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Midway Games

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Midway Games
Type Subsidiary of Warner Bros. Interactive Entertainment
Founded 1988[1]
Headquarters Flag of the United States Chicago, Illinois, United States
Key people Matt Booty, CEO, former Senior Vice President
Industry Video game
Products Mortal Kombat, Spy Hunter, NBA Jam, Rampage
Revenue ▲US$219.6 million (2008)
Net income ▼-US$191.2 million (2008)
Employees 550 (2008)
Parent Time Warner
Website http://www.midway.com

Midway Games (formerly Midway Manufacturing) is an American video game publisher and developer. Midway has published and developed titles such as Mortal Kombat, Ms. Pac-Man, Spy Hunter, Tron, the Rush series, and NBA Jam. It was listed as the #19 video game publisher in September 2005 and the #20 in September 2006 by the magazine Game Developer.[2]

Sumner Redstone, the head of Viacom/CBS Corporation, was a large investor in the company. He owned 87% of Midway at the end of 2007, both directly and through his companies.[3] In December 2008, he sold all his stock to Mark Thomas, a private investor, for $100,000 plus around $70m of debt.[4] On February 12, 2009, Midway Games filed for Chapter 11 bankruptcy.[5]

Midway announced on May 21, 2009 that Warner Bros. had bid $33 million for most of the assets of Midway Games, including their Chicago and Seattle studios and the Mortal Kombat franchise.[6] Midway later announced that it would accept offers up until June 24, 2009, to acquire some or all of the company's assets, followed by an auction.[7] However, no other bids were placed for Midway's assets.[8] On July 1, 2009, a Delaware bankruptcy judge approved the $33 million sale of most of the company's assets to Warner Bros.[9] On July 2, 2009, it was reported that the Midway Newcastle and Midway San Diego studios, and various "old sports titles" that were not included in the deal, are scheduled to close in 60 days if no one buys them.[10]

Contents

[edit] History

[edit] Arcade games

Midway Mfg. Co. began in 1958 as an independent manufacturer of amusement equipment. It was purchased by Bally in 1969. After some years making mechanical arcade games such as puck bowling and simulated western shoot-out, Midway became in 1973 an early American maker of arcade video games. Throughout the 1970s, Midway was very close to Japanese video game developer Taito, with both companies regularly licensing their games to each other for distribution in their respective country. Midway entered the consumer market in 1977 by releasing the Bally Home Library Computer, the only home system to ever be developed by Midway.

Midway's real breakthrough success came in 1978, with the licensing and distribution of the seminal arcade game Space Invaders in America. This was followed by the hit U.S. version of Namco's Pac-Man in 1980, and its unauthorized sequel, Ms. Pac-Man, in 1981. Also in 1981, Bally merged its pinball division with Midway to form the Bally/Midway Manufacturing division. Three games released that year, Solar Fox, Lazarian and Satan's Hollow, were the first to feature the Bally/Midway brand. From the late 1970s through the late 1980s, Midway was the leading producer of arcade video games in the United States.

The Bally/Midway division of Bally was purchased and reincorporated in 1988 by the arcade and pinball game company Williams Electronics Games through its holding company WMS Industries Inc. Midway moved its headquarters from Franklin Park, Illinois to Williams's then-headquarters in Chicago, and WMS reincorporated Midway as a Delaware corporation. Although WMS retained many of Midway's R&D employees, only two game designers were retained: Rampage designers Brian Colin and Jeff Nauman. WMS obtained the right from Bally to use the "Bally" brand for its pinball games since Bally had completely left the arcade/pinball industry to concentrate on casinos and slot machines.

Under WMS ownership, Midway initially continued to produce arcade games under the Bally/Midway label while producing pinball tables under the "Bally" brand. In 1991, however, Midway absorbed Williams' video game division and started making arcade games under its own name again, without the "Bally" part (pinball tables continued to be produced under the "Bally" brand until Midway discontinued this part of the business in 1999). In 1996, WMS also purchased Time-Warner Interactive, which included Atari Games, a part of the former giant Atari Inc.. Also in 1996, Midway changed its original corporate name, Midway Manufacturing, to Midway Games Inc., due to its entrance in the home console market. The original arcade division of the company became Midway Amusement Games and the newly created home division was named Midway Home Entertainment.

