Phil Harrison, who many people saw as the last, best hope for Atari, has stepped down from his role of president. He will remain with the company as a board member in a non-executive capacity.

In other words, he has gone from being a decision maker to assuming a purely ceremonial role.

The news comes as Atari parent Infogrames announced a net loss of $313 million in its last fiscal year. That’s $72 million worse than a year ago. Add the two together and the Atari death watch, which was already pretty advanced, has become a full-scale feeding frenzy among industry watchers.

Harrison, who formerly headed Sony Computer Entertainment’s Worldwide Studios and is one of gaming’s most recognizable faces, joined the company just over a year ago in a surprise move. The man who shepherded games such as “SingStar” and “Little Big Planet” to fruition was considered integral to Atari’s survival, as the company was on shaky legs even then.

The publisher is now shifting its business operations to the U.S., which is being cited as the reason for today’s management change, but the reasoning feels flimsy. Even if Harrison didn’t want to move from Europe, he could certainly manage remotely as it moves forward. (It's not as if he doesn't travel to the U.S. regularly.)

Jeff Lapin, a former CEO of both THQ and Take Two Interactive Software (where he quit after just 15 months), has joined Atari as COO.

Observers have been speculating about Atari’s longevity with renewed fervor of late. The company sold the European publishing rights to "Ghostbusters: The Video Game" — its biggest short-term release — to Sony and pulled out of E3 just weeks before the show.

It was the purchase of developer Cryptic Studios late last year that really confused people, though. Atari got the rights to a pair of forthcoming massively multiplayer online games with the buy, but it had previously said it was planning to focus on mass-market, casual games.

And Cryptic’s $26.7 million price tag, while dirt cheap for a developer, was a big hit to Atari’s coffers.

These days, Cryptic’s busy putting the final touches on those two MMOs and is trying to breath new life into several of Atari’s legacy titles for a 2011 release. (Which ones, though, remain a mystery.)

I’ve written Atari’s obituary more times than I can count over the years. The company continues to hang on, though, like a stubborn coma patient.

Ultimately, it’s probably not worth speculating whether today’s move means the company is shuffling closer to flatlining. Whether it is or isn’t, it just lost its biggest asset.

While the cinematic version of “The Matrix” had the stylized feel of a AAA video game, its gaming companions never quite worked.

On July 31, the most ambitious of those tie-ins, “The Matrix Online” will jack out for the last time, as Sony Online Entertainment pulls the plug on the game.

To its credit, the massively multiplayer online game lasted four years, which is more than most people expected at launch. Initially developed by Monolith and published by Sega, the game was quickly met with mediocre reviews. 

SOE took over publishing rights a short while later, which likely saved it from a much earlier shutdown. The game eventually became part of SOE’s Station Access package (letting players have subscriptions to several MMO games for a single monthly payment).

Sony declined to comment about how many people are still playing the game these days, citing its policy against releasing subscriber numbers. (That’s a flexible policy, incidentally. The company has been touting “Free Realms” user base loudly of late – and bragged about “EverQuest” players back in the day.)

It’s frustrating that “The Matrix” never became a strong gaming franchise. Both “The Matrix Online” and the film’s single-player titles fell far short of expectations, despite having hefty development budgets. (“Enter the Matrix,” an single-player game that is unaffiliated with "The Matrix Online," reportedly cost over $30 million to create, making it one of the most expensive games ever developed at the time.)

Maybe it was comparisons to the movie’s stylish feel. Maybe the plot was thinner when played out in long form. Or maybe the games just stunk.

Whatever the reason, we’ve now learned how far the rabbit hole goes – and where it ends.

A week from today, we’ll be hip deep in news from E3, the annual trade show of the video game industry. Some of the surprises have already leaked out. Some are still rumor. And some will remain mysteries until they’re formally announced.

We at The Cut Scene love a good guessing game as much as anybody, so after the cut, you’ll find a roundup of what we’re expecting to hear at this year’s show, a few things we’d like to hear and a couple things we probably won't hear.

It’s an open game. Are you pining for a particular piece of news from the show? Got a bold prediction? Share it below in the comments section!

The long-awaited pairing of Microsoft’s Xbox 360 and the Zune is finally imminent.

There's a lot of noise around the web today about former President Bill Clinton being Bethesda Softworks first choice to be the voice of President John Henry Eden in "Fallout 3". It's a great story - but it's not entirely accurate.

