Sierra On-Line, Inc. History

Address:

3060 139th Avenue Southeast
Suite 500
Bellevue, Washington 98005-4097
U.S.A.

Telephone: (425) 649-9800
Fax: (425) 641-7617

Website: www.sierra.com

Wholly Owned Subsidiary of Vivendi Universal Publishing
Incorporated: 1979 as On-Line Systems
Employees: 685
Sales: $69.5 million (1999)
NAIC: 51121 Software Publishers; 334611 Software Reproducing

Company Perspectives:

Sierra On-Line Inc.'s goal is to develop and bring to market the most creative and technologically advanced products available. Sierra strives to deliver high-quality interactive products that are fun, exciting and innovative in design to appeal to a wide variety of consumers. Key Dates:

Key Dates:

1980:: Sierra On-Line begins operating in Oakhurst, California.
1983:: Sales reach $10 million.
1987:: A partnership with IBM is formed and King's Quest is developed.
1989:: The firm goes public.
1990:: The company acquires Dynamix.
1992:: Bright Star Technologies, an educational software firm, is acquired.
1993:: Company headquarters moves to the Seattle, Washington area; Paris-based Coktel Vision is purchased.
1995:: The company acquires Print Artist, Green Thumb Software, and Arion Software.
1996:: Sierra is acquired by CUC International.
1997:: The company acquires Berkeley Systems and Books That Work.
1999:: Havas S.A. acquires Sierra.

Company History:

Sierra On-Line, Inc., a subsidiary of Vivendi Universal Publishing (formerly known as Havas Interactive), operates as one of the original developers and largest publishers of interactive entertainment and productivity software worldwide. The firm's four major brands include Sierra Attractions, Sierra Home, Sierra Sports, and Sierra Studios. The company's popular software titles include Hoyle, You Don't Know Jack, the Print Artist Series, the Hallmark Card Studio series, Grand Prix Legends, Nascar Racing 3, Football Pro 99, King's Quest, and Homeworld.

Late 1970s Origins and Growth

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, their 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. Aside from garnering international awards, King's Quest spawned as many sequels as a Hollywood blockbuster. By the mid-1990s, series sales had reached three 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 2 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 layoffs of 60 employees. The network was taken over by AT & T 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 workforce.

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 and losses were reported in 1994 as well. Sierra relocated its headquarters and moved to the Seattle area 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. 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.

Expansion in the Mid-1990s

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 Pixellite Group, a group of ten 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 finally was 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 one 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.

Changes in Ownership in the Late 1990s

The company's products were distributed in at least 50 countries in the mid-1990s. Sierra's recent acquisition spree left it with a plethora of software offerings, allowing it to compete with the likes of Microsoft and Broderbund Software. At the same time, the firm's diverse content brought it to the attention of consumer services company CUC International. Sierra agreed to be acquired by CUC in a $1.06 billion stock swap. The deal, announced in February 1996, gave Sierra access to CUC's powerful marketing abilities and its outreach of more than 40 million customers. Sierra eventually operated as part of Cendant Software--after a CUC name change to Cendant Corporation--along with Knowledge Adventure, Davidson & Associates Inc., and Blizzard Entertainment. The Cendant Software unit was touted as one of the largest PC consumer software groups in the world.

Under new ownership, Sierra continued to grow and develop new software. In April 1997, the firm purchased Berkeley Systems, a publisher known for its You Don't Know Jack series, its After Dark screen saver series, and the bezerk network. Sierra also acquired Books That Work, a software developer dedicated to home-related projects. The company continued to focus on introducing new software. Some of its offerings included the Mission Force: Cyberstorm game; a new version of its Print Artist; Print Artist 4.0 Platinum; and the Software Companion for PalmPilot.

As consolidation continued to sweep through the retail software market, Cendant's arsenal of companies anchored its position as a top player in the market. In August 1998, it secured 16.8 percent of the retail market, just ahead of The Learning Company's 16.2 percent, and Microsoft's 10.7 percent. Although Sierra flourished under Cendant Software, parent company Cendant Corp. was faltering under a mountain of debt. As part of its plan to restructure and sell off its noncore assets, Cendant Corp. sold its software publishing arm to Paris-based Havas S.A. for roughly $800 million. In January 1999, Cendant Software became Havas Interactive and operated as worldwide leader of interactive content with Sierra among its holdings.

Restructuring and Significant Product Development for the New Millennium

Yet again under new ownership, Sierra began to reorganize its operating structure. It formed four divisions, separating its diverse offerings into Sierra Attractions, Sierra Home, Sierra Sports, and Sierra Studios. The firm continued to take advantage of the Internet and its vast opportunities for creating Internet interfaces for its games. When Starsiege, a science fiction combat game, became available in March 1999, an Internet interface was made available for game players where they could join a game in progress, talk to other players, read information on the game, and get tips and hints for playing the game.

Sierra continued to introduce new software throughout the year. The firm released The Complete Web Studio, catering to home users who needed a simple way to create web sites. The program offered everything from templates to an upload wizard. Sierra also launched its newest version of Hoyle Casino, a CD-ROM game that was named the best-selling casino game of 1999 by PC Data. The company ended 1999 by releasing three new home and garden software products and MasterCook Food & Wine, a venture with Food & Wine magazine.

The Sierra Home division continued to release new products as the company entered the new millennium. The Generations Family Tree Millennium Collection was launched with more than 200 years of immigration records. With the software package, a user had access to 60,000 web links, immigration content, Ellis Island information, and family tree clip art. In May 2000, Sierra teamed up with Hallmark Cards Inc. to create Hallmark Card Studio, a personal expression software package. The firm also continued to build upon its popular Hoyle CD-ROM series.

Sierra management continued to pursue avenues that would allow its software products to develop into easy-to-use and informative Internet interfaces. Its games continued to have a cult-like following among game players and new releases were eagerly anticipated. Under the leadership of Havas International, which was renamed Vivendi Universal Publishing early in 2001, Sierra was poised to remain a leader in software entertainment for years to come. New leadership at Sierra was named in May 2001 and consisted of Thomas Hernquist as president and CEO, and Michael Ryder as COO and senior vice-president of product development. Both men were big names in the industry and reportedly looked forward to their mission as stated in a company press release: 'expanding Sierra's success across platforms, toward what is increasingly a mass market, and internationally.'

Principal Divisions: Sierra Attractions; Sierra Home; Sierra Sports; Sierra Studios.

Principal Competitors: The Learning Company; Microsoft Corp.

Sierra On-Line, Inc. History

Company Perspectives:

Key Dates:

Company History:

Further Reading: