Page 4 - OSG Presents Video Game Trader Magazine #14

Less Really Is nies in fad businesses have a more managed growth
pattern. They don‘t build up the management structure
to suit the peak years. Atari continued to beef up its
More $500 million a year, had a lot of problems. But most ing staffs—at one time an estimated 300—so that when
ATARI INC., like any company with losses topping management, research and development and market-
industry analysts agree that one of its major handicaps sales abruptly stopped doubling and started plunging,
Video Game Trader is going to be sent on a quarterly was that the video-game and home-computer firm had they toppled over.‖
basis from this point on.
just grown too fat during its good years. Another problem was the company‘s basic struc-
Still with me? Stings, don‘t it? Like quickly yanking a Jack Tramiel, controversial founder and former ture. The new management was trying to merge the
band-aid off of a particularly sensitive wound, right? president of Commodore International Ltd., who has video-game and computer divisions, which had been
Now before you fire up your email clients and send purchased the troubled subsidiary of Warner Communi- run separately, said a vice president of sales, inter-
scathing emails demanding particular organs to be
removed from Tom‘s body, hear me out for a few hun- cations Inc. in a deal valued at about $300 million, is viewed in February after Morgan had been chairman
dred words. While I abhor the use of marketing buzz- known as the type of chief executive for whom the term for almost six months.
phrases, ―less is more‖ really does sum up what we ―lean and mean‖ was invented. ―Not only was it costly, but it was counterproduc-
here at V.G.T. are trying to do and hopefully in the next If anybody can make Atari profitable again, it‘s tive; neither side knew what the other was doing or
couple paragraphs, you‘ll think so too. Tramiel, say friends and foes alike. But it is unlikely to planning.‖ he said then.
We‘ve always wanted the magazine to grow. We be painless. That dual operation was one of Atari‘s main prob-
started out as a humble online only mag that soon Within hours of his first walk-through of his new lems, said another executive no longer with the com-
jumped to a 50/50 electronic/print format to finally the company Monday, Tramiel began wholesale layoffs, pany. ―There were two distinct staffs, both bloated, and
product you have in your hands. However we‘ve which could cut as many as 1,000 persons off the they spent money like water.‖ he said.
reached a fork in the road-do we continue on our sub- 5,000 member staff worldwide. Adding to the difficulties, observers say, was
scription only path or do we attempt to travel up a large
hill to have V.G.T. adorn retail shelves and introduce an By the end of his first week, he had made it clear Atari‘s handling the two products as if they had sepa-
even larger audience to the glory of retro gaming? After that in addition to personnel cutbacks, there would be rate markets. ―Atari viewed the two marketplaces as
much debate, we decided to take the more difficult path cost-cutting measures instituted throughout the com- separate: a video-game-machine market and a home-
and go all out for brick-and-mortar domination. In order pany, including closing a manufacturing plant in El computer market. That was a big mistake.‖ the sales
to do that we have to increase our page count to be Paso, Tex. He also had named his three sons to top executive said. ―They had the best computer on the
able to be placed into stores BUT to do that we have to management positions. market for three years, voted as the ‗hobbyists‘ choice.
reduce our the number of issues to maintain our budget.
Even though V.G.T. is a labor of love and it is success- ―He was greeted with nothing short of terror by the They should have tried to combine the two and sell
ful, it‘s still a business. There‘s just going to be some staff on his first day,‖ said a former executive who their low-end computer as a video game.‖
growing pains. keeps in touch with his one-time co-workers, whose The sale of Atari to Tramiel, who left Commodore
morale has taken a roller-coaster ride along with the suddenly and without explanation in January, ―came
So what does this change mean to you, John or Jane Q.
