2008 is beginning to wrap up; the last major releases of the year are on shelves, and the industry is preparing to take a breather. Normally, we’d have quiet time until February, but a quick look ahead suggests that the releases will be rolling out from mid-January. At this stage it looks like Capcom is going to rock the quarter after having held their big guns off from the holiday rush - Bionic Commando, Resident Evil 5 and Street Fighter IV are all set for release in the first ten weeks of the year.

This week the Warp Pipe will look at the downfall of Midway, and investigate how they can rebuild and move forward.

The Battle of Midway

Midway was one of the early champions of arcade gaming

The wires have been crazy all week with the talk of Sumner Redstone and National Amusements selling Midway Games to private investor Mark Thomas for the rather paltry sum of $US100,000. Of course the deal comes with a few caveats, like assuming $US70 million of debt owed by Midway to Redstone’s company, but such deals are not uncommon (Rockstar North was acquired by Take Two for just £1, in exchange for assuming £12 million in debt. Redstone’s 87% share in Midway was worth $30 million, meaning Thomas scored the company for just over 1/10th of a cent per share.

Wading through the rather convoluted history of the company, one can establish that Midway has been around in some form since the late 1950s, and got into video games in the 1970s. The company hit the big time when it licensed and distributed some of the biggest early arcade titles, such as Space Invaders, Pac-Man, and Ms. Pac-Man. Midway was arguably the most successful of the western arcade developers, with titles such as Defender, Joust, Robotron 2084, Spy Hunter, NBA Jam and Mortal Kombat to its credit. As the arcade business began to sour, Midway established its own home development studios (previously having licensed most of its games to Acclaim Entertainment for porting to home systems) in 1996, before closing the arcade division entirely in 2001.

Mortal Kombat HD Remix could make for some tacky fun

Midway’s biggest problems are that it never quite adapted to developing video games for the home environment, and that it has been unable to successfully introduce any new intellectual property while relying heavily on its most established franchises. The company experienced some early success while developing for the home markets, but it’s now on an eight year streak of net losses. The company has made some really stupid decisions, such as deciding to develop all of its games on Unreal Engine 3.0 with very little R&D, pinning its hopes on the over-budget and heavily delayed Stranglehold, and who could forget the 2005 purchase and unexplained closure of Adelaide-based developer Ratbag Games.

The shift to the HD consoles has been unkind to Midway, but it is mostly their own fault. Their HD console releases have demanded high budgets, but have been mostly under baked and under-promoted (NBA Ballers: Chosen One, Blitz: The League II), simply failed to meet gamers’ expectations (Stranglehold, Unreal Tournament III), or outright sucked (Hour of Victory). Mortal Kombat vs. DC Universe, the company’s big hope for the holiday season, has been noticeably under-shipped in Australia (my local informants received only three copies for launch day and have had trouble restocking). On the Wii and the DS, almost all of their releases have been half-assed or quick ports of last-gen games. The company’s only real success story of recent times has been Game Party, a quickly thrown together mix of mini-games for the Wii, which managed to sit in the UK charts for most of this year.

Some of Midway’s recent output is just outright crap

Midway’s future is looking grim. The company is fast running out of money, and its 2009 lineup (The Wheelman and This is Vegas) doesn’t exactly fill me with optimism. Even if Mortal Kombat vs. DC Universe sells more than a million copies, Midway cannot continue on its own steam. Reports concerning the acquisition have stated that Mark Thomas is a passive investor; he’s not going to get involved in the management or day-to-day running of Midway. Since he’s not going to tell anyone what his plans are (multiple sources report that all interview requests have been denied) let’s propose that he that he wants to rebuild Midway, rather than gut it and move on.

First, Midway needs to take advantage of what it’s got and what it’s good at. Microsoft seems to be steering Xbox Live Arcade away from simple re-releases/ports of old arcade games in favour of original or heavily upgraded content, so they can’t simply release their games as-is on the service. Instead, they can follow Sega’s lead and repackage their existing Midway Arcade Treasures releases from last-gen into a new package for each console, perhaps with a few extra titles thrown in for good measure. Alternatively, they could follow Capcom’s approach and remake some of its classics, or even produce retrograde sequels. The company needs high profile, but low budget/low risk titles to get it back into form. Surely anyone with a green screen, HD camera and a couple of gallons of pig’s blood could produce Mortal Kombat HD Remix.

Anyone wanna go halves in the rights to Toobin’?

If they’re not prepared to utilise their old IP, then it’s time to hold a fire sale. Midway has a reasonably rich back catalogue that will appeal to the older market. Obviously some of Midway’s IP is worth hanging onto (well, mainly just Mortal Kombat), but if they’re not going to use them, let someone else do it. I know I’d like to see someone do a new Smash TV. Toobin’ and Pit Fighter aren’t exactly doing anything for the company, so it’s time to let them go.

Next, the fat needs to be trimmed. Midway’s current size is not sustainable, and downsizing is an obvious recourse, but they also need to consolidate some of their interests. Midway currently operates the main office in Chicago, Midway Home Entertainment in San Diego, a customer support division in a different part of San Diego, three European distribution subsidiaries and six development studios (Chicago, San Diego, Los Angeles, Austin, Seattle and Newcastle). There are also apparently warehouses full of old arcade parts in Chicago. I cannot see any reason why Midway can’t bring its US corporate operations under one roof, and have one company dealing with European distribution. The Austin studio has already had a bunch of layoffs, and the LA studio is being merged with the San Diego one – they might as well cut their losses on the UK studio (L.A. Rush and Rush for the Wii were both terrible). Talent needs to be brought in that knows the ins and outs out Unreal Engine 3, along with producing games meant for the home market. Some of the old arcade guys are still kicking around the studios – perhaps low cost/low risk projects for XBLA/PSN/WiiWare are more down their alley.

Midway needs something else to compliment Mortal Kombat

Along with trimming the operational fat, the managerial fat needs to go. Midway’s managerial team has shown that they’re just not up to the task of running the company. More than 65 titles have come out of Midway in the last eight years, and very few of those have sold respectfully. There’s not the level of support coming from the corporate side – the level of promotion Midway’s non-Mortal Kombat releases are getting is pathetic. Midway needs their own Phil Harrison to come in and reverse their fortunes. The rebuilding process for Midway will take years (unless they were to strike gold and produce the next big thing) and a competent management team that is aware of that fact is needed.