hiring employees in the fall of 1982 and got Don Valentine to let me use an office at
his venture firm, which he had offered to me earlier in the year.
I funded the company, including computers, rent, and payroll for the first 12
employees, until December 1982, when I received additional funding from
Valentine and other venture capitalists. The first games were published in
May 1983, and EA was off and running.
Ramsay:Many entrepreneurs in this business work within founding teams.
Did you? Were there any cofounders of EA?
Hawkins: No. A company is either founded by one person, who then hires
the early employees, or there is a group of cofounders who work together
to found a company on an equal level and who take equal risks. If there is a
cofounder, then there cannot be a founder.
Every company must hire employees, butbeing an early employee does not
make you a founder. I have been the founder of three companies, but none
of my early employees from 3DO claim to be cofounders. Since I left EA,
some individuals have wanted to position themselves as cofounders.
Chapter 1 | Trip Hawkins: Founder, Electronic Arts  4
But the facts are that I spent a decadeentirely on my own to develop the
foundational ideas. I funded the company’s first year entirely myself. I was
the only one there when I incorporated the company and opened the first
office. And I made offers to the early employees and paid their salaries, and
in some cases, I even made personal loans so they could buy stock.
Ramsay:How did you know Don Valentine?
Hawkins:I first heard about Valentine in 1978 when his venture capital
firm Capital Management—later renamed Sequoia Capital—invested in Apple, around the time I began working there. A year later, I became intrigued
when Valentine sold his Apple position prematurely when the company was
still private. It gave me the idea that there was something that Valentine
didn’t like about Apple, which made me curious.
When I was preparing to leave Apple in early 1982, I read an article about
Valentine in an airline magazine that claimed he was so intimidating that a
visitor making a pitch had passed out in his office from the pressure. At that
point, I purposely sought him out because I wanted to have tough mentors
on my board. I called his office and arranged to see him in February. He
liked my ideas and encouraged me to get on with it. Valentine offered to let
me borrow some of his office space for free if I needed it.
Ramsay:Were other venture capitalists just as receptive?
Hawkins:I found plenty of interest fromventure capitalists when I began
making the rounds in August and September 1982. I received multiple offers,
and I don’t remember anyone that wasn’t interested. There was even competition for the deal that helped me get a better price. This led to an even
hotter 1983 for funding companies doing personal and home computer
software. After then, the market and funding climate became more difficult.
Ramsay:Can you tell me about the publishing process at the time?
Hawkins:I developed my idea for the “software artist” from working with
brilliant developers at Apple, such as Bill Atkinson. These guys were legitimate divas. I decided to study and transfer the principles of artist management from the music industry to software.
I wanted the best game ideas from the most passionate independent artists
that were driven enough and good enough to get the job done. I hired a
couple of my buddies from Apple, Dave Evans and Pat Marriott, to be my
first producers, but I was really the first producer. I sought out the best developers I knew and heard about, and I personally called on them and closed
many of the first round of deals.
Gamers at Work 5
The typical model was to pay a small upfront advance because nobody else
was doing it, and an advance demonstrated that EA had resources, conviction, and faith in the developers. Then there would be milestone payments.
The entire deal for Hard Hat Mack was priced at $14,000.
Many of the early developers were teens living at home, developing on their
personal Apple II. We would work closely with them to edit, polish, and
improve the product until we either thought it was ready to publish or gave
up on it. After publication, the artist would earn royalties, initially at 15% of
our net revenue, but I made sure we could recoup our advance.
To create the contract, I took a traditional engineering development contract from the lawyer I had worked with at Apple and combined a copy of a
music-recording contract, and then I added a bunch of new stuff specific to
games. The entire industry copied mycontract for the next 15 years.
Ramsay:Were there problems with gettingthe first titles out the door?
Hawkins:There were always projects that were never completed. Jay
Smith, who created some wonderful games for the Vectrex system, was our
first big air ball, costing us $35,000. I loved the Vectrex, made that deal, and
was very excited because they had a legitimate professional track record.
Ramsay:Can you give me an example how you solved a problem project?
Hawkins:The young developers could be erratic and run late, but they
were very passionate and driven, and took reasonable direction, so many
things got done. I designed the One on One game, and then hired Eric
Hammond to implement it. He was struggling, so we moved him up to our
town and had him work in a cubicle near where I was sitting for the last
several months.
Ramsay:Which titles were your major early successes?
