# Sam Tramiel and Atari

## Atari's President talks back

An interview with Sam Tramiel,
president and CEO of Atari Corp.

[NdTB : cet interview date d'il y a quelques années, il a été fait pour un mag américain appelé Next-Generation. Je l'ai récupéré sur Internet juste pour rigoler... à moins que ça ne vous fasse plutôt pleurer ! Bien sûr, tout est en anglais... 8-)]

Sam Tramiel is the President and CEO of Atari Corp, the company responsible for Jaguar. Whereas Atari, as a name, is as old as videogaming itself, Jaguar is relatively new on the scene. While remaining open minded, NEXT Generation has never been a big fan of Jaguar. The games have been less than adequate, the system has been too expensive, and with PlayStation and Saturn looming on the horizon, Jaguar's appeal has never added up to the "must have" status of its rivals.

But now Jaguar is priced at just $149 and the games are improving. Is it too little too late? Over to Sam Tramiel, to find out what tricks Atari still has up its sleeve...

1. Jaguar: predator or pussy cat?

NG : How many Jaguars have been sold to date?

Sam : Approximately 150,000 machines in the US. We wish we'd sold more Jaguars in '94; the first software was very, very late. Now the software's coming up, so things are much better.

NG : What are you doing to improve sales?

Sam : The retail price -- that's the big push that we did. Sales have gone off better since the price has been dropped to $149.

NG : Is Jaguar really 64-bit?

Sam : Absolutely, uncategorically yes. If you look at the PCB, there are 64 data paths going into the UM. This is 64-bit architecture. Look at a PC, they call Pentium a 64-bit system, it is, but they also have 8-bit chips and 8-bit parts of the system as well; the clock is 8-bit. In Jaguar there's 16-bit, 32-bit, and 64-bit in parts of it. Trip Hawkins tried to screw us up with that. It is a 64-bit architecture, there's no two ways about it.

NG : How do you perceive Jaguar's position in the marketplace right now?

Sam : As the next generation machine which is affordable to the marketplace.

NG : And how do you see this changing over the next nine months as the new machines from Sega, Nintendo, and Sony are released?

Sam : It's a very hard question to answer without knowing the other machine's prices and exactly what will happen with Sony and Sega. The machines in Japan today sell for around $500 each, at the current exchange rates. If they bring them in at those kinds of prices, then the public won't buy them at all, it's just way too expensive.

NG : Jaguar hasn't always been at $149. Up until recently it's been $249 and higher. How do you feel about that as a price point now? Do you think that was too high?

Sam : I think it was too high, but at that time we had no choice. Our costs were just beginning to come into play. And we had to be at $249. But it was too high. We sold a good number of machines, though less than we wanted to sell. It was too expensive for the gaming consumer.

NG : Has the Jaguar been profitable for Atari?

Sam : Oh no. Not yet, not at all. We're investing in the future of the Jaguar.

NG : And in what time frame do you foresee the Jaguar becoming a profitable product?

Sam : That's one of those questions I can't answer, I'm not allowed to answer. We have our plans. One thing I can say is that it's a software driven business. We're using the hardware like Gillette does with razors and razor blades. We sell the razor for cost, or even below, to make it up in software. So as software sales comes up, and there's a higher ratio of software sales to hardware, then we'll start making money.

NG : So you're figuring on Jaguar being around for a couple more years at least?

Sam : We plan for Jaguar to be here for a long time. We're working on a Jaguar 2 right now, downstairs, as we speak. And Jaguar 2 will be software compatible with Jaguar 1, so all the Jaguar 1 software will be compatible with Jaguar 2. We're not hyping it like Trip Hawkins is hyping M2, because Jaguar 1 has a long life ahead of it at $149. It will be a very successful product.

NG : So it's a long-term buck you're making with Jaguar. In the meantime, Atari still has to pay its bills. How much of a help was the legal settlement and the cash injection from Sega last year?

Sam : It was a major help. Either we are to go out and get financing from the public, from the street as it's called, or we do it in a different way. As it turned out, Sega came in, they made an agreement with us, and that was our financing.

NG : Can you outline the bones of the legal dispute that led to this settlement?

