Atari’s fighting back against the suit filed by partner Turbine Interactive last week. The company calls the developer’s accusations “frivolous” and is asking a judge to dismiss the claims – and order Turbine to pay Atari an undisclosed amount of money.

At issue here is the future of massively multiplayer online games centered around the Dungeons and Dragons franchise. Turbine is the creator of “Dungeons and Dragons Online” and “Dungeons and Dragons Online: Stormreach” and accuses Atari of pulling back support for the game as it prepares its own D&D MMO. (That would be the still unannounced “Neverwinter Nights” game The Cut Scene broke word of in June.)

There’s likely to be a lot of back and forth on this before it’s all over, but in the interest of fairness, here’s Atari’s statement about the suit:

“Last week, with no warning, Turbine filed what can only be viewed as a frivolous lawsuit against Atari. This action can ultimately do a great disservice to D&D fans and to the MMO community at large. Turbine’s actions also appear intended to divert attention from the contractual obligations that Turbine owes to Atari.  In response, today Atari served a motion to dismiss the entirety of Turbine’s lawsuit.  Atari also filed a separate complaint to recover monies owed to Atari resulting from an independent third party audit of Turbine.  While Atari hopes for a quick and fair resolution, it remains fully committed to the D&D communities worldwide and will vigorously protect the franchise and its own integrity in this matter.”

Image by bloomsberries via Flickr.

A couple months ago, The Cut Scene exclusively broke word that Atari was working on a massively multiplayer online version of “Neverwinter Nights”. Now it appears those plans (still officially unannounced) could be getting the company in some hot water.

Turbine is suing the publisher for breach of contract and fraud (among other things), accusing Atari of purposely pulling back support for “Dungeons and Dragons Online” – a Turbine game – in favor of an upcoming internally developed D&D MMO. (“Neverwinter Nights” is a D&D license.)

The developer is seeking at least $30 million in damages.

Turbine and Atari have had a publishing agreement for the past six years, but it doesn’t look like it was ever a smooth relationship. When “Dungeons & Dragons Online: Stormreach” was released in 2006, Turbine alleges Atari failed to meet its publishing and distribution obligations.

The developer self-published in the U.S., but says Atari insisted on publishing and distributing the game in Europe, then failed to do so adequately.

Despite the experience, the two companies amended their original deal in May of this year when “Stormreach” moved to a free-to-play model, extending the deal until 2016. Turbine, though, says Atari was dishonest in its support for the game and then came up with false charges against the developer "in an effort to extort more money from Turbine, or, alternately, to free itself from its obligations under the contracts in order to clear the way for the launch of its own competing MMO service based on the D&D and Advanced D&D intellectual properties."

Turbine says the action has led to significant losses and it "would have never...expended time, money and effort (or staked its reputation) on the launch of [the free-to-play game] had it had any warning that Atari's representations concerning its enthusiastic support for [the game] were false."

Courthouse news has a copy of the filing, for those interested in the nitty-gritty details. It’s a pretty fascinating read.

A couple of weeks ago, we posted word that recent Atari acquisition Cryptic Studios was working on breathing life into several Atari legacy titles. Now we’ve got a few more details to share.

Sources tell us that the developer is working on a massively multiplayer online (MMO) version of “Neverwinter Nights” with an eyed 2011 release.

Details about the project are unavailable, naturally, as it is an unannounced title. But this reportedly was the primary reason Atari was interested in acquiring Cryptic late last year. (The developer is currently working on “Champions Online” and “Star Trek Online”.)

Based on the third edition Dungeon and Dragons rules, “NWN” is a well-loved franchise. The first installment of the role-playing game was developed by fan-favorite Bioware in 2002. A sequel, developed by Obsidian Entertainment, came out in 2006 to slightly less favorable, but still solid, reviews.

Part of what made the game unique was its robust multiplayer component. Many players built persistent worlds, capable of hosting up to 75 players – in essence, mini MMOs of their own.

The new game represents a very big bet for Atari – perhaps as big as the company’s continued existence.

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.

We interrupt this top ten games of 2008 countdown for our final videogame review of the year in Variety: The Tale of Despereaux.

As loyal readers and videogame business nerds (mostly the same, I hope) know, Atari is distributing this game after the demise of Brash. But the origin of the game is a bit more complicated. While Brash funded and oversaw production of the PC, PS2 and Wii SKUs (as well as a 360 SKU that disappeared), licensor Universal Studios was actually overseeing the DS version. Wanna bet which version was pretty good and which sucked?

