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'We never really led in any category.'
From the outside looking in, there's a sense that Atari CEO Wade Rosen had steadied the ship since taking the helm in 2021. Prior to that, the company grappled with uneven finances, struggled to realize its vision for the Atari VCS console (after allegedly failing to pay hardware lead Rob Wyatt), and began dabbling in the speculative world of blockchain.
Under Rosen, however, the company has repositioned itself as publisher and developer with a keen focus on preservation. It spent millions acquiring studios including Digital Eclipse and Nightdive Studios while reviving legacy brands like Infogrames. The company also reaffirmed its commitment to the retro console market, debuting the all-new Atari 7800+ at Gamescom 2024. By tweaking its business strategy, Atari managed to double its top-line revenue during the last fiscal year, with Rosen claiming the company is putting in place the "necessary levers for long terms success."
For Rosen, that turnaround was driven by a desire to lead from the front. Speaking to Game Developer at Gamescom 2024, he agrees the company was perhaps flailing when he took charge and seemed content to be a "fast follower in a lot of different categories."
"We never really led in any category," he explains. "So we stopped and we said 'okay, if we're going to be here we have to be best in the world at something.' [...] The first thing was to stop and say 'what are we doing? What can we be the best in the world at?' We looked at the brand. We looked at our internal capabilities. We looked at what we have passion for. What we came back with was 'retro gaming,' and specifically 'modern retro gaming.'"
Rosen feels the industry has perhaps responded well to this new, more refined iteration of Atari because the company has developed "subject matter expertise" in that specific market. He cites the buyouts of Digital Eclipse and Nightdive as two examples of Atari expanding its footprint in a way that really makes sense for the brand, referring to those deals as something of a "North Star" for the business.
Rosen explains the situation at the company was "complicated" when he arrived. "The numbers didn't look bad, but the cash in the company was a challenge," he says. "That can happen in the game industry for a multitude of reasons. People can report positive EBIT [earnings before interest and taxes] but they'll show negative operating cash flow. So the other thing was the really stop and say 'all right, how do we reverse that trend so we're more focused on building a sustainable business that is cash flowing and could exist for another 50 years.'"
When pressed on what the word 'sustainability' means within Atari in the context of wider layoffs and studio closures across the industry (often made in the name of 'sustainable growth'), Rosen feels it's about taking an even-handed approach to expansion. "Something that we wanted to aspire to as a company that had gone through so many ups and downs, and so many of these hyper cycles, was to reduce the cyclicality of that a little bit," he adds. "This is a cyclical business, but how do we not be thrown about so much by that cyclical nature?"
Development and restoration studio Digital Eclipse joined Atari in 2023 in a deal worth up to $20 million
Rosen says that means hiring slowly and expanding steadily—and refusing to put too much stock into perceived industry booms that often result in over-investment. "I think the challenge where sustainable growth [is concerned] is that a lot of companies will double or triple their development costs in a matter of one, two, three years," he continues. "Then we see contraction in the industry—but all of those seeds were sown with the boom. I think, if there's any lesson, it's that if there's a boom to be very skeptical."
He suggests the game industry's biggest problem is taking the past and assuming it will become the future, even when there's no precedent. The obvious example, he says, is how everybody decided to invest more in video games during the COVID-19 pandemic, despite that period of high engagement and spending being the very definition of unprecedented.
"People looked [at the industry during the pandemic] and thought 'oh, demand is up, we should invest more,' not realizing that everybody else was also simultaneously making the same decision. We make decisions that have release two, three, five years later–so everyone was making the decision to ramp up production at the same time, and now we're releasing those things into a market that has decreasing demand and increasing supply.
"The pressure comes from demand, but I would say even more so comes from supply and the belief that if everybody is increasing supply the returns will say the same as they did. That's a fallacy of always looking at the past and not looking forward. If demand would have kept increasing it wouldn't be as bad, but there would still be problems because things were so profitable because of a market that wasn't going to exist in three years."
Rosen says Atari isn't adopting a similarly high-risk strategy when it comes to its own release slate. Instead of banking on home runs, he wants to lean on games that can hit "singles or doubles." Projects that will "have success and are likely to be successful," but aren't going to live or die based on whether they soar out of the park.
What does that mean for the fate of the company's more speculative projects? Discussing Atari X—an ongoing web3 venture that aims to "to create a robust blockchain ecosystem that seamlessly integrates community, gaming, and utility"—Rosen said the segment isn't a "major part of the business we do."
"On the blockchain side, it's really just licensing with some of the larger players. It's really just a small part of our business. That team is really just licensing at this point, so there's really nothing to downsize there," he adds, referencing the company's decision to cut ties with one partner in that space in 2022.
In its latest fiscal report, Atari stated the "general blockchain environment remained challenging" and said it has "expanded from a web3 only focus towards a larger community led initiative including cross-collaborations with other Atari lines of businesses and select partners, exclusive merchandise, and the launch of Atari Club."
Atari remains active in the web3 space
The company added that it terminated its previously announced new token project, blaming the "current regulatory and commercial environment" and its own shifting "strategic priorities." As for why Atari ventured into the web3 space, including starting new ventures under Rosen, he suggests the cynicism surrounding the technology is warranted but claims there are some who genuinely believe it can be used to create "useful and meaningful" experiences. He does, however, admit those projects have "yet to be proven out."
"I think a lot of people viewed it much like AI is today, like 'hey, this is where the money is so lets pivot quickly to that.' It's tough to sift through and really make sure you're trying to work with partners who believe in that," he says. "Most of our licensing partners work hard to make sure their coinbase is one of the few you can do much with, and I think they're genuinely trying to create an interesting ecosystem. Whether that will go anywhere or not remains to be seen."
Looking towards the future, Atari remains interested in acquiring more IP as it looks to cement itself as a preservationist publisher. Rosen adds the company "wouldn't say no" to more studio acquisitions, but says Atari won't be spending with carefree abandon. "With a studio, you're bringing on capability but also people—and with that comes complexity and the potential for things to go wrong. What people also don't consider is the opportunity cost," he says.
"As soon as you do that it takes your team a long time to merge and start working together. That will come at the cost of doing something else. [...] I have to remind myself of that all the time. It's not just the cost of paying, it's the fact that I've paid a cost and am now having to give up an opportunity. Those [acquisitions] will make sense, but they're few and far between. We're trying to stay focused on the main goal, which is sustainability."
You can hear more from Rosen by checking out the latest edition of Patch Notes.
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