The entry into hardware was my idea. Survey’s were telling us that we had brand recognition second only to Microsoft. Hardware companies were looking to Sierra to decide what hardware to release for home computers.
We experimented with hardware by starting with music cards, with great success. We decided to expand this to video cards – also with success. We were in a position to have a heck of a competitive advantage. We could bundle our games with the cards, and add expanded support to the games. Hardware companies couldn’t compete with this. We also had a proprietary marketing pipeline. Our magazine “Interaction” was going to hundreds of thousands of game buyers. It was easy for us to launch new products.
The problem with hardware though is that you have a VERY short product life cycle. Our distribution channel was such that returns could take months to come back to us. I was buying cards for $70 that we were selling to retailers for $90. Our margins were paper thim. If we shipped 10,000 cards, and took 2,000 back – we lost money. Returned boards tended to be unmarketable by the time retailers sent them back to us.
Overall, our expansion into hardware was a success, and we would have built a great business out of it — but, the company that acquired us didn’t like the thin margins, and shut the division down.