Not All Fairy Tales Have Happy Endings: The rise and fall of Sierra On-Line by Ken Williams

Author:Ken Williams [Williams, Ken]
Language: eng
Format: epub
ISBN: 9781716727368
Published: 2020-09-27T22:00:00+00:00

SCI, our proprietary programming language, made it easy to write games. We were able to launch with a wide variety of games right from the beginning.

Changing the world isn’t always easy. We had a winner with TSN, but we had trouble figuring out how to make money. There was no internet in those days, and unlike today, there were no free long distance calls. We had to place modems locally in large cities in order for users to connect to the system without paying for a long-distance call. It was costing us more per hour to have customers on-line than we were getting in revenue. We repriced the system several times trying to find a price point that worked both for customers and for us.

Sierra was a public company, meaning people were buying and selling our stock based on their perception of our revenues, earnings and growth rate. TSN was becoming a big drain on earnings and starting to depress the stock. Worse yet, TSN was a drain on cash. With each user we added, the hole was being dug deeper.

To fund TSN we decided to do a “convertible debt offering” of stock. It sounds too good to be true, but the idea was that we would borrow money from investors, and at our option we could pay them back, or the money they borrowed would convert to Sierra’s stock at some previously agreed upon price. Assuming that Sierra’s stock price would rise, we’d never have to repay the loan.

To sell the idea I made up a slideshow talking about both Sierra and TSN, and went on the road. I traveled the country to met with portfolio managers for mutual funds. No one had ever seen anything like TSN, and our debt offering sold out easily.

We raised $50 million to fund the roll-out of TSN!

TSN was growing rapidly. We had reached 10,000 users and projections were for over 50,000 users within a year. We needed to quickly grow capacity and put people in place to support them.

Internally, TSN was becoming a distraction. It was new, cool and fun. And, unlike the rest of the company, TSN had no short-term need to make money.

I was unsure how to compensate our designers. For example, Al Lowe, who designed the initial version of TSN. For his Leisure Suit Larry games Al was receiving $2 or $3 for every copy sold. I did not want to burden TSN with royalties and was unsure how to compensate Al. I assured Al that I would sort it out, and probably paid him some fee for the design (or, hope I did!) but after a few months on TSN, Al dropped off the project wanting to go do something with a proven path to a payday.

My favorite idea was to use our computer games to drive subscribers to TSN. We actually did some of this. We produced a game called Yserbius which could be played single player, or if you were a TSN subscriber you could connect and play online.

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