3DO Says ‘I Do’ to a Major Switch in Its Game Strategy

Video game company 3DO Co., in a major switch in strategy, announced a corporate restructuring Monday to focus entirely on the Internet and game software, and said it will sell its hardware business or convert it into a joint venture.

As part of the reorganization, President Hugh Martin will assume full operating control of 3DO, the equipment and software company said in a statement. Its highly visible chairman and chief executive, Trip Hawkins, will remain in those posts but will shift his focus to the role of creative director.

“The Internet, and Internet entertainment in particular, is a huge opportunity,” Hawkins said in the statement. “We are moving toward focusing entirely on the challenge of building a strong entertainment software studio, with the Internet as a catalyst for growth.”

3DO plans to launch its first Internet product today, Meridian 59, a multi-player game set in a fantasy world. It said 25,000 people had signed up to play the game in an early free trial even though little money was spent on advertising. 3DO hopes to sell the game in retail stores, then charge $9.95 a month to play.

3DO also plans to release 10 games on CD-ROM this fall, with 15 more planned for 1997, Hawkins said.

The company said it expects that the sale of its 3DO Systems hardware business or a joint venture will cut the number of jobs from 450 to 300.

Monday’s announcement represents an about-face for 3DO, which went public in May 1993 with a grandiose plan to dominate the then-nascent market for interactive media by establishing a technical standard that it would license to hardware manufacturers.

“If you look at the original concept, we had all our eggs in one basket, and we didn’t have control of the basket,” Hawkins said in an interview.

He said he now favors the notion of a joint venture, in which a manufacturer would develop and control the technology. Hawkins said the company has discussed that option with several companies and will also consider an outright sale. 3DO, meanwhile, will focus on the “huge opportunity” in the Internet, he said.

Sean McGowan, an analyst for Gerard Klauer Mattison, said the reorganization looks like “a setup for closing the final door” on 3DO’s original plan to establish a technical standard.

“With this move, they’re one of many companies developing software for multiple platforms,” such as computers and video game machines, he said.

3DO stock dropped $1.375 to $6.75 in afternoon trading on Nasdaq.

As part of the reorganization, 3DO said, it has taken steps to cut spending by eliminating entertainment projects with outside developers and reassigning company employees to its most promising software titles.

“The game business climate right now dictates that we make hits and conserve cash,” Martin said. “Now we can concentrate on our most compelling entertainment software products while spending less capital, making better products and getting into position for Internet-driven growth.”