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Midway's Next Big Gamble

In Midway CEO David Zucker's final interview, he talks about the issues facing the troubled publisher

Yesterday, Midway announced that CEO David Zucker would be leaving the company to be replaced on an interim basis by Matthew Booty while the company searches for a new leader.

Zucker's exit follows other high-level departures over the past few months. CFO Thomas Powell resigned in January and senior VP Steve Allison announced that he will be leaving at the end of March.

In December, Midway's chairman of the board Kenneth Cron resigned from the company's board of directors.

The company appears to be bringing in new management to restore investor confidence after incurring significant losses - most recently, a USD 97.4 million loss for fiscal 2007.

In his final interview at the helm of the US publisher where he had been since 2003, David Zucker spoke to GamesIndustry.biz last week about the company's next big gamble - an open-world game called "This is Vegas."

GamesIndustry.biz: Midway just reported a significant loss for 2007. Are there any factors you attribute the loss to such as the US economy, the console development transition or strong competition last year from titles such as Halo 3?

David Zucker: We're very focused on succeeding in this next generation of consoles. We've made significant investment in our technology. We've essentially had two of our first next-gen titles that launched last year, but in 2008 we'll have significantly more console frontline releases than we did last year.

So we've been building and investing for this coming next-generation cycle. We're very focused on 2008. We've got seven frontline titles versus three last year and that's our primary driver.

You released your Q1 guidance - anticipating net revenues of approximately USD 28 million - but what are your overall expectations for the next fiscal year?

We said that we expect to significantly grow our revenues in 2008.

How would you respond to analysts who say that your debts are mounting and that you can't afford any more years like the last one - that it soon may be "game over"?

I think they've been saying that for five years or so.

It's all about making great games. We've been very focused on building up our technology and positioning ourselves to grow our revenues as we go through this console cycle.

We've got a strong set of titles for 2008. A combination of both multi-million unit selling franchises - like Mortal Kombat which we'll have later in the year, the next-generation debut of Mortal Kombat - and Blitz, our 1.5 million unit unlicensed football game. We've got NBA Ballers coming up here shortly and some very ambitious and mass market appeal new IP such as Wheelman with Vin Diesel and This is Vegas which we announced recently.

Acquisitions are still a big story in the games industry, with EA's hostile takeover attempt of Take-Two just the latest example. Have you been approached by any publishers recently with an eye towards acquisition?

We're very focused on growing our business. As long as we make relevant games, we feel that we can continue to grow our business. Our strategy is to grow the size and scale so that we can thrive in the next-generation environment.

Would it be fair, then, to say that your goal is to remain independent? Or would you be willing to consider a merger if the terms were right?

Our goal is to grow our business - grow our revenues and get to profitability as quickly as possible in this next console cycle.

But if that goal could be better achieved as part of a larger organisation, with another publisher, would you consider it? Are you ruling it out altogether?

Our goal is to grow our revenues and get to profitability as quickly as possible in this next console cycle. If something makes sense, we will of course consider it.

You have said that, with the technological hurdles overcome, you expect smoother launches for 2008. How will that play out in the development of sequels and follow-ups to the first titles that used your standarised tech? Do you anticipate a quicker and less costly development process?

I think a lot of developers last year...There were challenges getting the PlayStation 3 up to par with the Xbox 360. We feel like we've put that behind us.

As we look to that second batch of next-generation games - with the engines more stable and the technology more stable - I think it is a combination of being able to do them not so much in less time but with more manageable costs and also putting more quality into the game. More focus on things that make the game stand out from a quality standpoint - great gameplay and great level design, as opposed to just focusing on technology.

Immediately prior to GDC, there were rumours that Microsoft was interested in purchasing Epic - which they immediately discounted. With your current tech based upon the Unreal engine, are you concerned with such a possibility?

We have a good relationship with Epic. We obviously license the Unreal engine and we expect to continue that. We also have a multi-title publishing relationship with Unreal Tournament. We've been very happy with that.

Stranglehold was unique in that it was a sequel of sorts to John Woo's Hardboiled film. Was this a one-shot deal, or do you intend to follow the game up with sequels of its own? Do you view it as a potential franchise?

The team that made it is, we think, one of our better teams. Brian Eddy and his team...They really were the first next-gen title for Midway. As such, they really led the charge and took a lot of the bullets associated with getting the first next-gen game out.

They are certainly working on another game. We think they will be able to build on and improve what they started with [Stranglehold].

Is it possibly going to be a follow-up to Psi-Ops? I enjoyed that game.

There are a lot of fans that did.

In terms of what that game will be, we have nothing to say at this point.

Other than Stranglehold, Midway hasn't relied upon licensed movie or TV properties - well-known icons - at least, not to the same extent as some of your competitors. Do you think this might change in the future?

Well, Happy Feet did very well for us...I think it was two holidays ago. We continue to look at areas where licenses make sense.