[edit] Spin-off and home video game focus

In 1998, Midway was spun off by WMS to its shareholders, making Midway an independent entity for the first time in almost 30 years. Midway kept Atari Games as a wholly-owned subsidiary as part of this spin-off. Midway retained or shared some of the WMS executive staff and used some common facilities with WMS for a few more years. Over several years, Midway gradually terminated all material agreements and executive overlap with WMS and had a declining number of common members of its Board of Directors, until it shared only one with its former parent company.

In late 1999, Midway left the pinball industry to concentrate on video games. In January 2000, Midway changed the name of its "Atari Games" subsidiary to Midway Games West to avoid confusion with the other Atari company, then owned by Hasbro Interactive. In June 2001, Midway closed its arcade division due to financial losses. In February 2003, Midway closed Midway Games West, ending what was left of the original Atari. In 2003, Midway lost $115 million on sales of about $93 million.[11] Despite continuing losses since 2000, the company was able to finance its business with stock and debt offerings and various credit arrangements. In 2003, Sumner Redstone, a significant minority shareholder, began to increase his stake in the company and soon owned 80% of the stock.

In 2004, Midway began a purchasing spree of independent video game development studios to strengthen its product development teams (from Midway's May 2005 quarterly report). In April 2004, Midway acquired Surreal Software of Seattle, Washington. In October 2004, it acquired Inevitable Entertainment of Austin, Texas (now known as Midway Austin). In December 2004, it acquired Paradox Development of Moorpark, California. On August 4, 2005, Midway acquired privately-held Australian developer Ratbag Games. The studio was renamed Midway Studios-Australia. Four months later, on December 13, Midway announced to its employees there that it was shutting the studio down, leaving its employees based at that studio without a job. Two days later, on December 15, the studio was closed and their Adelaide premises emptied. During 2004 and 2005, Midway lost $20 million on sales of $162 million, and $112 million on sales of $150 million, respectively.[11]

[edit] Recent years

In 2006 and 2007, Midway lost a further $77 million on sales of $166 million and $100 million on sales of $157 million. It continued to finance its business with debt offerings and other credit arrangements.[11]

As of 2007, Midway Games was engaged in a legal battle with Mindshadow Entertainment for the Psi-Ops video game rights. Mindshadow alleged that Midway Games copied Psi-Ops's story from a screenplay written and owned by their client. On December 2, 2008 Judge Florence-Marie Cooper of the United States District Court for the Central District of California issued a ruling granting summary judgment on all counts in Midway's favor. Judge Cooper found no evidence of copyright infringement.[12]

Midway announced plans to open a new casual games portal. Zucker said that the successes of internally-developed mass-market Nintendo DS and Wii games Touch Master and Game Party had inspired the company by "returning to its roots" — the Midway brand first rose to prominence in the arcade era.[citation needed]

On March 6, 2007, Midway reported that it had entered into a new $90m credit agreement with National Amusements, a company controlled by Sumner Redstone.[11] CEO David Zucker stated that the introduction of PlayStation 3 exclusive Unreal Tournament 3, and the company's growing success in mass-market games, were setting it up for a "significant 2008".[13] On March 21, 2008, Zucker resigned as CEO. He was the third executive to resign in three months from the company. Succeeding Zucker was Senior Vice President and now CEO Matt Booty.[14]

In November 2008, Midway reported that its cash and other resources "may not be adequate to fund... working capital requirements" and that it "would need to initiate cost cutting measures or seek additional liquidity sources".[15] On November 20, 2008, Midway retained Lazard to assist it "in the evaluation of strategic and financial alternatives".[16] On November 21, 2008, Midway received a NYSE delisting notice, as its stock's price fell below one dollar.[17]

On December 2, 2008, Sumner Redstone sold his 87 percent stake in Midway Games to Mark Thomas, a private investor, through his company MT Acquisition Holdings LLC. Thomas's company paid approximately $100,000, or $0.0012 per share.[18] Thomas also took on $70 million of Midway Games' debt. National Amusements took a significant loss on the sale, although the loss improved its tax situation.[19] On December 5, 2008, the Chicago Tribune reported that Midway would default on $240 million of debt after the recent sale of stock to Thomas triggered clauses in two bond issues totalling $150 million of debt allowing the bondholders to ask for full repayment.[20]

In 2008, Midway lost $191 million on sales of $220 million.[18] On February 12, 2009, Midway and its U.S. subsidiaries filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. The filing does not include Midway's European operations. The company continues to operate as a debtor in possession.[18] A company spokesperson said, "We felt this was a logical next step for our organization, considering the change in control triggered the acceleration of the repayment options... we're looking to reorganize and to come out on the other side stronger".[21] The company's liquidity is limited during the bankruptcy, and it has no further borrowing availability under its loan agreements.[18]

[edit] Sale to Warner Bros.