Hawkins:The best developers from the group that made the six debut EA
games were Bill Budge, FreeFall Associates, and Ozark Softscape. Bill made
one of the most important games ever: Pinball Construction Set. FreeFall
made Archon, which is still one of my favorite games. FreeFall was a married
couple, Jon Freeman and Anne Westfall, and another great designer, Paul
Reiche. Ozark was put together at my request to make a simple businesssimulation game, for which I provided the design of the underlying economic
principles, such as the learning-curve theory of production.
I also wrote the manual for the game M.U.L.E., which also remains one of
my all-time personal favorites. Ozark, led by the ingenious Dan Bunten, did
a stunning array of clever and innovative things in M.U.L.E., and made it
Chapter 1 | Trip Hawkins: Founder, Electronic Arts  6
quite charming for a business simulation. Pinball, Archon, and M.U.L.E. won
a ton of awards, and all three shipped in the first group of games in May
1983.
Ramsay:There are many developers who cite M.U.L.E. as a favorite, too.
What’s the story behind the game?How did you know Dan Bunten?
Hawkins:I wanted to make a business simulation that would be based on
Cartels and Cutthroats by Strategic Simulations, but simpler and better. I
called Joel Billings, who founded SSI, but he didn’t want to license Cartels to
me as a starting point. I then went directly to Dan Bunten, and we became
mutually excited about doing a newgame. Their loss was our gain.
Dan and I shared a vision for games that was expressed by an old EA slogan:
“software worthy of the minds that use it.” We wanted games to be good
for people in terms of personal growthand social value. Dan got together
with his brother and a few other good souls in Little Rock, Arkansas, and
formed Ozark Softscape in order to work with me. To play M.U.L.E. properly, you really needed four players and four joysticks. It was ahead of its
time, but everyone that played it was completely charmed.
Ramsay:EA began publishing in 1983. Was there competition then?
Hawkins:I tabulated 135 competitors that were already shipping computer
and video games when I founded EA. I already understood that I could not
succeed with a “me, too” company,but 135 was a surprisingly big number.
Also, it was completely intimidating going to the Consumer Electronics
Show in January 1983 and seeing competitive game boxes stacked 60 feet
high to the ceiling. But by then, I believed passionately in what I was doing
differently and was fearless simply out of youthful ignorance.
EA made its conference debut in June 1983 at the Consumer Electronics
Show in Chicago. We had a tiny booth compared to many others, but we
later learned that we had made the biggest impression, and people respected our approach, which was thick with innovation, artistry, and quality.
Ramsay:Were there any particular competitors that concerned you?
Hawkins:I considered home computers the next wave, and many of the
game competitors were small and lacked business experience. Brøderbund
was certainly interesting and capable.I loved the Choplifter game they had
published, and we competed for good, independent developers. Activision
was the largest of the Atari 2600 developers. Activision had done a huge
IPO, but I thought they overrated the Atari platform and would eventually
burn out. And they did.
Gamers at Work 7
Ramsay:Did you consider Atari, which had been operating for at least a
decade before EA, a legitimate threat to your business?
Hawkins:I could tell back in 1982 that Atari was going to hit the wall and
would take down its game developers with it. The Atari 2600 was overhyped, but you could literally animate only six sprites, and the entire thing
had 128 bytes of RAM. Bytes! It was a glorified Pong machine, so it was only
a matter of time before it became a doorstop.
Atari made a famous announcement in December 1982 that was like the
Titanic announcing they had hit the iceberg. Their collapse gave video games
a bad name, and suddenly nobody wanted to admit that they liked video
games. For certain, Atari was a giant sucking sound that hurt the industry
from 1983 to 1985.
Ramsay:What about SoftSel?
Hawkins:In June 1982, I visited SoftSel, the dominant game distributor. I
went directly into the lion’s mouth. I presented myself as a potential customer, but I mainly wanted to size them up as a competitor since I had decided to bypass distributors and go directly to retail.
Distributors are distributors, and I did not care for SoftSel and never did
business with them. Again, I came away with a strong conviction that I was
doing the right thing, even though it proved to be extremely difficult and
required incredible determination over a three-year period. Retailers would
never have bought directly from me if they could have cherry-picked our
hits from SoftSel. Instead, they had tobuy from us because SoftSel did not
have our games. As this became a competitive factor, they got very, very
mad about it, but I had to worry about what I had to do.
Ramsay:Finding the right people, especially the right leaders, is a difficult
task. Was that your experience with hiring managers at EA?
