Truths About Midway "Offloading Mortal Kombat"

[Patrick McCarron]

This morning Kotaku posted a poorly phrased story about a court filing from Midway Games that stated that they are selling the Mortal Kombat franchise assets. If you look at the court filings from Kotaku's source of the story, you'll find the true details behind the filing. I am not a lawyer, but deciphering the filing isn't that difficult. Basically it says three milestones that Midway Games' executives must meet in order to receive a bonus payout after the companies reorganization is completed. One of the three has already been completed, and that's the sale of publishing rights for Wheelman to Ubisoft. The other two are related to reorganization and could result in Midway selling their Mortal Kombat assets. But in these filings the sale of Mortal Kombat is optional and actually far less likely than Kotaku (and other MK sites) want you to think.

The second milestone is the following:

Milestone: Either (i) execution of an asset purchase agreement for the sale of Midway’s Mortal Kombat franchise assets or (ii) submission by Midway of a plan of reorganization to continue as a going concern. Bonus Amount: $1,292,500.

That milestone basically means a $1.2 million dollar bonus would be paid if Midway can either sell Mortal Kombat rights or put together a working Plan of Reorganization to reorganize Midway. In fact, Midway has 120 days from the initiation of the bankruptcy case to file the Plan of Reorganization, which puts the deadline at around June 11, 2009. It is fully expect for Midway to file the plan and hopefully have it approved with the bankruptcy court before the June 11th date. Here is the definition of a Plan of Reorganization from Midway's own Reorganization Glossary of Terms.

The reorganization plan that sets forth the rights of all classes of creditors. It may also include various repayment schedules pertaining to the various creditors. Once the plan is filed with the Court, creditors and equity holders vote to approve it. Upon completion of this step, and with the concurrence of the Court, the plan is said to be "confirmed."

The final milestone is a variation of the second one.

Milestone: The earlier to occur of (i) confirmation of a plan of reorganization or liquidation or (ii) closing of a sale of Midway’s Mortal Kombat franchise assets. Bonus Amount: $1,965,000.

Basically the milestones say that the Midway Games executives are to earn another $1.9 million in bonuses IF they submit a "Plan of Reorganization" WITHOUT the sale of the Mortal Kombat franchise. This is the largest bonus for the executives, because it's the most important to Midway to retain and keep the Mortal Kombat franchise as their own if they continue to operate after a reorganization. Thusly, the executives would be rewarded the most for retaining ownership of Mortal Kombat during the reorganization process.

We believe that it is Midway's full intention to reorganize and retain most or all of their intellectual property. Selling off of the Mortal Kombat franchise would only be something they'd look at if they can't possibly reorganize without doing that. To not include this possibility in their bankruptcy filings would be irresponsible, so it does not come as a surprise to us. But it does not mean that Midway is selling it at this time. To say otherwise is simply jumping to conclusions at this point. In fact, development of the Mortal Kombat 9 still continues at this point.

Keep up to date on the Reorganization of Midway Games on their own Reorganization Page where they have put up all the information and news for their investors about the reorganization of the company.

[Tim Static]

I swear. I even wonder why Kotaku is allowed to do what they do.

Thats the company that needs to die, not Midway.

[Patrick McCarron]

I swear. I even wonder why Kotaku is allowed to do what they do.

Thats the company that needs to die, not Midway.

They are allowed to do it by people visiting their site and generating ad revenue. I find most VG blogs fairly negatively biased these days, and since we're in the same boat kind-of by being very small and independent I feel we should do the opposite here.

[Bearrrtality]

I appreciate the article, including the Midway milestone agreements. Good research.

However, I don't think these milestones pay more for Midway keeping the Mortal Kombat franchise. In fact, it seems as though the milestones are 100% attainable as long as the executives do their part and stick around until the end (which is the reason a lot of foundering companies pay bonuses).

The second milestone pays $1.2m WHEN:
a) Midway and another company agree to an MK sale
or
b) Midway submits to the courts a plan to keep operating.

Interesting in that they could do both (unload MK and keep operating), but have not set up the milestone that way. It seems to me they consider MK necessary to keep on going.

The third milestone pays $1.96m WHEN:
a) Midway and another company complete the MK sale ("closing" the sale)
or
b) The courts approve Midway's plan to keep operating OR a plan that involves selling everything off ("liquidation")

I don't see in the milestone language anything that gives Midway executives more money to keep Mortal Kombat.

When a company files for bankruptcy, it's saying it can't afford its debts. Everything that company owns, including IP, has to be valued, and is up for consideration. Midway gives a plan, and its owners and creditors (including employees, suppliers, the government, and lawyers) vote whether they'll take it or not. If Midway does not make a plan or the creditors do not agree on it, then everything gets sold and the money is used to pay off the creditors in a specific order under Bankruptcy law.

