Spring+2009+Lecture+15+Notes

= __Spring 2009 Lecture 15 Notes__ =


 


 * Personal computers on the rise – similar processors to video-game consoles – did more
 * Played games – also did more productive things – word processing, etc.
 * Cost a lot more than video-game consoles – late 1970's tended to cost well over $1000
 * Jack Tramiel – as Jewish boy in Poland – rounded up by Nazi's – sent to camps
 * Tramiel went to Auschwitz – learned harsh life-lessons
 * Germans needed workers to help build Autobahn – turned to camp prisoners
 * Tramiel realized Nazi's needed to feed workers to keep them alive – volunteered
 * Survived holocaust unlike many others who did not volunteer
 * Post WWII – went to USA – joined US Army – learned to repair typewriters
 * Opened a repair shop in Bronx in 1954 – following year moved to Toronto
 * New company – gained contracts to assemble typewriters for foreign firms
 * Commodore International – Tramiel's new company
 * Soon Commodore made adding machines, too
 * Commodore ran into manufacturing problems – ceased producing their own products
 * Teamed with outside company – Ricoh – Commodore products made – company grew
 * Tramiel saw trend towards electronics – knew calculators would replace adding machines
 * Partnership with Casio in 1960s – 1969 Commodore had calculator manufacturing plant
 * 1976 – Tramiel purchased small computer chip manufacturer – MOS Technologies
 * $800,00 for MOS – great investment – MOS created 6502 microprocessor
 * 6502 used in number of computer products – Apple II, Atari 400 and 800, etc.
 * Tramiel now officially in computer business – quickly earned reputation for ruthlessness
 * Employees who didn't follow his business philosophy fired – Notorious for bad temper
 * Tramiel named number 3 on California Magazine's list of “Bosses From Hell”
 * Also known for not paying debts – Commodore used others money in investments
 * Would earn large profits on interest before ever paying back debts
 * In contrast – Commodore strictly pursued people who owed them money
 * Common tactic by Commodore – not paying debt until supplier was nearly bankrupt
 * Commodore then comes in, buys company for cheap, forgives own debt
 * Tramiel's guiding principle at Commodore – computers for the masses not the classes
 * Inexpensive computers anyone could afford – various luxurious stripped out of computers
 * Used Commodore's owned-companies to get cheap parts – MOS Technologies for chip
 * Tramiel later bought printing manufacturer to start selling dot-matrix printers for cheap
 * Significantly reduced prices – 1977 Commodore released Pet Computer
 * Pet Computer - first home computer to retail for under $1000
 * 1981 – released VIC-20 – sold for under $300
 * 5K of RAM – 16 Color graphics – low end even for time – still impressive for price tag
 * Sold VIC-20 at regular retail outlets – not just specialized computer stores
 * VIC-20 big success – 1982 – Commodore sold 800,000 VIC-20's worldwide
 * August 1982 – released computer Commodore best known for – Commodore 64 (C64)
 * Claimed C64 rivaled capabilities of Apple II – Apple II cost $1000 – C64 sold for $600
 * January 1983 – Commodore shipping 25,000 C64 computers every month
 * Huge financial success – Coleco's Adam Computer could have challenged but didn't
 * Same price tag – more features – quality problems prevented competition
 * C64 unchallenged at price range – 1983 Commodore surpassed Apple in overall sales
 * Commodore became first computer company to report a $1 billion sales year
 * January 1984 – Commodore sold over 2 million VIC-20's – over 1 million C64's
 * Companies in video-game field – sell hardware for heap – make money back on software
 * Commodore sold hardware at high profits
 * VIC-20 estimated to cost under $60 to make – sold for $300
 * C64 could have made a profit selling for $99 – sold for $595
 * High hardware profits – Commodore encouraged outside developers to make software
 * Tramiel believed a good piece of software was 1 more reason to buy his computers
 * Most successful game company from Commodore 64 era – Electronic Arts
 * Founded by Trip Hawkins – background in marketing, not technology
 * Had great interest in technology – marketing training gave him unique insight into field
 * Attended Harvard – 1975 first got idea to enter computer business
 * Friend told him about personal computer on sale
 * Hawkins interested in computers as consumer item – ran marketing figures
 * Decided that computer market would be big enough to support software company in 1982
 * Graduated Harvard – went to Stanford to get MBA
 * Researched future of personal computing as graduate studies
 * Used research projects to make contacts – word spread about his research
 * Apple contacted Hawkins – set up a meeting to discuss his projects and employment
