If you happen to own Midway stock, now would be a good time to sell it. In fact, about a year ago probably would have been the best time. Despite a huge loss in 2006, Midway could not course correct in 2007 and bled another $97.4 million. Things do not look good for the house that Mortal Kombat built.
Things aren’t going to be getting any better anytime soon, either. Midway expects another loss for the first quarter of 2008. Yes, this is starting to get into Atari and Sega territory. But, despite all the doom and gloom, Midway is trying to put a positive spin on things. David F. Zucker, president and CEO, said of the future of the company
We were delighted to bring an eager fan base the PS3 version of Unreal Tournament 3 within the fiscal year, and the consumer response to a number of our casual offerings such as Game Party for the Wii and Touchmaster for the DS was encouraging. Now that we have overcome many of the technology hurdles that we encountered over the last year, we anticipate smoother launches as we release our strong 2008 line-up.
Of course, that’s great PR spin, but it doesn’t do much to put money in the coffers. Midway’s misfortunes are the same that are falling upon many companies as they attempt to make the transition to next generation consoles. Costs of development for a new AAA title on the Xbox 360 or PS3 have skyrocketed compared with development for the Xbox or PS2.
Where a company used to be able to handle a few bombs here and there, suddenly profit margins just aren’t high enough on the few sure-fire hits released each year. Few companies can handle this new game economy with the exception of behemoths such as Electronic Arts, which sustains in large part due to cash cow franchises such as Madden and The Sims. The times, they are a changing.
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