2019 will bring more mobile games, blockchain, and a new console
Atari CEO Frederic Chesnais recently told us how Rollercoaster Tycoon Touch helped bring back Atari, which, when Chesnais took it over in 2013, had $34 million in debut and a paltry $1 million in revenue.
Now, Atari has no debt, and it recently closed 2018 with good revenue growth (27 percent for the last six months) and strong operating income (up 87 percent in the last six months).
I talked with Chesnais about what he foresees in the year ahead. Atari plans to get back into the hardware business with the 2019 launch of the Atari VCS home console. And Atari is making games again — from original titles like Days of Doom to classic remakes, such as Tempest 4000.
Chesnais said Atari is in better shape than it has been in the past because of the success of its Rollercoaster Tycoon simulation games, including Rollercoaster Tycoon Classic, which launched in 2017. And the company has organized itself into four divisions: Atari Games, Atari Casino, Atari VCS (the console division), and Atari Partners.
Atari has $9.3 million in cash. It has $3 million in preorders for the Atari VCS, and it recently sold off Alone in the Dark and Act of War to THQ Nordic. The company also recently entered into a blockchain partnership with Animoca Brands, which will partner on blockchain versions of RollerCoaster Tycoon Touch and Goon Squad.
GamesBeat: You had some earnings news to talk about.
Fred Chesnais: Right, for the six months ending at the end of September. Just a few words about the numbers and what they show. The numbers are very simple. Revenue has grown 28 percent, at a profit margin of 20 percent of revenue. We're profitable. It's almost a doubling of income from operations. We're generating cash. I think, no matter how the markets react, the numbers are pretty good.
What they show is a couple of key messages. Our biggest division, Atari Games, is still the bulk of our business. It takes time to reboot a company. Two years from bankruptcy, two years to redeem the debt. Now, we're really rebooting. The games are still the core of the company, and they show very good performance. That's the first message. We have a strong Atari Games division, covering both games and licensing. That's software and the exploitation of software.
Our second business unit, online casino, is getting started. I think sometimes people don't understand what we're doing there, but for the moment, it's licensing our properties for real-money casino games. These types of businesses, which are regulated, take a bit more time, but once you're in business and have good games rolling — we're applying for casino licenses online. We're not doing anything physical. But even so, that takes time to build. We're in a pretty good spot right now. I'd expect that second business unit to start delivering next year.
The third area, of course, is the console. These numbers do not include any numbers for the console. The money we've raised, we've just kept that on the balance sheet, and we've kept working on the product. These numbers don't include any impact of the Indiegogo campaign or anything else related to the console. The console will start hitting in the next fiscal year and in subsequent years.
GamesBeat: Was Rob Wyatt still working on it? I know he was going to, and then, he had a skydiving accident and broke his leg a while ago.
Chesnais: We have a very solid team diving into the project. I haven't checked on Rob because I've been working on casino games. Michael Arzt is really in charge of that one.
In a nutshell, though, we have very strong numbers. Games is doing well as the core of the business. Casino is starting to grow. The console, we haven't announced any significant updates. The team will be working on something after CES to provide an update. CES is not contributing anything to the P&L at the moment. We hope it will be a strong pocket of growth for us.
GamesBeat: You have this deal with Animoca to do blockchain-based games.
Chesnais: Right. That was announced two days ago. I just gave an interview on that one to explain what we're trying to do. Let me try to summarize it. I think blockchain is here to stay. It's here to stay in many businesses — finance, identity, and also in gaming. In gaming, it's going to have a significant impact not only through games like CryptoKitties, but it's also going to have an impact on developers. Everyone will create assets in the industry, and, with blockchain, you'll be able to tag and identify and trace every asset.
Let's say I create a one-minute song track or an environment or an animation or a character, an avatar. With blockchain, you'll be able to tag that asset, identify it, and trace it. Especially with things like music, animation, or characters, if it's used along the way by one game or two games, if it's sold five or 10 or a million times, we'll be able to trace it. As far as protecting creations, it's going to be very interesting. That's one of the applications of blockchain.
Inside games, we'll see that as networks grow, we'll have more opportunities to play with things we've never before understood. What we're doing with Animoca, we're creating a game using blockchain not only to have fun and try to make money but also to try to understand and find new ways of how blockchain will impact our business and how we can use it to have more fun — and also more protection. It's about those two uses of blockchain.
