Shock news: Atari still in business

Everyone has heard of Atari. While most remember them as a console brand from the eighties, others remember their recent publishing efforts, such as Unreal II. With the publishing business becoming increasingly dominated by a handful of big players, is there a future for Atari?

The modern Atari

The modern incarnation of the Atari brand exists as subsidiaries of the French company Infogrames. There are two parts: one in the US, the other in Europe. The US based company was responsible for nearly half of parent company Infogrames sales in the last accounting period. That Atari is little more than a brand name of Infograme makes it hard to distinguish the directing force behind its actions. Which decisions are Atari, and which Infogrames?

Enter the Matrix

Infogrames/Atari were already almost bankrupt when they paid Titus an outrageous sum for the Matrix license. Titus had acquired the license through Interplay, which ended up under their control due to its own failures. Interplay owned Shiny, the original developers of the Matrix license, and Shiny had proved to be an expensive luxury that they were keen to be rid of - especially if the price was right. At this point, Titus themselves were already on the verge of collapse, and the addition of Interplay's debts did little to improve matters.

That Infogrames allegedly paid so much for the Matrix license should have been the basis of Titus' recovery, but instead, no significant amount of money ever seemed to be paid to Titus. A bad smell surrounds the whole affair, as it usually does when a lot of money is involved in a single transaction. What the Titus liquidators made of this remains to be seen, but its likely that Infogrames/Atari acquired Shiny and the attached Matrix license for much less than is generally accepted.

Suffice to say, Infogrames/Atari does not seem to be handing over the large sums of cash originally claimed as the value of the Matrix license, and it remains a mystery whether it made a profit on the deal; a deal that could have destroyed them had the product bombed at retail. Enter the Matrix performed well, but could not possibly have covered the inflated costs that Infogrames/Atari has claimed were associated with it.

Many journalists have taken at face value the expense that Infogrames/Atari suggested were associated with the development of Enter the Matrix, but it's likely that these figures were an accounting fantasy from the beginning. Their magnitude served to increase publicity for the the project, and served to the benefit of Infogrames/Atari and Titus. It is likely we will never know the real cost of the project but it is unlikely it ever approached the absurd figures that are routinely reported.

Battle for US Sales

Infogrames, and thus Atari, is involved in a battle for sales in the crucial US market with EA, Take Two and Activision that leaves it in a difficult position. As a smaller player it can't produce the volume of content that it requires to get a big hit, and it doesn't have the sure-fire cash-cows that EA has in the form of its sports and movie licenses.

Without a GTA or Sims to bring in the big money, Atari is struggling, but not yet dead. So far, Atari has followed the broken French model of acquiring products through the purchase of other companies. It used Shiny to get the Matrix license, and Accolade to acquire Test Drive, GT Interactive provided Driver and the excerable Deer Hunter brand.

Infogrames/Atari paid a high price for these acquisitions, but most of the companies were ruined shells, riddled with management problems, with depressed morale, and most of the best staff long departed. Then, mirroring Titus' failures, it hasn't managed to get anything of value from the companies themselves beyond their brand names.

This is the same business model that drove Titus into the ground, and is unlikely to do otherwise for Infogrames/Atari. Not only do they need some new, original hits, but they need some solid licenses that they can built a predictable cash-flow on. So far, they have been reluctant to spend aggressively in this area.

Alone in the Dark?

Neither Test Drive, nor Alone in the Dark are likely to produce the kind of sales that Atari needs to prosper, so they need something big: something more than a Matrix sequel such as Path of Neo. Getting Up sounds like a game I'd like to play, but it's unlikely to make huge sales. The Dungeons and Dragons Online MMO might make some money, but is in for a hard battle against Lineage 2, World of Warcraft and Sony's ailing EverQuest games, and may not be up to the task. It's hard to see the D&D MMO being the saviour of the company, even if it does provide a regular, dependable income.

The best thing that could happen to Infogrames and its majority owned Atari subsidiaries is that a company with more vision and management compentence might buy them out. Alas, there are no obvious candidates. The share price has already dropped substantially, but it would need to fall a lot further before anyone would consider taking on the enormous mess that would need to be cleaned up - and the potential debts.