Ghostbusters’ musical chairs continues – Sony Europe is the new publisher

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The Ghostbusters saga has more twists and turns than a rollercoaster. But the story may really be about the challenges facing Namco Bandai’s nascent European distribution arm, rather than difficulties at Atari.

Activision acquired the Ghostbusters game as part of the Vivendi Games acquisition, and dropped it because, in the words of Bobby Kotick, it didn’t have “the potential to be exploited every year across every platform, with clear sequel potential that can meet our objectives of, over time, becoming $100 million-plus franchises”.

Atari picked up the game, with Phil Harrison saying that he “would love to turn Ghostbusters into a $100m franchise, just to prove him wrong”.

Now with a month to go before launch, Sony has picked up the publishing rights to Ghostbusters, and for a brief moment, it looked as if the Wii and Xbox versions are unlikely to see the light of day. There is some logic to this as Sony Pictures is releasing a  25th anniversary edition of Ghostbusters at the same time, and sharing the marketing impact is a logical move.

Only now, it turns out that Sony is only the European publisher. In the US, Atari is still publishing the game on all formats.

So why the endless changing?

My first thought was that Atari was struggling with working capital. It takes meaningful cash to put out a AAA title. If Atari wanted to get a million units in store, that’s probably $7 million just in platform-royalties, let alone a AAA marketing budget and assorted distribution costs. That could add up to $15-20 million pretty quickly for a global launch.

At the end of September 2008, Atari’s interim report showed net debt of €3.5 million, down from a net cash position of €83.4 million in the previous year. The company ascribed this deterioration to “increased investment in R&D development process, required funding for the holiday season build-up of inventories and signing of multiple distribution licenses to strengthen upcoming line-up”.

That’s not unusual. Plenty of games companies need substantial working capital in the run-up to Christmas, but by May, even the famously slow-payers like Walmart should have stumped up the cash that they owe from Christmas sales, and Atari should be comfortably back in the black by now.

So did Atari do spectacularly badly at Christmas?

Well, to an extent, the answer may be yes. Q3 08 revenues were down to €102.3 million, compared with €132.4 in the same period in 2008. Atari cited “a lower number of major releases compared to last year as well as to the negative impact of the economic slowdown during the Christmas period.” The company also warned that full year revenues were likely to be flat year-on-year, compared with previous guidance that it would grow by 12%-18%.

So that’s a substantial hole in Atari’s expected cash-flow, perhaps by as much as €30-€40 million. Add in the €21.7 million that Atari paid for Cryptic Studios in December, and the number reaches maybe €60 million.

That may explain why Atari was so quick to exercise its put option to sell the 66% it still owned in Distribution Partners, the European joint venture established with Namco Bandai in September 2008. Based on numbers in the press release, Namco Bandai will pay Atari €40 million for the stake. But that may not be in the bag yet: the press release also says that Atari “will receive cash payment of the transaction upon closing, which is expected to occur within the 4 next months [i.e. by the end of July], after the approval by the competent antitrust authorities – which management does not expect to be withheld.”

So maybe that’s the answer: Atari does have some cash-flow constraints, wanted to make sure that Ghostbusters got the strongest possible push and decided to let Sony push it in Europe, while Atari would still push it in the US.

Is the real issue with “Distribution Partners”?

Only (and now I am really tying myself in knots) it isn’t Atari that would need to stump up the working capital for European distribution: it’s Namco Bandai’s soon-to-be-100%-owned subsidiary Distribution Partners. The self-same distribution business on which Atari has just exercised the put option to sell to Namco. And Distribution Partners only has European rights (well, actually “Europe, Asian countries (excluding Japan), Africa,
Middle eastern countries, Central and South America, Australia and New Zealand”) but not the States. So that at least provides some clear rationale for why why Atari is still publishing Ghostbusters in the US.

So is the answer from all of this that Atari is doing fine financially, it’s Namco-Bandai’s subsidiary that is struggling? Or is it even more prosaic than that: the exercise of the put option has made the financing of Distribution Partners so complex while the business is in regulatory limbo that passing the rights onto a third-party like Sony was the only way to get the game out in time?

I really hope that Atari’s next set of financial results shed some light on the situation.

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