Warner Bros. has emerged as the only bidder for Midway Games Inc., all but assuring that it will take control of the bankrupt video game publisher previously owned by Viacom Inc. Chairman Sumner Redstone and become a major force in the video game industry.
Midway had hoped that the film studio's $33-million offer, made in late May, would spark a bidding war that would boost its price. A Chicago investment group and several game publishers kicked the publisher's tires, according to a source familiar with the discussions, but none pulled the trigger.
"No other bids came in, so there's not going to be an auction," Geoffrey Mogilner, a Midway spokesman, confirmed.
Redstone, who took control of Midway in 2004, was never able to bring the troubled company to profitability. He sold it at a huge loss to a private investor last November in exchange for a $700-million tax write-off that has since led to a lawsuit from the publisher's creditors.
Integrating Midway will significantly expand the scope of Warner Bros. Interactive Entertainment, the studio's small but growing video game division. Warner has acquired three game production companies in recent years and hired industry veteran Martin Tremblay as WBIE president. It also tried, unsuccessfully, to buy Eidos, the British publisher of the Tomb Raider games.
Although Midway has declined in significance in the last few years because of big losses and poor-selling games, it is still a well-known brand with a rich library of titles that Warner will be able to exploit as games or, potentially, movies and TV shows.
"We bid on Midway because we are interested in their catalog of intellectual properties," Tremblay said in May.
Assuming the deal goes through, the studio will take control of most of Midway's assets, including Mortal Kombat and well-known but dormant game series such as Joust and Spy Hunter. It will also get two production houses in Chicago and Seattle.
That would allow Warner to expand its video game lineup, which currently includes titles based on "Where the Wild Things Are," "The Lord of the Rings" and the "Harry Potter" books, as well as an original game called Scribblenauts that received numerous awards at the E3 industry conference.
"Building a company takes time," Tremblay said of his division's growth plans. "We have one of the most efficient distribution channels in the world. We have strong intellectual properties. But we're missing a third piece: talent."
Warner Bros. is one of three major media conglomerates, along with Walt Disney Co. and MTV Networks, to invest hundreds of millions of dollars in video games recently in an effort to reach younger audiences and tap a fast-growing market as traditional cash cows like DVDs decline.
Before the deal is complete, the Delaware court overseeing Midway's bankruptcy must address complaints by several creditors about the sales process. One of those is producer Larry Kasanoff's Threshold Entertainment, which worked on two "Mortal Kombat" films and claims it has the exclusive film and TV rights to the series. Also objecting is Tigon Studios, a production company controlled by Vin Diesel, which said in a filing that it is owed $200,000 for the star's work on the Wheelman game.
A court hearing to address those and other issues is scheduled for Wednesday.