News Article

Atari's U.S. Division Files For Bankruptcy

Posted by Thomas Whitehead

A bid for freedom from its parent company in France

While filing for bankruptcy in the U.S. is typically an act taken by companies in significant financial trouble, it's being adopted as an escape mechanism by the U.S. divisions of Atari. Atari Inc, Atari Interactive Inc, Humongous Inc and California US Holdings Inc have all collectively filed in New York, with the peculiar goal of escaping its parent company in France.

In simpler days, notably the 1970s and early 1980s, Atari was a company that dominated and defined the video game industry. As many no doubt already know it was also victim to the so-called industry crash in 1983, while some will argue that it was a collapse in confidence brought on by poor quality control and licencing from the platform holder. In any case, a number of unsuccessful system releases followed in the era of SEGA and Nintendo's console wars, with the company eventually giving up and retiring to focus on software. After changing hands multiple times the company was bought by Paris-based Infogrames, which changed it's name to Atari SA in May 2009 to avoid branding confusion.

Atari is, unsurprisingly, not the profitable behemoth it was in its pomp, and despite profits in the last couple of years an issue with London-based financial company BlueBay Asset Management has prevented developed projects from proceeding to release so far this year. With the operations of Atari being U.S. based but reportedly hampered by issues with the parent company in Paris, this is a bid to sever that link and then continue work as normal. The U.S. operations said the following in a press release.

The chapter 11 process constitutes the most strategic option for Atari's US operations, as they look to preserve their inherent value and unlock revenue potential unrealized while under the control of Atari SA. During this period, the company expects to conduct its normal business operations.

The US companies are also seeking approval to obtain $5.25 million in debtor-in-possession financing from one or more funds managed by Tenor Capital Management, a firm specializing in convertible arbitrage and special situations. Each unit has filed a number of traditional "first-day" pleadings, which are intended to minimize any disruption of their day-to-day operations.

It's not often that major divisions within a company file for bankruptcy to escape those with overall ownership; this is Atari, however, and here we have another curious chapter in its rich and varied history.

[via gamesindustry.biz]

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User Comments (32)

Knuckles

#1

Knuckles said:

Well, at least they didn't file bankruptcy because they were out of money.

KAHN

#2

KAHN said:

@Knuckles
that was what i was thinking before i read the article. things could be worse, if you ask me.

cornishlee

#5

cornishlee said:

Like the NeoGeo, at the same time, the Atari Lynx will forever be remembered by me as an example of why graphics and power aren't the recipe for success that some believe.

Squashie

#6

Squashie said:

Atari were always too big for their own boots. We could all see this coming from a mile off!

Omega

#7

Omega said:

For me Atari was dead by 1998 when they were only a division of Hasbro.

ThomasBW84Admin

#8

ThomasBW84 said:

By the way guys, the detail's important here. Atari isn't going bust, it's using bankruptcy as a method to break off from its parent company. It looks set to survive, there's little doubt about that at the moment.

7th_lutz

#9

7th_lutz said:

It is good thing that Infrogames is selling of the Atari section. Infrogrames was masquerading as Atari and was doing stuff like shutting down Atari websites by their legal department with Kirsten Keller sending the letters.

Infrogames was out of control from legal standpoint. They sent a letter to homebrew author for developing Boulderdash for the Atari 2600 and that homebrew game was almost canceled because of them. The thing was Boulder Dash was not owned by Infrogrames, but by First Star software

The thing also was First Star Software gave the okay already to develop the game as long as the people pay the company first for developing the game. That basically mention Infrogames had no basis for sending a letter about the game.

luminalace

#11

luminalace said:

I thought they died a few years ago with Infrogames and didnt know they were still in operation!

steamhare

#12

steamhare said:

I originally thought that this was going to be about Atari declaring bankruptcy regularly.

Magicpegasus

#13

Magicpegasus said:

atari is like a founding father of the culture we all enjoy. its many failures in the industry still don't compromise that fact that they were there in the beginning and are responsible for many wonderful experiences and products. if you can't respect that, then i can't f with you.

Bankai

#14

Bankai said:

This news story is a good one. Now we know who actually reads the article/ comments, and who just reads the headline :P

Sean_Aaron

#16

Sean_Aaron said:

I'd like to see them make it as I'm enjoying some of the iOS releases like Asteroids Gunner and Breakout Boost. Their Greatest Hits app sets the bar for what a retro compilation should be and I'm pleased to see that Activision has followed suit and someone has kindly given the treatment to the Vectrex catalogue on iOS as well. If only the Namco and Midway offerings were as good...

Here's hoping we'll see Atari Greatest Hits on the Wii U!

GreenDream

#17

GreenDream said:

It's an important distinction that Atari filed for Chapter 11 bankruptcy, not Chapter 7 bankruptcy. This was duly noted in the article; that being said, it's important to note that here in the USA, Chapter 7 constitutes what one would imagine to be "true bankruptcy"- an indicator of an empty account. Chapter 11 is just a reorganization (or a cessation from a larger corporate body, in this case) to escape from dire straits, not necessarily an indicator of an empty account.

