GamesBeat

The game division of film studio Warner Bros. is expected to buy Midway Games, the once mighty owner of the Mortal Kombat franchise.

The Los Angeles Times reported tonight that Warner Bros. has emerged as the only bidder for the bankrupt video game publisher that was previously owned by Viacom’s chairman, Sumner Redstone. It is expected to pick up Midway for just $33 million.

Warner Bros. Interactive Entertainment is already a major video game publisher. It showed off big titles at the recent E3 video game conference, including a new Lord of the Rings game, Where the Wild Things Are, and an acclaimed Nintendo DS game called Scribblenauts.

Midway has a storied history, starting as a maker of mechanical arcade games in 1958. It expanded into arcade video game machines and built some of the most iconic arcade games in history: Space Invaders, Pac-Man, and Ms. Pac-Man.  By 1999, the company had split into different parts, and Midway left the pinball industry behind, focusing instead on home video games.

Redstone took control of Midway in 2004 and sunk more than $700 million into it before throwing in the towel. Midway controlled the Mortal Kombat, a series where superheroes and martial artists fought extremely violent duels. It also owned franchises such as the Blitz football game series, Joust and Spy Hunter. But it just had too many duds, like Blacksite: Area 51, an alien-shooting game. As the costs of making games rose, the consequences of making bad bets became severe.

Clearly, video games are undergoing a consolidation. Earlier this week, ZeniMax bought id Software for an undisclosed price. The Midway deal shows that Hollywood studios see the value of the game business. The profits in games can be huge. Both a movie and a game might generate $100 million in revenues. But chances are the movie cost $90 million to make and market, while the video game cost $30 million. Games also reach younger audiences.

Besides Warner Bros., Walt Disney Co. and MTV Networks are also investing heavily in games. Those companies are expected to eventually take back the licenses to make movie games from game companies and hand them over to their own internal game studios. That’s one of the reasons Electronic Arts has begun to shy away from movie franchises, though EA still has a big Harry Potter game coming on June 30 with the release of the Warner Bros. film Harry Potter and the Half-Blood Prince.

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