Modern Atari agrees to acquire Digital Eclipse, which employs a famous blinker

I did not expect this.

Kind of a bummer because Digital Eclipse does fantastic work and they've already done Atari. I'd like to have seen them work with other companies more broadly, maybe something with Activision or some documentaries on early Sega stuff. Digital Eclipse will still be able to work with outside companies on projects and will fulfill all obligations but I would bet the focus will be on their parent company's properties.

I also have no idea where Atari is getting the money for these acquisitions (they also bought Night Dive.) It's not like they've had a massive hit that I know of. I guess they're pulling in cash from outside investors but they seemed pretty skint a few years ago and now they're making big acquisitions.

Nonetheless from a strategic perspective it makes sense and if DE wants to focus on game docs for individual projects Atari has a lot of properties they can work on, so I can't say it is a bad idea per se. I just also hope that this isn't another Embracer situation.

I really hope Digital Eclipse cones out of this okay, they seem like a fantastic studio.

I guess between Night Dive and DE Atari are now the company to go ro fir basically any well-made re-release, but their fortunes are also tied to.. you know, Atari.

Genuine question: what does modern Atari make money off of?

@sethmode: It puts out those "recharged" downloadable games that I'd imagine are modestly profitable because they don't seem expensive to make. It licenses out its games to those home arcade toy manufacturers like Arcade 1UP and MyArcade. It does have some modern indie games it develops (recently did a Haunted House game) and other stuff, and some apparel. There were speaker hats.

There was talk of crypto and hotels but I think that fell through and that branch of the company may have gotten spun off?

Basically it has enough apparent revenue streams to stay afloat as a small publisher but I don't see where it's getting the cash to buy all these companies, and it apparently values itself at like $50,000,000 based on the stock part of the DE deal, which seems like a lot to me?

As I said it hasn't had a big hit to my knowledge.

These are the same questions we asked about Embracer.

@bigsocrates: Thanks for the thoughtful reply, as always. I've been less attentive to video games as a business between the bleakness of the industry and my own personal business stress (buying your first house tends to distract), yet I keep seeing Atari in this nebulous space of seemingly shattered reputation but also still doing a lot of things that presumably cost money to do...

Atari's also bringing hardware back. Effectively pitching to the retro nerds who really, really like shit on shelves.

This makes sense. Atari 50 is a fantastic product and Digital Eclipse can apply that blueprint to anything. Seemingly, Atari's found their niche.

I think the name Atari probably has more brand recognition than any of its games do at this point. If it wanted to pivot to using that and Digital Eclipse to put out other people's old games as its primary focus instead of its own stuff, I don't think that'd be the worse idea in the world.

@shindig: A lot of that hardware stuff is licensed out, as I said, though you're right they're seemingly doing a couple things in house. I think that 2600+ console (an emulation 2600 you plug cartridges into) is in house. I really question how big the market is for that stuff though, and some of their print runs are so low that they literally can't be making MUCH off of it. When they did those cartridge reprints the runs were very low.

I'm sure the hardware stuff is profitable on an absolute level, but I don't think it's funding a $6,000,000 acquisition.

@sethmode: Congrats on the house, duder! I think following the business ins and outs of these small retro companies is a tiny niche. I really only got into it because I fell into the Amico hole, and Intellivision loved to talk smack about modern Atari. Meanwhile Atari is actually putting out product and making moves and Intellivision sold off the rights to Shark! Shark!

They must just be really good at getting capital to offset acquisitions. Trying to find accurate revenues turns up something modest ($14m or whatever) or wild ($218m) which sounds like criminal activity. Or there's a lot of Atari logos in parts of the world I'm unfamiliar with.

The CEO of Atari recently did an interview with MinnMax where he admitted the company is not profitable. So I don't really know how all this will shake out, I hope it's positive but I'm not exactly optimistic.

I would like to go on the record and say that the most famous blink from the famous blinker isn't actually his best reaction.

This is the best one:

I hope Digital Eclipse is okay from this. Atari seems pretty shaky. At least they didn't build the hotel they were threatening to. That would have sunk them for sure. I also hope this doesn't end up being some sketchy money laundering scheme or Embracer-esque situation. Digital Eclipse deserves better than that.

