Sierra On-Line Inc.

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Sierra On-Line Inc.

3380 146th Place SE, Suite 300
Bellevue, Washington 98007
U.S.A.
(206) 649-9800
Fax: (206) 641-7617

Public Company
Incorporated: 1979 as On-Line Systems
Employees: 629
Sales: $83.4 million (1995)
Stock Exchanges: NASDAQ
SICs: 7372 Prepackaged Software

Sierra On-Line Inc. thrills computer users with interactive educational software and games such as Phantasmagoria, one of the best-selling CD-ROM games of the 1990s. Sierra has been acknowledged as one of the most creative companies in a progressive industry, retaining market leadership in personal computer (PC) entertainment software in spite of continuous challenges by large and small competitors.

Sierra’s story began when personal computers were a novelty. In 1979, Los Angeles computer programmer Ken Williams bought an Apple for Christmas. His wife Roberta, a real estate speculator, soon found herself hooked on an early text-only, interactive game called Colossal Cave. She was intrigued by the possibilities of incorporating graphics into such a narrative adventure game. Ken Williams had himself previously stumbled upon these games while logged onto a remote mainframe computer during a tax software programming session. In 1980, Roberta Williams wrote a murder mystery and her husband wrote the computer code for the game in less than a month. Mystery House, the resulting product, immediately sparked incredible demand as the first computer adventure game to combine text and graphics. In the first six months, more than 3,000 copies were sold, worth a retail value of $75,000. These impressive sales came in spite of low-tech packaging involving Ziploc bags and text clipped from magazines.

The company, first known as On-Line Systems, moved in 1980 to Oakhurst, California, at the foot of the Sierra Mountains and was renamed Sierra On-Line. Its second product, also authored by Roberta Williams, was The Wizard and the Princess; it sold more than 60,000 copies and offered color graphics. Within three years the company’s sales reached $10 million. Roberta Williams’s attention to story made her games stand out among the industry’s first games, which had been developed by programmers, students, and hackers. This was ironic, since the innovation in her first adventure game was the graphics.

Although Ken and Roberta Williams believed their venture to have lucrative possibilities from the beginning, her success was limited by the growth of the personal computer industry. At first, computers were simply too expensive for the mass market. At the urging of investors, in 1983 the company began producing cartridges for the early Atari video game machines, which were about to fall out of fashion. The resulting disaster forced Sierra to cut its number of employees from 120 to 30. Sierra later agreed to produce a version of its Red Baron game, to be released in 1996, for Nintendo’s cartridge-based video game system.

A major break for the company came in 1987, when IBM hired the company to develop a game to highlight its XT line of PCs. King’s Quest, conceived by Roberta Williams, proved Sierra could continue to ride the crest of innovation and lead a new generation of video games. Besides garnering international awards, King’s Quest spawned as many sequels as a Hollywood blockbuster. By the mid-1990s, series sales had reached 3 million copies, with each sequel selling better than its predecessor.

Sierra On-Line featured female heroines in later versions of King’s Quest and in the 1995 release Phantasmagoria, a development in which Roberta Williams took pride. Realizing that most buyers of computer software were male, she dared to make a female character, Princess Rosella, the protagonist for King’s Quest IV. The gambit worked, and the game sold twice as well as its predecessors. In 1994 Roberta Williams estimated that women made up 15 percent (growing two percent yearly) of Sierra On-Line’s customers.

In 1989, the company started its own games-only network, another first, which fared poorly out of the gate in spite of a $ 1 million investment. The ImagiNation Network, originally known as the Sierra Network, formed an alliance with Prodigy in 1993, and added CUC International’s Shopper’s Advantage on-line shopping service. Although the network reached 45,000 subscribers, high development costs consumed its increasing revenues ($20 million in 1994). The company’s poor performance at this time prompted lay-offs of 60 employees. The network was taken over by American Telephone & Telegraph in 1994, which agreed to pay royalties to Sierra for its software used on the network, as well as certain development costs.

In 1990, Sierra acquired Eugene, Oregon-based Dynamix, a specialist in flight simulation games founded in 1984 by Jeff Tunnell and Damon Slye. Bright Star Technologies, an educational software firm founded by programmer Elon Gasper, was added in 1992 just as the educational software market was becoming the fastest-growing segment of the software industry. The timing was perfect for Sierra: according to Software Publishers of America, annual home educational software sales rose from $146 million to $243 million in 1993. Bright Star benefited from improved distribution and marketing, and Sierra was able to build on Bright Star’s HyperAnimation, Talking Tiles, and Alphabet Blocks offerings. The success of this enterprise resulted in 19 new employees being hired at Bright Star in the first year, quadrupling the work force.