 This article or section contains information about scheduled or expected future events.
It may contain tentative information; the content may change as the event approaches and more information becomes available.

Midway announced on May 21, 2009 that it had received a takeover bid from Warner Bros. valued at more than $33 million dollars to acquire most of the company.[22] The sale would include Midway's Chicago and Seattle studios as well as rights to the Mortal Kombat and Wheelman series, but it would not include the San Diego and Newcastle studios or the TNA video game series. Midway Games had previously worked with Warner Bros. on several games including Mortal Kombat vs. DC Universe. Midway announced on May 28, 2009 that it would "accept binding offers up to June 24, 2009, to acquire some or all of the Company's assets." An auction was to be held on June 29, followed by a court hearing to approve the sale to the winning bidder or bidders.[7] However, no other bids were placed for Midway's assets, and so the auction was cancelled.[8] On July 1, 2009, a Delaware bankruptcy judge approved the $33 million sale of most of the company's assets to Warner Bros.[9] On July 2, 2009 it was reported that the Midway Newcastle and Midway San Diego studios, and various "old sports titles" that were not included in the deal, are scheduled to close in 60 days if no one buys them.[10]

[edit] List of subsidiaries

[edit] Divisions

  • Midway Amusement Games: This was the original arcade division of the company (founded as Midway Manufacturing Company), and is now an honorary entity which maintains Midway's former arcade games. The Midway, Bally/Midway, and Williams arcade game library are now copyrighted as "Midway Amusement Games, L.L.C.". Midway Amusement Games is located in Chicago just across the street from Midway's main offices.
  • Midway Home Entertainment: Based in San Diego, California, Midway Home Entertainment publishes and markets all video games made for home consoles and operates with a good degree of independence from its Chicago parent. Midway Home Entertainment is also largely in charge of the relationship between Midway and the console manufacturers of its games (Sony, Microsoft and Nintendo). The division originally started in 1986 as a popular Texas video game publisher called Tradewest. The latter company was acquired by WMS Industries in 1994, and was renamed Williams Entertainment, Inc. which in turn became Midway Home Entertainment in 1996. It was Midway Home Entertainment who enabled Midway to enter the video game console market for the very first time and, back then, all console video games were developed by Midway Home Entertainment while all arcade games were by the Chicago studio. For several years, Midway Home Entertainment operated in both Corsicana (Tradewest's original site) and San Diego until 2002 when the Corsicana location was shut down.
  • Midway Technical/Customer Support: Midway's customer service department. Handles customers inquiries either through the internet or over the phone. The division is located in San Diego but not in the same building as Midway Home Entertainment.
  • Midway Games Ltd: Midway's European branch situated in London, England. The tasks of Midway Games Ltd. can be easily compared to those of Midway Home Entertainment in North America. The division Midway Games Ltd. should not be confused with Midway Games Inc. which is the official name of the whole Midway entity.
  • Midway Germany GmbH: Based in Munich, Germany, Midway Germany GmbH publishes, distributes and sells all Midway video games in Germany. Midway Germany GmbH was inaugurated on February 2005 by Midway Games Ltd of London.
  • Midway Games SAS: Midway's French division located in Paris, France. Midway Games SAS does the equivalent in France of what Midway Germany GmbH does in Germany.

