Ratbag/Midway Australia goes boom

Someone help me understand the logic here. You spend 6 million on a company and then shut it down before its had any chance to recoup any of that money back for you.

Maybe Midway just likes buying stuff, probably got a fine collection of solid gold umbrella holders at the head office.

http://www.kotaku.com/gaming/midway/midway-shuts-down-austrailan-studio-...

unknownuser2's picture

I cant believe it. [:O]

Daemin's picture

This means that they probably bought Ratbag just so that there would be one less developer making racing games for the latest generations consoles. Either that or to pick talent from within the company, though that does not seem to be the case.

Caroo's picture

Ever heard of negative gearing? 6 million dollars can be rebated in tax against profits.. They wont lose any money at all. This shutdown is probably just a sneaky way to avoid ALOT of things.

In buying a company then shutting it down you can wound a growing industry. Get rid of competition. Get rid of tax, force previous employees to work for you as the tight industry leaves then little alternatives.

I remember listening to the founder of ratbag at the free play conference early this year. I wonder how he feels about all this. He was very proud of his achievement. Sad to think it can all disappear so very fast.

Daemin's picture

I think that the founders and owners of Ratbag would actually come out better from having their operation shut down, at least in the short term. They all got Midway shares as part of the deal, Midway closes a shop down and saves millions from its tax and personnel bills, Midway shares go up because of it, and the founders can sell their shares for more profit. But I don't know the exact circumstances so it might not even be a realistic scenario I described there.

The other thing is that there will be a whole bunch of experienced C and C++ software developers looking for work in the new year, so that probably doesn't bode well for University students trying to find employment. Although on the other hand the employees could just form their own company, seeing as they know each other and already have assigned roles and such.

I wonder what will happen.

CynicalFan's picture

Doesn?t surprise me at all, that is if it is true ? if it isn?t, then midway / Ratbag will probably release a statement.

I was kind of expecting this move by Midway after a year, when they could use an apparent lack of performance or quality in gaming experience in their defence ? whether true or not, though I think the lack of anything other than racing title design and development does hurt them as well.

I think the former employees starting their own studio is a great idea, but, being that most of their experience is in racing titles ? a competitive and perhaps not very large market in many ways ? they may be better off either joining or partnering with a startup studio that has the experience in other genres that they would most likely want and are hungry to get involved in ? as I am sure they are all sick and tired of racing titles. I suspect one studio is in dire need of experienced and professional programming talent in order to secure funding that is out there and just waiting for the right mix of development experience and the right project to come along and do so.

BTW: If this is all true, then it just goes to show and back-up my suspicions, that being a first-party developer will not be much of a reassurance for weathering the next-gen storm.

souri's picture

I'm getting reports that Ratbag weren't meeting milestones and that Midway weren't happy with the quality of the game they were making. It's a shame, I thought Scavenger was looking very nice ([url="http://www.ratbaggames.com/scavenger/"]from the screenshots[/url]).

mcdrewski's picture

ergh. "not meeting milestones" is sometimes a reason, sometimes an excuse. Thoughts and best wishes for the future to the whole team.

souri's picture

Yeh, publishers do have a reputation for screwing developers over milestone agreements...

pb's picture

quote:Originally posted by mcdrewski

ergh. "not meeting milestones" is sometimes a reason, sometimes an excuse. Thoughts and best wishes for the future to the whole team.

An excuse for what?

I know it might come as a shock to some people, but what publishers want is for developers to finish games, not to sack everyone at xmas. The former makes them money, the latter, at best, merely allows them to claim a portion of their losses in tax paid on profitable projects. Publishers don't knowingly kill off projects that they believe will make them money, that just doesn't make any sense.

pb

CynicalFan's picture

I have to agree with the people that have said something along the lines of: publishers aren?t in the business of killing of studios and projects that will make money, and, that publishers aren?t the sole reason to blame for these things happening. Developers have to take some of this blame instead of passing the buck onto publishers ? this is just idiotic guys, and shows your naivety.

