Keynote Transcript

The PC Is Where the Fun Is

Andrew S. Grove
Electronic Entertainment Expo
Atlanta, Georgia, USA
June 20, 1997

DR. GROVE: This is actually more fun than making chips.Good morning and welcome to E3. The following is a paid commercial announcement. Everything that you have seen so far today was produced on and played back on Pentium® II processor-based PCs.I lied.Batman and Robin was not produced on Pentium II processor-based PC but brought to you courtesy of Warner Brothers the day of its opening.However, the rest was and everything that you are going to see from here on forward will be. So I want to point out one more thing, one of those Pentium II processor-based PCs is on its way to a house near you, but in the meanwhile follow me to my house inside this PC and let's take a look.

What we do for a living is build silicon chips.This is a typical wafer that technicians dressed very much like our dancers, and me, were garbed in produced in our factories.And most of our wafers produce microprocessors.That wasn't always so.

In fact, about 12 years ago Intel faced what I call a strategic inflection point.What is a strategic inflection point?It is a word or a phrase to describe major discontinuity in your business, a discontinuity that comes, creeps up on you fairly gradually and unless you change gears, shift gears, you will be in trouble.

Our story in 1985/86 was that the business that we were founded in and the business that we prospered, with the building of memory chips, was getting in trouble.Fortunately for us, long before that business got into trouble, we started working on.So, that by the time, we realized we were in trouble, we had another business that we were able to focus on and put our resources on in a fairly dramatic and sudden shift because we did it too late.But we did it and successfully and, in fact, we became manufacturers of microprocessors and a pretty good one at that.

Our experience here may be somewhat instructive as we look at the video games industry. The video games industry is not in trouble at all, in fact, it is doing well.Although after a couple of rough years of going through a generation of change, it's about to grow.But, a little bit like we were building microprocessors, even as our memory business was prospering, something is gradually sneaking up on the world.That something is personal computers and increasingly high powered personal computers in the home.In fact, by best estimates in the United States, the number of home personal computers crossed over the number of video games last year.And it's likely to stay ahead, according to the projections that we show on this chart.

Another factor to consider is that the video game industry target market is 8- to 17-year-old males.And that target market by the best market projection and the most certain market projection of them all, the U.S. Census Bureau, is a pretty constant size market.So from my perspective anyway, the video game industry faces two factors.One of those is the growing PC market, which has crossed over in unit volume to video game industry, and the second one is a stable and finite target market in young males.

Now, one of the things that we've learned through the strategic inflection point that we navigated in transitioning from memories into microprocessors, is that the actions today determine which branch of that inflection point you end on -- you move up in more prosperous areas or you go into a decline.But the actions determine which branch only if you take those actions early.Specifically there's a very interesting factor, the most successful transitions take place when you use the benign protecting bubble of your existing business when it's healthy to make the transition.When you wait until the business is in a decline, your basic business is in a real decline, that transition is very difficult to make.

So with that, I would like to talk about three factors that characterize our future: new users, new technologies, and new delivery mechanisms, and I would like to start with the consideration of new users.

The PC industry has a user population that is very much more diverse than the video gaming industry.This shows the distribution in terms of age, and you see the representation in the young generation seeking, a typical bow shaped curve in the middle and going even into the hands of older people over 55, over 60. By comparison, when you compare that with the distribution of the video game industry, you see a very, very much more focused and limited video distribution as I said earlier.

The second characteristic: while the video game industry market is 90 percent male, the PC ownership population is about 55 percent male and 45 percent female, a reasonably evenly distributed population in that sense.

So the PC has the opportunity of breaking out of the 8- to 17-year-old male group, but, of course, only if it adopts approaches that are more appealing to a broader and more diverse audience. I found in a recent issue of Time Magazine a quote that is very thought provoking, and worthwhile for us to read slowly.The comment is: "Girls don't think boys' games are too hard, they think they are stupid, and they lack the complexity and dimensions that girls care about."