I've read the milestones that were posted. They strike me as a deal with executives to stay with the company until the end comes, rather than leaving for another company before Midway finishes its business. The second payoff is when the deals are agreed upon. The third is when the check is in hand. Only by leaving early does an executive miss out on the milestone.

[Patrick McCarron]

However, I don't think these milestones pay more for Midway keeping the Mortal Kombat franchise. In fact, it seems as though the milestones are 100% attainable as long as the executives do their part and stick around until the end (which is the reason a lot of foundering companies pay bonuses).

Yes I think I misread that final statement and will adjust accordingly. I misread "the earlier of" meaning only the first one, but in fact it does mean "whichever happens first"

I've read the milestones that were posted. They strike me as a deal with executives to stay with the company until the end comes, rather than leaving for another company before Midway finishes its business. The second payoff is when the deals are agreed upon. The third is when the check is in hand. Only by leaving early does an executive miss out on the milestone.

Yes that is exactly what they are meant to say I too believe, it's to keep the captains at the ship and to give them clear goals to stay on board and keep everyone focused. If the executives just jumped ship, well then it's harder to keep everyone focused.

[crankto11]

I understand your analysis of the docs and the possibly misleading journalism, but the truth is that these details just don't matter. Here's why...

The grim reality is that Midway has sacrificed some viable IPs just to get just about every version of MK shipped (yay for MK fans!), only to possibly sell off the whole franchise in the aftermath (boo for Midway!). Midway, a very viable, versatile company at one point, put all it's eggs in one basket.

The current CEO and Chairman was formerly VP of Product Development, and prior to that, head of the Chicago studio, in charge of several original IPs, including the golden boy IP, MK. Booty (CEO) has been with the company for more than 10 years, making him one of the most knowledgable, and politically driven employees, and now the most powerful person in the company (besides that mystery investor dude Thomas). Think about it, who gets a bonus if these milestones are met?

So for whatever legal protocol you think "the company" is making regarding the bankruptcy, or whatever number (in the million plus) it ends up to be, it is inconsequential. The "captains" as you mention, were most likely the ones making the decision to implement this plan so they could reap some benefits from the downturn, and are probably in no hurry to leave. The rumor that substantial bonuses to executives that were given out after the recent mass layoff would support this theory.

In this scenario, Midway sounds no different than the bank execs in the recent headlines and their affection for former employees is zero. And even more important to you, MK being just dollar signs. Kotaku (and other bloggers, journalists, etc) have full right to flame the current CEO (and former CEO; Zucker made off with MILLIONS!), and any other VPs who made selfish decisions and casually drove the company into the ground, along with your beloved MK.

So please do some research on the people making these decisions, and cheer independent journalism for shedding some much needed light on Midway's greed.

I'm sorry for the possible loss to MK fans, but it doesn't look good.

[Patrick McCarron]

crankto11, your points have been addressed elsewhere before and continue to be, and we don't intend to stop that. I think various news organizations (private and large) have all handled that story so far very well, and I'm sure we'll see more from them soon on similar matters that need to be addressed publicly.

Here at TRMK we were looking here to address was the misleading story on Kotaku about MK being sold. We wanted to make sure that the fans knew it's not happening at this current point in time, and we wanted to address that for the MK community who woke up to this dire news today, it would be irresponsible of us not to.

We're also not preventing or trying to misdirect anyone from "flaming" any executive who made poor decisions, again it's just not our news to cover. Midway has a lot of issues going on that I'm sure will be addressed, just unless it's MK related you wont see it on our news page since it's not related to our goal and direction of coverage. You can leave your comments here all you like, I have no problem with it and welcome your input to the discussion. Just ask that it be kept on topic.

Who knows the future, I don't, so there is no way to tell how the Chapter 11 proceedings will go and who will benefit and how much. I personally hope these bonuses given to executives will be spread out and shared amongst the subordinates if the company is successful in reorganizing itself, and all former employees are treated fairly with regard to unpaid personal time as required by law. But I have no say in those matters, as I'm not privy to all the information and thusly have no valid opinions to share either beyond what I think is the right and responsible thing to do.

[outworld222]

Does anyone else think if (and I said if) Mortal kombat gets sold to another company, then the MK game concept of a fighting game every two years might be replaced for something more comprehensive?

I'm of the mind that A good game can come out of a 2 year workload, however, does anyone else think 2 years is a very generic number? What makes one think two years is enough time to complete a 'masterpiece'?

