Last year, after a reborn, retro-focused Atari acquired Nightdive Studios for $10 million, the PC remaster specialists tried to reassure fans that the deal was a good fit. "The new Atari is dedicated to the same principles of bringing back classic and classic-style games that Nightdive has always pursued," Nightdive said. Then in November Atari purchased another retro-focused studio, Digital Eclipse, bringing the two game developers most focused on preserving and reviving gaming history under the same corporate roof.
It's a powerhouse team—but in the midst of massive industry layoffs, also the kind of consolidation that makes me nervous. What if an Embracer-style collapse one day hits Atari?
I know I'm not the only PC gamer who'd see that as a tragic loss, as no other studios are bringing back games like Dark Forces or building playable documentaries around pioneering games like Karateka. So at last week's Game Developers Conference, I asked Atari CEO Wade Rosen about what happens if the company ends up in dire financial straits, given how many other game companies are currently struggling and doing layoffs.
"We keep all that in mind—we're really trying to balance growth, both organic and inorganic growth, with reaching profitability and being in a sustainable place," Rosen said. (Inorganic growth refers to mergers or acquisitions like Nightdive/Digital Eclipse). "We feel like we're doing everything we can to make sure we don't reach one of those scenarios and get out over our skis, and that we're able to grow and rebuild the business, but not in a way that's unsustainable."
Much of the industry's growth since the start of the Covid-19 pandemic has indeed turned out to be unsustainable, with developers commenting on the rising costs of big-budget games and more than 16,000 layoffs affecting industry employees over the last year. Rosen said the "overexpansion" in gaming and tech in 2020 and 2021 was based on "a false sense of what future demand was going to be," leading companies to chase skyrocketing valuations.
"I think the thought process became 'if we're worth this much because of this performance, if we can push performance further, we will be worth this much," he said. "Being a public company, I understand the allure of that. The problem is it doesn't factor in that a lot of those prices are just transient; there's nothing that fundamentally says how much you're worth. As valuations came back down, decisions based on those valuations also faded away… the layoffs are painful, but the layoffs are the result of hiring. The mistake was overexpanding and hiring too fast, and taking a point in time and extrapolating it indefinitely into the future. In a lot of cases the growth should have never been that fast to begin with, and I think we would've avoided a lot of this pain."
I also asked Rosen about the boons of Atari's new ownership for Nightdive and Digital Eclipse; while the rights to Nightdive's white whale No One Lives Forever remain elusive, Rosen said the partnership has already been paying off.
"It has opened up more doors and more opportunities," he said. "For both companies there are a lot of exciting announcements to come. And it's not just [Atari] doing it for them: it's what can Digital Eclipse do for Nightdive and Nightdive do for Digital Eclipse, and what can Atari do for both of them."
Atari, Nightdive and Digital Eclipse now take meetings together as a group, and Rosen said combining their contacts and connections has benefited all three. He also confirmed Digital Eclipse's "Gold Master series," which includes Karateka and the just-released Llamasoft: The Jeff Minter Story, will continue.
"It's something we care deeply about. The first ones are always the most expensive [to develop], because you're laying the groundwork and the foundation for what's to come later. The [financial] value in the Gold Master series is still to come, but we feel really confident in it, and we're going to keep releasing a lot of games for it."
