Midway Games Inc.  (MWY) Trade Now »     Rate MWY  -  Discuss MWY  -  Add to Watch List        

Amazingly, sometimes we still hear serious people say the gaming industry is 'recession-proof.'

But let's review: Electronic Arts (ERTS) is struggling, laying off 1100 and slimming its product line. Take-Two (TTWO) slashed guidance. THQ (THQI) is a mess -- profits are down 30% from last year.  Midway (MWY) has only a few more days to live. Eidos saw what was once a sure thing in Lara Croft flop.

Midway Games (MWY) gets a few more weeks to live.

When Sumner Redstone dumped his majority stake in the troubled gaming publisher, the change in ownership allowed Midway's creditors to call in its debt--about $150 million, versus Midway's $10 million of cash on hand. Which effectively meant Midway would be out of business when the notes came due, at the end of January.

Midway Games (MWY) today announced that it will lay off 25% of its staff and take other steps to reduce costs, including shutting its Austin, Texas studio. Other jobs will be cut at studios in Chicago and San Diego. The struggling video game company is also suspending development of “several non-core games.” Midway has about 900 employees.

The company earlier this month hired investment bank Lazard to provide advice on how to deal with a crippling debt burden.

MWY today is down a penny to 18 cents.

Only 50 days to live for Midway Games (MWY)?

Earlier this week, Sumner Redstone sold his 87% stake in the game publisher to private investor Mark Thomas for a paltry sum of about $100,000. But there's a kicker: The sale triggered a provision allowing Midway's creditors to demand immediate repayment of debt, about $150 million. Midway says it expects all its bondholders to demand payment, and it also says it won't be able to meet the request.

Filed under: Deals, Viacom (VIA), CBS Corp 'B' (CBS), Electronic Arts (ERTS), Activision Inc (ATVI)

Sumner Redstone, the executive chairman of both CBS (NYSE: CBS) and Viacom (NYSE: VIA), has been having a difficult time during the recession. Because of financial pressures, he's been forced to sell stock assets to cover some of his debt problems. Now comes word that he's jettisoned his controlling stake in Midway Games (NYSE: MWY).