Sam : It started off as a fight. It was a patent lawsuit, that they'd copied certain patents on our original technologies, dating back to '84 and earlier. So Nintendo had already paid on a similar case, through Time Warner, to us. Sega knew that it had a tough, tough case. A judge decided in the preliminary hearing that they were going to lose the case. So we had a settlement discussion. And out of that came a friendly agreement, and they walked away very friendly with us.

NG : So Sega made a cash settlement -- ending up owning 7% of the company. But what does this new "friendly" relationship involve?

Sam : We can cross license up to five titles a year on each other's systems. We can also publish on each other's platforms. So we could publish Tempest 2000, if we wanted to, on Saturn as an example. They could publish Virtua Fighter on Jaguar if they wanted to. So far it's been a very friendly agreement.

NG : But at this point there has been no actual fruits of this "friendship," no Sega games on the Jaguar or vice versa...

Sam : Correct, but we have both chosen titles.

2. The old kids on the block

NG : What would Atari's best friends say about Atari as a company?

Sam : We are a very lean organization that is trying to promote the business. We've been in business now for, gosh, more than 20 years and we just love this business, we're really dedicated to it. So we're not looking at this as how to make a quick buck. We love the entertainment and electronic business. I think our friends know that.

NG : And what do you think your worst enemies would say about Atari?

Sam : That we're cheap. We strike a hard bargain. That's the most criticism that we get. And we do, we are hard negotiators.

NG : Can you just explain who owns Atari, what's the relationship between Jaguar and Atari coin-ops and all the rest?

Sam : Sure. The Atari Corporation is a public company traded on the American Stock Exchange. It started July 1984 in a transaction between our family (the Tramiel family) and Warner Communications -- which is now Time Warner. And we took over the assets of Atari Inc. at that time. So that's what Atari Corp. is. And our family owns close to 50%, in the high 40's, Time Warner has a big chunk, Sega has 7% and the rest is in the public hands. Now, the other Atari -- Atari coin-ops -- how it works in the Time Warner group is very confusing to me, I'm not really clear myself, but it's in the Time Warner group. And Atari Games is the coin-op division of Time Warner, so they can do coin-op games and that's all they can do -- we have the Atari name on everything except the coin- operated videogames.

NG : So some shared financial backing ensures that there is a relationship between Atari home consoles and Atari coin-op machines.

Sam : Yes, we're good friends with the guys at Time Warner Interactive. And right now they're developing a system called KoJag which is a coin operated machine based on the Jaguar technology. The KoJag is Jaguar plus some more hardware. They beefed up the audio system and threw in a 68030 as well. With a coin-operated machine, if they add on another $20, they don't care. There should be a game coming out in June. It should be the first coin-op machine based on that technology. I hear it's a fantastic game. And that will then eventually find its way onto the Jaguar home console. I think they have five or six titles in development right now on KoJag.

NG : How do you think that the Atari name has been perceived differently over the years, and where do you think it stands today?

Sam : It's a question of where you're looking at that in Europe or the United States. In Europe, because of our success in the European computer business, we're known as a high technology consumer company.

In the US, we're still very well known but it's known as a game company. That's where it's at. And it's our job to show them that we're still here and we have a great new exciting machine and get that message across big time.

NG : Do you think there's a danger that because the very first videogames were badged Atari, that now -- in 1995 -- there's a danger the Atari name could be perceived as old fashioned, and outdated? Kind of like, "Granddad's videogame system?"

Sam : I want this to be a very frank discussion and I agree with you. We've done actual focus groups in the US about that very issue. And people do have the perception of "Oh Atari, it was the first, it was great. But what is it doing now?" So you'll notice that on the boxes of our product, "Jaguar" is the big thing and we have "Atari" small in the corner. So we're using the Jaguar name, saying "Jaguar, Jaguar, Jaguar -- by Atari," and then slowly bringing the Atari name back up.

3. Playing with the big boys

NG : Up against Nintendo, certainly Sony and perhaps Sega as well, Atari is a tiny company, and has to be regarded as the underdog, right?