The company went public in 1989, and a second offering followed in 1992, when sales were $41.7 million. The year 1993 proved to be a bleak one; losses were also reported in 1994. Sierra relocated its headquarters to Seattle in 1993. Ken Williams cited difficulties convincing senior executives to move to rural Oakhurst, California as the prime reason for the move. In the same year, Sierra bought Coktel Vision, headquartered in Paris, which published both education and entertainment software. Ken Williams stated that Sierra’s goal was to become the leader in educational software. Further to this end, Sierra and Western Publishing Group Inc., a leading publisher of children’s books, joined in developing interactive software for children aged three to eight under Western’s “Golden Step Ahead” brand. Children’s Television Workshop, producers of “Sesame Street,” announced plans to create a show based on Sierra’s Dr. Brain math and science series. Sierra Education also marketed and developed such titles as Berlitz Live! and Talking Tutors. A 1995 joint venture with Pioneer Electronic Corp. established a presence in Japan through Sierra Pioneer, Inc. European sales were worth $15.7 million in 1995 and American sales hit $60.7 million. Other exports, including Canada and Asia, were worth $5.0 million.

With $90 million in cash available in 1995, Sierra shopped for underdeveloped companies in fields beyond the highly seasonal entertainment and educational software markets. To round out its strategy games, Sierra bought Cambridge, Massachusetts-based Impressions Software. Sports, auto racing, and flight simulation offerings were beefed up with the purchase of Papyrus Design Group (Watertown, Massachusetts) and SubLogic (Champaign, Illinois), respectively. Home productivity, however, was the focus of Sierra’s 1995 acquisitions. The rights to Print Artist, a desktop publishing program for producing greeting cards and banners, were acquired from The Pixel-lite Group, a group of 10 California developers. Green Thumb Software and Arion added gardening and cooking titles to the Sierra line. P. F. Collier embarked on a joint venture with Sierra to produce a multimedia encyclopedia. Sierra breezed into the kitchen with its 1995 purchase of Arion Software’s MasterCook series. The series offered a way to manage a database of recipes, as well as scale down the ingredients to produce differing numbers of servings. Although the adventure category’s share of Sierra’s sales fell to 36 percent in 1995 from 47.4 percent the previous year, education sales hovered around 14 percent. Most of the growth came in the simulation category, nearly doubling from 15.2 percent to 27.9 percent.

With the coursing growth of computer technology, Sierra On-Line came into its own. Multimedia systems and the compact disc added the capacity for full-motion video and high fidelity audio to the gaming scene. Mixed-Up Mother Goose, touted as the first true PC multimedia game, was released in 1990. Sierra On-Line spent lavishly to make the game-playing experience live up to its potential; development efforts occupied more than 75 percent of its staff, and scores of writers, musicians, and actors were employed. The company developed a special computer language, Sierra Creative Interpreter, to allow artists and musicians to contribute without being mired in programming details.

After months of delays, Phantasmagoria was finally released in 1995. A true multimedia product, the game was contained on seven CD-ROMs and featured live actors, three-dimensional backgrounds, and high fidelity sound effects. CD-ROM products, with their capacity to hold tremendous amounts of sound and picture data, grew increasingly important to Sierra, accounting for 36 percent of game sales in 1994 and 65 percent in 1995. Phantasmagoria was too violent for retailer CompUSA Inc., which refused to carry it. The company included a password protection option with the game to let concerned parents limit their children’s access to explicit scenes. The Leisure Suit Larry series had earlier made certain critics groan because of suggestive themes. Nevertheless, by 1995 it had sold more than 1 million copies.

Sierra pushed the envelope of gaming again in 1995 when it applied IBM VoiceType speech recognition technology to its Command U-boat simulation. Allowing players to merely speak commands rather than enter them through a keyboard or mouse, the CD-ROM included a video orientation featuring historical footage of World War II U-boat commanders. To operate, the game required up-to-date hardware and Windows 95.

The company’s products were distributed in at least 50 countries in the mid-1990s. Massive investments in the most advanced technologies, world class talent, and the uncanny instincts of Ken and Roberta Williams have virtually ensured Sierra’s presence at the top of the programming heap into the new century.