 * Apple hired Hawkins as 68th employee – instant 1-man marketing department
 * Hawkins – central figure at Apple – helped implement number of strategies
 * Established Apple II as business machine – with Steve Jobs on trip to Xerox PARC
 * Apple went public – Hawkins became millionaire at 26 years old
 * Made contacts through Apple – Don Valentine – venture capitalist
 * Valentine helped Bushnell expand Atari – helped Jobs and Wozniak start Apple
 * 1982 arrived – Hawkins ready to start his software company – turned to Valentine
 * Hawkins left Apple – needed to find people to start his company
 * Used charming personality to convince talented people to come on-board
 * Also needed software designers – went to computer shows – discussed plans
 * Found 3 game designers – Bill Budge, David Maynard, Dan Bunten – core of company
 * Hawkins and team decided to name company Electronic Arts (EA)
 * Name emphasized artistic aspect of games Hawkins wanted to produce
 * Hawkins attracted designers with unconventional philosophy on treatment of designers
 * Industry flooded with stories of how companies like Atari mistreated designers
 * Hawkins with his marketing background knew importance of promotion
 * Decided that programmers should be promoted – treated like stars
 * Hawkins promise of celebrity-treatment was attractive to designers
 * Hawkins also wanted to change the way games themselves were promoted
 * Early 1980s – computer games largely sold in cheap plastic bags
 * Hawkins felt even the best games would be overlooked if packaging wasn't eye-catching
 * Felt game packaging should be like album covers – flashy and well-designed
 * EA game packages – custom boxes – professional artwork – designers' names on labels
 * Packaging and eventual designer name-recognition helped make EA industry leader
 * May 21, 1983 – EA shipped first 6 games
 * 3 of 6 best-sellers – Hard Hat Mack, Archon, and Pinball Construction Set
 * Within 6 months EA had over 25 new games on market for Apple II, C64, and Atari 800
 * 1984 – video-game industry had collapsed – consoles all but dead – computers still sold
 * Game sales on computers suffered – lack of interest in video-games
 * Sales of C64 didn't disappear but did stop growing
 * Mid 1984 Commodore began reporting Atari-like sales-losses
 * Apple no longer proliferating as it once had been
 * Shortly after EA's big debut – computer games starting to look like dead console industry
 * Hawkins decided new strategy needed – deemphasized game designers
 * Designers still treated well and got credit – no longer promoted prominently on labels
 * Hawkins had indirect connection to Philadelphia '76ers star Julius Irving (Dr. J)
 * Approached Dr. J's agent about using him in a video-game
 * Movie titles had been used in games – Mattel had licensed professional sports leagues
 * No individual sports star had ever been licensed for use in a video-game
 * EA paid $25,000 to use Dr. J's name and likeness in a video-game
 * Dr. J's agent approached Larry Bird's agent for EA – similar deal made
 * Final game from EA called “Dr. J and Larry Bird Go One-on-One”
 * Limited processing power of C64 and Apple II – poor looking, bad moving characters
 * Graphics still cutting-edge for time – Dr. J also gave pointers to game designers
 * Made basketball in game more realistic
 * Game huge best-seller for its time – started EA's long tradition of sports games
 * Specifically began EA working on another game based on a sports legend – John Madden
 * Resulting game – John Madden Football
 * Sparked the most long-lasting sports series in computer and video-game history
 * John Madden Football later helped decide leaders of two future generations of consoles
 * Commodore – problems – back in 1960's financial problems made Tramiel seek help
 * Turned to Canadian investor – Irving Gould
 * Gould bought controlling shares of Commodore stock for $500,000
 * Later sold 8 percent of stock back to Tramiel – Tramiel officially in control again
 * Gould still strong player behind the scenes at Commodore
 * Kept strict eye on Tramiel – no money could be borrowed with Gould's signature
 * No decisions could be made with Gould's approval – not pleasant relationship
 * Tramiel frequently threatened to quit Commodore
 * January 10, 1984 – Commodore board meeting – Tramiel made threat for final time
 * Meeting held to discuss future of Commodore – Tramiel wanted his sons to run company
 * Sam, oldest, to be president – Gary, next oldest, control finances
 * Leonard, youngest, just got PhD from Columbia – work in Commodore Software division
 * Gould didn't care for idea – wanted Marshal Smith to take over
 * Smith – 54 year old finance specialist from steel industry
 * Tramiel responded by threatening to quit Commodore – Gould simply said “Fine”