Sam : Absolutely. That's what we are, of course. I mean, compared to Sony, everyone's an underdog. Sony is a $40 billion a year sales corporation. Nintendo is much bigger than we are but it is one tenth the size of Sony. But the consumer doesn't care what the size is at all. It doesn't know, it doesn't really care. What is the best value? What is the most fun a customer can have with the system? That's what the customer cares about.

NG : Looking to the battle ahead, when Sega and Nintendo launch their machines against Jaguar, the three companies will be battling head to head. The last time this happened was in the hand-held market, when Nintendo was pushing GameBoy, Sega had Game Gear, and you guys had the Lynx. For various reasons, the Lynx failed very early on. Are there any parallels between what happened then and what could happen this time around?

Sam : I don't think so. I think you can't compare that marketplace to this marketplace. The hand-held marketplace is minuscule compared to the set-top box marketplace, and there are many complicated issues on Lynx which I don't want to get into right now of why it wasn't a "fair" battle on that side. This one is a fair battle.

NG : What do you tell someone who won't buy a Jaguar today because he's waiting for PlayStation?

Sam : A lot of people are doing that. The marketplace right now, we perceive as extremely slow. The 16-bit market is going down like a lead balloon -- really fast. And our system and 3DO are selling, but not really going places right now. And I'm convinced the consumer is out there saying, "I'm confused." You know, he's thinking "I want to wait and see what happens with Sony? What does this Saturn thing look like? Where is pricing going?" And so on. If I can convince them, the reality is that we are at $149, whereas the competition will be at $300 or $400 plus dollars. We are an affordable system if you buy now. It's not a lot of money and it's a great, great, next generation machine.

NG : What do you think of Saturn as a machine?

Sam : Sega is my friend, but I'd still have to say that Saturn is a pooch. It's a mess inside, and no one in the industry is impressed with the technology in the Saturn.

NG : Do you think that Sega is facing a much tougher fight in the next generation marketplace than it had anticipated?

Sam : I think that Mr. Nakayama knew he was going to have a fight. He's a very smart man. But when you're always at the top of the heap, you'll always have a problem staying up there in this industry. Atari was on top, Nintendo was on top, Sega was on top -- we'll see who comes out on top this time. You can't be king of the mountain most every time; this is a tough business. Our consumer is very fickle. They're not like a loyal car buyer who buys a Toyota every year. They'll switch around and buy whatever is the neatest, coolest thing at the time.

NG : Does Sony knows what it's doing?

Sam : In many things, Sony absolutely knows what it's doing. I think that Sony makes a great DiscMan. But it has lost its drive, its focus. When Mr Morita, Sony's leader, was alive and powerful, he had a very strong focus of where the company was going. Now, I believe, in general, Sony is quite confused as a corporation.

NG : What about Sony Computer Entertainment, the division handling PlayStation?

Sam : I don't know that division very well. I have one friend over there. I know the staff was having fights internally on the pricing of the machine; will the hardware guys win? Will the software guys win? I don't know.

NG : Would you describe the manner of Sony's "invasion" of the gaming market as arrogant?

Sam : Yes. I think that's very fair. Were you at ECTS [European Computer Trade Show]? Our booth was next door to the Sony booth and Sony's was... enormous. It was a huge booth, they had blaring music, we couldn't hear ourselves talk in our stands. We asked them to turn it down, they wouldn't. Their posters looked dreadful. It was just horrible. I think it was very tasteless. They were like a gorilla in a china shop.

NG : Sony is saying that PlayStation will come out at $299 in the US, and rumors would suggest that a $249 price is possible. This would be a tremendous threat even to a $149 Jaguar, right?

Sam : If Sony comes in at $249 or $299, we'll do whatever we can to have the ITC -- that's the International Trade Commission of the United States -- to go after them. That's called dumping. You can't have the Japanese consumer paying a fattened dollar price, then subsidize the product and dump it in the United States for $249 and kill the US manufacturers. It's against the law.

NG : There's actually a law against doing that?

Sam : Yes. It's absolutely against the law. That sort of operation is called dumping and there's an anti-dumping provision.

NG : And Atari would have no hesitation in bringing the law into effect on this one?

Sam : In a nanosecond. You can't do that. We'll go for it, we're not going to be put out of business.

NG : So what would you see as a fair price -- a legal price -- for PlayStation in the US?

Sam : $500.

