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Atari closes doors on Shiny.

Again, thanks to Gamespot.

Shiny Entertainment, the studio behind the Earthworm Jim franchise and two high-profile titles based on the The Matrix sci-fi film trilogy, has been sold by its owner, Atari.

The buyer is Foundation 9, a fast-growing consortium of development studios that includes The Collective, Backbone Entertainment, Pipeworks, ImaginEngine, and Digital Eclipse.

Purchased in 2003 for an estimated $45 million, Atari said last January that the studio was up for sale. To facilitate the sale, founder and then-CEO Dave Perry said he would step down. He has since gone on to found an independent game-dev consultancy firm.

In a statement released at the close of trading today, Foundation 9 chairman and CEO Jon Goldman said, "Shiny Entertainment fits well with the current studios of Foundation 9 Entertainment and aligns with our long-term goals for the future."

The operations of Shiny will soon transition to the facilities occupied by The Collective, a studio which also has a long history in making games tied to movie and TV licenses. The shop has made titles based on The Da Vinci Code and Indiana Jones films, and is currently working on an adaptation of Dirty Harry.

"The studio has tremendous talent and experience working with big Hollywood franchises," Goldman said, "and will be working with us on a major, as-yet-undisclosed day-and-date release."

Shiny's connection with "big Hollywood franchises" started in 2000 when the studio was handed responsibilities for creating a game based on The Matrix. Shiny was owned at that time by Interplay, but during the making of the game (and movie), Interplay sold Shiny to Atari, and the license transitioned to Atari, as well. The game, Enter the Matrix, was released as planned in May of 2003. It went on to sell millions of units, in spite of ho-hum reviews. Shiny followed up that title with a second Matrix-based game, 2005's The Matrix: Path of Neo. It fared better with critics but not as well at retail, selling just over 500,000 copies in the US to date.

In February 2006, reacting to its dismal financial condition, Atari said it was putting Shiny on the auction block as part of an internal studio sell-off (which included Reflections, the studio behind the Driver franchise that was sold to Ubisoft in August). Today's news ends the search for a buyer, and provides Atari--which hasn't posted a profit since 1999--with much-needed capital.

"The sale of Shiny Entertainment completes the final phase of our strategic restructuring," Atari president and CEO David Pierce said in a statement

Terms of the sale were not announced, although one industry source estimated the studio's worth could be determined on a per-employee valuation of $500,000 per person. With a headcount of 40 (see below), that would mean Foundation 9 paid around $20 million for the studio.

[UPDATE] When contacted shortly after the deal was announced, Shiny founder David Perry told GameSpot he can "rest easy now, as I've been waiting to see if Atari would put Shiny back on the market." Perry added a nice twist to what might have been, saying, "if no buyers surfaced, I was planning to buy the team back myself."

Reflecting on the buyers, Foundation 9, Perry portrayed it as a company on the rise: "Foundation 9 is growing from strength to strength and had been doing a great job of attracting top Hollywood licenses (Star Wars being a good example). I found it funny last year when we actually bumped into each other when pitching a particular Hollywood director. The fact that they were there showed me they were very aggressive. Having done deals like Dirty Harry, they definitely have some fun projects for their staff to work on, [but] now that Foundation 9 has locked a deal down, I could not be happier for my old crew."

And of The Collective, Shiny's soon-to-be officemates, Perry also had positive things to say, indicating he had recently engaged principals at the company on the topic of a sale: "I'm very good friends with the heads of The Collective, and when I was looking for buyers in February I'd discussed the idea with them." [END UPDATE]

According to a statement, the terms of the deal stipulate that the Shiny team "will remain intact" as it relocates and joins forces with The Collective--a move that is slated to take place sometime in 2007. In addition, Atari said it will retain ownership of the Earthworm Jim brand.

GameSpot spoke with Foundation 9 CEO Jon Goldman for additional color on the transaction.

GameSpot: Shiny Entertainment has, of late, been indelibly linked to the Matrix license. As a result of the acquisition, does F9 own any part of that license now?

Jon Goldman: No, we do not, although Circle of Confusion, the film/tv management and production company in which Foundation 9 has a large minority interest, represents the Wachowski Brothers, and we're definitely enjoying exploring future opportunities together with this caliber of talent. Coincidentally, it turns out that Andy Wachowski is a fan of our original IP, Death, Jr., separately from recognizing our involvement.