Sure, Lev Chapelsky, general manager of Blindlight, which secures Hollywood talent for voicework in games, told Edge that his company had approached Clinton for the role, but Bethesda says it wasn't at the developer's request.

“Before they would pitch us on someone like Clinton, they may first go ask if he would do something like that,” says Pete Hines, Bethesda's vice president of public relations and marketing. “In no way, shape or form, did we say is President Clinton is who we want for this role or [tell Blindlight to] go chase him.”

What likely happened is that as Bethesda described the character, it sparked an idea at Blindlight. The company reached out to the former President and was told ‘The former president will not participate in one of your videogame products, thank you very much’.

"We appreciated that frankness and candour – you don’t get that kind of candour from Creative Artists Agency, frankly," Chapelsky told Edge. "If the answer's no, they don’t return your call for six months."

Ultimately, Malcolm McDowell voiced the part for the game, which became one of the most critically acclaimed - and top selling - games of 2008.

Warner Bros., which already had a solid presence in the video game world, is looking to expand its turf. The company today offered $33 million to buy several key components of Midway Games.

Midway, which filed for Chapter 11 bankruptcy protection in February, has been on the block for some time. What’s interesting is what Warner wants – and what it plans to leave on the curb.

The “Mortal Kombat” franchise, natch, is on the ‘gimme’ list, as are development studios in Chicago and Seattle. Warner’s also interested in Midway’s legacy games, including arcade standards “Gauntlet,” “Joust” and “Defender”.

But Warner has no interest in Midway’s license to create games based on the TNA wrestling franchise or its other studios in San Diego and Newcastle.

The two companies have a recent history together, having worked on last year’s “Mortal Kombat VS. DC Universe,” so Warner’s familiar with the Midway team and the strengths and weaknesses of the company, giving it an advantage should it acquire the assets.

But Warner’s bid is really the start of a longer process. Once it’s made formal before the bankruptcy judge, other companies will be able to submit counterbids for roughly 30 days. (Look for Ubisoft to give this serious consideration.)

From there, it’s an old-fashioned auction. The submitted offers will act as opening bids, but companies will be able to increase them. And a Midway spokesperson says he expects Warner to get some competition.

“We do expect other bidders to come in,” says Geoffrey Mogilner, director of corporate communications for Midway. “We’ve been talking with a number of parties throughout this process. There’s always the possibility they’ll come in for all portions [of the company].”

Don’t get me wrong, I love the video game industry – and I fully believe it’s the future of entertainment. But for a field that’s growing at such an exponential rate, it sure has an inferiority complex.

The NPD Group, which tracks video game sales, put out an interesting survey late Wednesday, showing that 63 percent of Americans have played a video game in the past six months while only 53 percent who have gone out to see a movie.

That, inevitably, led to triumphant headlines about the dominance of the industry. Most of those, though, forgot one little thing… the number of people going out to see a movie has been stagnating for some time. DVDs, On-Demand viewings and other forms of in-home entertainment continue to grow by leaps and bounds – and still trump the video game industry.

The most interesting part of the survey was actually buried in the fine print - and had nothing to do with the video game industry's 'battle' with Hollywood. 

Digital downloads are gaining traction at a notable pace. Five percent of the people NPD spoke with have paid to download a video game from the Web. That’s just shy of double the number who did so a year ago. It’s a sign that traditional retailers, who have mostly shrugged off the digital marketplace, might want to start rethinking their attitudes.

Video games may ultimately supplant the movie industry in terms of audience and dollars, but the industry still has a way to go – and, really, there’s no rush to do so. It’s a bragging right, but won’t buy video game developers or publishrs any additional legitimacy or respect. That’s something that comes with time and quality products.

Hi folks, 

I’m Chris Morris and I’ll be your new guide to the world of video games here at “The Cut Scene,” doing my best to fill the big shoes left behind by Ben Fritz. (Seriously, the guy has enormous feet!)

I’ve been a fan of the blog for some time – especially its tendency to break news, give insightful analysis into the industry and dig beyond the headlines. That’s what made Variety’s coverage of this industry special – and it’s a tradition I fully intend to continue.

Since I’m the new guy here, I thought I should tell you a few things about myself. I’ve been covering the video game industry for 15 years, starting with an obscure, long dead Website that no one remembers. Things really started to get serious when I began writing the “Game Over” column for six years at CNN and CNNMoney. From there, I’ve covered the industry for Forbes and CNBC.com and wrote the “Business of Xbox” column for Official Xbox Magazine.