The answer is obvious, I suppose. Poor, poor Brash. Here's what our critic Chris Dahlen had to say in today's Daily Variety:

The DS version... is a straightforward platformer with elements as old as the first “Super Mario.” Players jump, scurry up walls, swing on nails and solve simple puzzles. The graphics are surprisingly good for Nintendo’s handheld system, with lovingly illustrated levels including the mazelike chutes from the kitchen to the coalmine-like castle dungeon. The rat’s coliseum, where two rather clever boss battles take place, rewards combatants with a colorful three-dimensional backdrop and silhouetted rodents who jeer from the stands...

By contrast, the Wii version proves that there’s nothing as irritating as a platformer that doesn’t quite work. The look and idea are very similar: Despereaux has to navigate one level after another by scaling giant books, jumping from candle to candle or hitching a ride on a moving cup. While the mouse-eye perspective should make the world engaging, the environments lack atmosphere, even in the dankest, most sewage-swamped depths of a dungeon. Poor visibility and dark colors occasionally obscure the path even in well-lit areas, and the camera frequently looks the wrong way or loses track of Despereaux altogether.

It looks like the last game to see a release that was produced entirely under Brash's watch won't exactly bolster the company's reputation. Though there's still a good chance some of the games in the works for next year which will probably see the light of day ("Night at the Museum 2," "Saw") will at least show Brash can start developing a good game.

As for Universal, its new videogame publishing initiative -- which reps the studio's first entry into the space since it sold Universal Interactive to Vivendi nearly a decade ago -- is off to a solid start, critically speaking, at least. After the film's soft opening (due in part to the weather, but oh well), commerical prospects for the game might not be so great.

Full review: The Tale of Despereaux videogame

When a company finances a major purchase entirely with debt, it's making a big bet.

It's an indication of how key Atari (well technically its parent company Infogrames, but let's just say Atari for simplicity's sake) thinks Cryptic Studios is to its future that the resurgent, but still cash poor, publisher is financing the acquisition entirely with bonds.

I'm not sure exactly how much the bonds will be, but based on Infogrames' public filing, they should total at least $40 million (31 million Euros), which will be used to pay back a bridge loan that will immediately finance the acquisition, as well as Cryptic's working capital needs and an old loan Atari needs to pay back (oops!).

Meaning that Atari needs Cryptic to be successful and generate cash if it wants to pay back those bonds and avoid an awkward Midway-like situation.

So what Cryptic need to do to succeed for Atari? Well, there's "Champions Online" next year, but it's unclear whether Atari will even publish that, since 2K originally signed on for that job (a 2K rep told me "discussions aren't finalized" on that point). If Atari doesn't publish it, all it will have is Cryptic's royalties if the game performs well. Then there's 2010's "Star Trek Online," for which it'll have to pay royalties to CBS, meaning the margins are smaller than for an original MMO (though perhaps the chances for success are greater). And of course there's the inevitable "unannounced game" in the works.

That's a decent slate, but MMO's are very risky propositions. They usually lose money (paging "Age of Conan," "Matrix Online," etc.) and very rarely turn into big successes. Even "City of Heroes/Villains," the games on which Cryptic made its name, had a relatively modest 180,000 subscribers at their peak (about 1.6% of "World of Warcraft's" subscriber base). If even one of these games hits it big, especially one Atari publishes, it could be in very good shape. But those aren't great odds. (Cryptic's revenues were $17 million in the year ending June 30, but Atari didn't report how much the developer made or lost).

The other benefit Atari is counting on is Cryptic's technology, which it says will "reduce development risks for future online games developed internally and improve margins due to the low cost structure of the Cryptic engine’s technology and tools."

That's a big sign, much bigger than any of the statements Phil Harrison and David Gardner have made, that online gaming is really at the heart of the company's future. Though "Ghostbusters" and the other games Atari is picking up / announcing should help along the way.

The first of Brash's many orphan games has found a new home.