Hawkins:Like Apple, I found that about half of the managers I hired were
not very good. In hindsight, when I think about the first 50 managers at
Apple and EA, I think perhaps 5% were exceptional and another 40% were
solid role contributors. Both companies succeeded despite being held back
by the shortcomings of the other 55%. But sometimes managers with dysfunctional personalities weretolerated for far too long.
Over time, as I gained more experience and perspective, I got better at identifying and confronting issues, and either getting them resolved and improved
or making management changes. Anotherpositive for both Apple and EA is
that I worked hard on creating a stronginternal culture and making sure that
we were hiring true believers who were passionate. Their tolerance for
Chapter 1 | Trip Hawkins: Founder, Electronic Arts  8
change, determination to succeed, and willingness to work hard on something they believed in made up for other deficits.
Ramsay:Do you believe that people who work within a strong culture
carry its values forward? Many of your first hires now have great careers.
Hawkins:You get out what you put in. I have always invested heavily in
defining and building corporate culture. If you don’t do it, the alternative
forms of organizations are dictatorshipand bureaucracy. As the saying goes,
things rot from the head. If a company’s leadership exemplifies certain values, they will more likely become part of the true culture, which is often
different from the officially stated culture.
With a good culture, you have more successful delegation, faster decisions,
and better development of people for their own future and that of the enterprise. In my organizations, I put a lot of effort into the learning and teaching environment, and employees are regularly promoted. This was also true
at Apple, where, although not a founder, I was asked by the founders to
define and maintain the company culture, which I did.
I think Apple lost some things in the 1980s because the founders didn’t do
enough to drive the culture. Several years ago, I did a rough count and realized over 50 executives who worked closely with me had later become
chief executives, many of which were running public companies. I’ve been a
good school for executives. I’m sure the numbers are much higher now.
Ramsay:Why did EA become a public company?
Hawkins:Having been through the Apple IPO in 1980, I founded EA with
the intention of being successful enough to go public. I planned to have venture investors and to give stock options to all employees, and I knew the
company would need a path to liquidity. I maintained strong relationships
with investment banks throughout the 1980s, and it began to look feasible
to do an IPO as early as 1986. But I did not think the company was mature
enough, and then there was a market hiccup in 1987.
In the 1980s, consoles were underpowered, passé, and EA only made games
for more powerful PCs. Computers had mass storage, read-write storage,
keyboards, printers, modems, and otherfeatures, whereas Atari had made
consoles the butt of a joke. But after Nintendo gave rebirth to consoles, it
became clear that the low hardware price of a discless machine and the convenience of plug-and-play cartridges would engender a much larger market.
The American game industry hoped Nintendo would be another hula hoop
like Atari had been, and was ignoring it and hoping it would just go away. I
didn’t like Nintendo’s draconian license agreement, but I felt compelled to
enter the cartridge game market.
Gamers at Work 9
In 1988, I was looking for an intelligent strategy to enter the console game
sector, and the Tengen-Nintendo lawsuit inspired me. I decided that we
should focus on the upcoming 16-bit market and enter the market by reverse-engineering the Sega Genesis. I believed that EA would be better off
with a cash war chest to deliver on this plan, including deep pockets in the
event that we might get sued by Sega. Once I had this strategy figured out, it
made sense to go public to establish the war chest. Ironically, we only raised
$8 million in the IPO, and EA has never touched or needed to use a penny
of that money. I pulled off a great agreement with Sega in 1990, and the cash
just kept rolling in, without there ever being a lawsuit.
Ramsay:What impact did the transitionfrom PCs to console game systems have on publishing operations?
Hawkins:It was an enormous change to go from read-write floppy discs to
smaller read-only cartridges with highmanufacturing costs. We also needed
to make different kinds of games with very different user interfaces. For example, the Madden user interface got a complete overhaul, even though it
used the same underlying gameplay mechanics, camera angle, playbooks, and
player stats. Many of our employees did not like the change and were uncooperative, insisting that we could not make quality games for an underpowered machine like the Genesis.
I knew we had to let go of our attachment to machines that the public did
not want to buy, and support the hardware that the public would embrace. I
made this argument on the grounds ofdelivering customer satisfaction and
how quality is in the eye of the beholder. If the customer buys a Genesis,
we want to give him the best we can for the machine he bought and not
resent the consumer for not buying a $1,000 computer.