I promise, though, I won’t be turning The Cut Scene into a deep dive of earnings forecasts and EBITDA. Throughout my career, I’ve always been more interested in talking with the people who make these games and looking behind the curtains at the industry, to see how things operate. It has always astounded me that most media outlets skimp on their coverage of gaming, when there are so many rich, fascinating stories to tell. I’ve been lucky to convince editors to look beyond the stereotypes previously and I’m thrilled that Variety has the insight to encourage me to dig even deeper.

Beyond my reporting philosophy, though, there are a few more fun facts you should know:

• I’ve attended 12 E3s to date – and, remarkably, still look forward to the show every year.
  
• I believe “Gyruss” is the greatest game of the arcade era.
  
• I didn’t own an Atari, but I did have one of the Sears pong machines in the mid-70s.
  
• I once made Sony so mad by scooping them on their own news that I was banned from a teleconference. (They later apologized – and we get along great now.)
  
• I prefer single-player games to multi-player ones. (Give me a good story arc any day.)
  
• I was the guy who first likened the N-Gage to a taco.
  
• Once, while doing a stint as a radio reporter, I inadvertently blasted an obscenity over the airwaves – right as the city of Atlanta was leaving church. Safety tip from your Uncle Chris, kids, any microphone is a live microphone.
  

I think a blog (or any form of reporting, really) works best when there’s good conversation, so I encourage you to drop me a line at chris.r.morris-at-gmail-dot-com or in the comments below. I’m curious to know what you, as readers, are interested in learning more about – especially as we close in on E3. 

Let's have some fun together.

How could I say good bye without giving my loyal readers some schwag one last time?

Here are the rules. Pick one item you want, leave a comment asking for it, and say why you want it. Over the weekend I'll choose the person who makes the most compelling case for each item and contact them to get their mailing address. Asking for more than one thing will disqualify you. If you've won a giveaway before or if I know you personally, you're not eligible:

-"Rogue Leaders: The Story of LucasArts"

-A "Wolverine: the Game" foam claw

-"Resident Evil 5: declassified" booklet

-"Grand Theft Auto: Chinatown Wars" t-shirt

-"Grand Theft Auto: Chinatown Wars" stickers (three sets)

-Tricell's "progenitor virus detection and submission kit" (if you need to ask, you probably don't want it enough)

-A "Flock" collectible art figurine (not shown in the picture

Dear Cut Scene readers,

With more than a tinge of sadness, I must report that this is my last post on the Cut Scene and my last writing for Variety. On Monday I start a new job at the Los Angeles Times.

I'm saying my farewell here because the Cut Scene has been particularly important to me. Though it was only for 15 months, writing this blog has been far and away the best experience of my journalistic career. It has connected me to readers directly and built a little community of sorts around my reporting. It has introduced me to a world of video game bloggers and journalists whom I have come to respect and appreciate, and some of whom I now consider friends. Most importantly, it has given me an opportunity to do work that I enjoy and could never have published anywhere else.

If this blog had any impact on video game journalism, I'd like to think it was bringing a bit more rigorous reporting to the space. I try not to be didactic (and occasionally fail), but if there's one thing I'd like to see more of, it's original, investigative reporting on the video game industry. We already have plenty of folks who very ably report on breaking announcements as they happen (I mean that with no irony; it's an important job). And there are a growing cadre of smart and talented writers and critics, some working for professional outlets and some running their own blogs (I could list my favorites, but just check out my short blog roll on the right and you'll see who I read and love), who write about what video games mean. But, in my opinion, there aren't enough folks breaking news and reporting information that the publishers would prefer the public not know. Video games are a mature industry and a mainstream part of American cultural. We need business reporting to match it.

There are lots of people I need to thank for making this blog, and my coverage of video games at Variety in general, such a wonderful experience. Leigh Alexander, Tom Chick and Chris Dahlen are all excellent critics who I've been honored to edit, and they have also been very generous occasional contributors to the Cut Scene. If you're not reading their blogs Sexy Videogameland, Fidgit and Save the Robot, get on it. They're all friends and I know I'll work with them more in the future.

Dana Harris and the Variety.com editorial team, as well as Jennifer Collins and the business team, have been great supporters of me and this blog, particularly after an unfortunate incident in January.

Two editors at Variety have been important not just to this blog, my my work and my career. Tim Gray, the editor of Variety, is one of the smartest, funniest, and most decent people I have ever worked with and has provided crucial support to me when I needed it.