NG : The same as it was priced in Japan.

Sam : Exactly. And as long as we can keep pricing good software for our machine at $149, we've got a very good chance of giving them a difficult time.

NG : And what about 3DO? Where's Trip Hawkins right now?

Sam : New York, I think [laughs]. He was just launching his M2 statement. I think 3DO is really struggling, from what I understand. Trip is a very clever guy also, he might pull something out of the bag. But his manufacturers of the machine have to make money on the hardware, they make no money off the software. So how do they bring the price down to a low price? I don't see how they could do that. Why should they do that?

NG : 3DO would counter that argument by saying that because the hardware manufacturers are also investors in The 3DO Company -- and hence will benefit from its long-term profitability -- these manufacturers are sympathetic to the Gillette "razors/razor-blade" philosophy that you described earlier.

Sam : No, no, no, that's peanuts to them. That's baloney. I don't see that.

NG : So when do you see 3DO disappearing?

Sam : In the foreseeable future I see the players being Nintendo, Sega, Sony, and Atari. In my humble opinion, I don't see 3DO being in there.

NG : So how much longer do you think 3DO will remain in the business?

Sam : A couple of years.

4. Jaguar, the future

NG : Why has the Jaguar CD been so delayed in reaching the stores?

Sam : We're waiting until the software is right.

NG : Should Jag have had CD-ROM from outset?

Sam : No. The reason why, in our opinion, is very simple: it's a question of the retail price. What can the consumer buy and afford at the very beginning? We went back to our Commodore 64 experience in the early '80s. If you can buy a machine for $159, and then later buy a CD as an add-on, you can afford it. To have it all in one package at $300 or $400, it's just too expensive.

NG : What percentage of the current Jaguar owners do you see buying the Jaguar CD add-on when it goes on sale?

Sam : Going back again to the Commodore 64 analogy, we found almost 100% percent of Commodore 64 owners bought a floppy disk drive when they were made available, with a lag time of between three and six months. Right now we're expecting that 50% of Jaguar owners will buy CD players. And if it's a higher percentage then, well, great.

NG : And eventually you'll be able to buy an integrated machine with a Jaguar and a Jaguar CD-ROM player built in?

Sam : Yes, eventually it will be integrated.

NG : And at that point will Jaguar games be available only on CD?

Sam : No, we will still make cartridges as well. I can't abandon the basic Jaguar owners. Eventually CDs will become more and more the mainstay.

NG : When will Jaguar 2 be released?

Sam : Development systems will be ready this summer and it will begin shipping in the second half of '96 -- that's the present plan. But that's all I can say right now.

NG : Can you tell us a little about the Virtual Reality add-on for Jaguar?

Sam : It's developed by Virtuality. It's full motion tracking and stereoscopic display. We've done a lot of study on what is the right VR system, and Virtuality is the best. They know their stuff. They have a lot of experience.

NG : But they've never had to produce a system for a mass market price, they're used to making VR units that cost tens of thousands of dollars...

Sam : They won't be producing it, they're just designing it. We will have a mass manufacturer in Japan, Taiwan, or someone else in south east Asia produce it for us.

NG : And what price do you think constitutes mass market?

Sam : That's a good question. When the final costs come in, we can decide, but I'm hoping that it will be $300 or less for the system.

NG : Sega announced plans to release a low-cost virtual reality system a couple of years ago, but the project was put on ice -- simply because it just couldn't be done, from a price/technology point of view. Then, having been rumored for a long time that Nintendo was working on a Virtual Reality headset, they show Virtual Boy -- which is such a watered-down, poor relation of genuine VR that it's hardly VR at all. Now, if Nintendo can't get it right, how can anyone else get it right?

Sam : I don't think Nintendo is known to be a fantastic hardware company. When have they ever come out with great technology? NES was not a piece of great technology -- it was an 8-bit machine like Atari's 2600. But that's all I can say about our Virtual Reality product right now. If it doesn't work out as we planned, we won't sell it. There's no way: I will not sell it if it's not doing things exactly right.

5. The games...

NG : Are you a gamer yourself, Sam?

Sam : Yes. I still like games -- not as much as my two boys do -- but I still do play videogames.

