Stonecutter
05-24-2003, 10:26 PM
http://www.chicagotribune.com/technology/chi-0305230224may23,1,5684087.story?coll=chi%2Dhomepagebiz%2Dutl
Midway's new CEO sets sights on revival
By Rob Kaiser
Tribune staff reporter
Published May 23, 2003
Leaving his job as president of Playboy Enterprises Inc., David Zucker is moving into the media that now widens young men's eyes: video games.
The 40-year-old Zucker, named chief executive and president of Chicago-based Midway Games Inc. this month, expects his experience at Playboy, ESPN and other male-oriented media outlets will help him turn around the struggling video game-maker.
A pioneer in coin-operated arcade games, Midway has had trouble adjusting as video games have moved from arcades to living rooms with the growth of home systems like the Sony PlayStation and Microsoft Xbox.
While successfully recycling some of its games for home play, particularly Mortal Kombat, Midway has been plagued by missed launch dates and an inability to generate excitement around new titles. The company has been in the red for 13 consecutive quarters.
"Midway is kind of a broken story," said Paul Kaump, senior equity analyst at Dougherty & Co. LLC in Minneapolis. "They really need somebody to come in and shake that operation up. Essentially, you need to break the model."
Zucker now has the hammer.
While Zucker expects his prior experience will help Midway connect with gamers, his current and former employers appear headed in opposite directions. To attract more celebrities onto its pages, Playboy plans to let some models be less revealing.
Meanwhile, Midway, having lost ground to Electronic Arts Inc. and other makers of reality-based video games, is pushing into the realm of "mature" games that rely on more violent content to satisfy the appetites of increasingly older players.
One new Midway game, called "The Suffering," is set inside a maximum-security prison and billed as an "action-packed survival horror game."
Zucker noted how much the video game audience has changed in recent years: While nearly two-thirds of the original PlayStation users were under 18, now 70 percent of PlayStation 2 users are older than 18.
The video game industry also has grown, with sales of hardware and games exceeding $10 billion last year, according to the research firm NPD Group.
"Video games have really leapfrogged the movie business," Zucker said. "This is really the future of entertainment."
Midway, though, hasn't taken part in much of the industry's growth. Spun out of slot machine-maker WMS Industries in 1996, Midway's revenue has fallen from $391 million in 1998 to $191 million last year. Most of the drop was due to the decline of arcades and the company's exit from coin-operated games in 2001, but its sales of home video games also have fallen.
Midway shares have fallen 85 percent since the beginning of 2000, closing at $3.63 Thursday on the New York Stock Exchange.
Before the rise of technologically advanced home systems, Midway could easily turn its popular arcade games into home game hits, said Neil Nicastro, the company's previous CEO and current chairman.
"It was a great formula," Nicastro said.
But the introduction in the late 1990s of more advanced Nintendo and PlayStation machines led to a demand for games with greater depth. Instead of providing a two-minute jolt of entertainment, as in an arcade, players wanted to play games for an hour or longer, Nicastro said.
Nicastro and analysts said Midway has gone through a difficult adjustment, resulting in delays in the introduction of new games.
Another problem Midway has had is predicting what games players want.
Last year, the company tried to round out its portfolio of games by introducing a couple of Mario Brothers-like adventure games, just as interest in that area evaporated.
"It was a swing and a miss big time," Kaump said.
Investors wanted change
The analysts said Midway was due for a leadership change since Wall Street had lost confidence in Nicastro after he repeatedly missed earnings targets.
Nicastro does little to defend Midway's recent performance. "In this day and age, if you're not meeting expectations, you should make changes," he said.
Zucker said that while Midway has been willing to take risks before on new games, he's aiming to correct the company's organizational issues and create a culture capable of consistently delivering successful titles.
Although the executive has worked in several media arenas, he has limited experience in video games. Early in his career, Zucker helped manage shows such as "MacGyver" and "Coach" at ABC Entertainment. He stayed at Walt Disney Co. to work at ESPN, helping launch ESPN2, the X-Games and ESPN International.
Zucker then led a pair of online gaming and video on demand start-ups at Walker Digital, and he joined Playboy nearly a year ago as the company's president and chief operating officer, a role created to relieve CEO Christie Hefner of much of the day-to-day tasks in running the business.
Zucker said he left Playboy for the opportunity at Midway, not because of problems at his former job.
"It has always been my goal to run a publicly traded entertainment company," he said.
Company has its fans
While his new employer is down in Wall Street's eyes, Midway does have its supporters.
Media magnate Sumner Redstone, chairman and CEO of Viacom Inc., owns a large stake in Midway and has been snapping up shares recently. Redstone and his ex-wife own 37.6 percent of the company, according to a recent Securities and Exchange Commission filing.
A Viacom spokesman did not return a call for comment, but Midway officials have said they don't think Redstone intends to take over the company.
Michael Pachter, an analyst at Wedbush Morgan Securities in Los Angeles, said he thinks Midway's push into mature games should pay dividends, particularly since industry leader Electronic Arts is staying away from that category. "I think that Midway got the right formula this time," he said.