Peter Bart, the longtime editor-in-chief and now editorial director of Variety, has without a doubt been the person most responsible for whatever success I have had. Peter gave me my first internship at a professional newspaper and hired me as a reporter back in 2004. He is an extremely smart, passionate, and talented editor and has steered Variety through good times and bad over the last two decades. I consider Peter a mentor and a friend and will be eternally grateful for the opportunities he gave me.

Finally, and most importantly, I'm grateful to all the readers of this blog, particularly the loyal ones who have followed me regularly and commented. In this, shall we say, dynamic time for the journalism industry in which it's hard to rely on an institution, a reporter is nothing without his or her fans. You guys have let me know what you think (positive and negative), provided hundreds of awesome tips that turned into stories, and proved that the kind of journalism I enjoy, though it doesn't get the rush of clicks enjoyed by exclusive assets spoon-fed by publicists, really does have an audience.

I'm pleased to say that the Cut Scene will continue here on Variety.com. I'll leave it to the editors and/or our new blogger to share their new plans with you. If there's a short period with no posts during the transition, I hope you'll all be patient.

As for me, I'll be covering all facets of the entertainment industry for the L.A. Times (including, yes, some video game stories; you're not rid of me yet!). Though I won't have my own personal blog, I will be writing articles for the business and calendar (entertainment) sections and contribute to the Company Town blog.

In addition, for anybody into that sort of thing, you can follow me on twitter @benfritz. And of course my personal email address remains benfritz-at-gmail-dot-com.

Thank you for reading.

PS I'm having one last schwag giveaway for loyal readers

This July Microsoft is releasing a new collection of "Gears of Wars 2" add-on content (details here).

The retail version will include the Flashback, Snowblind, and Combustible map packs, which cost $5, $10, and $10, respectively, to download on Xbox Live, along with the new "Dark Corners" add-on, which has a new campaign chapter and seven multi-player maps. Cost: $20. A great deal.

But for gamers who already own those map packs, Microsoft is offering "Dark Corners" by itself for digital download. The cost: $20.

Eh?

Let's get this straight: People who download via Xbox Live get a portion of the content available at retail for the exact same price. And remember that distributing content on XBL costs substantially less than selling it at retail, since there's no manufacturing costs, no shipping costs, and no retailer to split the proceeds with. So Microsoft's profit margins are much bigger on that $20. Sounds like a major rip-off to me.

In fact, customers who have already bought the map packs and now buy "Dark Corners" are paying over twice as much as those who buy the entire retail package. Even allowing for some kind of discount on the first three map packs over time, that's pretty damned bad.

Considering that the people who download content on XBL are probably Microsoft's most loyal customers, it sounds like the Xbox 360 maker is giving fans a little financial chainsodomy.

Buried in today's Elecrtonic Arts earnings call (which I won't have time to fully report on for reasons that will be apparent soon; I recommend the Gamasutra write-up) was this amazing revelation from COO John Pleasants: Revenue for music/rhythm games was down 36% during the first quarter of the year and 42% in March, per NPD. As a result, EA has cut the gross sales revenue it expects from its EA Partner division, which distributes "Rock Band" for Viacom.

That's a huge decline. And keep in mind that there weren't any major music game releases during the first quarter of last year, while 2009 saw "Guitar Hero: Metallica" (albeit at the very end of March). As we started to see in late 2008, sales of "Rock Band 2" and "Guitar Hero: World Tour" must be down massively from the original "Rock Band" and "Guitar Hero III."

And while EA CEO John Riccitiello said he feels "really bullish" about "Rock Band: Beatles Edition," the fact that the company is expecting $400 million less in sales indicates just how big an impact continued sales of "Rock Band" through last year mattered, and how far "Rock Band 2" is lagging.

No wonder Viacom blamed a "challenging comparison to the particularly strong initial sales of the music video game Rock Band in the first quarter 2008," to put it mildly, for the 37% drop in its ancillary revenues (mainly "Rock Band") in its earnings for last quarter. And this comes after the revelation that even when it was selling well, "Rock Band" lost money for Viacom due to hardware manufacturing costs.

And no wonder Activision Blizzard CEO Bobby Kotick recently brought in a heavy hitter, former Yahoo COO Dan Rosensweig, to oversee its critical "Guitar Hero" business.

Given the high price of music games, of course, it's hard to know how much of the decline is recession-driven. But with declines that dramatic, there's clearly something bigger going on. Consumers are getting tired of the slew of new music games. And/or they're happy with the ones they already have. And/or everybody who wants "Rock Band" or "Guitar Hero" has it. The market may not expand as broadly as many in the industry have been better.

