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My Baby Publisher Southpeak Resolves CDV Dispute, Loses $5.8 Million

Posted October 14, 2010 by M.H. Williams

Southpeak, publisher of the Two Worlds and My Baby franchises, revealed their  earnings for the fiscal year ended June 30. The company reported sales of $40.3 million, down from $47.3 million during the previous fiscal year despite an increase in the number of titles sold. The company saw net losses of $5.8 million, which stand as an improvement over the net loss of $13.3 milliong for the same period last year. Southpeak remained enthusiastic, citing a 32 percent reduction in operating costs, down to $16.1 million.

The report states that resolving the litigation with CDV over non-payment resulted in higher losses than the company would have otherwise incurred.

"Along with macro-environment factors, our business and bottom line was impacted by increased litigation during the fiscal year,” said Southpeak CEO Melanie Mroz. “Excluding the excess legal charges that we incurred based on these disputes, especially with respect to CDV, we would have demonstrated even greater improvement to our bottom line."

"I am pleased to report that we have successfully resolved our litigation with CDV and distribution dispute with Paradox.,” she explained. “CDV in particular marked a substantial drain on our resources. Misguided media had a negative impact on our cost structure. We are pleased to put these matters behind us and continue to focus on our business and future growth."

CDV filed suit with Southpeak, claiming that the non-payment led to CDV filing for bankruptcy. The exact terms of the settlement were not revealed. The company also resolved another legal dispute over payment with developer Paradox Interactive in April.

"We certainly don't plan on it, but the litigation costs of $3.2 and 3 million, those were pretty much offset. So those were mainly related to CDV. A large amount of that was due to professional fees and legal expenses,” said Mroz.

Southpeak released 29 games during the fiscal year, up from 18 in fiscal year 2009. Titles included Section 8, My Baby Girl & First Steps, Risen, Prison Break and Horrid Henry. Southpeak blames a tough retail market for the lower revenue seen this year. Southpeak Chairman Terry Phillips pointed out a number of high profile releases for 2011, including Two Worlds II, Stronghold 3 and Get Fit With Mel B.

However, Southpeak is not completely in clear waters yet. The company is still disputing the loss of the My Baby franchise to Majesco. Developer Nobilis took the next game in the franchise, My Baby 3 & Friends, over to Majesco, but Southpeak says that it has the sole rights to publish My Baby games. Southpeak admits that My Baby contributes a great deal to their bottom line.

"It was a significant part of our revenues that's for sure. I'm not sure it's quite that high of a percentage,” said Philips. "Now this year we've got a great line-up of other games - we'd certainly like to be able to complement that with the My Baby series, which we feel is our series, so we're still hoping that that can happen."

[Thanks GI.biz]

M.H. Williams has been writing in some form or another for ten years and has been a hardcore gamer since the NES first graced American shores.  You can catch him on Twitter as @AutomaticZen, Google+ as himself, or on his personal Facebook page.