Sumner Redstone’s Midway Games reported a slow first quarter with no major new releases and announced plans to increase internal development spending, driving up its predicted net loss for the year.
Chicago-based company, in which Viacom chairman Redstone has a majority stake, saw revenue fall 31% to $13.8 million in the first quarter, while its net loss was up 12% to $15.9 million. Midway released only one budget game and a GameCube version of its hit “Mortal Kombat: Deception” during the quarter.
With its pipeline growing, Midway also disclosed it will develop more of its products for next-generation consoles inhouse, which will drive up production spending this year. Company increased net loss guidance for 2005 from $38 million to $47 million.
A number of Midway’s upcoming projects are based on licensing deals it recently signed with Cartoon Network and WB to bolster its product lineup. Company will produce games based on Cartoon Net’s Adult Swim lineup, as well as WB toons “Happy Feet” and “Ant Bully.”
Midway is not the only vidgamer to report lower Q1 earnings. Activision recently said its first-quarter profit fell by nearly half to $3.6 million, even though revenue was up 25% at $204 million. Publisher, which has games based on “Madagascar” and “Fantastic Four” in the works, disappointed Wall Street with predictions it would report a small loss this quarter.
THQ was the only company to report a boost in first-quarter earnings, based primarily on its “Incredibles” game, which has sold more than 4.5 million units, as well as strong sales for “The Punisher,” based on the Marvel comic and last year’s Lions Gate pic. Company’s profit jumped 86% to $10.1 million, while revenue rose 40% to $171.9 million. But company also predicted a wider-than-expected net loss this quarter on higher spending.
News comes after industry giant Electronic Arts reported that its net income fell and predicted a loss in the current quarter (Daily Variety, May 4).
Midway shares were up 1% at $9.43 before earnings were announced Monday. THQ shares were up 5% at $27.27 since earnings were announced last Wednesday, while Activision stock was up 3% at $15.48 since its earnings report last Thursday.