Oct 23,1996
Phil Goldman, Bruce Leak, Steve Perlman
WebTV Networks - A New Approach to Computing

Abstract:

<To Be Provided>

WebTV NETWORKS INC.

Company Backgrounder

The Internet is one of the most pervasive, far-reaching and impactful information tools of the 20th century. No other data-access innovation, including the telegraph, the telephone, the fax machine, or the modem, has had as powerful an effect on global society as the Internet, which has manifestly changed the means by which the world receives and processes information.

WebTV Networks Inc. is the first company to provide that access, affordably and in a user-friendly format, to individuals around the world via another breakthrough technology of the 20th century: the television. WebTV Networks has developed the technology behind the world's first all-in-one, families the world over to access the Internet through their TVs. Consumers from all walks of life will have unprecedented access to a virtually unlimited sphere of information, entertainment and personal enrichment, which can all be obtained with the touch of a single button in the comfort of their living room.

The creation of WebTV Networks by co-founder, CEO, president and chief technology officer Steve Perlman is actually a development which had been gathering momentum for years. While at Atari, his first job out of college, then at Coleco and then at Apple Computers, Perlman tinkered with the idea of somehow providing consumers with easy access to e-mail capabilities and information resources.

After six years at Apple, Perlman figured that he finally had the concept to bring a revolutionary product to market when he formed his own company, Catapult Entertainment Inc., in 1994. He created an inexpensive modem that allowed children to play video games and communicate with one another through a local phone line. Although kids primarily used the system to play games, they would still average several e-mail messages a day, which to Perlman, signaled the incredible potential of such a product.

After leaving Catapult, Perlman observed the explosive growth of the Internet, and he began to ponder over the World Wide Web. He wanted to design a new consumer-oriented product which would bring communication and information capabilities to consumers worldwide.

Having conceived of a patent-pending technology which reduced flicker and enhanced image quality on the TV screen, Perlman, like any true genius, went to his local electronics store and purchased several thousand dollars worth of components to see whether or not it would work. After three straight days without sleep, Perlman finished the product's construction, and called his friend Bruce Leak in the middle of the night to show off his creation.

When Leak arrived, he asked Perlman what he had done to his TV. Perlman explained that he hadn't done anything to the TV, as what he had done to the signal going into the TV. Perlman had reshaped the television signal by going back to the original 1948 U.S. television standards to create a digital-quality, crystal-clear picture that enhanced the overall Internet experience on TV. It was at that moment that Leak realized the brilliance behind Perlman's innovation, and the two agreed immediately to start a company in order to build a product and online service around this revolutionary technology. WebTV Networks was officially born.

Perlman and Leak, who acts as chief operating officer and executive vice president of engineering, then brought in mutual colleague Phil Goldman to complete the triumvirate which manages WebTV Networks. Goldman serves as senior vice president of engineering and is the company's supervisor of hardware and software system integration.

Getting the company to the point where it would not be considered "just another tech start-up," was not an easy task. The company began conducting business out of a converted Palo Alto, Calif. BMW garage under the name Artemis Research to maintain the air of secrecy surrounding WebTV's proprietary technology. Artemis Research, a name trademarked by Perlman, is the moniker under which he operated for years when working on highly-confidential projects.

Perlman, Leak and Goldman needed high-capacity phone lines with incredible amounts of bandwidth to fine-tune the WebTV technology, and local carrier Pacific Bell informed them the garage was in such an old neighborhood, such high-tech services were not available. As a result, WebTV Networks had to call in a cable truck to run the highest bandwidth lines commercially available into the office. WebTV Networks now has one of the highest connections to the Internet bandwidth in the world, and Perlman likes to claim that it has more bandwidth than any other "car dealership" in the country.

Perlman, Leak and Goldman brought in an impressive group of investors to provide the necessary operating capital, including Paul Allen's Vulcan Ventures, Marvin Davis' Davis Internet, Brentwood Associates and Asia Pacific Ventures. Davis, an investor in Perlman's previous company, Catapult Entertainment, had enough faith in Perlman's next endeavor to single-handedly supply enough venture capital for the company to operate its first year from April, 1995 through March, 1996. Brentwood Associates provided principal funding for the second year of operation. Paul Allen wrote a significant check to Perlman on the spot after witnessing a WebTV demonstration in Perlman's hotel suite at Esther Dyson's PC Forum in Scottsdale, Arizona.

