Will Midway Vaporize in January? ...Pachter Explains

December 5, 2008 -

On Monday GamePolitics reported that financially-troubled Midway had been sold to a no-name investor for the shockingly low price of $100,000.

Along with assets like the Mortal Kombat and Blitz: The League game franchises, mystery man Mark Thomas also bought himself $70 million worth of Midway debts.

Late yesterday, Midway filed a document with the Securities and Exchange Commission which outlines what the deal means for the company and its shareholders. Essentially, the change in ownership permits Midway's creditors to demand payment in 50 days and they are expected to do so (GP: wouldn't you?).

In the interim, Midway is hoping that investment firm Lazard will help them find a way to avoid being forced into liquidation when the loans are called. So, what does it all mean? Will Midway cease to exist in 50 days? We put those questions to Wedbush-Morgan game industry analyst Michael Pachter:

It means that because of the change of ownership from Redstone to Thomas, some of Midway's creditors holding $150 million of debt are able to demand repayment in January.  Midway expects this to happen, and hired Lazard to help them figure out how to refinance.

It's really interesting, because the creditors cannot expect Midway to repay unless the company remains in business.  If the creditors compel bankruptcy liquidation, they'll get something, but arguably less than the full $150 million.  Midway's assets are worth something, but in this market, it is hard to figure out how much.  As a comparison, THQ has an enterprise value of only $80 million, so Midway's assets in liquidation would have to be worth twice as much as THQ's (as a going concern) for the creditors to be repaid.

My guess is that Midway works out a deal with the creditors and remains in business, but they are going to have to start generating sustainable profits soon, or their creditors will become impatient.

The other real interesting thing is the change of control provision.  While not uncommon, this one makes it clear that the creditors felt comfortable as long as [former owner Sumner] Redstone had skin in the game.


Comments

Re: Will Midway Vaporize in January? ...Pachter Explains

Thank you Pachter for once again stating what is obvious to anyone who does 5 seconds of research in an attempt to make yourself sound like you know more about this industry than your average day trader.


Parallax Abstraction
Ottawa, Ontario, Canada

Re: Will Midway Vaporize in January? ...Pachter Explains

What I would do is field strip the company top to bottem. Get rid of Area 51, Psi Ops, sell Killer Instinct to Microsoft to give it to Rare, Stranglehold, maybe Unreal Tournament at this point, and all this other stuff. and make Capcom style remakes of Spy Hunter, Joust, MK2 and MK 3, Sinastar, put it on Xbox live arcade and PSN, wii ware, PC everywhere you can and sell it for like 10 bucks. Compile all that and sell it on the DS and PSP. Keep the TNA license, keep the MK license, maybe keep unreal just as your AAA project and make a new Unreal Chapionship 3, LOTR online still has some legs and it's fanbase so keep that, and keep up the shovelware that sells on the wii. The Wheelman might work if given enough marketing. But sell basically everything else. because you want to keep a very low mantanice cost and keep pumping out these low budget arcade re-releases and shovelware, and like 1 or 2 AAA potential games.

And I think a lot of you are wrong that MK vs DC was a bad move on Midway, because that game is going to sell a lot simply because of the super hero license. It's probebly the best thing Midway has done because the mothers are going to walk in the store and look at MK vs DC and say it's okay since it's Rated T and has superman in it. It's going to sell a million if not two million.

Re: Will Midway Vaporize in January? ...Pachter Explains

SMASH TV?  WHERE'S YOUR GODDAMN SMASH TV? 
 

Seriously, that could revitalize it.  Also, if they could pick up the MDK license, I thnk they could pump out a great shooter.

Re: Will Midway Vaporize in January? ...Pachter Explains

They should also use their arcade experience to make arcade and pinball machines on demand for about 600-1000 each for collectors.

Re: Will Midway Vaporize in January? ...Pachter Explains

I agree with selling Area 51 and Psi Ops, but selling Killer Instinct and Unreal Tournament is just suicide.