The majority of employees and developers got on board with our new values and culture, but there were about 30 employees who departed because
they thought I was nuts. That was a big number at the time because we
probably only had about 200 employees in total. Those that stayed and believed in the plan went on to experience the greatest growth and success
period in the 28-year history of the company.
Ramsay:Fast-forward to 1991. Why did you leave EA?
Hawkins:I didn’t feel like I was leaving EA, but it turned out that way.
From 1988 to 1990, I did my most transformative work at EA, led by a radical strategy to enter the console game business by reverse engineering a
new and unproven platform. In 1988, Tengen reverse engineered and sued
Nintendo. I watched that situation unfold to Tengen’s ultimate detriment.
Chapter 1 | Trip Hawkins: Founder, Electronic Arts  10
At the same time, Sega released the 16-bit Sega MegaDrive, which was later
branded as the Genesis, in Japan. I reallyliked this machine and investigated
a strategy of reverse engineering it. Doing so would allow EA to have publishing freedom on the platform, which would probably be released in the
United States in 1989 and Europe in 1990. EA already had great 16-bit
brands and technology that could easily move to the Sega Genesis.
We moved forward, had it figured out in 1989, and had products ready to
go in 1990. I then went back to Sega and made a huge strategic deal that
made us good partners. The deal would also prove to save EA $35 million in
licensing fees and catapult our market cap from $60 million to $2 billion in a
two- to three-year period. Once that was all in the bag and well underway, I
was still very concerned about future platforms for EA.
I worried that Nintendo and Sega would take steps to make it harder for EA
to have freedom in the future. Sony had not yet entered the game business,
and the PC was completely dead as a game platform at that time. I concluded that it was time for EA to take a more active role on the platform
side—perhaps not to the same degree as Microsoft or Sega, but in some
way that we could drive market expansion and publishing freedom. I wanted
to see consumers and developers get the chance to have 3D graphics, optical disc storage, and networking.
This effort began with an internal skunk works, but took on a life of its own.
I couldn’t resist the temptation to spin it out and organize it as a “Dolby
sound”-type licensing model called 3DO. From 1990 to 1994, I was chairman and the largest stakeholder of both companies; however, the two companies gradually pulled apart due to conflicting priorities and agendas.
Ramsay:How did you feel about leaving behind something you created?
Hawkins:I was like the father of a rebellious teenager and an infant having
open-heart surgery. I felt obligated tocare for the infant and knew that the
teen was going to make it to adult life. 3DO was in business for 12 years,
and twice reached revenues of up to the $100 million level.
For a variety of reasons, 3DO was not sustainable. I made a lot of mistakes,
and many of the ideas were too far ahead of their time. I was sad to become
estranged from EA because it was my baby. I had always admired Walt Disney as a role model and the fact that he was with his company until the day
he died. I regret the misadventure, but I take full responsibility.
Life tests and develops our character,hopefully into something better over
time as we learn and understand what is right and true. One thing I do know
is that it was somewhat inevitable that I would do something like 3DO because I was trying too hard to push the envelope in those days. I think many
Gamers at Work 11
of us as younger entrepreneurs are trying to find out exactly who we are and
where our edges are, and you don’t know where the edges really are until
you fall off a few times.
Ramsay:Platform manufacturers not onlycompete by publishing their own
games; they benefit from hardware licensing and third-party properties. Is
this business really that lucrative, or are there hidden costs?
Hawkins:Investors like to play monopoly, so they like platforms, but many
platforms fail, and many are capital-intensive. In reviewing history, game
consoles are now apparently among the riskiest of platform businesses. To
be successful, you need custom chips, high manufacturing volume, and tons
of marketing. The pace of technology is also very fast, and new models can
quickly become obsolete. Nintendo is the only company in that sector that
has been consistently successful over a long period.
Ramsay:Why wasn’t 3DO sustainable? What were the mistakes?
Hawkins:For starters, 3DO was more than $1 billion short on the capital
requirements. Licensed technologies like Dolby sound, Flash, HTML, or
MPEG can gradually sneak up on the market, penetrating more devices and
platforms over time and becoming de facto standards. This is because the
hardware is selling for another reason and the emerging technology is only
an additive. I might buy a tape-cassetterecorder because I want to record
songs or buy music tapes, and I don’t even have to know or care that Dolby
sound is an option. It is completely different with game consoles, especially
in those days where it was winner take all.
