Ratbag from another perspective

Stan Beer
Friday, 27 January 2006 06:18

IT Industry - Development

New reports from former Ratbag employees have indeed confirmed earlier accounts of the demise of the company at the hands of the new US owner Midway Games. However, perhaps people are looking in the wrong direction for the reasons behind the closure.

Yes, it is true that senior vice president Matthew Booty paid a visit to the Adelaide-based company two weeks before Christmas to hand the 70 or so employees their pink slips. He and an HR manager gave the company 24 hours to come up with a good reason to avoid the shut down.

However, very little light has been shed on the reasons as to why a company would pay $7 million in company stock for another company, only to shut down its operations four months later. Pundits have speculated that Midway is in trouble financially and decided to cut its losses, knowing that part of the $7 million acquisition fee was performance related and would therefore not have to be paid. Others have ventured the opinion that the later purchase of a PS3 developer in Germany made the Australian development team redundant.

One theory that has not been put forward, however, is that maybe Midway decided that its purchase of Ratbag was more valuable without the baggage of its Adelaide developers. After all the  existing games and the Ratbag games development platform, Difference Engine, is the real intellectual property of the company, while games developers can be hired from all over the world. Ratbag founders Greg Siegele and Richard Harrison spent five years and their life savings developing that technology to the point where they produced their first saleable product in 1998. For their efforts, they each have received a share in something less than $7 million, while the acquirer Midway got the fruits of their labour. from Midway's point of view, it sounds like a pretty good deal.