 * Three days later Jack Tramiel officially resigned as CEO of Commodore International
 * Atari – James Morgan CEO – worked to fix Atari's problems from business standpoint
 * Laid off nearly 1/3 of Atari workforce – moved manufacturing to Asia
 * Also noticed odd situation – dozens of departments existed spread across 49 buildings
 * Departments rarely communicated – hated each other
 * Overall mentality that each department wanted to see the others fail
 * As one department lost money, others laughed even though all part of same company
 * Didn't bother to think that losses at a single department would hurt company as a whole
 * After significantly cutting workforce – Morgan reduced number of buildings from 49 to 4
 * Soon found he couldn't turn to parent company Warner Communications for help
 * Submitted 1984 budget – vetoed by Warner
 * Morgan needed to find his own funding or find new tactics to save Atari
 * Revised budget – cut operating expenses from $600 million down to $150 million
 * Removed an additional 550 jobs – sold 20 million older cartridges at $2 to clear inventory
 * Realized cutting expenses not going to be enough – pushed to introduce new products
 * May 21 Atari announced new game console – 7800 ProSystem
 * Also announced deal with LucasFilm to make games based on their movies for 7800
 * 7800 released as Atari product but not made at Atari – developed by General Computer
 * General Computer – made enhancement boards previously – also made Ms. Pac-Man
 * General Computer had made nearly half of all 5200 games – close ties to Atari
 * Atari also announced plans in 1984 for an odd concept – Mindlink
 * Mindlink – controller – claimed to allow control using impulses from players' heads
 * In reality worked by sensing muscles tensing in forehead
 * Planned to come packaged with Breakout-style game called Bionic Breakthrough
 * 7800 – powerful system – released far later than original design/announcement
 * Mindlink never released – still both products were Morgan's plan to boost Atari profits
 * 1984 Atari reported $425 million losses in second quarter
 * Morgan returned to Warner to ask for more money to run Atari
 * Steve Ross did not expect such big losses – refused to give Morgan any more money
 * June – rumors floating that Warner would sell Atari
 * Morgan insisted that Warner had confidence in Atari and would not sell – was wrong
 * Early July 1984 Warner Communications sold Atari to new owner – Jack Tramiel
 * Tramiel did not acquire all of Atari – Warner still retained Atari's coin-op division
 * Warner renamed cion-op division Atari Games - kept separate from Tramiel's Atari Corporation
 * Deal highly complex - Tramiel Technologies Limited bought consumer division of Atari
 * Appeared like Tramiel had paid Warned $240 million for consumer division of Atari
 * Really paid Warner $240 million in promissory notes based on future performance
 * Warner essentially lent Tramiel money to buy Atari – deal also had exchange of stocks
 * Tramiel received Warner stock and promise from Warner to cover certain costs
 * Promise lead to occasions where Warner was forced to give Tramiel millions of dollars
 * In exchange Warner received 14.3 million shares of Tramiel Technologies stock
 * Tramiel took over Atari consumer division (Atari Corporation) – every employee nervous for future
 * Tramiel notorious for being ruthless boss – also bringing sons with him into company
 * First time Tramiel entered Atari an employee made an announcement over PA system
 * Quoted “The Empire Strikes Back” by saying Imperial Storm Troopers had entered the base
 * Fear quickly confirmed – Tramiel and sons immediately began interviewing employees
 * Decided how to adjust company – soon Atari's workforce dropped to a mere 1500
 * Tramiel saw excess all over Atari when compared to Commodore
 * Atari's marketing department had 300 employees – Commodore had 25 at its height
 * Consumer, owned by Tramiel was in adjacent building to Coin-Op, owned by Warner
 * Tramiel had doors between buildings sealed off - almost a symbol – no escape
 * Coin-Op employees had to watch their former colleagues destroyed
 * Tramiel openly offensive to workers – even ones he wanted to keep sought work elsewhere
 * Doug Macrae of General Computer – could no longer work with Atari after Tramiel there
 * General Computer soon making software for recently released Macintosh Computer
 * Tramiel took Atari's focus away from video-games – instead focusing on home computers
 * Private meeting with venture capitalists – announced his intentions
 * All skeptical – Tramiel asked if he really expected to keep Atari afloat through Christmas
 * Responded saying he would release a new line of high-quality, low-cost home computers
 * Claimed Atari sales would grow to between $1.2 and $1.5 billion in next year


 media type="custom" key="4236531"