Atari files Chapter 11? Yes, it is still in business

Original Pong cabinet

An original Pong cabinet at the Videogame History Museum. Image: Stew Dean/Flickr/CC BY

People who are old enough remember the impact Atari had in the neophyte days of video game development. Many, however, will be surprised that the company is still in business. The U.S. arm of the company has filed Chapter 11 bankruptcy in order to separate from its parent company in France. That parent is likewise making a similar move it its country.

Atari cutting edge in 1980s

Those who were coming of age in the 1980s no doubt remember playing Asteroids, Centipede and that ancestor of all video games, the frustratingly dull Pong. Atari launched its Video Computer System, a.k.a. the Atari 2600, in 1977. Then came the video game glut of the mid-1980s, when the new market was flooded with new formats and games, many of shoddy quality. The company, which turned 40 last year, lost market share quickly, and has been passed between many owners in the intervening years.

Its impact at the time can not be underplayed, however. Sam Grobart, writing for BusinessWeek, pointed out the many images of the Atari logo featured in the futuristic 1982 motion picture “Blade Runner.” According to Grobart, “Back then, if you were thinking about the future, it was impossible to imagine it without Atari.”

Atari’s founder, Nolan Bushnell, left to found the Chuck E. Cheese pizza franchise, which caters to an even younger demographic than did Atari.

Seeks emancipation from parent

In the U.S., Atari has moved away from console video games to digital and mobile games. In doing so, it has been more successful than its parent, Infogrames Entertainment, in France. Atari says the break is necessary to entice the investors it needs to grow in the market. Last year, digital and licensing revenues grew to encompass 70 percent of the company’s earnings.

Protecting ‘company and its shareholders’

Chapter 11 is “best decision to protect the company and its shareholders,” according to Atari’s CEO Jim Wilson. Investors and creditors will be paid proceeds from the auction of company assets. Those creditors include the accounting firm Deloitte & Touche, as well as Kmart and Wal-Mart Stores.

Significant losses for 2012

Atari said in its filing that it has $1 million to $10 million in assets but owes $10 million to $50 million. Last month it said it expects to report significant losses in the year recently concluded.

The company is seeking a loan of $5.25 million from Tenor Capital Management to rebuild its operations while being protected by bankruptcy proceedings.


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