Atari: Hanging On By A Thread

Pretty soon, it's likely that we won't have Atari to kick around anymore.

The embattled videogame publisher, having already sold off most of its major game franchises and in danger of losing its flagship *Dragon Ball *titles, has filed a quarterly earnings report with the SEC that paints a bleak picture of a company on the rocks.

Reporting an $11.9 million quarterly loss, Atari said outright in the statement that the company has "substantial doubt about our ability to continue as a going concern."

A going concern is a company that will "continue to operate indefinitely, and will not go out of business and liquidate assets."

Atari notes that its only current line of credit is in real danger of being canceled by the lenders "if, as is likely, we fail to meet financial covenants."

Atari's hottest property right now is the fact that it produces games based on the Dragon Ball Z animated series, but it notes in the SEC
report that license holder FUNimation is currently pursuing a breach of contract notice and is attempting to pull the games from Atari.

Atari's plans to save itself, such as they are, have been to sell off its internal studios* and divest itself of valuable properties like Stuntman, which it sold to THQ for $9 million last year.

But this can't go on forever, of course, if Atari plans to release any video games at all: " Further significant asset sales may not be practical if we are going to continue to engage in our current activities," reads the report.

Thus, the one concrete (if one can call it that) proposal that Atari offers by way of bettering itself is the following:

The "Atari" name (which we license) has been an important part of our branding strategy, and we believe it provides us with an important competitive advantage in dealing with video game developers and in distributing products. Further, our management has been working on a strategic plan to replace part of the revenues we lost in recent years by expanding into new emerging aspects of the video game industry, including casual games, on-line sites, and digital downloading. In addition, we are considering licensing the "Atari" name for use in products other than video games. However, our ability to do at least some of those things will require expansion and extension of our rights to use and sublicense others to use the "Atari" name. We have no agreements or understandings that assure us that we will be able to expand the purposes for which we can use the "Atari" name or extend the period during which we will be able to use it.

In other words, Atari realizes that its name could be much better used to sell casual games, toys, T-shirts, and electric cake mixers branded with the stylized Mount Fuji. But it isn't quite sure if it has the right to even do that, because they are, technically, licensing the Atari name from their majority stockholder company Infogrames.

Infogrames became owner of the Atari brand name (and the company's back catalog of legendary games like Pong, Asteroids and Centipede) for a song in 2001, when it acquired Hasbro Interactive for $95 million in Infogrames stock and $5 million in cash.

Infogrames' American subsidiary changed its name to Atari in 2003.

*That post made me laugh when I read it again.