That said, I have this nagging gut-feeling that perhaps this is all a result of Midway acquiring Ratbag, in that sure the founders were happy with the deal they got, but perhaps the employees were not happy at all in becoming a first-party developer ? not being an independent anymore ? and perhaps having to work on licensed titles rather than original IP ? I am sure that scavenger got canned for something less original, and the only outcome of it was that Ratbag was acquired by Midway.

This has resulted in the missed milestones and lack of quality in what has been delivered perhaps, in that these guys have just had enough and didn?t appreciate the change in environment, as it was not what they were perhaps lead to believe Ratbag was all about when they signed up and put in their hard effort and stuck in for the long-haul of game development and studio development. In other words it was a blow to their moral and studio culture ? as it is perhaps a betrayal in many ways.

Just a nagging gut-feeling though, had no direct contact with former staff there in years, so I can?t be certain on this.

Shplorb's picture

I've now been on a bender for at least 24 hours. Yeah, I'm that fucked up over it. Shit, I still live at home and dont' have a baby or mortgage... it's those guys that I can't stop thinking about. Man, it's fucking cold... they even cancelled the christmas party on friday. Fuck Midway. Fuck them slowly with a chainsaw. I still haven't been told by any official that I'm out of a job yet.... fucking weak gutless bastards. I got told about it by an ex-employee. I really don't give a shit anymore, fuck them if they don't like that I'm spouting shit publicly. I haven't been told to keep my mouth shut. Did I say FUCK MIDWAY? If I ever see anyone playing a Midway game I'll break their fucking fingers.

For fuck's sake, they didn't even look at the Vertical Slice we shipped them last week. That shit kicked arse. I'm glad to hear that one of the programmers stood up in front of the execs when they read the announcement and called them a bunch of cunts to their faces in front of everyone. For fucks sake, I had two days off and this shit happens!

Yeah, fuck Midway, bunch of scum sucking cunts. I don't care if you ban me for swearing my head off.

Also, if you're looking for a sound programmer with UI experience, I'm all ears. I've already been asked to apply for jobs in the US and Canada, but I'd prefer to stay in australia.

dsi's picture

It is not pretty any way you look at it.

Looking forward, there is some useful advice at http://www.games-jobs.com/tips2.htm

and more at http://www.jobsdbase.net/Aust_summaries.asp

grantregan's picture

ouch, I feel for you man, and I thin you're well within in your rights to vent like that. It's a pretty disgusting thing to do right before Xmas.

eightbitnasty's picture

Thankyou to all the people I've worked with at Ratbag. We are a good bunch and can move on.

grantregan's picture

you know when you think about it 6million AUSD is not a lot to pay for a studio, particularly given IP's it holds and it's inhouse technology.

Perhaps MW simply wanted the technology and licenses? 6 million is pretty good value. I owuld say this has been planned for a while....

LiveWire's picture

[url="http://www.gamasutra.com/php-bin/news_index.php?story=7515"]Gamasutra:[/url]

According to independent sources close to the company, publisher Midway Entertainment has announced to its staff that it will be closing both its San Diego and Australian development offices, resulting in significant layoffs.

Midway's most recent financial results included a large quarterly loss of $29.1 million, and had predicted a financial year loss of $95 million, and the company is believed to be closing these studios in order to cut costs and better approach next-generation development. (emphasis added)

The San Diego office of the company had recently completed Gauntlet: Seven Sorrows for PlayStation 2 and Xbox to a mixed critical response, after losing co-leads John Romero and J.E. Sawyer from the project earlier this year. Reports indicate that Midway have chosen to give the employees 60 days notice, attempting to relocate some to open positions at other Midway offices, rather than start a new next-generation game project from scratch.

Midway Australia, which is based in Adelaide and was formerly Ratbag Games before being acquired by Midway only in August 2005, was working on undisclosed titles for Midway, believed to be in the racing genre that Ratbag (Dirt Track Racing) was noted for. According to a report in the Adelaide Advertiser, Midway senior vice president Matthew Booty delivered the news to the 70 Midway Australia staff on Tuesday.

