Monday, January 5, 2009

the Rape of Midway Games

a long time ago, in a city far far away (at least from where i'm at right now), the Chief Monkey Officers sought to bleed as much money as they can from the company before high tailing it out of town to escape the destruction they left behind in the wake of:

i have come to the realization that douche nozzles with MBAs (and marketing veeps) who goes into a company who knows nothing about that industry - only takes the job to make out like a bandit not caring about all the peons who work there.

Work Work Work

Me Not That Kind of Orc
and anyone who plays RTS games knows that you can't do $#!t with out the humble peon worker. (images courtesy of

note: i started writing this article dec 1st, so this article may sound a bit dated. also, i thought against publishing this since it didn't seem nice to comment on the people who used to be with my former employer (i left more than a year ago -- the writing was on the wall -- and it wasn't hard to see this coming. i gave the company 5 years left instead of just one). anyways, in light of the following articles, it was time to add my 2 cents:
Midway execs get rich while company crashes - Dec 23rd 2008

Midway Execs Raked In Big Bucks While Company Foundered - Dec 23, 2008

let's take a look back at Midway Games when the sith began to take control of the senate.
David F. Zucker Named Midway's Chief Executive Officer and President
may 07 2003

Midway Games Acquires "Area 51" Developer Inevitable for $2.1 Million
October 11, 2004

Midway Games Acquires "Mortal Kombat" Developer Paradox Development
November 30, 2004

Midway Games Acquires Aussie Developer Ratbag for $5.6 Million
August 4, 2005

Midway Games Acquires U.K.-Based Pitbull Syndicate for $3.1 Million
October 4, 2005
more than $11 million so far (ongoing salaries and the cost for paradox, etc.). but first, in light of this whole financial market disaster the whole world is currently in, a snapshot of Midway's stock at the time Mr. Zucker started to the day he filed his fire sale [].

MWY - Midway Games historical price
March 07, 2003 to December 09 2005
a healthy 662.67% gain. nice.
(chart from Google Finance)

this is where it dawned on me, that everyone in the financial sector are also only there to take your money. more on this a little later.

continuing, there was interview "Sumner Redstone, Video-Game Whiz" that has a few juicy tidbits.
...the media mogul,... sat down and explained why he's such a fan of the video-game industry -- even though he has never played such a game [ Mortal Kombat ] himself.

"this company [ Midway Games ]-- which was hardly known a year ago..."

"I don't have any information that is not public. I have told David to never give me any material inside information."

on Paramount making an Area 51 movie:
"I have absented myself completely. [Because Redstone also owns a 70% stake in Viacom, he has recused himself from Viacom discussions concerning Midway to avoid conflicts of interest. ...]
redstone has absolutely no idea what it takes to make a video game. he was someone who had a big bag of money, looking for a project to see if he can get into the video game market. the chiefs smelt blood. here's where the raping begins.
Midway Games to Sell $75 Million in Convertible Notes
May 24, 2006

Video Game Publisher Midway Faces Investor Lawsuits
July 23, 2007

Midway Games CEO David Zucker Resigns
March 20, 2008

Redstone Sells Majority Stake in Midway Games
December 1, 2008
MWY - Midway Games historical price
December 09 2005 to March 31 2008
(chart from Google Finance)
note: this chart does not include the 2008 global market meltdown numbers - only to the day zucker has resigned (almost an 88% drop)

how can redstone keep tabs on a company, that was "hardly known a year ago" (NFL blitz, NBA jam, ... mortal kombat... whatever...), let alone take a no hands approach to running the company is beyond me. he hires some guy who also knows nothing about making video games, and basically "talks the company up, just to drive it into the ground". the guy also plays the moronic "increase market share by buying your smaller competitors" bull $#!t rule.

a whole bunch of peons in the studio were perplexed at the decisions to buy studios (all over the world) only to shut them down in a matter of months (and no, no technology was ever gained from buying these studios - a sequel or 1 was sometimes done... and that's it...). and instead of reappropriating resources on projects that clearly didn't show progressive results, more money was poured into sinking boat anchors. wtf.
image courtesy of

as for the cash infusion, there was no rhyme or reason for it at the time (other than to take more money from these "investors"). did redstone benefit from the convertible notes sales to cover his enormous loses? probably not. but i don't think the company burned through all of that cash on day to day expenses either.

zucker has managed to leave the company with a lower stock value and a humongous debt. the day before he was hired, midway was trading at $3.57 (and at around $8million in debt at the end of 2002). and on the day he left: $2.01 (and a $250million debt).

the following should be in a separate article (since it's getting a little long already - but i don't want to revisit this in a future article).

back to the money people. these dirty wh*res would lie, cheat and basically steal the money that should have been given to the people who are actual making the products. i don't know what were they thinking when they basically cut all of the bonus/royalty numbers, adjusting the payout program or renege on reserves (scheduled retention bonuses) and expect the developers to stick around.

it got so bad that there was a major meeting with the team and the finance department to explain their actions. no answers were ever given to the peon workers. the money monkeys would constantly repeat "the payout equations are complicated". i would love to see who can tell me the answer first, the finance department to rotate a point around a line in 3D space or if the coders can figure out how "complex" the royalty equations really are.

