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Д¬ourtney Cox(later known for her role in the sitcom Friends) worked at the publisher briefly in the 1980s. In June 1988, after no new cross-console version of Gridiron! had been released, Bethesda stopped work on the project and sued Electronic Arts for US$7.3В million, claiming EA halted the release while incorporating many of its elements into Madden. Electronic Arts was working on the first John Madden Football, and hired Bethesda to help finish developing it, and acquired distribution rights for future versions of Gridiron!. Д®arly games scored respectably in the gaming press. The initial release of a few hundred copies distributed in plastic bags was sold out within one week, to the surprise of Bethesda Softworks. Gridiron! was released as the company's first game later in 1986 for the Amiga, Atari ST, and Commodore 64 systems. Unlike VideoMagic, Bethesda Softworks was entirely self-funded, starting with roughly US$100,000, and was not attached to any business plan. Clarke, but 'Bethesda Softworks' ultimately stuck. He had considered creating a unique name, such as one using the word 'magic' after a quote from Arthur C. Weaver and the owner of that company agreed to co-exist rather than fight over the title, and Weaver changed the name of his company to Bethesda Softworks. Weaver originally named the company 'Softwerke' but found that the name was taken by a company based in Virginia.

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The formation was described as an experiment 'to see if the PC market was a viable place to develop games'. Weaver formed Bethesda Softworks 'on the proverbial kitchen table' of his Bethesda home as a division of Media Technology on June 28, 1986. No artists or animators were involved in the project, which gave the game a sub-par graphical presentation for the time. Weaver disliked this concept and, at his behest, he and Fletcher devised a more realistic, physics-based system. His initial approach was to use lookup tables to map player inputs to predetermined outcomes. Fletcher developed the game, later named Gridiron!, out of Weaver's house in Bethesda, Maryland, in roughly nine months. Fletcher was a fan of American football and suggested that they develop a football video game for the system, which Weaver supported despite no interest in the sport. While waiting for potential new contracts, the company acquired an Amiga personal computer with which the two began to experiment. ДЄt Media Technology, Weaver worked with Ed Fletcher, an electrical engineer with whom he had collaborated at VideoMagic, on video games for LaserDisc-based systems until that industry crashed in 1984. Media Technology had offices in Maryland and New York. The company provided engineering and media consulting for private companies and government organizations. After leaving the House Subcommittee some years later, Weaver established Media Technology Associates, Limited (renamed Media Technology Limited in March 1988) in June 1981. The funding family, having financial issues of its own, dropped out of the venture and sold off some of VideoMagic's properties.

The company developed several technologies, including location-based entertainment systems, that Weaver deemed 'radical and cutting-edge' but put out prematurely, causing little commercial return. They had put together a 400-page business plan to commercialize their prior lab work and, through the Industrial Liaison Office at MIT, they came in contact with a wealthy family in the electronics industry that provided VideoMagic with venture capital. In the meantime, Weaver had also founded VideoMagic Laboratories with a friend from the Architecture Machine Group at the Massachusetts Institute of Technology (MIT). Eventually, Weaver became the chief engineer for the United States House Subcommittee on Communications, where he influenced legislation that affected the telephone, television, and cable industries. In that capacity, he helped design high-speed data communication systems for several member companies of the association. After multiple national magazines quoted his articles on 'the exciting prospects for cabled distribution systems', he was recruited by the National Cable Television Association and created its Office of Science and Technology. After finishing grad school, he was hired by the American Broadcasting Company, where he wrote several memos about 'the importance of alternative distribution systems and how satellites and broadband networks would impact network television', which landed him the position of manager of technology forecasting. Prior to founding Bethesda Softworks, Christopher Weaver was a technology forecaster and a communications engineer in the television and cable industries.