[edit] Studios

[edit] Active

[edit] Defunct

  • Midway Studios – Austin Inc.: Formerly Inevitable Entertainment which was acquired in 2004 by Midway. Responsible for developing Area 51 and its 2007 sequel BlackSite: Area 51. On August 11, 2008, Midway announced it was canceling the game in development at its Austin location and was laying off between 90 and 130 of the Austin employees.[23]
  • Midway Studios – Los Angeles Inc.: Formerly Paradox Development, acquired in 2004 by Midway. Despite its name, the studio is actually located in Moorpark, California. The studio has developed Mortal Kombat: Shaolin Monks. This studio was featured in Rampage: Total Destruction. Their last game was TNA iMPACT! the video game. As of July 2008, Midway announced plans to close its LA location, and combine the studio with its unit in San Diego.[24]
  • Midway Studios – Australia: Previously known as Ratbag Games, the studio was purchased by Midway on August 4, 2005 and was closed down four months later in December 2005. Midway Australia was working on the original Wheelman for last generation consoles, upon closure the project was transferred to Midway Newcastle.[25]

[edit] List of arcade games developed or licensed by Midway (selection)

[edit] Video games

  • 1 Originally developed by Williams
  • 2 Originally developed by Atari Games
  • 3 Originally owned by Rareware
  • 4 Co-owned by Nintendo
  • 5 Owned by Namco

[edit] Pinball (under the Bally brand)

[edit] List of console games developed or licensed by Midway (selection)

[edit] Arcade system boards

Some of Midway's former arcade system boards:

  • Astrocade
  • MCR
  • MCR II
  • MCR III
  • MCR-68
  • Y-Unit (1991–1992)
  • T-Unit (1993)
  • X-Unit (1994; used only in Revolution X)
  • Wolf Unit (1994–1996)
  • V-Unit (1994–1996)
  • Zeus (1997–1999)
  • Zeus II (1999–2000)
  • Seattle
  • Vegas
  • Quicksilver II

[edit] References

  1. ^ Midway in its current form was incorporated in 1988 in Delaware by WMS Industries. Midway Games Inc. considers 1988 as its official founding year, although its business foundation can be traced to 1958.
  2. ^ Game Developer's Top 20 Publishers, 2006 from Gamasutra
  3. ^ Midway Games Form 10-K
  4. ^ "Redstone sells Midway Games to ease debt", Reuters, December 1, 2008
  5. ^ IGN story: Midway files for bankruptcy
  6. ^ "Mortal Kombat Owner Midway Offered $33 Million by Warner Bros.". http://gamefreaks365.com/newsarticle.php?sid=3134. Retrieved on 2009-05-21. 
  7. ^ a b Midway Announces Timeframe for Section 363 Sale Process, Midway press release, May 28, 2009
  8. ^ a b Fritz, Ben and Alex Pham. "Warner Bros. emerges as sole bidder for Midway Games", Los Angeles Times, June 27, 2009
  9. ^ a b "Court OKs Midway Games $33M asset sale to Warner Bros.". http://www.chicagotribune.com/business/chi-biz-midway-july1-,0,7568945.story. Retrieved on 2009-07-01. 
  10. ^ a b "Midway studios not acquired by WB to shut down within 60 days". http://www.joystiq.com/2009/07/02/midway-studios-not-acquired-by-wb-to-shut-down-within-60-days/. Retrieved on 2009-07-02. 
  11. ^ a b c d Midway Games, Inc. Annual Report on Form 10-K for 2007
  12. ^ Case No. 2:07-cv-00967-FMC-JCx (docket entry No. 175)
  13. ^ MCV Reports Midway Financials
  14. ^ Matt Booty appointed interim CEO, Chicago Tribune, 2008
  15. ^ Midway Games Inc. Quarterly Report on Form 10-Q for the first 9 months of 2008
  16. ^ Midway Games Inc. current report on Form 8-K dated December 4, 2008
  17. ^ Midway Games Receives NYSE Delisting Notice | Digital Media Wire
  18. ^ a b c d Midway Games Form 10-K for the year ended December 31, 2008, filed with the SEC on April 6, 2009
  19. ^ Gamasutra - News - Redstone Sells Midway For $100,000 To Ease Debt
  20. ^ Chicago Tribune story, December 5, 2008
  21. ^ Midway Games, known for Mortal Kombat, files for Chapter 11 - Chicago Tribune
  22. ^ Kotaku - Warner Bros. Offers to Buy Most of Midway - Midway
  23. ^ Rockwell, Lilly (2008-08-12). "Midway to lay off much of staff at Austin studio". Austin American-Statesman. http://www.statesman.com/business/content/business/stories/other/08/12/0812midway.html. Retrieved on 2008-08-11. 
  24. ^ Midway to close LA studio
  25. ^ "Wheelman: The Project That Never Was". http://thatgamingsite.com/news/668/wheelman-the-project-that-never-was/. Retrieved on 2009-04-10. 

[edit] External links

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