The current incarnation of Atari is a collection of games people that ended up beating out the crypt and hotel faction of shareholders. Those ventures are no longer moving forward. The repo printing side of the business is and incredibly small niche of what the current company is doing. The real market they seem to be aiming for is the re-release of old games in the form of remasters, or in the case of their purchase of Nightdive, emulated versions of classic games that are compatible on modern hardware. They are also snatching up the IP rights from defunct or bankrupt studios in liquidation courts. In 2023 alone they have:

• Bought the rights to the Accolade, Infogrames and Microprose catalogues. Yes, Infogrames was once Atari, but again, the current company is under new leadership that need to beat out the European version of the company that technically was its own thing.
• Acquired the trademark to the Accolade and GTI brands. Meaning they could open new studios that used those labels.
• Bought Nightdive, one of the biggest providers of emulated games for GOG and Steam.
• Bought AtariAge, a retro video game enthusiast site and placed it in its website division along the likes of Mobygames. That said, with AtariAge they also bought the rights to all of its community's emulation software.
• Bought the rights to 12 of Stern's non-pinball IPs.
• Bought the rights to Mattel's 2600 game IPs from its defunct M Network label.
• Bought the rights to Ronimo Games' IPs which includes Swords & Soldiers and Awesomenauts.

@zombiepie: All that is true but it doesn't really explain where their money is coming from or is supposed to come from. Nightdive does good work but as far as I can tell while the games may be profitable they're not exactly massive hits. And maybe you can make some money off the rights to old Microprose games but it's probably not very much (you did not mention their investment in Antstream, which is an important part of their distribution package.)

I have a bunch of the Recharged games and they're competently made but, again, not huge hits.

Again there are parallels to Embracer. Putting out games that seem to be doing okay but not spectacularly and buying all kinds of IP and smaller companies without a totally clear strategy.

I honestly think the reason Atari still gets play by a lot of investors is because of nostalgia of how great Atari used to be and people wanting them to have another golden age resurgence. Their brand recognition takes them pretty far. Remember that scene in Bladerunner, where you had the huge Atari building in the future. Yeah, that will be a reality soon.

@bigsocrates: For most of these purchases, especially the IP grabs, they are buying things in liquidation or have been long derelict and sometimes in bankruptcy arbitration which is notorious for handing things off at nominal rates.

In terms of how they are raising this money, the answer is two-fold. First, as indicated in their investor FY2023 report, they generated €30M by successfully closing convertible bond offering during 2023. Second, they are also acquiring new shareholders and investments through brute force. Like many companies, their efforts to expand their grasp on IP licenses allows them to now claim they have a €12.5M capital increase in a single fiscal year. There's no massive alarm bells with these investors because, unlike Embracer, they are not hedging bets on an unclosed deal and instead went with hybrid bonds, and are pointing to their growth plan as the primary reason for their negative revenue. It's not an entirely novel company strategy or even alien in the video game industry.

@zombiepie: It's not a totally novel strategy nor one that has zero chance of paying off, but as we can see from these negative revenue numbers it's definitely not a strategy that's paying off yet.

Embracer didn't start off saying they were trying to get acquired by the Saudis, they only announced the deal fell through after it actually fell through. Until then their business model publicly looked pretty similar to Atari's. Buy a bunch of companies, put out product, build a portfolio and profit.

I'm not saying that Atari's plan is secretly to get bought, of course, but it's not clear what it is. It's possible it's just "keep making games and hope one or more of them hit." From the earnings report it looks like one moderate hit the size of a Bloodstained might be enough to make the company profitable.

But whenever a company goes on an acquisition spree without any clear source of consistent income or bankroll I get suspicious, regardless of industry.

Some of these moves (like buying Awesomenauts of all things) make no sense from the outside looking in. Maybe that was so dirt cheap that it will work out to their advantage but it seems to me that either there's a hidden strategy we don't see or this has the potential to just be a bunch of companies and properties mashed together hoping that one of them makes something that's a big enough hit to sustain the rest.

This news bummed me out a bit. A preservationist studio like Digital Eclipse really shouldn't be beholden to a publisher like this.

EDIT: This thread is how I found out Ronimo went bankrupt. Wow.

I think it makes sense if that preservationist studio has a lot of Atari projects in mind. Maybe that cuts a hurdle when it comes to access to materials.

It is worrying, when i think of safe places to be i don't think of Atari, but so far Nightdive have been able to continue doing what they do seemingly unimpeded so i hope the same goes for Digital Eclipse.