Well, we can add some of this complexity by embracing an emerging category of applications that we call PC Creativity, but PC Creativity is really not truly new.It started many years ago by draw packages and peripherals that were aimed to handle outputting and inputting of draw related data types.It has moved on and it is moving on fairly rapidly to self- applications that are centered around digital photography.With increasing performance and capability, the applications are moving on toward to include digital video capture, digital video on-line editing.And with the factor of communication that we will talk about later, of shipping this kind of characteristics, this kind of data, these kind of files from one personal computer to many others.So let's take a look at that with a real live demonstration.Hi, Rachel.


DR. GROVE: What are you involved in?

RACHEL: Well, right now I am working on a project on Versailles.

DR. GROVE: You look like you're looking at an Internet Web page.Did you find something interesting there.

RACHEL:Yes, as a matter of fact, I did.I found out, as you know, the stairs got demolished in the French Revolution, so I found a way through this 3-D thing where you can go into it and see what it used to look like.

DR. GROVE:Can I see, please?

RACHEL: Yes, look.

DR. GROVE: Is this a real staircase? Could you see it if you went there?

RACHEL: No, it's destroyed now, but this is the recreation of what they thought it looked like.

DR. GROVE:So it's a digital rendition of a nonexistent staircase that must have existed at some point.It looks brand new.

RACHEL: It does.See, you can go up the stairs and --

DR. GROVE:I want to see the painting at the top of the stairs.

RACHEL: Okay.There's one painting.

DR. GROVE:Very nice.Can we see the other painting?


DR. GROVE:You've got to go further away.

RACHEL: Got to turn around.

DR. GROVE:Wonderful hall.Okay, what else can you do with your PC?

RACHEL: Well, one of the things I was doing, I was making a movie to send to my grandma. Can you be in the movie?

DR. GROVE:I'm a little gun-shy, but if I have to, I will.

RACHEL: Okay, one second.Okay, look into this camera.

DR. GROVE:Uh-huh.

RACHEL: Okay, when I say go, I am going to press this and it's going to start recording so you can say something, okay?

DR. GROVE:Okay.I am ready.

RACHEL:On your mark, get set, go.

DR. GROVE:Hello, Rachel, grandma. Greetings from Atlanta where Rachel and I are busily at work.Rachel has been very, very diligent and rehearsed until late hours into the night and she's doing extremely well.So goodbye from Atlanta.


DR. GROVE:What are you going to do with that?

RACHEL: Now we have to save it, and now we are going to go into the editing to add it onto the other movies.First, we have to import it from the other file.Okay, now we are going to play it back.

DR. GROVE:Uh-huh.

DR. GROVE:And then what?

RACHEL: There you go.I can't play you the rest of the movie now, but I will show you later on.

DR. GROVE:How are you going to do it?

RACHEL: Well, I'm going to put it on, I am going to save it, and then I am going to put it on the DVD disk and we can play it on the TV screen on the left.

DR. GROVE:The DVD disk that you so casually mentioned happens to be better than you think.It happens to be one of the early prototypes of DVD RAM that we got courtesy of Toshiba, and Rachel is going to show us how that works a little later in the day, right?

RACHEL: Right.

DR. GROVE:Thank you very much.Now I want to move on to talking a little bit about new technologies, and new technologies -- excuse me for the clumsy phrasing -- are nothing new in the PC industry.The PC has been a constantly evolving instrument from its origins as a terminal type device, a business-type device, to the currently prevalent and popular multimedia PC and moving on to the next generation which we call the visual connected PC.

But these evolutions come on the backs of technological steps.For instance, the multimedia PC came in through the widespread adoption of the Pentium® processor, something called the PCI bus structure, and CD ROMs.Likewise, visual connected PCs are going to come in with a new generation of microprocessor, the Pentium® II processor, that we have seen some examples of at the beginning of the show, and other technologies that we are going to talk about.Of course, including things like the DVD disk.