However, Chapter 15 bankruptcy can also apply with foreign companies, though Atari is the debtor here, not Infogrames. I'm not sure about the fine details of that situation...

cornishlee

#18

cornishlee said:

@GreenDream
Thanks for clearing that up. I'd read the story in several places around the web today and was no nearer understanding how an allegedly profitable company could file for bankruptcy. It seems it means something slightly different in the US!

GreenDream

#19

GreenDream said:

@Yellowhare91 Untitled

Some say... somewhere, out there... the corpses of the mass grave of ET cartridges, slumbers restlessly... But some of them.... HUNGER.... FOR REVENGE....

KingMike

#20

KingMike said:

Author, this article is factually incorrect.
The original Atari didn't chance to a focus on software. They went out of business completely in 1996.
Their IP was sold off to toy company Hasbro, and then to Infogrammes. Who as you said, eventually just changed their corporate name to Atari.

ajcismo

#22

ajcismo said:

Atari has become the Black Knight from Holy Grail. Keeps getting chopped up and keeps kicking.

Mikau94

#24

Mikau94 said:

@GreenDream Atari never had amazing success after Crash of '83. The 5200, 7800, Lynx, and Jaguar all did poorly compared to their competition.

7th_lutz

#25

7th_lutz said:

@KingMike
The Atari that went out of business was in 1996 was only part of the original Atari. The original Atari was bought by Jack Tramiel in 1984, but not all divisions of it. Jack Tramiel only bought the Atari Consumer division of Atari Inc., not arcade division of Atari. inc.

Not having the arcade division didn't help the 7800 at time that Atari Games Corp released games such as Marble Madness, Paperboy, Gauntlet, Toobin', and Super Sprint as examples. The only way Atari corp. can have newer arcade games such as Super Sprint was by them having a contract with Atari Games Corp.

Atari Games Corp was alive through 2003 with them being under Midway from 1996 to 2003.

7th_lutz

#26

7th_lutz said:

The Atari 5200 died during the crash. Warner announced the 7800 to replace the 5200 basically.

The Atari 7800 in North America had 3.77 units sold and that information was found by Curt Vendel. That meant the 7800 did better than originally thought. The problem with the 7800 through multiple things.

The first thing was while the 7800 had a test market in 1984, it didn't go National before 1986. It was caused by the transaction by Jack Tramiel because GCC actually owned the 7800, not Warner. Warner hired GCC to develop the 7800 and to develop games for the system. Jack had to pay GCC for the games and the system itself and that didn't happen in 1984, but in May of 1985. That means the transaction of the Home consumers division of Atari from Warner to Tramiel hurt the 7800 and put their game library behind the 8 ball. Atari 7800 had games developed in 1984, but the sale froze programing on whatever 7800 games that weren't completed by July of 1984. That meant games like Galaga became dated when they came out nationally. In 1986 and 1987, Atari couldn't release games that were similar to the nes because of frozen development of the 7800 game library.

The 2nd problem was Atari under Jack Tramiel froze projects and streamlined staff and operations. He basically closed down video game division of Atari. That meant That meant Atari had no in house programmers to develop games for game consoles and used contractors instead. Jack also brought in a new Management team after he became owner of Atari. The quality of 7800 games did suffer as a result such as Karateka.

That changed when Jack bought the rights to the 7800 and Jack had to find someone to lead the newly formed video game division after that. It took them from May of 1985 to Nov. of 1985 to find a person to lead the video game division of Atari. That meant it slowed down the 7800 even more.

The third issue was Nintendo was already getting a Monopoly on 3rd parties by the time Atari Corp. released the 7800 in January of 1986. That was same that hurt the Sega Master System in North America.

StarDust4Ever

#28

StarDust4Ever said:

In all seriousness, this is like the billionth time Atari has filed bankruptcy. Nintendo started slowly killing Atari in the late 80s, hitting the final nail in the coffin in 1996. Sega's console division died a few years later in 2002, but unlike Atari somehow the company has stayed relavent. Aside from retro compilations and flashback consoles, I've really had very little interest in recent games under the Atari name. I just wish Atari VCS games could be added to Virtual console: some of them would quite make attractive $2 downloads.

retro_player_22

#29

retro_player_22 said:

R.I.P. Atari, thanks for all the great Dragon Ball and Dragon Ball Z games you made over the years, definitely better than what Namco Bandai offered lately. You will be missed.

This is the Atari I know and love (Dragon Ball: Advanced Adventure):

Untitled

Not this (E.T.):

Untitled

Magicpegasus

#30

Magicpegasus said:

the discussion here in the comments is slightly more interesting than the legal/numbers content of the article. it's like an oral history, maybe not completely accurate, but what we collectively remember about the icon.

miletich3

#31

miletich3 said:

What's gonna happen with RollerCoaster Tycoon 4 or the entire franchise now that Atari's gone belly up.

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