As I'm reporting in tomorrow's Daily Variety, Atari has bought North American publishing rights for the PC, PS2 and Wii version of the game from Brash (though not the 360; so much for that). It has also picked up the deal Brash made to distribute the DS version for Universal, which is funding and producing that game itself. (Details on the original deal between Universal and Brash are here)

I've been hearing for a little while that Atari was going to pick up a few of Brash's completed games that need a publisher ASAP. Apparently it didn't (or hasn't) bought the completed Wii version of "Six Flags Fun Park," but "Despereaux," which needs to come out before the film's Dec. 19 release date, was more appealing.

Atari, of course, has been on a bit of a spree buying homeless movie-to-videogame adaptations of late, since it also picked up Sierra cast-offs "Chronicles of Riddick: Assault on Dark Athena" and "Ghostbusters" from Activision Blizzard in October (details here).

The newly revived publisher also announced some new games in the works at a London event today, including a new Wii music title from the creator of RezHD, Lumines Live and Every Extend Extra Extreme. GameSpot has a good summary.

Atari won't have any time to market the game and will be relying on primarily on some promotions Universal has in the works. But, as is always true, if a kids' movie is successful and the tie-in game is halfway decent, it should sell just fine. Even the famously abysmal "Alvin and the Chipmunks" moved a few hundred thousand units last year. And Brash ex-employees assure me that "Despereaux" is much better.

The deal is so last minute that Brash actually had the game in production when it shut down. So while Atari is publishing, the box art will say Brash. Making this game, in a sense, the last hurrah for Hollywood's (dearly?) departed videogame publisher.

Another former Sierra game dropped by Activision Blizzard has found a home. In tomorrow's Daily Variety, I'm reporting that "Chronicles of Riddick: Assault on Dark Athena" will be published by Atari in the spring (click here for all the details). I'm also confirmed through sources -- though the publisher won't yet confirm -- that "Ghostbusters" will indeed be published by Atari, as Dan Aykroyd previously let slip. Expect it to be released early next summer, timed to the film's 25th anniversary.

Fans might also be interested in more details on "Athena" (for starters, that's a new screenshot on the right). We already knew that developer Starbreeze was remaking the critically acclaimed (though only so-so selling) "Escape from Butcher Bay" for current gen systems along with multi-player. But Atari also confirmed that the game will have an entire new campaign. I spoke with Bill Kispert, head of interactive for Universal, which owns the "Riddick" rights, and he promised even those of us who have played "Butcher Bay" will get our money's worth from "Athena's" new campaign and multi-player.

"Originally it was just a remake, but we started thinking more and felt that wasn't super compelling," he explained. "the new campaign is robust, it's not an extra mission or two. It has a storyline, new characters, new locations, new weapons."

He added that he's really excited about the multi-player too and promises it will give fans "something a little different" than what they're used to in multi-player.

It's my understanding that Infogrames (which essentially is Atari now) president Phil Harrison was particularly excited about "Riddick," knew how great the original game was, and saw the potential in doing a follow-up. And Atari is hoping for more. Along with buying the "Dark Athena" game from Activision Blizzard, it also has licensing rights from Universal for "Riddick" that will let it publish more sequels going forward if this one does well.

It's my understanding Atari has a similar long term deal with Sony Pictures for "Ghostbusters," though I couldn't confirm that.

In both cases, sources told me that Atari paid a flat fee to Activision Blizzard to compensate it for some, but not all, of the development money Sierra spent on the games.

This is a pretty big deal for the reconstituted Atari and it's new management team. They've talked a lot about online gaming, utilizing their library, and distributing games for partners, but these are the first AAA titles they've picked up. Though they hardly have a full sized slate, it shows they're still a player.

So what other former Sierra titles are left? "50 Cent: Blood on the Sand" went to THQ. Early work on "Scarface 2" was scrapped and now rights to the franchise have reverted back to Universal, which is looking for a new licensor. Ditto the Bourne games and the Robert Ludlum estate.

What about "Brutal Legend?" I'll have more on that in a minute.

Full story: Atari gets "Riddick," "Ghostbusters"

Even though the new management team had nothing to do with it, Atari has a lot riding on "Alone in the Dark." It's the only high profile release the company has this year outside of its "Dragonball Z" deal and if it were to go well, it could revive pretty much the only franchise the ailing company has left that it didn't sell off.

But it doesn't appear to have worked out, quality-wise at least. Variety critic Tom Chick calls "Alone in the Dark" " confused goulash of driving challenges, old-school puzzles, zombie battles, some late-game tomb-raidering and even a bit of “Grand Theft Auto” in the park" that "fails at pretty much everything it tries to do."