Despite the apparent layoffs, the company still owns significant internal development resources in its Chicago, Los Angeles, Seattle (Surreal Software), Austin, and Newcastle, UK (Pitbull Syndicate) operations.

Representatives from Midway had not returned Gamasutra's calls at press time, and the company has not yet made an official announcement on any development resource repositioning.

eightbitnasty's picture

chewed up and spat out. I bet pitbull will be using our tech.

mcdrewski's picture

quote:Originally posted by pb

quote:Originally posted by mcdrewski

ergh. "not meeting milestones" is sometimes a reason, sometimes an excuse. Thoughts and best wishes for the future to the whole team.

An excuse for what?
[snip]
Publishers don't knowingly kill off projects that they believe will make them money, that just doesn't make any sense.

You're not thinking like an accountant, and certainly not thinking like the board of a publically listed company.

Not "meeting milestones" is often an excuse to axe a project that they don't believe will make them money in sufficient time. It could be the best game ever due out in 2007 and the publisher will see the cash burn now that they need to report to their shareholders now. This means they can axe a good game or a good team even if it is going to make money.

Ever had to rush something out to meet an end-of-month or end-of-financial-year deadline set by those with the money? I have. Ever had new requirements or targets appear seven days before a milestone is due? I have. What a surprise when you don't meet those new requirements or ship buggy or unpolished code.

I'm not saying this is what happened, I know nothing at all about Midway/Ratbag's situation - just saying that in the corporate shareholder-driven world, decisions get made for other reasons than quality or potential.

Jacana's picture

quote:
Midway's most recent financial results included a large quarterly loss of $29.1 million, and had predicted a financial year loss of $95 million...

That is the main issue I have with the whole situation. You can not tell me that this much money was only lost in the past two months. I mean if they didn't know their financial situation when they bought Ratbag then they really are just stupid. Which I don't believe.

The other thing I have to question is how much this will hurt their stock prices. Buy out a company with "paper money" before you announce your loss for the year, your stocks take a dive from it, and suddenly the "real value" of what you paid for something drops.

So when facing a huge loss, as much as $95 million, you then have to question (as people have) the motives behind such a decision.

I am unsure as to where the Midway HQ is, but it is interesting to note that US runs a Jan to Dec tax year, unlike July to June in Australia. So I do find it interesting that these closures come up at what could be the end of a tax year.

eightbitnasty's picture

Chicago is where hq is.

From the Advertiser:

[url]http://www.theadvertiser.news.com.au/common/story_page/0,5936,17573741%2...

"New York Stock Exchange-listed Midway Games, worth $US2 billion yesterday, bought Ratbag in August by handing over more than $7 million worth of shares to the founders and 10 senior staff.

Those shares had since increased by 64 per cent, putting their worth at more than $11 million yesterday.

"

Mario's picture

Sorry to hear when any Australasian studio closed down, whatever the reason. The timing certainly isn't the greatest in this case.

For those ex-Ratbag employees looking to get back into work quickly, Sidhe Interactive is currently hiring experienced people across the board for work on PS2, PSP, Xbox, Xbox 360, and PC projects. Take a look at www.sidheinteractive.com or send a resume to jobs@sidheinteractive.com. No promises, but we do look at every CV we get (even if we suck at responding to people).

Otherwise, I know there is some great talent there and would encourage ex-employees to consider setting up a new studio or venture as it would be a shame for that talent to disperse back into the "real world". I'm happy to provide advice via email if anybody ends up considering it.

CynicalFan's picture

Well if not just the founders but 10 senior staff were offered shares in Midway ? from the what, 70 employees ? then that says to me that by closing the studio, they have pretty much kept the best talent for themselves, if, those shares were conditional ? meaning they had to stay employees.

Unless their shares were lost when they heard the news, or, they get to retain the shares yet are no longer employees of Midway?

