MTV and Midway deal as Redstone scoops up stock

Midway Games and MTV today announced a partnership that will see the two companies market and jointly sell in-game advertising and collaborate on soundtrack development for three upcoming games. Under the deal, the companies said MTV will participate in a royalty-sharing formula.

The first game to benefit from the alliance is L.A. Rush, due in October from Midway. According to a statement, the game will feature "MTV branding throughout the game world." The cast from MTV's Pimp My Ride will also have significant exposure in the game.

The other two games in the deal will be announced sometime in the future.

The deal is being spearheaded by recent hire Jeff Yapp, who hails from Cablevision, where he was president of the retail group, and, prior to that, Hollywood Entertainment Corp., the video- and game-rental chain where he was president and chief operating officer.

Yapp is now executive VP of MTV Networks Music and Logo Enterprise Group. Earlier this month, Variety said that MTV would collaborate with Myelin Media in that publisher's upcoming poker sim, Stacked, though details of the deal remain unclear. But it does seem to herald a more game-savvy MTV. Variety added that Yapp's division at MTV would develop its own games internally, as well as "strike partnerships with existing game developers."

Today's news also sets the stage for an even closer linking of Viacom CEO Sumner Redstone and Midway. Ever since Viacom said in SEC filings that it was looking at Midway (as well as other game makers) in the context of its being a takeover target or partner, many have speculated it was only a matter of time before Redstone's National Amusements Inc. would purchase the game publisher outright. Redstone, through National Amusements, currently owns about 82 percent of Midway Games' stock.

The likelihood of such linkage solidified earlier this month. In a statement that accompanied the June 14 announcement that Viacom would be spinning off its CBS broadcast network, Redstone said, "We anticipate that Viacom stock will attract a higher trading multiple that can in turn be used for targeted acquisitions in promising areas. With the increased importance of wireless, online, and video gaming businesses, the ability of the new Viacom to be opportunistic will be a distinct and powerful advantage."

On that news, one industry analyst told Crain's Chicago Business, "There's no doubt that Viacom is going to be big into video games within five years. With all the connections there, Midway obviously is a name that comes to mind."

Redstone himself offers some obvious transparency, telling the New York Times today, "I think the Midway assets can help MTV get into the game business in a productive way."

As for Redstone's ongoing intent to take over Midway, a listing of stock transactions for the month of June (listed in reverse chronology below, through June 22) shows his wholly owned National Amusements Inc. as having acquired an additional 1.2 million shares of Midway in a few weeks.

From the perspective of Midway, the deal seems to offer a competitive edge to the game publisher, which has only recently shown itself capable of turning profitable quarters. "MTV is a key partner in terms of overall marketing reach; their programming truly defines pop culture worldwide," Midway pres and CEO David Zucker said in a statement. "By combining forces with MTV, we ensure that great titles like L.A. Rush, which are targeted to passionate gamers, get the maximum amount of exposure."

Redstone's recent transactions

Transaction date - number of shares bought - share price - total cost
6/22/05 - 74,500 - $10.98 - $817,637.50
6/21/05 - 84,100 - $10.89 - $915,428.50
6/20/05 - 80,900 - $10.92 - $883,428.00
6/20/05 - 3,200 - $10.91 - $34,912.00
6/17/05 - 48,000 - $11.07 - $531,360.00
6/16/05 - 47,600 - $10.80 - $514,080.00
6/15/05 - 77,200 - $10.63 - $820,250.00
6/14/05 - 72,600 - $10.46 - $759,396.00
6/13/05 - 77,200 - $10.33 - $797,090.00
6/10/05 - 74,800 - $10.14 - $758,098.00
6/10/05 - 3,700 - $10.08 - $37,296.00
6/09/05 - 78,500 - $9.71 - $762,235.00
6/08/05 - 78,500 - $9.50 - $745,357.50
6/07/05 - 76,500 - $9.48 - $725,220.00
6/06/05 - 78,500 - $9.42 - $739,470.00
6/03/05 - 70,000 - $9.28 - $649,600.00
6/02/05 - 78,800 - $9.28 - $731,264.00
6/01/05 - 74,400 - $9.09 - $676,296.00