Copyright © 2003, Chicago Tribune
Midway's new CEO sets sights on revival
By Rob Kaiser
Tribune staff reporter
Published May 23, 2003
Leaving his job as president of Playboy Enterprises Inc., David Zucker is moving into the media that now widens young men's eyes: video games.
The 40-year-old Zucker, named chief executive and president of Chicago-based Midway Games Inc. this month, expects his experience at Playboy, ESPN and other male-oriented media outlets will help him turn around the struggling video game-maker.
A pioneer in coin-operated arcade games, Midway has had trouble adjusting as video games have moved from arcades to living rooms with the growth of home systems like the Sony PlayStation and Microsoft Xbox.
While successfully recycling some of its games for home play, particularly Mortal Kombat, Midway has been plagued by missed launch dates and an inability to generate excitement around new titles. The company has been in the red for 13 consecutive quarters.
"Midway is kind of a broken story," said Paul Kaump, senior equity analyst at Dougherty & Co. LLC in Minneapolis. "They really need somebody to come in and shake that operation up. Essentially, you need to break the model."
Zucker now has the hammer.
While Zucker expects his prior experience will help Midway connect with gamers, his current and former employers appear headed in opposite directions. To attract more celebrities onto its pages, Playboy plans to let some models be less revealing.
Meanwhile, Midway, having lost ground to Electronic Arts Inc. and other makers of reality-based video games, is pushing into the realm of "mature" games that rely on more violent content to satisfy the appetites of increasingly older players.
One new Midway game, called "The Suffering," is set inside a maximum-security prison and billed as an "action-packed survival horror game."
Zucker noted how much the video game audience has changed in recent years: While nearly two-thirds of the original PlayStation users were under 18, now 70 percent of PlayStation 2 users are older than 18.
The video game industry also has grown, with sales of hardware and games exceeding $10 billion last year, according to the research firm NPD Group.
"Video games have really leapfrogged the movie business," Zucker said. "This is really the future of entertainment."
Midway, though, hasn't taken part in much of the industry's growth. Spun out of slot machine-maker WMS Industries in 1996, Midway's revenue has fallen from $391 million in 1998 to $191 million last year. Most of the drop was due to the decline of arcades and the company's exit from coin-operated games in 2001, but its sales of home video games also have fallen.
Midway shares have fallen 85 percent since the beginning of 2000, closing at $3.63 Thursday on the New York Stock Exchange.
Before the rise of technologically advanced home systems, Midway could easily turn its popular arcade games into home game hits, said Neil Nicastro, the company's previous CEO and current chairman.
"It was a great formula," Nicastro said.
But the introduction in the late 1990s of more advanced Nintendo and PlayStation machines led to a demand for games with greater depth. Instead of providing a two-minute jolt of entertainment, as in an arcade, players wanted to play games for an hour or longer, Nicastro said.
Nicastro and analysts said Midway has gone through a difficult adjustment, resulting in delays in the introduction of new games.
Another problem Midway has had is predicting what games players want.
Last year, the company tried to round out its portfolio of games by introducing a couple of Mario Brothers-like adventure games, just as interest in that area evaporated.
"It was a swing and a miss big time," Kaump said.
Investors wanted change
The analysts said Midway was due for a leadership change since Wall Street had lost confidence in Nicastro after he repeatedly missed earnings targets.
Nicastro does little to defend Midway's recent performance. "In this day and age, if you're not meeting expectations, you should make changes," he said.
Zucker said that while Midway has been willing to take risks before on new games, he's aiming to correct the company's organizational issues and create a culture capable of consistently delivering successful titles.
Although the executive has worked in several media arenas, he has limited experience in video games. Early in his career, Zucker helped manage shows such as "MacGyver" and "Coach" at ABC Entertainment. He stayed at Walt Disney Co. to work at ESPN, helping launch ESPN2, the X-Games and ESPN International.
Zucker then led a pair of online gaming and video on demand start-ups at Walker Digital, and he joined Playboy nearly a year ago as the company's president and chief operating officer, a role created to relieve CEO Christie Hefner of much of the day-to-day tasks in running the business.
Zucker said he left Playboy for the opportunity at Midway, not because of problems at his former job.
"It has always been my goal to run a publicly traded entertainment company," he said.
Company has its fans
While his new employer is down in Wall Street's eyes, Midway does have its supporters.
Media magnate Sumner Redstone, chairman and CEO of Viacom Inc., owns a large stake in Midway and has been snapping up shares recently. Redstone and his ex-wife own 37.6 percent of the company, according to a recent Securities and Exchange Commission filing.
A Viacom spokesman did not return a call for comment, but Midway officials have said they don't think Redstone intends to take over the company.
Michael Pachter, an analyst at Wedbush Morgan Securities in Los Angeles, said he thinks Midway's push into mature games should pay dividends, particularly since industry leader Electronic Arts is staying away from that category. "I think that Midway got the right formula this time," he said.
Copyright © 2003, Chicago Tribune