Seems like to me to be something similar I heard years ago. When certain eastern European countries became newly ?democratic,? foreign investors bought up companies, and then sold off all the assets for far more than what they paid for the company to begin with ? making themselves a profit, and ruining a company in the process. Perhaps by doing this, they have benefited by not just having their shares increase in value, but have also kept the most experienced for themselves ? not to mention that they have acquired Ratbag?s technology and tools.

Maybe they were offered jobs in the UK for instance?

Just a thought, don?t know the whole story or spoken with anyone about the situation yet ? at least directly.

Red 5's picture

Man this sucks! I feel for all of you :(

souri's picture

Vertical slice, that's a complete finished level, isn't it? Did Midway cancel Scavenger and made Ratbag work on something else when they bought out the studio?

I've read elsewhere that Ratbag cofounders Greg Siegele and Richard Harrison tried to convince Midway worldwide studio senior VP Matthew Booty to allow the studio to remain open. Someone wrote in the [url="http://www.sumea.com.au/snews.asp?news=1830"]news comments[/url] that the deadline for an answer on whether Ratbag has a chance was 2pm this afternoon.

Brett's picture

Why dont the ratbag seniors take all those millions they made from the sale and start up a new company and continue as they were only a few months ago :)

sixzeros's picture

I've got a friend over there who will be axed and I cant help but be concerned for him and family. Its very disturbing.

He tells me that he's constantly in awe of the calibre of minds that are over there at Rat Bag, even intimidated, and this amazes me because I know my friend to be an absolute King Kong genius!
He was programming the assembly language in the 3D graphics engine, and thats some hardcore stuff right there!

I know you guys are facing a lot of hard decisions right now.

I would sure appreciate genius's helping me out.

Send me a resume to support(at)comusthumbs.com

Tron's picture

Brett: Here's hoping.

I wouldn't be surprised if part of the original buyout agreement was that Greg couldn't start a new company which could compete with Midway, hopefully Midway isn't that evil though.

Starting a new dev house would be extremely tough in the current climate though, if they do manage it I doubt it will be here in little old Adelaide anymore. :(

gamer23's picture

you think there could be something put in a contract to prevent this from happening this soon after selling? some sort of protection for the employees? in reality though what just happened is a classic example of corporate america, i can just visualize the board of directors sitting at the table saying, well we got to cut some studios, who do we cut, then one guy suggests australia, then its settled, so easy for things like this to happen.

What I wonder is how many employees who were issued midway shares actually held on to the shares or sold them as soon as they were issued them? this is important as you would see that Midways share price plummeted after the announcement, a 50% drop? so that 7 million share buyout of ratbag is only 3.5 million now? so hopefully greg and the employees sold there shares early. I feel sad for the employees, its a terrible thing to happen to anyone, but i feel it brings them back to earth a bit, for a while i thought ratbag in the adelaide media and such were a bit overrated, this thing about being one of the best developers in the world is a bit farfetched, in australia, maybe. anyways lets hope the employees find new jobs soon or alternatively setup a new company and develop new technology.

JohnP's picture

I just want to say that this is a sad thing that's happened but I'm positive that people will find a place in the Aussie industry.

If any ex-Ratbag people want to get back into games development then Pandemic Studios Australia is looking to hire experienced people. We're building a second team and with the recent merger with BioWare we have a lot of really exciting things in the pipeline. Check out our website at www.pandemicstudios.com or send a resume to jobs@pandemicstudios.com.au. If you're in a hurry then call Christie Cooper on 07-3252-3381 ext. 28

If we don't have a position to suit we can definitely put you in touch with other dev teams here in Australia or we can forward your details to the LA studio or Bioware in Canada.

rgsymons's picture

This is more than sad for our industry and all involved. Further, if Greg leaves our industry then we will indeed have lost a very good friend, ambassador and spokesperson.

I know that the team at Ratbag were very talented and will find other positions in short order as every studio in Australia is hiring at the moment. We at Bullant would certainly look forward to receiving resumes to programmer@bullantstudios.com or artist@bullantstudios.com

Cheers,

Ross.