Back from Hard Knocks U.

Back from Hard Knocks U.
By Margie Wylie and Jeff Peline
Staff Writers, CNET NEWS.COM

There used to be a time when Trip Hawkins's name was synonymous with hubris.

In 1992 the brash, charismatic Hawkins set out to wrest gaming from the controlling hands of corporate giants, like Nintendo and Sega. He started the 3DO Company that year to create a state-of-the-art gaming machine more flexible and open to developers than those of his domineering competitors.

In 1993, with no products and no profits, Hawkins took 3DO public with a valuation of $1 billion. He was flying high, and it showed in the frequent public appearances where he preached the superiority of 3DO's ideas. The stock market rewarded him with high stock prices, while the press derisively dubbed him "Ego Trip."

When 3DO released its player in time for Christmas 1993, the machine cost too much (about $700) and offered only about a dozen games. It sold poorly, but that didn't stop 3DO's stock from hitting an all-time high of 48-1/4 in 1995. Later that year, Goldstar and Sanyo announced that they would cut down on the production of 3DO's machines, and AT&T sold its stake in the company. The company's stock slid, and by July, there were rumors that 3DO would be sold. In October of 1995, Sanyo parent Matsushita licensed 3DO's hardware technology for $100 million, and the company showed its first profit. Now 3DO has reorganized itself to take its games to the Internet. It has also put its entire 150-person hardware division on the block. After three years of rough riding and 3DO's near-death experience, Hawkins, like his company, has been born again. We spoke to a humble, seasoned Hawkins outside his office near Silicon Valley in Redwood Shores, California.

NEWS.COM: For some time, pundits have tried to dub 3DO the Pan Am of the video game business; that is, down and out. How has this criticism affected you?
Hawkins: 3DO has had its ups and downs. You've got to look at what we've tried to do, which is something positive and constructive for this industry. We had an optimistic view of human nature and wanted to do something cooperatively. You can't feel bad about wanting to do something like that. You can feel humbled, pragmatic as a result, but I don't think I want to stop feeling optimistic or stop having a positive view of human potential. You have to shrug off criticism. It's a natural part of being innovative. Any entrepreneur is going to get criticism for whatever they're doing. If you can't shrug that off, it's going to get to you.

NEXT: The past, no regrets

The past, no regrets

In the gaming business, you've been one of the pioneers. What are the biggest changes you've seen?
Silicon Valley is a different place now. The industry has gotten bigger. The stakes are higher. In some ways, everything's harder. People have changed. When I started 20 years ago, it was easier to get people to do what they were told. [Smiles.]. Nowadays, that's not so easy.

Did any of them surprise you?
You know, I always enjoy working with young people. They always have lots of new ideas. It's a young marketplace. I think there's a lot of clever ideas now about how to use new technologies, and in particular, the Internet. We have this new game called Meridian 59, and players in that game, even though they don't get points for it, do things like marry each other, form police squads to keep the peace, or get into gang warfare, reinventing all the segments of society.

What were some of the mistakes you made? There were technologies in the '80s that a lot of people tried to use. You have Philips with CD-i. You have John Malone with TCI, who tried to make 500-channel television. You have what the gaming industry tried to do with CD-ROM. A lot of these technologies just weren't quite ready. This is true in many cases with inventions. They just don't work the first time, and you have to just sort of appreciate that the industry right now is just going through that. I think that in the next ten years, you'll see DVD (digital video disc), the Internet, and gaming. Those three will be really strong sources of demand for computing. They will create new markets and those new markets will feel a lot like what we were trying to do.

Is there anything you've learned from this business that you can boil down into a law or a bromide?
One of the surprising things about this business is that in some ways, it's really simple. If you want to survive, your revenues have to be bigger than your expenses. You have to be realistic about what it takes to generate revenue. In terms of what I do, I think my mantra is, "to do is to be." That's what we're really here for. If I can make really great products that allow you to transport yourself in time and space, to be someone else, to use fantasy and role-playing as a way of finding out who you are, I am accomplishing something.