We continue to have a Hollywood relationship. I mean, Vin Diesel is in The Wheelman and you referenced, of course, the hook up with the director in Stranglehold. Especially in terms of new IP, doing things to reduce the new IP effect...Here we've got an action star who is also a big gamer for Wheelman.

For us, Vegas is the ultimate icon. When you say "This is Vegas"...Whether you are in France or in Kentucky, you know what that means. 40 million people a year go there. There is certain an iconic nature to Vegas and living your Vegas fantasy and we will be drawing upon that in that game as an example.

You recently announced that Stranglehold and Unreal Tournament 3 have shipped over a million units. Is that across all platforms and including Europe as well?

Yes. We obviously haven't yet launched the Xbox 360 version of UT3, so that's just the PC and PS3 versions.

And have you announced a release date for the Xbox 360 version of UT3?

Not yet.

Are there any issues with Microsoft that could delay that release? Any concern over user mods and such?

Reilly Brennan: We had an exclusive deal with Sony for the PlayStation version of Unreal Tournament 3, so to date we have only shipped and we're only talking about the PC and PS3 versions. We don't have any information on the 360 version right now.

You recently announced This is Vegas, and you mentioned new games in the Mortal Kombat, NBA Baller and Blitz franchises coming this year. What are the remaining frontline titles we can expect?

David Zucker: TNA Impact. It is an up and coming, growing wrestling series that has done very well on television - not just in the US but around the world - and we're very excited about it. From our team out in Los Angeles. I think you'll see incredible control, quick responses, great animations...Really redefining quality in the wrestling genre. That's a game we are very excited about. People who have been able to get their hands on it have been impressed and we think the market will be [impressed] when we release that title.

Wheelman, starring Vin Diesel, set in Barcelona. Obviously it is focused on driving, car combat, high speed stunts along with on-foot combat and exploration. We think it will be the ultimate car chase game.

This is Vegas, which we really think is open-world gaming evolved. Live your Vegas fantasy. It is an action game, but you'll also have those great Vegas moments. You'll be able to fight, race, gamble and party in the first true Vegas open world with comedy, satire and some fantastic Vegas-style production values.

Anything new with the Spy Hunter franchise?

Well, there's the movie which has been in various stages of development. It's a franchise that, at the moment, we're resting.

Next month, of course, Rockstar will release Grand Theft Auto IV. I know your Vegas game isn't coming out until the fall, but how will you distinguish it from Rockstar's franchise?

As I said, I really think that it is open-world gaming evolved.

Grand Theft Auto is going to be great. It is going to sell a lot of units. It is going to be a great game, but it is directly more of a crime-oriented saga. [Our game] is a live your Vegas fantasy.

There will certainly be action and there will certainly be crime in the game, but it is much more about...And actually a lot more about interiors. Beautifully built-out interiors. Fully-realised casinos. Clubs. With Vegas-style production values and a comedy and satire that is much more attuned to the lifestyle of living in Vegas - you know, gambling, partying and "what happens in Vegas, stays in Vegas" moments.

So it is really going to be an entirely different tack on open-world gaming. It will be a very different environment than one set in a quasi-New York City underground world.

I saw a promotional item which I initially mistook for a real Vegas brochure until I realised that the hotel names weren't quite the same - even though they gave a nod to the originals. Did Midway make any attempt to approach any of the real-world properties to license them for use in the game?

It wouldn't be as fun, and I think it would have restricted our freedom.

You'll get Vegas. There is a little bit of an RPG element. There are different suits and you'll be able to raise your rank among the suits - hearts, diamonds, spades and clubs. Each of these different factions control parts of Vegas.

You can think of literally hundreds of Vegas moments that will happen in and out of the casinos and around the town. Having the freedom to be able to do that without having to deal with a licensing obligation made more sense to us.

When you said that Midway is looking to more casual gaming opportunities, including an online portal, how do you envision that? Are you referring to your classic arcade properties, or will these be new games?

We've had a lot of success with Touch Master for the DS which launched in June and more than 20 games which came from our Touch Master series. Game Party for the Wii has been selling very well - it debuted at #3 on the Wii sales charts in the UK two weeks ago. So you'll see more of those kinds of titles from us.

As we said in the call, we're also going to be launching an online games website - launching with 20 games that will come from a number of different places, including our arcade heritage and other places. We'll be building on that as we go forward.

What about continued support of Xbox Live Arcade, PlayStation Network or even Wii Ware in terms of casual games?

Yeah, you know we had four of the top ten launch titles on Xbox Live [Arcade]. We've been adding to those over time along with the PlayStation and Wii versions. It's an area we've been active in and will continue to be active in.

Sony will soon be launching their online PS3 community, with talk of casual games to include billiard tables and possibly even classic arcade games such as the ones Midway is known for. Are there any specific plans you can talk about for Home?

Nothing to announce, but we're obviously in the loop on the development.

David Zucker was CEO of Midway from 2003 through 2008. Interview by Mark Androvich. Special thanks to Reilly Brennan.

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