Atari, Inc. (formerly GT Interactive)
Atari, Inc. is an American video gaming company based in New York City, and a subsidiary of the Atari SA holding company. It is the main entity serving the commercial Atari brand globally since 2003. The company currently publishes games based on retro Atari franchises as well as some new content, and also produces the new Atari 2600+ console. In the past it produced titles including Neverwinter Nights, Driver 3, Fahrenheit, RollerCoaster Tycoon 3 and Test Drive Unlimited.
Its origins date to GT Interactive Software Corp. in 1993, which published games such as Doom II, Quake, Driver, and the first Unreal. The company was acquired by Infogrames in 1999, and later renamed to Infogrames, Inc. Two years after Infogrames's purchase of the Atari brand and assets from Hasbro Interactive, the company was rebranded to Atari, Inc., initially serving as Infogrames's US operations. In 2008 it became a wholly owned subsidiary of Infogrames, now known as Atari SA, and activities were largely consolidated into Atari Inc.
History
As GT Interactive
Beginnings and growth
GT Interactive Software Corp. was founded in February 1993 in New York as the video game publishing division of GoodTimes Home Video, a video-tape distributor owned by the Cayre family, with Ron Chaimowitz as co-founder and president. In its first year, revenue reached $10.3 million. Their first product was the retail release of Wolfenstein 3D. GT was unusual among many publishers as they allowed developers they contracted to retain their intellectual property.GT Interactive revenue soared 880% and reached $101 million in its second year of existence, with profits reaching $18 million. GT Interactive's partnership with id Software scored another hit with Doom II: Hell on Earth, which was released in October 1994 and sold over 2 million copies. In February 1995, GT Interactive obtained the publishing rights to games based on Mercer Mayer property, which included Little Critter and Little Monster. GT Interactive began to set up displays at Kmart and Walmart for low cost software. GT Interactive signed an exclusive software supplier agreement with Walmart that meant, according to UBS Securities analyst Michael Wallace, "All software developers have to deal with GT if they want to sell in a Walmart."
In March 1995, GT Interactive signed a $35 million deal with Midway Games to become the exclusive distributor for Midway products outside North America for four years, to end in 1998, and was later expanded to end at the end of March 2000.
Initial public offering
In December 1995, GT Interactive debuted on the NASDAQ stock exchange under the stock symbol GTIS. Raising $140 million with its initial public offering, it was one of the biggest IPOs of the year. GT Interactive offered 10 million shares to the public at $14 each. During GT Interactive's IPO, Joseph Cayre sold more than 1.4 million shares, 9.2% of his shares, for a $20 million return. GT Interactive reported a strong revenue growth of 134% in the year to $234.4 million but, in the first sign of trouble ahead, profits increased a meager 23% to $22.6 million.In January 1996, GT Interactive obtained the publishing rights for the highly anticipated Quake from id Software. The game was released in June of that year to huge success, selling 1.8 million copies, becoming a PC classic. In February, GT Interactive and Target signed an agreement in which GT Interactive became the primary consumer software supplier to all Target's 675 stores.
By 1996, GT Interactive began expanding by purchasing other publishers and distributors. The company purchased budget publisher WizardWorks for 2.4 million shares on June 25, which would form together as part of the company's GT Value Products division. WizardWorks' Macintosh publishing division MacSoft became a stand-alone division of GT. On 1 July, they purchased FormGen for 1 million shares and followed this up on July 11 by purchasing Humongous Entertainment for 3.5 million shares, or $76 million. Humongous formed as the first developer owned by the publisher, and their revenue had revenue had risen to $10 million in 1995, an increase of 233% over 1994's revenue of $3 million. In November, GT would gain an expanded distribution arm in Western Europe by purchasing Warner Interactive Europe from Time Warner for $6.3 million in cash.
In a sign of uncertainty for its future, GT Interactive, for the year, reported a net income increase of only 11% over the previous year to $25.1 million. Revenue growth also decelerated to 56%, revenue for the year was $365 million. Making matters worse, net income in the fourth quarter reduced 16.8% to $8.5 million when compared to 1995's fourth quarter.
Continued acquisitions
In January 1997, GT Interactive bought One Stop, a European value software publisher, for $800,000 in cash. In June GT Interactive signed a deal with MTV, the deal gave GT Interactive the rights to publish games based on Beavis and Butt-head and Æon Flux. By October, GT Interactive added their second developer purchase to their portfolio - SingleTrac, for $14.7 million — $5.4 million in cash and $9.3 million in stock. SingleTrac owned and developed such games as Twisted Metal and Jet Moto. In September, Humongous division Cavedog Entertainment, made its first release, Total Annihilation, which sold more than 1 million copies.On October 5, 1997, GT Interactive announced that it had signed a definitive agreement to acquire MicroProse for $250 million in stock; the deal had even been unanimously approved by the Board of Directors of both companies and was expected to be completed by the end of that year. The merger would have made GT Interactive the second largest U.S. gaming software company, exceeded only by Electronic Arts. But on December 5 the acquisition was cancelled, according to both CEOs "the time is simply not right" for the deal. MicroProse's stock plummeted after the announcement of the deal's cancellation. GT Interactive's result was negatively affected because, in March, they stopped being the exclusive computer software distributor to Walmart, who decided to buy its software directly from the publishers.