It’s a little bit video games, a little bit Internet, all 21st century storytelling.

That’s the idea of Fourth Wall, the interactive “event” company formed by three of the founders of 42 Entertainment, makers of Microsoft’s famous “I Love Bees” alternate reality game to promote “Halo.”

All of their projects so far have been marketing campaigns for films like “Eagle Eye” (above right) and “Watchmen” (below left) and the short-lived NBC TV show “Kings.”

But they’re aggressively looking to start producing their own original content and are starting to connect with partners for just that purpose.

The Fourth Wall guys are currently working with “Wanted” director Timur Bekmambetov to develop a multi-media project called “Nano.”

“Their art form is like research and development for new and exciting products,” Bekmambetov said of their collaboration, “helping me to find a way to combine film language and the game world and install them in our real world by using film language in the game world to create an alternative reality.”

I sat down with the Fourth Wall team – chief designer Elan Lee, chief creative Sean Stewart, and president and executive producer Jim Stewartson (That's Stewart and Stewartson working on the "Eagle Eye" project on the bottom left) – at the Game Developers Conference in late March to talk about their company, their goals and their new form of storytelling.

Ben Fritz: Tell me a little bit about what Fourth Wall is and how you guys got started.

Elan Lee: Well, with these two fine gentlemen and two other friends, we founded 42 Entertainment, that created what was sort of known as the world’s first alternate reality games.

We really started to get our feet wet in what this new form of storytelling could be. How it works, how you engage with an audience, what to means to tell stories on the Internet.

When we did that for a few years, we decided if ever there was a time to start a company that is solely devoted to continuing that evolution, to taking that next step in a new form storytelling, this is that time, because we've got some much knowledge and so much experience.

Jim Stewartson: The other way that we like to put that is the Internet -- and by Internet I mean your cell phone and your email and everything -- the entire electronic sphere around you wants to tell stories, just like the movie camera wanted to tell stories.

BF: In a different way than you were doing at your previous company?

JS: We spent many years throwing essentially rock concerts. Very large, real-time, elaborate
experiences that were really cool and really fun for the people who were involved with them.

Over seven months ago, EA Redwood Shores chief Glenn Schofield told the Cut Scene that he was in the process of renaming his development studio to give it a unique identity beyond the city where the publisher's corporate headquarters is also located.

"[W]e're looking to brand the studio," he said. "That's what I'm doing right now. It's going through legal."

Legal sure takes a long time. Finally, EA announced the new name today: Visceral Games. Personally I'm much more a fan of esoteric nouns like Valve and Pandemic than dynamic adjectives like Radical and Visceral (it's like they're trying too hard), but it's still better than EA Redwood Shores for sure. And a cool logo.

But if Visceral is actually the name Schofield had in mind back in September, EA should really get its legal department moving a little faster.

Visceral is currently working on "Dante's Inferno," Wii spin-off "Dead Space: Extraction," a proper "Dead Space" sequel for 360, PS3 and PC, and one other unannounced title.

I'm just putting together a piece for NPR that features an interview with Paramount's senior VP of interactive (essentially the top video games guy) John Kavanaugh and noticed that he dropped an interesting tidbit that won't make the final piece: The studio is making downloadable games based on "Top Gun" and "Days of Thunder" for Xbox Live Arcade and Playstation Network.

It's not Paramount's first experimentation with those "classic" (as long as I can remember seeing a movie in theaters I refuse to call it "classic" without quotes) franchises as games. There's already a "Days of Thunder" iPhone game and one about to come out for "Top Gun."

For Paramount, which is taking a "crawl, walk, run" approach to games, as Kavanaugh puts it, moving those franchises to XBLA and PSN is pretty obvious. After releasing a slew of iPhone games, the studio is taking the next step into downloadable titles with "Star Trek: DAC" and the upcoming "Warriors." If you have well known franchises that fit perfectly into casual video game genres -- flying and racing -- well, it's not too big a leap. (Not like doing, say, a "Watchmen" game in which you awkwardly shove the film into a familiar video game genre).

Plus, really, can there ever be enough games where you get to live out your fantasies of being Tom Cruise? When there's a "Cocktail," or "Eyes Wide Shut" game, I am so there.

Paramount is also trying its hand at casual titles targeted at female audiences. I forgot to link to it when it was published, but Leigh Alexander wrote an excellent and amusing review of Paramount's three-pack of games based on "Clueless," "Mean Girls" and "Pretty in Pink." Check it out.