The characteristics of this computing, the type of application that this computing is designed for involved the necessity of defining performance in a more complex way than it has been before.Performance no longer means just fast number crunching; it also means fast processing of 3-D images, and that requires fast floating point performance and requires fast processing of multimedia implements and requires what we call MMX™ technology. The Pentium® II processorinvolves and incorporates all three of those elements. In addition, these three vectors of performance that we build into the processor in order to make sure that the applications can take advantage of it and the users can have the benefit of it, require quite a bit of changes in the fundamental way the personal computer is put together.That fundamental way is encapsulated in the phrase bus architecture.So let me spend a couple of minutes talking about that.

The prior generation of bus architecture was fine for the multimedia age of personal computers, but as we are moving towards more demanding applications, it becomes a bottleneck.As you can see on this chart, all the data from the processor whether it goes to memory, to L2 cache or to the graphic subsystem, has to go through the system bus; and the system bus, while it was adequate from a previous generation of personal computers, is no longer adequate.So we needed to re-engineer the platform, and we did so in a way that we call a Dual Independent Bus architecture. The Dual Independent Bus architecture is designed to take advantage of the Pentium® II processor, and this is what the Pentium® II processor looks like.It comes in a different packaging scheme that is necessary to economically take advantage of the new bus architecture.

The main thing that we have done here is separate the data flow from the rest of the systems and that L2 cache that I mentioned, when you look inside that cartridge I showed, 90 percent of the time the processor communicates with that so-called level two cache and by separating it, and giving a real husky pipeline bus that leads to the L2 cache, we can scale the performance of the computer with the microprocessor.

So let me show you what effect this free performance and the combination of high performance microprocessors can do.

Let's go and visit with Gordon. Hi, Gordon.

GORDON:How is it going, Andy?

DR. GROVE:So far so good.What are you doing?

GORDON: I am playing this new flight simulator.It's called super EF2000.I am playing with my friend Jeff over the network.There he is. He is taking off in front of me.

DR. GROVE:Where is the plane?I can't see it.

GORDON: Okay.He's actually in that little box right there, as well as in my control panel.There's a picture of my target, which is him.

DR. GROVE:That's good.Now, does he know you are chasing him?

GORDON:Oh, yeah, I'm shooting at him right now.

DR. GROVE:Would it be -- would it enhance your experience of flying this if you could chat with him while you are doing it?

GORDON:Oh, yeah.Can you hear me, Jeff?


GORDON:That's me.

JEFF: Are you shooting at me?

GORDON: Oh, whoa, I will talk to you later, dude.

DR. GROVE:Well, what we have here is because this is a Pentium® II processor based computer with a Dual Independent Bus architecture, we have it on performance that in addition to a game application, we are able to put voice on top of it and there is enough capability, enough processing power, to handle voice.Not only that, if you want to, you can see him because there is enough processing capability for seeing the video between yourself and the other person.

GORDON:Did I get you again?

JEFF:I saw you go by and I'm coming after you now.

GORDON:I can see you now.

DR. GROVE:Oh, my God, there's the Red Baron himself.

GORDON:You better start sweating, man.

JEFF:You're the one that better sweat.

DR. GROVE:All right.Good luck, Gordon. Bye.

GORDON:Thanks, Andy.

DR. GROVE:Thank you. Another bottleneck, a second bottleneck in the PC architecture that has to do with the communication path between the microprocessor and the graphic subsystem.This, too, needs to be dealt with or else we cannot stretch the capabilities of these computers to more graphically demanding applications.The way we get around that limitation is by developing a new point of connection.It's called the Accelerated Graphics Port between the graphical subsystem and the processor, and to see what this connection will be able to do for users and for applications, let's take a look at what Gordon is doing now.

Still on his Pentium® II processor system, the same one that he did the flight simulator on. What are you doing?

GORDON:This actually is a new program called "Incoming by Rage" software and this is just a pre-programmed flight.But I really like this game because the graphics are so realistic and all the explosions and everything.So it's really cool.

DR. GROVE:Well, I agree with you that the graphics are very realistic, but the movement has a jerkiness to it.It's kind of like a low frame rate or something.

GORDON:Yeah, it is a little bit choppy.