In 1997, GT Interactive's share of the entertainment software market reached a historical low of 6.4% down from the record highs of 9% and 10% years earlier. GT Interactive was a leader only on the arcade/action category, with a 20.3% market share. Making matters worse, GT Interactive also had a high debt/equity ratio of 41%; for comparison, Electronic Arts had a debt/equity ratio of just 8%. For 1997 GT Interactive's return on equity was a dismal -16.14%. For the year, GT Interactive's revenue growth continued to decelerate, increased only 45% to $530 million. During 1997 GT Interactive posted its first net loss, totaling $25 million.
In May 1998, Epic Games's Unreal, which was published through GT, sold over 800,000 copies. For WizardWorks, Deer Hunter II, which was released in October, also sold 800,000 copies. In November, GT Interactive bought OneZero Media for $17.2 million in stock and $20 million in total, becoming the first game publisher to own an entertainment Internet website. In the fourth quarter of 1998, GT Interactive posted a net income of $16.7 million on revenues of $246.3 million. For the year, GT Interactive reported revenues were almost flat rising 10% to $584 million, but GT Interactive swung into black by posting a $20.3 million net income.
In January 1999, GT Interactive started the year with two additional developer purchases; Legend Entertainment, a developer which commonly published its titles through GT and British based Reflections Interactive. Legend was purchased for $2 million, while Reflections was purchased for a reported 2.7 million shares of common stock, which was valued at around. In the same month, GT Interactive filed a lawsuit against Midway Games for a breach of contract for failing to inform them of new game releases and trying to run off with the money from the deal. The lawsuit ended on good faith between both companies six months later.
During the year, GT Interactive posted first-quarter losses of $90 million due to restructuring costs. In February, in light of the bad results, CEO Ron Chaimowitz was replaced. Game sales in 1999 fell in comparison to 1998, which had dire consequences on GT Interactive's finances. In April, GT Interactive predicted for 2000 a first quarter loss of $55 million on revenues of around just $95 million. A failure to release 5 major games and a planned relocation to Los Angeles added to the losses. In June GT Interactive announced it had hired Bear Stearns to look into the possibility of either a merger or a sale of the company and in October GT Interactive fired 35% of its workforce, or 650 employees, mostly from its distribution section. In June, Reflections-developed Driver was released, selling approximately 1 million copies. In July GT Interactive sold OneZero Media for $5.2 million in cash, just six months after it was purchased.
Purchase by Infogrames
On November 16, France-based Infogrames Entertainment SA announced that it would buy 70% of GT Interactive for $135 million and assume $10.5 million in debt, a deal completed by December 17. IESA's acquisition came just in time because GT Interactive's 1999 results were dismal. Revenues fell 30% to $408 million in 1999 and GT Interactive posted a net loss of $254 million for the year. Infogrames' purchase of GT Interactive allowed the company to hold a "distribution network for all of its products in the United States".In February 2000, GT announced the closure of Humongous subsidiary Cavedog Entertainment as part of a post-purchase restructuring. On May 10, IESA announced that the company would be renamed from GT Interactive, Inc. to Infogrames, Inc. to better represent the Infogrames brand in the country. In June 2000, IESA purchased developer Paradigm Entertainment for $19.5 million and placed them under the ownership of Infogrames, Inc. In October, IESA's former North American arm, the California-based Infogrames North America, Inc., was consolidated into the new Infogrames, Inc. and hence became IESA's de-facto North American division. In December 2000, Infogrames, Inc. secured a licensing deal to publish games based on the Dragon Ball media franchise from its North American license holder FUNimation.
In January 2001, IESA completed the sale of Hasbro Interactive and folded its North American publishing arms under Infogrames, Inc., allowing the company to publish titles featuring Hasbro licenses and the legendary Atari brand. In October, Infogrames, Inc. and Infogrames Europe licensed the Atari brand from Infogrames Interactive and began using it as a secondary publishing label for their core titles aimed towards an 18-34 year-old market. MX Rider, Splashdown and TransWorld Surf were the first three titles to be branded under the reinvented name.
In May 2002, Shiny Entertainment was placed under Infogrames, Inc. management after IESA purchased the developer from Interplay Entertainment for $47 million. The deal also included the license to The Matrix and upcoming video game title Enter the Matrix. Although not a critical success when it was released in May 2003, it represented itself as being one of the most expensive video games ever developed and was a sales success for Infogrames, sold 1.38 million units for the PlayStation 2 and 1 million units for the GameCube.