Ouch. There are a few individual sequences he praises, but the overall assessment is grim. At a basic level, the game just doesn't work. "It’s constantly falling apart, with glitches, wacky physics, inconsistent sound and bad controls," Tom writes. "It’s the horror movie equivalent of being able to see the zipper running down the back of the monster suit."

Even when it does work, Tom finds that it's not always clear what to do, the inventory system has "the absurd feel of MacGyver’s Greatest Hits," and that the decision to divide the game into episodes with recaps is a big mistake since "the story and characters are far too threadbare to need a recap."

You can read the entire review here. As for Atari, it's looking like the sooner Phil Harrison and David Gardner et al can get started on their new online strategy, the better.

Being an Atari shareholder for the past few years has probably been like a slo-mo recreation of getting chainsawed in "Gears of War." Think I'm exaggerating? Take a look at the chart above.

At this point, it's probably good news that Infogrames is offering to buy all the remaining shares of Atari stock on the Nasdaq market that it doesn't own. The scrutiny that will be on new Infogrames/Atari CEO David Gardner and president Phil Harrison as they try and revitalize a moribund company is probably intense enough without them worrying about the price of two separate stocks (Infogrames in France and its subsidiary Atari in the U.S.)

Nonetheless, for whoever's left holding Atari stock, they're being offered the exact same price by Infogrames as it was trading at on Wednesday (the day the non-binding proposal was delivered) : $1.68 per share. Absolutely no premium. That means Infogrames thinks that Atari shareholders don't expect their their stock will go up one penny in the coming months. $1.68 is probably the best price they're going to get and they should be grateful for it.

Just for the sake of comparison, remember that Electronic Arts offered Take-Two shareholders a 64% premium over the trading price. And the board rejected that as too low.

There's lots of good coverage out there about Sony Computer Entertainment worldwide studios topper Phil Harrison's defection to Infogrames/Atari, where he'll serve as president and be focusing on networked/online gaming and so on, but to my mind there are two very big unanswered questions:

-Why leave Sony? According to GamesIndustry, Harrison's answer at an event in NYC today was "the things that excited me the most, the things that turned me on as a gamer, and as a business person, and as a creative person were the future of our industry, the connected community experiences - all the things we're starting to see emerge that are really exciting players around the world. And those are the things I started thinking about in terms of creating a company or getting involved with a company to really shape and direct a business towards that future."

I think it's safe to say that between the Playstation Network, all of its downloadable games, and Home, Sony was getting pretty damned involved in "connected community" as well. So that's far from the most believable answer I've heard come out of a corporate executive's mouth lately. Clearly, something bad went down for him at SCE. Though it's hard to tell what, since the PS3 (and, one assumes, its games) are on a bit of an upswing and he has worked closely with Kaz Harai for a long time.

-How is Infogrames/Atari going to pay for Harrison and new CEO David Gardner's vision? This is a very financially troubled company. As of its last financial statement, it had just $188 million in cash, the vast majority of which it got from a new bond issuance in early January (before that, it had just $28 million). That may sound like a lot, but it's not in the videogame industry, especially for a company with no reliable sources of revenue, aka successful franchises. It's also pretty troubling considering that Infogrames/Atari has $152 million in debt.

If the new "Alone in the Dark" game (which I have seen, and looks decent) doesn't perform well, they're pretty much screwed for the year, it looks like, since it's their only major release. That's a very risky proposition in a business where the majority of products flop.

Still, no matter what was up at Sony, you've got to imagine Phil Harrison doesn't take a job without some prospect that he can try and implement his plans. The same with Gardner. So I've got to imagine there are good answers to both these questions. I just have no idea what they are.

PS I love this quote from Harrison: Atari is "the best opportunity that exists in the industry today to redefine, refocus and re-energies an incredible brand." That's a nice way of saying "Atari has no value and we can turn the brand into whatever we want it to be."

Looks like I'm not the only one who thinks that EA's bid for Take-Two signifies a period of consolidation coming to the videogame business. Take a look at the performance of several small and mid-sized publishers' stocks Monday, none of whom had any news of their own:

THQ: Up 10% to $9.65

Midway: Up 7% to $2.19

Atari: Up 13% to $1.61

Anybody want to take bets on how many of those companies, along with some European publishers like Eidos and maybe even Ubisoft, will still be independent a year from now?