Point being, what I was trying to say is, sometimes it takes more time, sometimes it takes less time. Also please do not forget there is an adventure team in place. MK is not purely fighting anymore. Also it is incorporated with an Adventure philosophy.

Now with that being the case, I am eagerly awaiting MK9 news.

[KornKombat]

If midway ends up having to sell off every IP except Mortal Kombat, I could deal with that. But Im affriad if they sell MK then who would pick it up, and what would they do with it. Would Ed be hired to work on it, or would it be an all new MK-team? This is stuff i dont want to find out, so hopefully midway keeps a tight grip on MK.

[Patrick McCarron]

Some official news quotes on the issue from Midway can be found here, if you didn't believe our analysis.

http://multiplayerblog.mtv.com/2009/...mortal-kombat/

[outworld222]

Some official news quotes on the issue from Midway can be found here, if you didn't believe our analysis.

http://multiplayerblog.mtv.com/2009/...mortal-kombat/

Great! I always thought Midway and Ed Boon and his team could do a much better job than others.

[Goraka]

I don't think it would be such a bad thing if Midway did sell the MK franchise. Everyone's complained about everything they have done with it over the last decade, so maybe a new developer would do it a lot of good, as long as it's a company that's established itself as being good at fighters, like Namco or Capcom. I don't like what they do, but Tecmo must be in the market for a new fighting franchise right now too. Thing is, MK is a very western franchise, and there aren't any other decent western Fighter developers really. I wouldn't want to see it become another anime-influenced big-hair-and-english-subtitles game.

[Tim Static]

If MK is sold, it still belongs to Ed. Lets say McDonalds bought MK. Ed and Team MK would still make the MK games, but McDonalds would be the new Midway. They would just be financing the projects.

But maybe a change scenery could breath new life into the franchise.

[outworld222]

Well, Midway did make MK1 - MK4. They must have done something right in that time.

Even though MKDA through MK VS DC may be highly debatable, let us at least wish them good luck in the upcoming decade. Peace out everyone.

[Goraka]

Sooooooooooo...
http://www.gamedaily.com/articles/ne...analyst/?biz=1

How would you guys feel about Activision acquiring it? The prospect of seeing Scorpion in the next Tony Hawk or Guitar Hero interest me, if nothing else. As long as EA don't pick it up, I'm fine with the other suggestions too. Not really an EA fan.

[KornKombat]

Designing a new engine? Thought they were going to keep Unreal 3 for awhile?


“The MK team is hard at work designing a new engine,” Mogilner said.

[DeathcoreRyknow]

I noticed that too. I'm thinking that this person is either unclear as to what an "engine" is or just misspoke. I can't imagine them building a new engine for the next game when they can (and are supposedly going to) simply tweak the existing one.

[Patrick McCarron]

Sooooooooooo...
http://www.gamedaily.com/articles/ne...analyst/?biz=1

How would you guys feel about Activision acquiring it? The prospect of seeing Scorpion in the next Tony Hawk or Guitar Hero interest me, if nothing else. As long as EA don't pick it up, I'm fine with the other suggestions too. Not really an EA fan.

Well that's just an Analyst comment, that's like someone like any of us saying "I think this company has enough money to buy it." Don't read much into Analyst comments that predict future moves, it's not insider information just someone making a best guess analysis of the situation and they are likely wrong in something this large.

I noticed that too. I'm thinking that this person is either unclear as to what an "engine" is or just misspoke. I can't imagine them building a new engine for the next game when they can (and are supposedly going to) simply tweak the existing one.

Exactly. The engine redesign they talk of is the entire gameplay engine, not the core graphics engine of Unreal 3. They are taking the MKvsDCU engine and making required changes. They need to tweak the graphics for the desired style, the gameplay where they want it, and then start adding characters. Early versions of engines may only have one 1 or 2 dummy or rough characters in place to mess with how the game is coming along.

[Glamador]

Whether the MK franchise gets the boot or not I'll continue to buy MK games and probably still love the MK franchise. But it's been a very long time since we've had any meaningful expansion of the MK lore, not since Deception. I agree with Goraka completely. It might be good for an established fighting game company to get the MK rights. A company like Namco, Capcom (though I'd be dissapointed), or SNK. And even though Midway doesn't NEED to sell MK, Midway is in deep shit and they might not be able to manage.

[Angel]

On the other hand though, without MK Midway's got no big earner. I must admit aside from the one Gauntlet game on the PS2, I've NEVER bought any of Midways other games. Sad I know, but I don't think much of most of the other stuff they produce usually, the MK series is all I like. I can enjoy the fan speculation after each game with MK even if the games crap in the end.