DR. GROVE:And I think this is exactly where we can improve on matters by taking a look at what a computer that magically appeared here can do for us with the accelerated graphics port.You want to start this up?

GORDON:Okay.That is a lot smoother.

DR. GROVE:What you have here is basically the same loop running on my right, on your left, is without the accelerated graphics port, on the center, and to my left and to your right, with the accelerated graphics port, and you see that even in this early prototype implementation the smoothness of the graphics is substantially different.

Thanks very much, Gordon.See you later.

GORDON:Thanks, Andy.

DR. GROVE:And that's not all.By taking advantage of all of these technologies that we are talking about, we are able to take arcade quality entertainment and move it to the PC.A couple of months ago, working with a number of partners in the industry, we came up with a set of specifications called the open arcade specification, open arcade architecture, with which arcades and arcade games can be built on high performance personal computer based platforms.And that application that starts its life in a very high performance environment can then be ported very readily into ordinary home PCs based on similar technology.

I would like to demonstrate that, and I have Rick Mull from Evans and Sutherland.

RICK: Andy, can you come out to your backyard to play?

DR. GROVE:Okay.That contraption doesn't look like a computer, Rick.

RICK: Well, Andy, as you know, Evans & Sutherland has been in graphics for about 29 years, and one of our business units focuses explicitly in the area of entertainment and education.One of the things that we deploy around the world is the hang glider, or the virtual glider, and it's a unit that is put into supper arcades.It's been deployed already all over the world.In fact, let me give you an idea of what a canned flight path through this looks like.

To do this type of images in the past, we've had to use proprietary image generator technology, and that's what we've deployed around the world.But, as you know, we introduced real image technology recently and coupling that with your Pentium® II processor, we have been able to move this technology onto a PC as you see it here, that's what we have playing back here and going on this flight path.

DR. GROVE:And the benefit of that is presumably you are going to be able to enjoy mass production economies that is implicit in the PC platform.

RICK: Mass Production economies and also if you study it, we are getting better and better visualization out of it so the quality is improving, too.

DR. GROVE:Good, so one of these days I can really have one of these in my backyard or pretty soon?

RICK:Well, Andy, you could have one right now in your backyard if you wanted it.

DR. GROVE:Before I do that, I want to see if I qualify as a hang glider pilot.

RICK: You haven't got your certification, but why don't you step up and try it?

DR. GROVE: Well, if you stay with me.

RICK: When you are ready, there's a go button up on the panel.You are in control.Further left, further to the left, and out.There you go.

DR. GROVE:I got it.I don't think I am ready for flying time yet.It's getting a little smoother.All right.


DR. GROVE:Thank you.I want to talk about the last item, which is new delivering mechanisms.The fundamental truth that is engulfing the computer universe is that in the future all computing, home, business, and combinations, are going to be based on networks and network applications.The Internet is providing a universal backbone for data communications everywhere around the world and it is drawing users and connected populations by the millions.By latest estimates for this year, we have 70 million people connected to the Internet in the United States.This is something like two or three times the population of a typical major network.Which, however, gets us into a fundamental problem that we have in our business: leisure time of individuals is limited.And while money can be made time cannot be generated.We are basically in a long-term fight for eyeballs with the most time demanding instrument and in that sense the most competitive sense to our industries, which is the television.We are making progress in this.If I look at worldwide production of television sets notice a relatively slow growth but very high volume market, high volume business.In the last several years we have been gaining on this business with the total worldwide personal computer production and are on track of crossing over before the end of the decade.

But that is not really the important competition.The really important competition for leisure time is, in fact, for eyeball hours.And when it comes to that, the TV is very well entrenched.Those of you that are parents know very well how difficult it is to cut into this five-hour or so average viewing time that our children and our adult populations are involved with their television in.

The most effective tool that we have to cut into that is nothing other than owning a PC, because the statistics show that in households that have a personal computer, the total time devoted to the television is cut by half.The more interesting we make the content on a personal computer and the more increased the technological capabilities of the platform so interesting content can be delivered, the more progress we are going to make stealing of eyeballs from the television to the personal computer.