What do you say to the people who bought your stock for $46 a share?
I'm one of the people who buys the stock. Bud Colligan (of Macromedia) buys the stock. I'm interested in seeing the stock go up. The technology category has just been pounded the last few years. A lot of companies have seen their stocks go down. You can't take it all too personally. I try to take a long-term view that anything that happens overnight probably isn't a very good thing. You've got to look at any company as a five-year proposition.

How do you plan five years in this market?
Sometimes when you think you're prepared, you are totally unprepared. You're quite better off if you step back and are willing to believe things that are unbelievable.

Such as?
I think that at the beginning of 3DO we thought that consumers would be ready to pay more if they could do more. It turns out that there's such a mind-set that says, "a game system is only worth $100." It's pretty hard for the industry to move to new technologies that drive up costs. One of the things that I believe is that where the game industry will really grow in the next ten years is DVD movies, which will be a huge mass market on the Internet. Those machines will expand the number of machines out there.

It wasn't that long ago that you were getting the press attention of a rock star. Since then, the fickle finger of the press has moved on. Has Silicon Valley become too glamorized?
I've never really been into what I do or interested in what I do in terms of the celebrity or the attention I get. I enjoy talking about it because I think we are trying to do something important and of potential social value and interest. The media has a job to do and they're going to go where they're going to go. I'm not particularly concerned about it.

3DO recently reinvented itself; tell us about that.
3DO started as a technology company and tried to orchestrate an industry of companies to use that technology. We realized that's not the role we should be trying to play, so we decided to take our technology and use it in different markets: 3D capabilities in the chips of personal computers, as well as designing our technology for DVD and the Internet, for example. We also decided to expand our software business, and so now we do alternative games, like Meridian 59.

Was that a blow to your ego?

I think that in a way anything that's a blow to the ego is a good thing. Because you shouldn't have an ego; you shouldn't be making decisions from the ego. So anytime that sort of thing happens, it helps you to get some perspective, to be more practical. I try to view that in a positive way. I read a comment from someone recently that said "I try to be a fountain, not a drain." I think you have to take anything that happens to you that is negative and figure out what about it is positive and try to get to the next thing.

NEXT: The future, high hopes

The future, high hopes

Could you have predicted that there would be so much interest in Internet gaming?
I have to say that the Internet humbled the entire industry. All of us, three or four years ago, were focused on other things, and the Internet kind of came out of nowhere. Once I saw it, even in its primitive form, I could see the potential. I see the Internet as a new medium. I think we'll create new kinds of entertainment experiences. The Internet isn't just a new way to publish a magazine, a new way to watch a movie, or a new way to get news. Human beings need to be social [and] need to be interactive. The Internet is the first time since the telephone that we've had a technology system that really promotes that. People really gravitate to that. They'll put up with a lot of shortcomings in the technology because their desire to be social and to interact is so strong.

What is the future of the Internet and gaming, with the pluses and minuses?
The great thing about the Internet is that it's really big and everyone is connected all the time. And that connectivity not only has a social dimension--meaning I like to talk to you--but the technical fact is that all the data, all the information is interconnected. On the minus side, everything is really slow today. With games, with things that are turn-based, you don't have as much real interaction. That will change over time, but in the meantime, we think that many of the customers are happy to do things with some recoil and are willing to tolerate the wait.

What about the future of video games with high-speed machines?
We're going to continue to see technology allow video games to have more photo realism and graphics and sound that will make it seem like real life in a box. That trend is always expanding the market. We'll get to a point in the future when the Internet dovetails with that.

What is your role in the company reorganization?

I'm going to try to continue to do what I always do, which is to try to be the pioneer, the innovator, to look for the new changes and trends in the market. I'm right now very actively involved in our Internet strategy and making sure that we build great games that will be next-generation capable.

Do you have any hot projects on the horizon?
For the Internet arena, it means designing entertainment experiences that aren't just one person playing against a computer or against another person, but a community environment where people are sharing an entertainment experience, having something happen that's emotionally meaningful. We're trying to approach the Internet in such a way that we apply some unique technologies to carve out a unique brand position. That's a tricky technical and business problem.