THE TIMES 100 : The Best Performing Companies in California : RISING FORTUNES : The New Hollywood : Electronic Arts Is the Microsoft of Fun
This pleasant suburb of San Francisco, hard by the airport and halfway between the city and Silicon Valley, doesn’t seem a likely location for the new Hollywood.
Yet Trip Hawkins, founder and chairman of video game maker Electronic Arts Inc., suggests that San Mateo is destined to become just that: the home of a dynamic new industry that will combine the computer expertise to the south with design skills from San Francisco to the north.
The new industry is “interactive entertainment.” For contact with the actors, musicians and film professionals of the real Hollywood--an important ingredient--there’s always telecommunications and, of course, that handy airport.
Electronic Arts is headquartered here. The company’s impressive performance--along with Hawkins’ reputation for prescience and a new joint venture with Time Warner Inc.--suggests that his vision of the New Hollywood may not be all hyperbole.
Since it was founded in 1982 as Apple Computer’s first spinoff, Electronic Arts has become the largest and most profitable game software company in the world. In 1991 sales rose 48%, to $140 million, good enough for the No. 15 spot on the Times list of fastest-growing California companies.
With its novel approach to product development, consciously patterned after the traditional Hollywood movie studio, Electronic Arts has also become one of the few software companies of any type that owes its success to a broad array of popular products rather than one or two smash hits.
Hawkins, an articulate 38-year-old, is confident the company can continue its strong performance.
“The market that Electronic Arts is in is the one remaining field of computer software that is relatively untapped,” he says. “There should be plenty of opportunity in that primary field of entertainment software.”
Industry analysts agree. Though the fear that game software is a fad-driven business has caused wild fluctuations in Electronic Arts’ stock price since it went public in 1989, consistent profitability has persuaded even the doubters.
Game enthusiasts never needed any persuading. The company’s sports titles--”John Madden Football” and “NHL Hockey,” for example--have a loyal following, as do some of its simulators and fantasy-adventure games.
“People look at them as a company that’s willing to test new concepts and not be a follower,” says Andy Eddy, executive editor of the magazine Video Games and Computer Entertainment.
And Hawkins believes that Electronic Arts has a good opportunity to redefine the boundaries of its existing business. While most of the company’s products are built for Sega and Nintendo video devices and appeal to children and teens, Hawkins sees the interactive home entertainment market of the future as far broader, incorporating new types of television and electronic information services and offering something for children of all ages.
“As the technology gets better, the ability of the medium to tell a story through audio-visual realism is going to make the products more compelling to a wider audience,” he says. “Information is going to become fun.”
But a number of technical and marketing obstacles stand in the way. Today’s video game machines aren’t powerful enough and personal computers aren’t up to the task either. Besides, they’re too expensive to serve as a mass-market “platform.”
Hawkins has been vocal in pointing out the inadequacies of the computer and game hardware available today. He’s also criticized the proliferation of incompatible systems that force software companies such as Electronic Arts to make expensive bets on which new machines will be successful.
Hawkins is also trying to do something about the problem. Last October, Electronic Arts said it had joined with Time Warner Enterprises and the venture capital firm Kleiner Perkins Caufield & Byers to form a new company, SMSG Inc., to “investigate new technologies and applications designed to grow the market for interactive multimedia.”
