Trying To Stick It To Microsoft

How joystick maker Immersion hopes to go toe-to-toe with the Mighty One

Thanks, but no thanks. That's not the response most entrepreneurs would choose if Microsoft Corp. courted them. But for Louis Rosenberg, founder of Immersion Corp., a maker of joystick technology that helps users "feel" on-screen action, it was ultimately the only possible answer. "I just didn't want to be finished before we got started," says Rosenberg, 27.

It wasn't an easy choice. For much of 1995, Microsoft's $350 million-a-year hardware unit had been in talks to acquire an exclusive license on Immersion's technology. It would have meant millions of dollars for the tiny San Jose (Calif.) company (table). But in the end, Rosenberg took his "force-feedback" technology to Microsoft's joystick rivals instead, pitting his 20-person staff of young techies against high tech's most ruthless competitor.

Force feedback gives its users a whole new game experience. Shoot a gun, feel the recoil. Crash your spacecraft, lurch back and forth as the stick goes haywire. In a joystick market estimated at $125 million and growing at 15% to 20% a year, the opportunities are huge for Immersion, which should reach just $3 million in sales this year.

There's one problem, though, and it's a big one: Microsoft. The Redmond (Wash.) software giant entered the joystick market just one year ago and claims a 40% share. Convinced that a third of all joysticks will soon use force feedback, Microsoft bought Immersion rival Exos Inc. in April and plans to roll out its own joysticks in late 1997. "Ultimately there's only room for one," says Mike Paull, Microsoft's manager of hardware development.

Rosenberg disagrees. So rather than wait for Microsoft to create the industry standard, he has licensed his technology to San Diego-based CH Products Inc., one of the top five joystick makers, and two smaller licensees. In late October, a year ahead of Microsoft's scheduled arrival, CH Product's Force F/X model will hit store shelves at retail chains. Rosenberg hopes Force F/X will cause other top joystick makers such as Logitech Inc. to clamor for the technology. "So far," says Bob Wudeck, Logitech's product manager for entertainment, "we're impressed."

Already, Immersion has some top game makers updating programs to work with its force-feedback software technology, dubbed I-FORCE. Over 300 developers have requested the software, and more than 20 titles will soon be available, including Interplay's Descent II and Accolade Inc.'s Unnecessary Roughness.

The applications may go far beyond joysticks. Feel, predicts Rosenberg, will one day be as much a part of computing as sight or sound. Force feedback could help handicapped people use PCs by programming joysticks to guide unsteady hands. Web surfers could both feel and see virtual worlds, "pushing" doors open on a cyber-house tour, for example.

The excitement of force feedback transformed Rosenberg from a researcher into an entrepreneur. While a mechanical engineering student at Stanford University, he decided to examine the obscure topic in his PhD thesis. Rosenberg realized something was happening when he ran force-feedback experiments on volunteers. "People would immediately get a big smile on their face--every time," he says.

Rosenberg turned entrepreneur while still pursuing his doctorate, raising $60,000 in 1993 from friends and family to start Immersion. His first obstacle was reducing the cost of force-feedback equipment, which normally runs at least $100,000--orders of magnitude beyond the $70 typically spent on a joystick. Rosenberg's research showed it was necessary only to recreate the "perceptual keys" people notice most--say, the initial impact of leaning against a wall rather than feeling its continued pressure. So while traditional force feedback requires powerful motors and heavy materials, Rosenberg built devices with a one-pound motor.

Realizing it would take years to get force feedback moving, Rosenberg soon came up with a cash generator called the Microscribe. A so-called 3-D digitizer that helps developers trace objects instead of draw them, Microscribe's sales will bring in the bulk of Immersion's revenues this year, along with research grants totaling around $1 million.

Half of Rosenberg's initial $60,000 was spent applying for patents. This allowed him to raise an additional $700,000 from private investors in late 1994. To date, he has spent $250,000 on 21 filings. While none has been granted, that's more than rivals Exos or Ann Arbor-based Cybernet Systems Corp. can claim, making Immersion front-runner in the intellectual-property war.

By early 1995, Rosenberg was ready for his toughest task: persuading joystick and game developers to back a little-known startup. After a sneak peek won raves from Microsoft and other prospects, he decided to license his technology for a 5% royalty rather than try to compete with other joystick makers. To woo harried software developers, he told engineers to make I-FORCE extra simple. Rather than charge for the software as rivals do, I-FORCE is free.

The plan was even more successful than Rosenberg had hoped. Microsoft was so interested that it decided to try to lock up the new market by asking for exclusive rights to Immersion's joystick hardware technology in the spring of 1995. Rosenberg agreed to put off talks with other potential licensees but worried about selling out too soon. "There were too many scenarios where we could get screwed," he says. One key sticking point was Microsoft negotiators' insistence on knowing the nature of Immersion's patents. Rosenberg refused even to show them the applications. Last January, talks broke off, and Microsoft turned to Exos.

PAVEMENT POUNDING. For now, Immersion's feistiness seems to have won the big guys' respect. Rick Thompson, general manager of Microsoft's hardware division, was surprised when Immersion and partner CH showed prototypes of their upcoming product at a March trade show. He expresses confidence in Microsoft's progress, but says he understands why Rosenberg walked. "If I were him," says Thompson, "I would not do anything any differently."

After the deal fell through, Rosenberg pounded the pavement. By the end of January, he had inked the CH Products deal. Since then, Immersion has signed deals with SC&T International Inc. and steering-wheel maker Interactive I/O. That's a good start, but it's hardly enough to slay the giant.

Much will depend on the CH product. At about $170, CH's Force F/X stick costs more than today's $100 top-of-the-line joysticks. Microsoft's eventual rollout of Exos to its 4.5 million software developers, with its vaunted marketing muscle, could quickly erase Immersion's lead. "We certainly would not be the first to get squashed by Microsoft," admits Rosenberg. Says Jerry E. Wolosenko, executive vice-president at game maker Looking Glass Technologies: "If [Microsoft] tells developers to use Exos, I don't think they'll say no."

Still, if the CH product is a home run, Rosenberg's plan just might work. While CH's projected sales of 50,000 joysticks by Christmas of 1997 is a pittance compared to the 1.5 million joysticks sold in 1995, it could be enough to persuade other big players to back I-FORCE. That would make it harder for Microsoft to wipe Immersion off the map. If one-third of all joysticks do utilize I-FORCE by 1998, as analysts and Microsoft predict, it could mean tens of millions in royalties for Immersion. Add $10 million from joystick makers for arcade games and Nintendo-style home consoles, and cash won't be a problem.

Of course, Microsoft might call again with a more compelling offer, especially if Immersion's patents are as groundbreaking as Rosenberg says they are. "Hopefully [then] our technology will seem more important to Microsoft," Rosenberg says. With its clout, Microsoft is hardly shaking in its boots. But should the gutsy Rosenberg keep playing his cards right, he may just make mighty Microsoft "feel" a little I-FORCE pain.

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