Spectrum HoloByte Inc. announced yesterday it will form a new company in Hunt Valley with Capital Cities/ABC Inc. to create and sell sports-oriented video games.
The venture was called a good strategic move by game industry analysts, who noted that Spectrum, owner of Hunt Valley-based MicroProse Inc. -- maker of some of the top-selling strategy and flight simulation games -- has not had success breaking into the important sports game segment.
The alliance with the ABC television network is key because increasing competition in the computer game industry has made it important for new entrants to give themselves a boost into consumers' consciousness by using a familiar brand name, said Johnny Wilson, editor of Computer Gaming magazine in San Francisco.
"Licensing makes a big difference in breaking into a new area," Mr. Wilson said.
There is a lot of money to be made in the field. Consumers spent about $800 million on games for their personal computers last year, and another $1.5 billion on games for their Sega and Nintendo machines. Analysts figure sports games make up about 10 percent of the market.
Spectrum could use extra money. The company has lost money since it bought financially struggling MicroProse in 1993.
And there is little hope the company finished its most recent fiscal year -- which ended March 31 -- in the black.
Spectrum reported losing $4.1 million on sales of $71.2 million in the nine months that ended Dec. 31, and hasn't yet released its fiscal year performance.
Stock analysts recently lowered their earnings estimates to a predicted annual loss of about $7 million after Spectrum delayed release of its much-anticipated Star Trek game.
The company says it is still getting the bugs out of the game and expects to have it in stores by the end of this month.
Gilman Louie, chairman of the Alameda, Ca.-based game maker, said he has "high hopes" for Spectrum in 1996, partly because of the new sports game venture.
He said he expects the new company to have about 25 employees, and produce five new games over the next two years.
ABC and Spectrum will each own half of the as-yet-unnamed company, he said.
He declined to disclose the financial terms of the deal, but said one way ABC will help out is by providing its commentators to tape play-by-play descriptions of the video games' actions.
Mr. Louie said the new games, which will probably include titles such as "Monday Night Football," will feature animated players but video and audio clips of the commentators.
Mr. Louie said he decided the new company would be based near the operations of Spectrum's MicroProse division because there is a surplus of engineers in Hunt Valley.
"Hunt Valley is a good place for a lot of talent. There are a lot of technical people coming out of the defense industry," whereas in California, there is so much demand for game developers that "there is all sorts of company-hopping. If someone has been at a company six months they are a long-time employee," he said.
Steven Muirhead, president of the MicroProse division, said he expects to move about 10 of the 130 current Maryland-based employees to the new division, and hire another 15 new employees.
Although MicroProse used to specialize in games for personal computers only, the new company will make sports games for Sony, Sega and Nintendo game machines as well as personal computers, Mr. Muirhead said.
The reason for the shift: money. Games for personal computers are considered big-sellers if they sell 300,000 units, he said. But it is not unusual to sell a million video computer games, he said.
The company's shares closed unchanged after the announcement yesterday at $14.