I'm happy to work with Animoca. For the moment, what we have in mind is something like, you create a coaster, you blend it with another coaster, and then, you can share it or swap it or sell it and build your collection of coasters. That's one of the applications we're working on. But the broader picture behind this — how can we use blockchain in our business? Let's start with a simple game, but everybody knows we're going to find something that's both fun and more useful for the future. That's why we're doing it.
Blockchain is here to stay. It's the revolution for the next 20 years. Peer-to-peer decentralized ledgers, that's going to affect a lot of industries. We don't want to be the last one to wake up. We want to be among the first to work on it and think about how this can affect our organization.
GamesBeat: Are there any other things in 2019 that are becoming more clear to you, as we come to the end of this year?
Chesnais: For our casino business, in the U.S., we're only doing licensing of our properties to Scientific Games. We're not an operator. In Europe, our second area, where it's legal — France is a monopoly, so there's no way we can operate there — for the last two years we've licensed our properties, but we're going through the process of going direct in Europe and establishing operations to sell or export three types of games: scratch games, slot machines, and lotteries.
Our third area for that business — since we're not going to Asia, not even for licensing — is Africa, which is very promising. Lots of things have changed. There are not many competitors. We're in the process of acquiring the regulatory licenses to operate online casinos in East and West Africa. Here, we're going to go direct. That's my goal for next year, especially with lotteries on the phone, in key countries. For smaller countries, we're working on licenses right now. It's working quite well. I should be able to tell you more around GDC.
I know the numbers. I know what people are doing. I know most of the operators in the area. The numbers I'm seeing — we've not made any cash for the moment, but we've met the test in Europe. We know how the games are doing. We're planning to over-deliver in 2019. It's a very interesting business, but people don't necessarily understand it in the U.S.
GamesBeat: Do you have anything on your radar for CES?
Chesnais: We'll have the team there, but we go to CES basically through our licensees — like the ones doing the Atari Pong table. They'll have a big booth present. Most of our licensees are there. But we're not doing anything direct for the moment. We'll see in 2020.
GamesBeat: As far as the games market overall, does anything stand out to you as an interesting opportunity or something to worry about?
Chesnais: Again, because we're rebooting, we're doing our own games. Our simulation games have an audience that's very stable. It's growing. They're loyal. We're not subject to changes like the big waves of Fortnite versus Call of Duty versus Battlefield. To me, what's going on right now — it's more important for us to remain in the casual field and try not to get into racing or bigger games.
We could do it. We could raise the money to do another game. For the moment, our strategy is still that we have a lot of things to do in simulation and strategy games. We know how to do these games. When I see what's going on in other categories, I feel like we should keep investing in what we know the best. Of course, I keep an eye on what's going on elsewhere, but strategy, simulation, and casual are where we're strong. We don't want to add a new core area. We're going to stay with what we do best.
What I'm seeing in many areas is very volatile. This is almost the only industry, along with the movies, where you can have a new entrant becoming the king in, what, maybe two years? That's pretty cool.
GamesBeat: The Chinese government apparently started approving mobile games again. The agencies are starting to greenlight things that have been held up for months. Overnight, you have a better picture for mobile games.
Chesnais: On November 30, we released our own game, Rollercoaster Tycoon, in China. We made it to number 47 in the app stores over there. I can send you the screenshots from AppAnnie. That's really an achievement for us. We don't trumpet things like this too much because you can never be sure about your approvals. We're just going to keep working.
I feel like we got approved in part because it's Rollercoaster Tycoon. It's a simulation game. It has no message whatsoever other than, “Build something funny and have fun.” We're working through a Shanghai-based studio. They're big fans of the brand, and they were instrumental in pushing the game in China.
GamesBeat: Do you foresee doing a lot more in China over time?
Chesnais: I'm keeping my fingers crossed — but yes. We have two other simulation games — a transportation game and a city-building game — and our Chinese partner is looking into it. We hope to be able to have Chinese versions of those submitted to the Chinese authorities. They're fun, casual, easy to play games. So far, we've had success with Rollercoaster Tycoon, and we look forward to more.
It's more than just translation, just swapping Chinese for English. Our studio there has put in a lot of effort to create a Chinese version of the game. We've changed up a lot of assets to create a Chinese game made by Chinese people using the core game mechanics of Rollercoaster Tycoon. We're also launching a Korean version. That's being finalized for the end of January.
The future is promising. We'll keep working. We've got our heads down on the VCS. There's always a lot to do in these challenging and volatile times.