A new game console would only succeedon the basis of new games using
its new features. Backward compatibility would not drive its success; it had
to have new, state-of-the-art games. It turns out that to make a new console good enough to achieve this and to win support from enough good developers, it takes more than $1 billion to build it out and convince others to
jump in. Sony committed more than $2 billion, and not only beat 3DO, but
pushed aside larger and stronger competitors like Sega and Nintendo.
Sony, Nintendo, and Sega also had strong brand power and great lineups of
first-party games. Mario is only on Nintendo, and Sonic was only on Sega.
3DO could lead off with Madden and Road Rash, but as fast as they could,
EA put those games on Sega, Nintendo and Sony. Ultimately, the low license
fees for 3DO didn’t matter. Developers were willing to overpay Sony because they believed in Sony’s strength in building the market.
A great deal is made of 3DO’s high hardware price, but this mistake is overrated. First of all, the initial street price was $599, not higher myths that are
Chapter 1 | Trip Hawkins: Founder, Electronic Arts  12
often reported. Within a few months, I negotiated with Panasonic to bring
the price down to $499, which was, by the way, Sony’s introductory price
the next year in Japan. Sony was very aggressive when they later entered
the United States at $299, but by that time, 3DO’s price was $349. 3DO
would have done better at lower prices, but Sony won, and also beat Nintendo and Sega for a variety of these other reasons.
Ramsay:When did you start Digital Chocolate?
Hawkins:When 3DO was selling its assets in 2003, I began to see the mobile category emerging as the next big change, and challenge, in the media
landscape. I love new media. The dot-com bubble had recently burst, and
venture-capital investors were more intrigued with mobile after seeing
strong growth with the mobile Web in both Japan and Korea.
I finished the business plan in September 2003, received funding almost immediately, and hired the first employees in December. My wife suggested a
few names for the company using the word “chocolate.” I took that word
and put “digital” in front. I like names that are a mash-up of two ideas that
aren’t yet associated and yet that belong together, defining something new.
Digital Chocolate’s first mobile apps and games came out in 2004.
Ramsay:Are the games you’re now developing very different from what
you were publishing at Electronic Arts?
Hawkins:A few years ago I realized, in hindsight, that my big, true ambition
ever since childhood had really been about social games. I was always looking for opponents as a kid. With EA, I supported a four-player game like
M.U.L.E. in 1982 and Modem Wars a few years later, at least a decade ahead
of the Web. I was very passionate about the multiplayer EA Sports games.
Even with 3DO, I produced another multiplayer game called Twisted, and
we made a daisy chain of joysticks so that a game could have as many as 16
players in the same room. FIFA only supported six players.
However, Digital Chocolate today is making a much more casual games for
a larger and more mainstream audience, like Millionaire City. And our
games are free to play with virtual goods, which was never the business
model at EA.
Finally, these modern games don’t want to let players fail, which was “part
of the deal” in the old days. Now, you want everyone to feel like a winner.
One of the best tools for making that happen is to completely eliminate any
need for timing or hand-eye coordination. Too many people find it intimidating or embarrassing to fail on that basis. By contrast, everyone has brain
cells and can enjoy basic decisions and tactics, and will even develop pet
Gamers at Work 13
strategies. In comparison, the traditional arcade games have typically been
about hand-eye coordination. While these arcade games were easy enough
to play for everyone in the beginning, within a few years, they became too
difficult to play, especially in the everlasting pursuit of the next quarter.
Ramsay:Is the “free to play with virtual goods” model sustainable in the
long term? There has been much evangelism, but what are the weaknesses?
Hawkins:It is the future. Even in the present, all of the growth at Digital
Chocolate is in virtual goods. I am especially excited about the long-term
potential for our NanoStar platform thatallows a virtual item to be a character with personality, and to then turnthat character into a different game
asset in a variety of different games. This approach gives the player much
more emotional and gameplay value.
Games are going mainstream, so it is only natural that the business model
would become less like a theatrical filmand converge toward television and
the Web. Free broadcast television paved the way for today’s hefty cable
subscription fees, and the original World Wide Web paved the way for the
monetizable Web 2.0. The only major weakness is that virtual goods work
well in some game genres but not in others. As television also works better
with some genres, the game industry will have to migrate more to what will
work better in the future.
Ramsay:Are you concerned that mass-market video games are migrating
toward a future where art, entertainment, and fun take a backseat to what
you called “the everlasting pursuit of the next quarter”?