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Re: Will Midway Vaporize in January? ...Pachter Explains

Well it's not like UT 3 is burning up the charts, especially not on servers these days, and I said maybe work on a UC 3 as your one AAA project, but for KI they should just hand that over to Microsoft to give it to Rare. Mind you Rare were the people who made KI in the first place, and this comes from just personal mentallity but I would really like a sequal for that game to come out from Rare. And it's also not like their doing anything with the license, and the only people who care about KI would want Rare to make it.

Re: Will Midway Vaporize in January? ...Pachter Explains

Problem with UT3 is it's an arena shooter in the days where arena shooters seem archiac.  I love it, but I also love Tribes so... yeah.

As for Killer Instinct, did Midway ever touch that game?  I know Rare retains the rights as has been confirmed hundreds of times.

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Re: Will Midway Vaporize in January? ...Pachter Explains

Killer Instinct was published by Midway, and personally I have no idea who really holds the rights. It might be shared between Midway and Rare, which might explain why there hasent been an KI 3 yet. As for UT 3 yea, that's basically why, but I think there might be room for a UC 3, and just use that as their big million selling AAA potential title.

Re: Will Midway Vaporize in January? ...Pachter Explains

Midway has nothing to do with Killer Instinct other than providing the arcade cabinets for the arcade machines. Aside from that nothing else. They didn't publish a single KI. Midway can't sell a property that they don't own.

Re: Will Midway Vaporize in January? ...Pachter Explains

You are right. Midway only published the arcade version. Nintendo published the console version.

E. Zachary Knight
Oklahoma City Chapter of the ECA
MySpace Page: http://www.myspace.com/okceca
Facebook Page: http://www.facebook.com/profile.php?id=1325674091

Re: Will Midway Vaporize in January? ...Pachter Explains

If the new owner does indeed start selling stuff off, hopefully Capcom or Namco snap up the rights to Mortal Kombat. Hell, maybe Sega. These guys have at least demonstrated that they can make good fighting games, and Sega might be able to inject a little Virtual Fighter into MK with the gore of their own series Eternal Champions. There you go, maybe they could revive Eternal Champions by having a cross over with MK. At least it'd fit somewhat unlike DC.

Re: Will Midway Vaporize in January? ...Pachter Explains

Like the Capcom Vs. series made a lick of sense.  Seriously, Cyber Akuma?  Giant Lava Dude?  I mean, seriously, pick your fights on this one.  Does MK vs. DC make sense?  No.  Pick up a comic book in the past decade?  Look up Amalgam.  What if Batman wasn't Bruce Wayne but instead Logan and had Andamantium Claws?  Oh yes, they did that.  Asking for games to make sense defeats the purpose of crossovers.  Complaining that a crossover doesn't make sense is like complaining that you have to breath air instead of cotton candy.

*cleansing breaths*

And seriously though, have you even PLAYED Eternal Champions in the past 10 years.  You complain about MK but EC is good?  Next thing you know you'll be begging for a Ballz crossover.

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Re: Will Midway Vaporize in January? ...Pachter Explains

It would have been nice if you actually read what I said. I basically said that they should get their inspiration of the game's gore from Eternal Champions. Eternal Champion has always been more gruesome than Mortal Kombat in the gore department, just check out some videos of the Sega CD's kills.

As for Capcom's Vs. games, well, it made perfect sense really. How? It started simply because Capcom started making X-Men fighting games, and since that was well received it made sense to mix the two together since they used the same fighting style. It didn't have to make sense storyline wise because Capcom is known for making great fighters, Midway on the other hand isn't and they've never had anything to do with DC before now so that's why it makes even less sense. Midway doesn't have gameplay to fall back on.
 

Re: Will Midway Vaporize in January? ...Pachter Explains

Well if you played MK vs DC it makes sense from a story perspective and a gameplay perspective. The've done a good job mixing those two franchises together into something workable, but in the gameplay sense the game plays more like MK2 and MK3, and that's the MK people like from a gameplay perspective. The characters also make sense, Flash is basically Cabal, and Lex Luthor is basically Sirax.

