U.S.-Based Atari Wants a Reboot, Separation from Cash-Starved Parent

1/22/13Follow @jpruth

Hoping to start a new legacy, the U.S. branch of venerable video game maker Atari filed for Chapter 11 bankruptcy protection on Monday in New York with plans to restructure as a separate entity from its French parent company, Atari S.A. The domestic divisions of Atari, which has offices in Los Angeles and New York, helped pioneer the video game market with titles such as Pong, Asteroids, and Centipede. Technology, consumer tastes, and competition have changed drastically since the company’s founding in 1972, and now Atari focuses on mobile and digital games.

Staying afloat in this era of mobile games, though, is no easier than fighting to survive in the console market. The U.S. division of Atari said in a statement that it is seeking independent capital to fuel its growth. The company expects to sell its assets or reorganize within 120 days under a bankruptcy plan that includes procuring $5.25 million in debtor-in-possession financing through Tenor Capital Management in New York.

In the competitive retail video game scene, the Atari brand has been crowded out of the limelight by such massive publishers as Electronics Arts in Redwood City and Take-Two Interactive Software in New York, and console makers such as Microsoft and Nintendo. Atari has not made video game consoles—a market it essentially created—in decades, opting to focus on publishing games.

The company also faces plenty of competition in the mobile games sector from juggernauts such as Rovio Entertainment, the Finnish developer of the Angry Birds franchise, as well as up-and-comers such as Arkadium in New York. A number of Atari’s mobile titles borrow from the brand’s legacy, bringing games such as “Breakout” to smartphones and tablets.

Atari’s U.S. operation hopes restructuring through bankruptcy will help it better use its intellectual property and licenses apart from its troubled parent company. Atari S.A. in Paris said in a statement Monday that it is “starved for funds and unable to finance its continued growth” in spite of reporting positive operating income for fiscal years 2012 and 2011. London’s BlueBay Asset Management, Atari S.A.’s sole lender and main shareholder, can no longer support the company and has not found a buyer for its stake in the game maker.

This is yet another turn in Atari’s twisty history. Ownership changed hands several times over the years until in 2000 French video game maker Infogrames Entertainment S.A. procured the Atari brand through the acquisition of Hasbro Interactive. Infogrames in 2009 changed its name to Atari S.A.

The brand’s reign as king of the video game scene is the stuff of history; it remains to be seen what kind of future, if any, Atari can fashion for itself.

João-Pierre S. Ruth is the editor of Xconomy New York. He can be reached at jpruth@xconomy.com and followed on Twitter @jpruth. Follow @jpruth

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