The company's July 10, 1996, "coming out" party in New York City threw many of its competitors for a loop because of the well-maintained secrecy surrounding WebTV's proprietary technology. In addition to the fictitious business name, Artemis Research, WebTV's trial users were careful not to leak any information about the company or its technology to the media or to competitors. As a result, the world was astounded when the company announced the creation of its product and business strategy, which was displayed for the first time ever at the New York Equitable Auditorium and captured rave reviews from media and analysts alike. Although many industry insiders had been following rumors of such technology for quite some time, WebTV Networks was the first entity to bring such unparalleled quality to a totally operational TV online service and mass market-ready set-top box.

Perlman and his partners have struck high-end licensing agreements with consumer electronics powerhouses Sony Electronics Inc. and Philips Consumer Electronics Company to manufacture the set-top box for widescale consumer distribution through their extensive distribution channels, coming this fall. The company added additional muscle by forging associations with a number of leading companies, including: Concentric Network Corp., Excite Inc., Headspace Inc., Integrated Device Technology Inc., Progressive Networks Inc. and Surfwatch Software Inc.

As time quickly marches on, so does WebTV Networks. To extend its position as "Internet for the rest of us," WebTV Networks is committed to providing its customer base with added features and benefits to further enhance the WebTV experience. Beginning in 1997, WebTV will be incorporated into new television models, and consumers will be provided with optional accessories, such as printing capabilities and cable modem connectivity to further its technology.

Finally, WebTV will be working extensively with its content partners to provide families with the most stimulating and variety-packed content available. As for Steve Perlman and his partners, their biggest secret is now out of the bag and consumers may soon be the ones staying up all night . . .e-mailing friends and family and taking advantage of the power of the Web.

A privately held company, WebTV is backed by a group of respected investors, including: Brentwood Associates, Paul Allen, Vulcan Ventures, Marvin Davis, Davis Internet, and Asia Pacific Ventures

Web address: http://webtv.net{http://webtv.net).

Biographies:

Phil Goldman
Co-Founder and Senior Vice President of Engineering

Like Steve Perlman and Bruce Leak, Phil Goldman began making a name for himself at Apple Computers. Goldman created and co-designed MultiFinder, a program which allowed Macintosh users to run more than one program at the same time. This technology introduced several modern software design techniques which have since become hallmarks of Apple system design, including multitasking and high-level programming languages. In addition, Goldman's software expertise helped run Macintosh applications on CommonPoint and resulted in the creation of an innovative virtual memory system which became a cornerstone for the widely-used System 7 for the Macintosh. While at General Magic, Goldman created the revolutionary Magic Cap operating system and an electronic memory upgrade system, in addition to most of the software produced at the company. Ranked first in his engineering class at Princeton, Goldman graduated summa cum laude and is a member of Phi Beta Kappa.

Bruce Leak
Co-Founder, Chief Operating Officer and Executive Vice President of Engineering

Bruce Leak has an extensive background in multimedia, graphics and operating system software. Leak first worked with Goldman and Perlman at Apple, where he brought multimedia to the desktop computer as the creator and team leader for QuickTime, and true color imaging to the Macintosh as the creator of 32-bit QuickDraw. Leak moved to General Magic, where he was pivotal in developing the first generation of the Magic Cap operating system. Leak found success in video games as a founding member of Rocket Science Games. As Chief of Product Engineering, Leak was the architect for the company's multi-platform, real-time CD-ROM authoring system named Game Science Tools. With undergraduate and graduate degrees in electrical engineering from Stanford University, Leak has been granted several technology patents, and has several more patents pending in relation to WebTV's design.

Steve Perlman
Co-Founder, President and Chief Technical Officer

Steve Perlman's wealth of experience in developing consumer electronics can be traced back to the design of his first computer graphics system at the age of seventeen. As a liberal arts student at Columbia University in New York, Steve Perlman created numerous graphics systems, modems and speech and music programs that he sold to Atari Inc. and Dun and Bradstreet. During his six years at Apple Computers Inc., Steve Perlman was instrumental in the development of essential multimedia and video technology in Apple Macintosh computers. While at General Magic, Perlman designed the second generation computer system, which included General Magic's signature product, Magic TV. At the helm of Catapult Entertainment Inc., Perlman invented the XBAND video game modem for Sega Genesis and Super Nintendo Entertainment System. Perlman currently holds eleven patents in the areas of graphics, animation, modems, communications and telephony. In addition, Perlman has ten patents pending in related technologies in conjunction with WebTV.

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