Atari's Attempted Turnaround
Atari has really had a tough time. With credit troubles, a Nasdaq delisting, and continued losses, what's the approach now to get back on track?
Jim Wilson: There certainly was a time when Atari North America was struggling. Over the last year, a number of steps have been made with Atari Inc. and Infogrames to shore up the business, to simplify the way the companies work together, to get the companies to work more closely than they have in the past. Infogrames is a 51% owner of Atari Inc. and in many ways the companies should be and do work very well together. From a cash perspective, a number of things have been done in the last year, whether it's the credit line with Blue Bay investments or with Infogrames right around the time of our merger agreement, that have really helped stabilize the company from a cash flow standpoint. There has also been a focus on streamlining the company from a cost perspective. There were some initiatives in the fall to do that and we most recently focused on some initiatives that were happening in June.
Overall, the plan for growth has really been about building a strong North American sales, marketing, and distribution platform that allows us to build our franchises and build franchises from some of our key partners. By streamlining the company, by bringing in experienced game executives (whether Tim Flynn, SVP Sales or Jeff Reese, VP Marketing), the real emphasis for growth is a strong, experienced team that is going to build a strong North American platform. I think with that in mind, we can look to grow our company. I think we started to see some of those results. We are very focused on how we continue to grow as a best practices company – how we take a look at the portfolio of products we have and how we maximize that portfolio. In our first quarter, we put a lot of focus on looking at what our opportunities were for building our revenue story. That was [fueled by] the Dragon Ball Z launch, which continues to be a strong franchise for us, our Alone in the Dark launch, our Backyard Sports launch, and we also across the board saw a lift in our catalogue [sales].
From a portfolio perspective, although Alone in the Dark did well, making those big budget hardcore games is risky. Majesco, for example, used to put out one hardcore game after another and it nearly killed them, and then they switched gears to focus on the casual market and lower budget games for DS and Wii. Is that an approach we're going to see from Atari, or will we continue to see hardcore games?
I think we are fortunate because Atari and Infogrames are franchise owners. We have the benefit of looking into our franchise portfolio from which we can pull our overall product strategy. We are a company that has a very diversified approach on what our product strategy is. If you look at a franchise like Alone in the Dark, it's a bigger budget, console franchise, but we also have the benefit of the history of the Atari Classics or the N+ title, which is coming out in August, to really look at the growing mass market audience. From a risk perspective, we have the opportunity to be fairly well balanced, to have a diversified portfolio approach. You would expect to see from us products that fit both audiences. We have the benefit of having Phil Harrison and David Gardner really leading that global product discussion amongst all the executives worldwide about where we put our time and emphasis, what our overall portfolio strategy is going to be.
You're bringing N+ to the DS and PSP, but the Q1 revenue breakdown was heavily slanted towards PS3 and 360. Is Atari looking to do more on portables and on Wii?
Yes. At E3, we showed N+, a Jamie Oliver What's Cooking? title for the DS, the Backyard Sports franchise for the DS... There's certainly more that you'll see announced this year that will come out for the DS and PSP. Certainly on the Wii, we have opportunities that we'll be announcing also. Obviously, Backyard Sports on the Wii has done very well for us and will continue to be part of our franchise strategy there. So yes, you'll be seeing more on those platforms from us.
Is there a certain percentage that you're targeting for how to balance the portfolio, like 50% on Wii or something?
We're not exactly setting those types of goals for ourselves. We look at the franchises we think are important to us and we evaluate those franchises for the platform that it makes the most sense on, the audience we're looking to [target]. As a franchise company, we look at what platforms make the most sense. We definitely look at the platform lifecycles and pricing in the market. We do a careful analysis of the platforms, but at the same time, as a franchise owner, we are focused on the platforms that make the most sense for our titles.
Is there any thinking of getting more into digital distribution on XBLA, PSN, WiiWare or leveraging your own Atari classics with a PC portal?
We already are in the business of digital distribution, but on the Atari website, which will be updated, it will be more readily seen and readily available. We are involved in a number of digital distribution initiatives, whether it's powered by Digital River or other companies that we're working with. It's definitely a stronger focus for us in the future, and that's something from a portfolio perspective that we're much more focused on going forward. We are doing products on XBL already and we will continue to focus on building that business as well as PSN and the WiiWare business.
There's always talk of digital distribution eventually replacing retail, but how big do you see this business becoming for Atari?
The exact numbers, we're all looking to see how it plays out. We are seeing success on a number of our PC titles, while we're also seeing the fact that the PC overall as a retail platform continues to flatten or shrink in some cases. We are looking toward digital distribution as an outlet for us for our PC franchises and PC versions of our titles.
In terms of branding, when Phil Harrison came on board he talked about the strength of the brand, but how relevant is the Atari brand nowadays, especially among today's youth who didn't grow up with those classic games?
It's still one of the world's most recognized brands. It certainly resonates with an older audience that grew up with it. There's a retro/cool aspect to Atari with the younger audience that we see. I think our goal is to continue to transform the Atari brand by going back to how it was built in the early days – quality games, innovative games. The brand is really built on the gameplay experience. I think Phil and David have both talked about the role of our games and the Atari brand as an anchor for the company going forward. There is certainly a lot of brand equity, but that brand equity needs to be reinforced and we need to continue to build that through quality, innovative games because, at the end of the day, that's what our business is. You will also see going into the future, we will continue to look at other ways [to grow]. From a licensing perspective, there's some stuff that's been announced, like t-shirts... Atari hasn't been in that business, so we're reaching out to the Atari consumer with some licensing programs. But, of course, our real focus in on building the brand through the games.
You mention the retro/cool factor but does a 15-year-old really care? Were surveys conducted to find out how the brand resonates with the younger demographic?
There have been some surveys... we'd have to circle back with you on that. Again, I think there is an awareness, mostly focused on an older set; there still seems to be that '80s retro world, and Atari just happens to be one of the brands that people do know regardless of whether they grew up with it. But our job is to not rest on that... If we stay focused on building quality, innovative games, the overall brand awareness will continue to broaden and certainly reach the younger audience.
Will the Atari brand be used as the global brand in place of Infogrames once the merger is complete?
Sorry, I can't comment on that.
Ok, so which games in the pipeline do you see as reinforcing the brand for Atari?
Again, I'd say N+, which is more of a high quality casual gamer's game. The Witcher continues to be a focus for the company as more of a core title. And we have some releases coming out this fall, which I think will differentiate us. For example, the Race Pro racing sim game and even titles like Jamie Oliver's What's Cooking?. So I think you'll see some diversity with what we're doing, but at the end of the day, [these titles] are built around franchises and really built upon reaching our consumers as a quality game experience.
From a business standpoint, what I can't reinforce enough is that in North America our goal is to really build a best-in-class sales, marketing and distribution platform that, when given franchises, maximizes those through innovative marketing and campaigns. When people think about Atari in North America, I want them to think about our strength in launching titles and managing titles.
Thanks for speaking with us today.