GS: What role did Shiny founder Dave Perry play in the deal? Is there a chance Dave would return to the Shiny/F9 fold now that the sale of the studio is complete?

JG: Dave was not involved in the transaction. He had already left Atari.

GS: Exactly what does F9 acquire in the deal? Staff/talent, technology, licenses?

JG: Our focus was talent and technology. It didn't hurt that Shiny is local to The Collective, our studio in Newport Beach. This makes collaboration a lot easier, more likely. There's not really a lot of granularity to go into, since this is an asset purchase, not a complex transaction. We really like Saxs (Michael Persson) and his team, and as everyone knows, it's hard to find enough great people to work with in this industry.

GS: The draft release states: "Under the terms of the deal, the Shiny team will remain intact and continue with its existing projects." Can you elaborate on the current projects being worked on at Shiny?

JG: Soon, we'll be able to make an announcement. But this team is busy and growing. It should be a very healthy operation in the neighborhood of 80 people over the course of 2007. Job seekers in Southern California should definitely check out f9e.com for all of our job openings.

GS: Atari isn't exactly in the strongest of financial shape. You must have picked up the operation for a song. That so?

JG: I think Atari has recently completed some financing. Obviously, this isn't the sort of dirt you'd ideally like to hear, but it was a fine transaction for both parties. From our standpoint, we were buying a great studio that we expect will make a strong contribution to our future, not bargain shopping at the flea market in Paris.

GS: You say in a statement: "[Shiny] will be working with us on a major, as-yet-undisclosed day-and-date release." A very tantalizing tidbit of information. I assume a movie tie-in. What more can you tell us about the project?

JG: We can't disclose this just yet, but, yes, it is a movie tie-in, and the early game is looking great. I think there will be opportunities for Collective and Shiny teams to share best practices, but with titles like The Matrix, Shiny also has plenty of film experience. One thing we're finding by pulling developers together is that smart people naturally share the best solutions. They can't help it. It doesn't need to be mandated from above. Talented people always want to do better, and that's the type of collaboration we're expecting in Newport.

GS: When you work with venture-capital money, I presume you need to sell the partners on the deal points and acquisition property. What was it about Shiny that Francisco Partners, the group that funded the acquisition, found valuable? What were the tough questions they asked about the deal?

JG: Francisco has had numerous conversations with Atari over the years, so they are pretty familiar with the opportunities there. It didn't take much convincing for them to see the fit. Francisco is a financially oriented investor, so a deal needs to make dollars-and-cents sense. They trust us to understand the strategic fit issues. Like I said when we first announced our relationship with Francisco, one of the huge benefits in our mind was that they had spent a lot of time investigating the video game industry and therefore did not need to be taken back to first principles. Our lead investor, Brian Ruder, plays games, knows all the players and certainly understands the business dynamics of the game industry as well as anyone. In the case of Shiny, he was onboard immediately. It doesn't hurt that we hired Eugene Mesgar out of Francisco to be our new VP of corporate development. He can deal with all the tough questions! By the way, for other developers interested in exploring relationships with us, Eugene is certainly the man to reach: [email protected].

GS: Can you bullet point how Shiny looks day one as a F9 property? How many headcount? Who is the studio's director or general manager? When does staff relocate to The Collective location?

JG: Forty or so people, growing to 80. [We're] working on all platforms except for DS right now. Michael Persson is the studio head. And, we expect to colocate in March, when we, The Collective, and Shiny, all move into a new, larger location with 55,000 whopping square feet.

GS: Where does worldwide F9 headcount stand now, including Shiny?

JG: In the 450 to 500 range and growing. This does not include full-time equivalents who are contracting. We have a lot of mouths to feed!

GS: What's the philosophy of F9 when it comes to the PlayStation 3 and Wii?

JG: One of the goals of scale is to cover all platforms and not place bets on some platforms to the exclusion of others. As long as a title makes financial sense, we'll consider it, regardless of the platform. But, yes, we are absolutely working on both PS3 and Wii. There are going to be a lot of choices for gamers, and we'll be making games for as many folks as we possibly can. Just like you, we'll watch how the consumer responds, but no matter which platforms pull ahead, Foundation 9 will be there.

GS: Thanks, Jon.

Posted by Ed on October 03.

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