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Geeks
"R" us:
Spectrum Holobyte finally turns successful computer games
into profits
Joseph R. Garber. Forbes. Dec. 30, 1996.
HERE'S
NEWS THAT many despaired of hearing: Spectrum Holobyte has
had a profitable quarter--the second in its 14-year history.
With
sales zooming 106% one year and dropping 29% the next, the
$80 million Alameda, Calif.-based gamesmaker has given investors
more heart- stopping thrills than its software has given the
players.
I never
understood why.
After
all, Spectrum's product record is an unbroken string of coups.
Early on, Spectrum Holobyte brought runaway bestseller Tetris
from Russia to the U.S. A few years later Paramount awarded
Spectrum lucrative software rights to Star Trek-The Next Generation
and the hit movie Top Gun. Long before the card game Magic
had become an international cult phenomenon, Spectrum had
locked up computer rights.
The
brands Spectrum developed on its own were winners, too. Its
Falcon fighter plane simulators set a benchmark for realism.
Its Grand Prix Formula One game was so true to life that rising
race star Jacques Villeneuve ascribes a victory to having
practiced not in a Ferrari but on Spectrum's software.
Year
in, year out, Spectrum's games have topped the lists, and
it seemed Spectrum understood everything you had to know in
the computer game business except how to make money at it.
Now the company appears to have learned that trick as well.
Much
credit goes to its new chief executive, Stephen M. Race, 47,
the executive behind the U.S. success of Sony's PlayStation.
When Sony rewarded him for winning an 80% market share by
showing him the exit in July 1995, Spectrum was waiting with
open arms.
There's
no magic to Race's turnaround. First, he hit the road, peddling
$50 million worth of convertible debt. Spectrum had never
gotten around to rationalizing a big 1993 acquisition. With
the bond money safely in the bank, Race cut overhead in half
and moved on to the real challenge, which was to get some
focus in a cluttered product line.
Before
taking out his pruning shears, Race identified Spectrum's
most loyal customers: ultra-geeks.
"Our
demographics are seriously Y chromosome," he opines--hard-core
game players who think nothing of dropping $500 for a joystick
or $1,000 for a monitor, and who complain that 800-page user
guides (some of which read like a military flight manual)
aren't quite detailed enough. In other words, Spectrum's best
customers are people who measure their machismo by the number
of transistors in their microprocessors--an insight that told
Race to forget about the kiddie market and only build games
that eat processing power like Godzilla eats Tokyo.
Mission
accomplished. Spectrum's next generation simulators deliver
Dolby Surround Sound and graphic realism heretofore unseen
outside Navy flight school. To run the things, you'll want
a mighty fast Pentium and 16 megabytes of memory. Better yet,
wait for Intel's MMX-featured Pentium, due first quarter of
1997. Available in both 166- and 200- megahertz versions,
MMX technology makes graphics (and therefore games) run like
a dream. Seriously Y chromosome fighter pilots will probably
be first in line to buy the new processor, which can be plugged
right into their already high-end motherboards.
To create
true-to-life landscapes, Spectrum commissioned extensive aerial
photography, plugging the digitized results into the new version
of Falcon. The software's virtual avionics were designed by
a licensed pilot who takes his work so seriously that when
I tried to dive a virtual fighter into the ground, he went
white with horror. And because the game's scenario involves
North Korean naughtiness, the software models that nation's
geography so accurately that maximum leader Kim Jong-Il probably
will throw a tantrum.
Race
thinks the ultimate power gaming market is still a few years
off. In the not so distant future, he sees worlds of "infinite
and ultrarealistic game space" on the Internet, where Spectrum's
bellicose customers can form armies together, pay real cash
to virtual armaments brokers for software weapons (the best
electronic commerce application I've heard so far), and liberate
or conquer imaginary lands to their hearts' content.
One
quarter's profit does not a trend make. Nonetheless, with
Race's ultra-geek strategy Spectrum may now be reporting profits
as regularly as it spews out hit games.
©
1996 Forbes Inc.
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