Re: Will Midway Vaporize in January? ...Pachter Explains

Things I would do if I had bought Midway (At $100,000 the only stopping me was not knowing they were for sale at that price):

There are no Midway games on the Wii VC. Open the whole library of classic console games. People want to play them.

There are no Midway games on GOG.com Open the library of PC games to GOG. People will play them.

Refurbish the arcade machines and sell them off at auction.

Start licensing some of the older popular IPs (ie Smash TV) to quality developers to remake for PSN, XBLA, and Wiiware.

Make good games again.

E. Zachary Knight
Oklahoma City Chapter of the ECA
MySpace Page: http://www.myspace.com/okceca
Facebook Page: http://www.facebook.com/profile.php?id=1325674091

Re: Will Midway Vaporize in January? ...Pachter Explains

The problem is they are aiming for big budget with narrow chance of success.  Like This Is Vegas.  WHO DOES THIS APPEAL TO?!?  MK vs DC proved they still have talent there and hell, a ton of their staff are industry vets.  The guy who created Spy Hunter still works there.  If anyone is in a position to understand the digital distribution gameplay model, wouldn't it BE the men behind Hydro Thunder?

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Re: Will Midway Vaporize in January? ...Pachter Explains

Unfortunately, that is the state of the industry currently. Too many publishers have that focus.

It seems that the majority of publishers have either that focus or the other extreme. Extremely cheap casual games. For some reason they cannot find middle ground anywhere.

Hopefully that will change.

E. Zachary Knight
Oklahoma City Chapter of the ECA
MySpace Page: http://www.myspace.com/okceca
Facebook Page: http://www.facebook.com/profile.php?id=1325674091

Re: Will Midway Vaporize in January? ...Pachter Explains

It's not only the current state of the industry, but it's also the current state of the core gamer.  Most core gamers nowadays demand over-the-top violence, realistic graphics and superior physics, not to mention online gameplay so they can frag their own friends.  And I'm only saying most core gamers as there are still gamers like myself who prefer a Kiddie game.

 

As for me and MK vs DC Universe, my brother came by today and I let him play both Soul Calibur 4 and MK vs DC Universe.  He enjoyed the latter more than the former.

What is a game?(throws wine glass on the floor and it breaks to pieces) A miserable little pile of secrets.

Re: Will Midway Vaporize in January? ...Pachter Explains

The core problem is Miday and their properties are Arcade properties.  Midway has yet to realize they excel at arcade style games.  Why they haven't been hitting the digital distribution model is beyond me.  They could crank out a 3D remake of Sinistar in a matter of weeks.  A 3D remake of Roadblasters on XBLA and PSN would be excellent.  And why in the hell is there no new Smash TV despite the 300,000 twin stick shooters on the market?  Also, they have a warehouse full of old arcade equipment.  Repair those and start selling them to collectors.  I'd easily drive up to Chicago if it meant picking up a $200 Mortal Kombat II arcade machine.

Instead they are focusing on Wheelman and This Is Vegas....

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Re: Will Midway Vaporize in January? ...Pachter Explains

If I were the new owner, one of the things I would do is snatch up as many former Team Ninja guys as I could to finally develop a smooth and intuitive fighting system for the MK series (as well as really beef up the graphics and animation quality). 

Re: Will Midway Vaporize in January? ...Pachter Explains

But Dead or Alive is everybit the joke to core fighting game fans as MK.  So all you've really done is revamped one series generally despised by the weeabos with another series only enjoyed by hentia.  Frankly, I don't get the MK hate at all.  It's one of the few series someone can pick up and play decently without getting into moves lists.  It's a casual fighting game, in other words.