NG : How do you personally feel about the quality of Jaguar games so far?

Sam : Honestly, it's been uneven. There have been some stellar games, and some games which were not stellar games. This industry is like the movie industry in as much as you're never quite sure which games will be great and which games will not be great -- looking back you say, "of course, I shouldn't have done that." And we're getting better and better and better at utilizing Jaguar and its benefits. The software that's coming out over the next few months are just -- we think -- great, great, great games.

NG : Most of the best games on Jaguar at this point have been PC ports, such as Theme Park and Syndicate. But there's nothing that is the equivalent of Sega's Sonic The Hedgehog or Nintendo's Mario. So far Jaguar has failed to produce an...

Sam : ...the icon game, right. Our competitor, 3DO, does not have an icon game. Sony does not have an icon game. But we do think it is a nice thing to have an icon game. We're going to work on two or three different ideas at one time to see which one really takes hold. There's an old coin-op from the old Atari games called Major Havoc. It was a Tempest game from a technology point of view, with vector graphics. The game featured Major Havoc who goes out and saves a space station. He's a very cool character. We're going to modernize him and make him into an Atari character, bring him back from the '80s.

NG : How do you think the quality of Jaguar games compares to those on PlayStation and Saturn?

Sam : Well the Jaguar stuff you see so far is cartridge stuff. And it's hard to compare a cartridge piece of software to a CD piece of software. So it's hard to compare our games that way. From the gameplay point of view, I'll put up our stuff against anything that they have. And our CD stuff will be just as cool as theirs.

NG : Does Atari's history and experience help in game development?

Sam : We are doing Jaguar games now, where the designer looks at the old 2600 game from a gameplay point of view, and says that was a great game to play, now let's make it to our technology. And it's unbelievable comparing the two: it's just day and night, from a graphics point of view. In gameplay, it's very, very similar. It's like going in the movie industry from a black and white silent movie to today's color talking movies. It's the same basic plots, they just look better. Better effects, the style has changed, but they're the same.

NG : In terms of system power, would you acknowledge that Jaguar isn't as powerful as PlayStation or Saturn?

Sam : No. Absolutely not. Jaguar is as powerful, if not more powerful than Saturn. That we are convinced of, from the technology that we've seen.

NG : And do you think that the Jaguar games released so far would support that point of view?

Sam : Absolutely. Alien Vs. Predator, Iron Soldier, and Tempest 2000 -- these are things you couldn't do on any 16-bit machine and Saturn couldn't do them any better then Jaguar can. We've got Tempest 2000 coming out on the PC in the next few months, and what our development has proved is that PC 486s just don't have the horsepower to do what the Jaguar can. The PlayStation, I must say, is a little, little bit more powerful in certain areas -- but not in others -- it's a little bit more stronger machine than Jaguar. A little, little bit. But Jaguar 2 will blow it away.

NG : So by placing the price of the original Jaguar at $149, when the PlayStation and Saturn will be priced at least at $300, there's no acknowledgement that Jaguar is a weaker machine and the others are a leap ahead?

Sam : The others are definitely not a leap ahead. As I said, Saturn is the same, if not even less, technology than Jaguar. PlayStation is a little bit more -- not more technology, but PlayStation does have more memory than Jaguar, it's using more silicon as a solution.

NG : You must be a little bit disappointed with the level of third party support for Jaguar so far.

Sam : A little bit, but not seriously. We want to be the major publisher on our system. That's where we see ourselves making money to move Jaguar forward. Anyone who's got a good third party title, we will go get the license from them, we'll get the game developed, we'll publish it -- like we are doing with Mortal Kombat 3. And we welcome third party people on the platform, there's no pressure.

NG : So you're glad that Atari is developing and publishing for Jaguar, rather than anyone else?

Sam : We want to do it. I was reading a Nintendo statement last night, the forecast for its business, and it said, a) they will export much less because the yen is too strong, they will focus on the Japanese marketplace, and b) they will publish more of the titles themselves. They want to make more of the money themselves. For hardware makers to succeed, they have got to be significant publishers on their own platforms.

NG : And this is how Atari will succeed?

Sam : We're here, we're competing, and we will be a major competitor through the '90s. I think that's a really important message.

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