Reader who took a chance and subscribed to our hum- company‘s profits and losses in the last five years. out of the blue,‖ said one spokesman for Commodore
ble publication besides a longer wait between issues? The major problem with the Atari-Warner marriage, who has know Tramiel for seven years.
which was consummated in 1976, when Warner Com- It was no secret that Atari was on the block, but the
You will NOT lose any issues. Current subscribers will munications purchased Atari from founder Nolan Bush- primary suitor was perceived as N.V. Philips, the Dutch
continue to get the same number of issues they paid for.
It just won‘t be bi-monthly. nell for $15 million, was ―total mismanagement‖ by electronics firm, with whom negotiations had been
Warner, said Harold Vogel, an analyst with Merrill continuing for months. Warner apparently just couldn‘t
The pacing will give our writers more time to write and Lynch, Pierce, Fenner & Smith Inc. in New York. get enough money out of Philips, one analyst said.
polish their articles for your enjoyment (or just give them The former executive, who asked anonymity, con- Preliminary talks with Tramiel began in late May
more time to procrastinate…*cough* like me *cough*).
curs. ―Warner ran Atari like a movie studio.‖ he said. and intensified late last month, with the announcement
The larger page count will allow even more articles to ―The engineers and conceptual people were the of the sale coming Monday.
be in each and every issue. stars, and whatever they wanted they got. There was a Beyond the early blood-letting, speculation on
After your current subscription is up, the rates will de- cadre of executives who rose quickly through the ranks Tramiel‘s moves vary. Most industry observers agree,
crease to just $14.99 for quarterly issues. without benefit of the sophistication, education or ex- that given his dazzling success with Commodore, he
perience that comes with time. They should have got- will concentrate on the computer side of the business.
So that‘s the scoop. It may be an awful pill to swallow
at first but know that we aren‘t going anywhere. Heck ten that sophistication and savvy from the parent com- The Commodore spokesman, however, pointed
we‘re just getting started. So kick back and enjoy the pany, but they didn‘t, because Warner isn‘t a strong out that Tramiel was impressed with the revenues
―Mascots‖ issue you have in your hands and we‘ll defi- management company itself, and it couldn‘t teach generated in the past by the games division and is
nitely see you next time. something it didn‘t know to its subsidiary,‖ said the unlikely to let it drop. The game machines will continue
executive, who spent 1983 on the Atari payroll. as a standard, Ladd predicted, as long as Tramiel

Par of the problem, said analyst Robert Ladd of doesn‘t have to pump any money into it.
Duff & Phelps in Chicago, is that the market suddenly Tramiel is described variously as ―brilliant, tough,
fell apart on the video-game industry at the same time aggressive and willing and able to change course in
that competition grew stronger in the home-computer midstream,‖ but he‘s also characterized as harsh and
-Dan Mahlendorf industry. Atari‘s management, he added, had grown lacking in empathy with an emphasis on leanness that
used to the good times and hadn‘t prepared for the can be brutal.
lean ones. Speculation runs heavy that the new Atari will veer
From 1979 to 1982, Atari‘s sales towards an all-out attack on Apple Computer rather
doubled each year, reaching a peak of than the low-end, Commodore home-computer market.
$2 billion. Last year, revenues were Ladd said Tramiel is likely to come out with an
halved, dropping to $1.1 billion, and Apple IIe-type computer as far as capabilities go, but
speculation is that they were well on with a price of $300 or $400 rather than $1,000.
their way to being halved again this ―I don‘t see him coming out with a $1,000 com-
year. A recent Fortune magazine arti- puter to attach Apple straight on at its own price point,‖
cle said former Chairman James Mor- Ladd said. ―The only way I can see Tramiel coming out
gan had revised his 1984 budget to with something at that price is if he introduces a Macin-
show sales of $500 million. tosh-type model in the $1,000 range.‖
―Management got greedy,‖ Ladd Macintosh is Apple‘s newest star, a 32-bit office
said. ―They saw only the up side of the microcomputer that retails for $2,495.
business. They didn‘t see it in the
context of a fad market. Most compa-
4 • Video Game Trader Magazine • Issue #14 • Winter 2009/2010 • www.VideoGameTrader.com