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Re: Will Midway Vaporize in January? ...Pachter Explains

I don't hate Mortal Kombat and I would surely love to see it rank up there with SF etc.  But what DOA does have is a very responsive and fluid feel to it.  I'm not saying they just transplanet DOA into MK, but get rid of MK stiffness and balance issues.  And increase the graphic quality and arenea design.  While DOA arenas may not be any more functional than MK arenas, I still find thier look more appealing aesthetically.  Also Ninja Gaiden gore vs MK Armageddon gore would just be sweet.

Re: Will Midway Vaporize in January? ...Pachter Explains

Well here's the thing.  MK tried the dial a combo of other 3D fighters and it failed.  MK, at it's core, it's meant to be fluid.  It's harsh, brutal and sudden.  Meanwhile most 3Ds are flighty and floaty by their nature.  MK as a series wouldn't work under those condictions.

Second, most people I notice who complain about unresponsiveness hasn't touched the latest one. 

Balance issues would almost be a decent point to make, except every fighting game has balance issues.  Even the holy grail of the 2D arena, Marvel vs. Capcom 2, is about as balanced as Britney Spears.  I mean even SFIV will have the excessively unbalanced Seth boss character.

Graphic Quality is debatable.  Frankly I think MK vs DC looks uniquely american in it's comic style and I'd prefer they keep that.  Arena design is also something that's debatable.  DOA has a history of electric cage matches and stuff.  MK meanwhile draws heavily from old kung fu movies and high fantasy artwork.

As for the gore, well, hate to be the controversial one here but keep the gore cheeky and fun.  I don't want NG gore.  Not when I can tear off three arms from one person of watch 14 ribcages explode from a single body.

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Re: Will Midway Vaporize in January? ...Pachter Explains

I admit not having played MK VS DC.

I love when people defend sub-standard design by saying "it's suposed to be that way" or "That's part of it's charm".  And you know what, sometimes it can be right.  But when I'm standing right damn next to a motherfucker and do an uppercut, and the shit goes through thier body but still fucking misses?  That's not charming, that's fucking broken.  Are you really saying the MK series wouldn't work if that shit was fixed?  Ok.

Damnit now you have me ragging on MK, and I actaully have a big old soft spot for the series, but it could really be better.  As for the arena I never said DOA backgrounds should be used, I just think Mk backgrounds are boring as fuck now (as of Armageddon not MK VS DC).  You can still use Kung Fu fantasy, just fill that shit up.  Make it look lived in.

Finally gore.  Some people love the silly shit.  I really became enamored with MK1 and it's fatalities.  The spine was nasty and the face of the guy looked horrified.  The body dropped to it's knees before falling over lifeless.  I thought that was cool.  But now getting 5 feet, 3 ribcages and half a dozen femurs in an explosion is just irritating.  As you say, though, that comes down to opinion.

Re: Will Midway Vaporize in January? ...Pachter Explains

Ummm, even SFIV has hit detection issues.  Old MK is based off hit boxes as is Street Fighter.  DOA has the exact same issue.  Frankly, most of the complaints people can jump out at MK has been fixed for a while or found in every fighter.  I'm not saying MK can't be improved, far from it.  Hell, if I had my choice, I'd want the entire franchise rebooted using MK vs DC gameplay with tweaks.  But as a series it really does get a bad rap for no other reason than it being Mortal Kombat.  I mean, I can't think of another fighting franchise that completely revamped and updated their fighting engine 4 times.  Closest is Soul Edge/Calibur and even that's been unchanged since Dreamcast.

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Re: Will Midway Vaporize in January? ...Pachter Explains

Yet the one thing I, and Jeff at Giant Bomb don't get is those same people think Smash Brothers is up there with Street Fighter and Tekken. Which... you turn your nose to MK and DoA, yet you say your going to play Smash Brothers at your tournament....

dot dot dot....

Re: Will Midway Vaporize in January? ...Pachter Explains

Smash Brothers is weeaboo approved.  Diego himself once said he won't touch any fighter that wasn't made in Japan.  In other words, the fact that Mortal Kombat is made in the US is the main reason why it's snubbed on the professional circuit.  Which really is sad.

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