i was going to go on and on about how a bunch of brand new cars (M5's M3's and other 5series vehicles) all of these execs suddenly showed up literally on the following monday right after the theft-fest meeting - all in all, the peons got the shaft.

anyways, what's left of Midway Games right now? everyone who has nothing to do with video games are gone. that's finally a good thing. but, a lot of people i knew are also no longer there. and the ones who are still there... can finally enjoy their down time after crunching for this winter's holiday season releases (maybe permanently, too). it was pretty interesting seeing how many linked-in profile updates were fired up right after this meltdown.

it sucks that matt booty got left in the path of destruction with more than a quarter billion dollar debt to figure out. but i trust him more than any of the other "CEOh-nos" to run a video game company. an actual game developer with experience. but i would actually recommend to leave this disaster and start a brand new studio. leave the legacy of the old studio to the former board of directors and past CEOs. there is no away to keep this studio running anymore except to sell off the assets and IP for the new "owner". basically, a reset like atari did is needed.

i would like to leave this post with a pretty interesting interview with Eugene Jarvis who made a lot of arcade games that many of you may have dropped hojillion quarters in.
The Making of…NARC - September 16, 2008
“The company was screwed up, like their worst competitor had staffed the upper management. The guys they hired could not have done a better job of destroying everything. A guy with no knowledge about videogames says: ‘What’s wrong with this company is we need more schedules and managers’.”

1 comment:

Unknown said...

dont hate the 'playah':
yeah the recent uneven lambasting of auto labor vs wall st, or looking within just one sector, the blaming of quants for creating "exotic instruments", rather than on clueless executives really drove home a point- labor gets no respect! Those be the rules my friend!

The project of the month on sourceforge is piece of software that takes care of a big chunck HR. Given how useless HR often-times is (not always, caveat emptor) it really comes as no surprise to see that this relatively young project (2y/o) has sky-rocketed in popularity... This led me to ponder the feasibility of computational models that can capture/outperform the behavior of human managers/execs.

So what does an executive do? LOL aside, this was pretty hard question for me to answer. However, there is no reason the software cannot be extended to capture the top ten tasks or other needed feature. So three main behaviors are:
1. resource management (ie purchasing, what to buy/where),
2. human resources(hiring/firing, raises, etc)
3. forecasting (sales prediction, task allocation, etc.)

1.bayesian networks- I recently read a paper that outlined a purchasing manager model that was able to outperform human managers in terms of cost and stock-on-hand using a very simple bayes net. theory- there are games with perfect information (chess-all moves known), and games of imperfect information (poker- bluffing). This summer Polaris defeated professional poker players in Vegas- using variant of Hidden Markov Models. Modeling hiring/firing would require some transition probability matrices and game theoretic approaches that I am not unaware of... but the poker example gives me enormous optimism that this can be done, ie there is a downturn in the market or sales are sluggish, who should be hired, who should be fired OR sales are great but someone is underperforming should they be fired or transferred, etc. Game Theory (ie prisoners dilemma, or some as of yet unknown decentralized, torrent-style decision framework) I think is the way to go here. But in terms of a starting pt. just looking at how the Polaris Poker team achieved victory over humans in situations of uncertainty is probably good enough.

3. optimal control forecasting: this comes right out of operations research and is nothing new. I recently read a paper that described how nature uses optimal ctrl to minimize destructive mutations. So if this is good enough for cells to survive evolutionary forces, than it is an interesting question to test if it can be used to predict sales, what the cost of product should be, task allocation, etc. This is unproven as far as I know, but there are standard sales prediction models- for example word-of-mouth can be described by Poisson distribution, or spam can be modeled by depth-first-search. So there is good off-the-shelf business intelligence tools out there. Linear programming an objective function with a set of constraints has been around since WWII.

dinosaur goes extinct:
So what is the point of all this. Well ultimately, I want to work in an environment, where the value of work is assigned correctly and cannot be under or overpriced. Not for any ideological reasons, but for competitive fitness and adaptive reasons. Hand-waving as "complex" royalty distribution schemes leads to inefficiency, and the flip-side as well, not assigning value to truly complex work leads to inefficiency.

start-ups implicitly implement some form of this efficiency. Value of work is calculated accurately, resources are spent wisely, and the energy of the team is devoted to building value (not gaming golden parachutes). Market-pressure forces some form of this behavior into startups. So software the can explicitly provide this functionality for non-tech firms (say laid off steel metal workers who want to start a small shop, because again start up tech firms have this functionality to a certain degree implicitly- at least at the beginning), AND can give competitive market edge over hiearchical, Jack Welch style firms... that will be a game changer.

Where do you want to work- a firm that is going to go belly-up and youll be taken advantage of, or a place where your work is valued accurately and gaming of the system is accounted for ?

In medicine, there is enormous hierarchy and it is total bunk. Software from the 70s can outperform human (ie attending with 30yrs experience), so think of what the models of today can do (85%bayesNet vs 65% for the human). Do you think the value of all clinical workers is being priced accurately? Personally I smell enormous arbitrage opportunity as Google and Walmart aggressively bring data online.

So across industries, being able to provide a platform that explicitly is able to cover the resource management, human resources, and forecasting functionality discussed above would be a game-changer

(sorry for the long post_ nice blog)