Midway hasn't made a profit since the turn of the century. This year, they're finally feeling the fallout. Following numerous departures by key management, the closing of their Los Angeles studio and a reported $34.8 million loss this quarter, Midway announced today that it is "has instituted a strategic workforce reduction," and has plans to lay off as many as 90 individuals, or 10% of their global workforce, by the end of the month. According to documents retrieved from the SEC, these employees were working on a single unannounced game at the Midway Austin studio, whose cancellation today has put their jobs in jeopardy.
Since December 2007, Midway has shed staff like a snake sloughs skin. They've lost a chairman, a CEO, CFO, two VPs, and a director of media relations. In the hours following his departure from the company in March, CEO David Zucker was still somewhat optimistic -- in an interview with GamesIndustry.biz, he pinned high hopes for 2008 on titles including The Wheelman and This is Vegas -- but last week, we received word that those two were pushed back to 2009, and today we received the following press release:
CHICAGO — August 11, 2008 —Midway Games Inc. (NYSE: MWY) today announced that it has canceled an as-yet-unannounced project in production in its Austin, TX, facility, and as a result Midway will have a reduction in force of a portion of the affected development team. The studio will remain open and will continue to operate both the Company’s Central Outsourcing Group as well as two teams that are working on unnamed prototype projects intended to expand Midway’s portfolio of new intellectual property.
This decision will allow Midway to maximize its development resources and apply manpower and capital to projects with the highest chances of success. The workforce reduction will affect approximately 90 of the 130 people currently employed in the studio. For further details on the reduction and the financial impact, please reference the report filed today on Form 8-K with the Securities and Exchange Commission.
Matt Booty, interim CEO and president of Midway Games Inc. commented, “While this was a very difficult decision, we feel it was the right thing to do for the future of Midway. We view every game as an investment that must meet certain standards for quality, scheduling, and profitability. Midway remains committed to producing the highest quality entertainment, as evidenced by our strong holiday line-up which includes TNA iMPACT!, Blitz: The League II, and Mortal Kombat vs. DC Universe starring a team of MK characters and some of the most recognizable DC Comics personalities such as Batman, The Joker, and Superman.”
The form 8-K mentioned by the press release adds this following:
On August 8, 2008, the Company’s Board of Directors committed to implement a plan to reduce the Company’s cost structure and maximize its development resources by applying manpower and capital to projects with the highest chances of success. To that end, the Company has instituted a strategic workforce reduction that it expects will allow the Company to realign and streamline its resources. As such, the Company anticipates that it will reduce headcount by approximately 90 positions of the approximately 130 positions currently at the Austin, Texas facility. This represents a reduction of approximately 10% of the Company’s global workforce. The workforce reduction relates to product development and related employees staffed on the development of a specific game, which did not meet the Company’s expectations and has been canceled. The Austin facility will continue to house important product development and related teams. The Company expects that the majority of the headcount reduction will occur by the end of August 2008. The canceled game resulted in an impairment and write down of approximately $10 million of related capitalized product development costs. There will be no future cash expenditures related to such impairment charge; however, the strategic workforce reduction will create an additional current cash expenditure related to severance costs that represent an immediate charge of approximately $1.2 million.
A source who wished to remain anonymous confirmed that the canceled Austin Studios project was formerly known as Criminal, although US trademark filings indicate that as of June 12th, Midway's trademark application for Criminal had been refused. The mark "Career Criminal" had been granted Midway in November 2007.
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