I am going to go a step further and go a little bit into the future of what these instruments might look like when we get to the place which is the home ground and home territory of the television set, which is the living room.

So let's go and visit a living room where we find Gordon, who got tired of playing his flight simulator.

RACHEL: My movie is ready.

DR. GROVE:Your movie is ready.Show us, Rachel.


DR. GROVE: By the way, Rachel, wait, let me have that.This is it, ladies and gentlemen.This is our future, writable video disks.Okay.

RACHEL: I made it this week.

DR. GROVE:It is from Atlanta.Sort of like a picture postcard, isn't it?

RACHEL: This is the Coke Museum.

DR. GROVE:Wow, Coke bottles over the ages.

RACHEL: There is the Underground.This is the Ebenezer Baptist Church.

DR. GROVE:Oh, that looks like E3.Gordon, what would you like to do with it?

GORDON:I was wondering if I could get anything like concert tickets over the Internet or something like that.

DR. GROVE:Well, there are places to do that, like Ticketmaster*.


DR. GROVE:What do you want to see?

GORDON: Well, to tell you the truth, I really wanted to see this Beck concert coming up. So I am going to head over to the box office.

DR. GROVE:I understand he's popular and you probably want be able to get tickets?

GORDON:I hope I can.Here's one for tomorrow night in Rochester.You want to ...

DR. GROVE:Rochester, good.Sold out.I didn't want to go to Rochester anyway.

GORDON:Look at this, you can see his rehearsal over the Net.

DR. GROVE:Good, everything is free over the Net.So let's see if we can do that.

GORDON:Actually, Andy, it looks like it's going to cost us 25 bucks.

DR. GROVE:Oh, my God.


DR. GROVE:Hey, that's my credit card number, Gordon.

GORDON:I didn't think that you would mind.

DR. GROVE:I guess for Beck I don't mind.Now, who is Beck?I'm a Beatles guy.

GORDON:Actually, he won a Grammy.

DR. GROVE: Uh-huh.

GORDON: He's real popular, Andy.You should listen to some of his music.

DR. GROVE:You think we can get into his rehearsal.

GORDON:I hope so.

DR. GROVE:So far I see ourselves.

GORDON: Wave to them.

DR. GROVE:That's us.

GORDON:I hope he answers the phone.

DR. GROVE:I hope he is up, 6:49 a.m.

GORDON:I hear him.There he is.

DR. GROVE:Hi, Beck.You are an early riser.What time is it there?

BECK: Awfully early, but...

DR. GROVE:Well, play us something, please. We have a few friends visiting us in our living room.

(Beck plays).

BECK: How does that sound?

DR. GROVE: Wonderful.


DR. GROVE: Thank you very much for playing for us. It was very enjoyable.

BECK: Thank you.

DR. GROVE: And it came through very well. Have a good rest of the day.

BECK: Thank you very much. See you later.

DR. GROVE:Bye, bye.


DR. GROVE: To sum up, the central idea that I'm suggesting here, is that it is time for those of us that are associated with this industry to redefine what we are doing. I think the definition of the industry that says that we are in the business of building and selling video games is too restrictive. We need to open it to a new definition that says our business is to create and sell interactive entertainment.

This is a little bit like the proverbial story where the railroads had at the onset of the interstate highway system had too restrictive a definition of their own business where they thought of themselves as being in the railroad business as compared to being in the transportation business. Had they defined their business in the more open and broad fashion, they would have been able to encompass the evolving truck transportation mode and obviously benefit from it financially.

In a similar fashion, I think it is time for us to go through a rethinking, a re-invention, a redefinition of our business. One corollary is that this new definition would bring us all into the same business where advanced PC technology and imaginative entertainment software would build on each other and work with each other, and that combination I believe is the best way for us to reach new users, exploit the new technologies that those of us on the technology end are working very hard to bring to the market and deliver this through the new delivery mechanisms that the world is availing itself to.

But most of all, I think by the combination of the best of the two breeds all of us in this industry are going to have a whole lot more fun.

Thank you very much.

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