Hawkins:The arcade games took a fork in the road, opting to make the
games harder to win. The competitive hardcore male player would try
harder, and devote more time and quarters. This made games too difficult
for the mass market that had been happily playing Pong, Pac-Man, Centipede, and Space Invaders. Also forsaken and misunderstood were the importance and value of social benefit.
Pong was played, socially, in a lot of bars by people looking for social life.
The games that followed in the next decade were almost exclusively played
solo. We realized that interactive and social media are far better for us than
the “boob tube.” We now know how to make better user experiences that
are simple and convenient and social. And today, we have more and better
technology and art. We are also reaching an enormous mainstream audience. It is still a business, so there is nothing wrong with figuring out what
people want. It’s entertainment, so there’s nothing wrong with helping players release hormones like dopamine and feel good about themselves.
Chapter 1 | Trip Hawkins: Founder, Electronic Arts  14
Physical exercise and video games are big elements on the short list of
healthy ways to use hormone management to improve life and health. We
are not Pavlov’s dogs, but B.F. Skinner proved long ago that the strongest
form of behavioral modification is variable-ratio reinforcement. The slot
machine thrives on it, but is a social ill because it is a dehumanizing addiction. In a more interesting, thought-provoking, and truly interactive game
design, the principles of reinforcement are very useful. Nobody is going to
do anything if, in the end, it doesn’t constructively involve your emotions.
Ramsay:In 2006, quality of life became a hot-button issue for EA. Can you
provide any insight into the labor environment then? Did you do anything
differently with the culture at Digital Chocolate?
Hawkins:I don’t know the details, but I’ve always been interested in organizational culture, and I want to help my employees win and become better
people. At every stop in my career, I’ve defined the personal values for my
companies and the business practices to make them a reality. I even did this
at Apple at the request of the founders.
As the industry matured, it became a bit more “dog eat dog,” and all of the
companies were under more pressure. Many companies, including 3DO,
failed. Countless people have told me over the years that the culture and
quality of life at EA declined after my departure. While this is disappointing,
culture is defined by everyone’s values, beliefs, and behavior, not just any
one person’s.
Ramsay:How has Digital Chocolate fostered a culture where employees
can thrive and enjoy their success? Have your publishing strategy and offering numerous outlets for creativity played a role?
Hawkins:Digital Chocolate operates throughout the world, and our employees were born in 35 different countries. But we speak English in our
offices. As a lazy American, I appreciate this accommodation, and it helps
the global organization exchange ideas and feedback, and learn faster. We
do our own technologies, design, and brands internally, so there is plenty to
be creative about. Projects tend to be pretty short and have small teams.
Over the course of a year, we can crank out dozens of new games, and
again, this creates much more opportunity for good ideas to be used. We
let everyone participate in generating ideas and discussing plans, and we’re
committed to the highest level of production values and quality. We also
give bonuses and stock options to all employees. For all of these reasons,
the results are very good, and our people are highly motivated.
Gamers at Work 15
Ramsay:Has recruiting talent for mobile or social games been difficult? I’ve
heard that some developers can be averse to joining teams dominated by
business graduates instead of experienced game developers.
Hawkins:We have around 350 employees infive major offices on three
continents, and our people come from a variety of backgrounds. I think the
most important things are good education, aptitude, and willingness to learn
and adapt. In the old days, the ponytails made the games, and the suits got
the packaged goods manufactured and put on shelves, and collected the
money. There were big operational demands. Today, the ponytails and suits
can sometimes be embodied in one person. In any case, the perspectives of
art and science need to be blended together. Creative peopleneed to get out
of the ivory tower and pay attention to the tests in the Petri dish. And the
scientists need to understand that it takes creativity to make something fun.
Ramsay:You’ve seen this business from every angle, having worked in publishing, development, and even hardware. What would you say are the most
serious threats to the growth and long-term viability of startups?
Hawkins:Digital media has collapsed the traditional value chain, so financial
and distribution leverage are no longer viable means of controlling shelf
space and pipelines. Now, digital platform companies like Apple, Facebook,
and Google have the ability to dominate and control entire value chains.
We all have to be concerned that any of them that get too big or become
too central could misbehave. In order to favorably influence the platform
titans, smaller game publishers and developers will need to find ways to
stick together, and have some collective bargaining power and policy viewpoint. Going forward, the business of games will be about how to leverage
technology and intellectual property. Startups will have to find ways to contribute in those dimensions, but it is always possible.