@Bkk2 residual revenue should've tied them over though

We don't know that. Revenue =/= Profit.

How can Midway get negative net revenue for 360 though? That seems... impossible.

Makes you wonder where the revenue came from if it was discounting expenses though... UT3 since they didn't develop it?

Blacksite Area 51? I don't see that as having made profits, i actually saw TV ads for that trash.

 Well overall, their total loss increased from last year which makes me wonder what the hell did they spent all of that money on especially when their revenue increased from last year? (UT3? Blacksite? Stranglehold?) Man, did they screw up.

If I remember correctly, the last year where Midway post a profit was in 2000 ...

Honestly, I have no clue. However, R&D, Marketing, Royalties & development costs, product costs & distribution are all recorded apart from revenue. 

I suck at reading this kind of stuff... how much profit or loss did they make? I'm assuming they ended up in the red, since they're mostly talking about revenue.

Here's something about negative revenue. So maybe retailers returned a whole bunch of softwares they bought before?

http://www.revenuerecognition.com/content/experts/9011.asp

Negative Revenue
- A. C. Sondhi & Scott A. Taub, Miller Revenue Recognition Guide, 2006

Because revenue relates only to amounts received from customers, negative revenue generally should not occur. However, negative revenue might exist for a reporting period or a particular transaction in several ways. For example, if a company underestimates the amount of returns it will receive on sales with return rights, it will eventually need to reverse some previously recognized revenue when the additional returns occur. Negative revenue could also arise because of payments made by the vendor to the customer that exceed the revenue from that customer but do not provide a separately identifiable benefit, as discussed above. For example, a company may agree to pay an up-front slotting allowance to have its products sold in a store where they were not previously sold. The initial product order may be less than the slotting fee, resulting in negative revenues.

As part of EITF 01-9, the EITF considered whether the existence of negative revenue for a reporting period, a transaction, or some other segment of a company’s transactions should result in a recharacterization of negative revenue amounts as an expense. The EITF concluded that negative revenue amounts may only be reclassified as an expense if, at a particular point in time, the company would have recognized negative revenue for a specific customer on a cumulative basis since it began selling to the customer (EITF 01-9, par. 17). This is consistent with the model for classification of payments made to customers in that it looks at the entire vendor-customer relationship as a whole, rather than on a transaction-by-transaction or any other basis.

Based on this conclusion, it is clear that a payment at the inception of a relationship with a customer, before the customer makes any commitment to purchase products or services from the vendor could be recharacterized as an expense, even if there is no separately identifiable benefit. However, this recharacterization would not be appropriate to the extent that the customer contractually agrees to make future purchases from the vendor as part of the arrangement including the up-front payment, and it is probable that such purchases will be in amounts greater than the up-front payment (EITF 01-9, par. 18). In that event, the payment to the customer would result in an asset, rather than an immediate expense. The asset would be amortized (as a reduction of revenue) as the customer makes the related purchases.

The evaluation of whether the recording of a cost results in negative revenue for the customer on a cumulative basis should be made whenever the cost must be recorded in the income statement. Thus, additional revenues received from the customer at a later date would not cause a "re-reclassification” of the negative revenue that was previously reclassified as an expense.

ILLUSTRATION: NEGATIVE REVENUE

EXAMPLE 1

Facts: Company C provides computer technology support services to large corporations. Company C enters into an arrangement with Customer D to provide information technology troubleshooting and installation support for Customer D. Company C will charge specified hourly rates for various services that Customer D may ask it to perform. Customer D agrees to publicize its relationship with Company C through the issuance of a press release, to inform all of its personnel of the arrangement with Company C, to allow Company C to meet with its employees to "pitch” its capabilities, and to ensure that Company C’s dedicated technology support phone number for Customer D is conspicuously placed throughout Customer D’s facilities. In part to defray the costs Customer D will incur in these activities, Company C makes a $500,000 payment to Customer D at the inception of the arrangement. However, Customer D also uses other technology support companies, and will continue to do so even after the relationship with Company C is put into place. As such, Customer D does not guarantee any level of purchases from Company C.

Discussion: The $500,000 payment would normally be treated as a reduction of revenue, since Company C gets no separately identifiable benefit in exchange for it. However, since this payment is made before any revenue is received from Customer D, it results in negative revenue from Customer D on a cumulative basis. Because there is negative cumulative revenue and because Customer D has not contractually agreed to make future purchases from Company C, the entire $500,000 payment may be recharacterized as an expense. Even when revenue is received from Customer D in the future, the $500,000 payment may remain classified as an expense, as the negative revenue model need not be applied retroactively.

EXAMPLE 2

Facts: Same as Example 1, except that Customer D had previously used Company C as a service provider, and has purchased $800,000 in services from Company C over the past two years. The new arrangement raises Company C’s profile significantly with Customer D. Company C believes that the additional publicity within Customer D will result in more business being directed to Company C, rather than other technology support providers.

Discussion: Again, there is no separately identifiable benefit from the $500,000 payment, so it should initially be characterized as a reduction of revenue. In addition, even though Customer D makes no purchases at the time the new contract is signed, it has made $800,000 in purchases from Company C in the past. Therefore, on a cumulative basis, Company C has positive revenue of $300,000 from Customer D. Thus, the $500,000 payment should remain classified as a revenue reduction, even if it results in negative revenue for the reporting period.

EXAMPLE 3

Facts: Same as in Example 1, except that Customer D guarantees that it will purchase at least $800,000 in services from Company C over the next two years.

DISCUSSION: Again, there is no separately identifiable benefit from the $500,000 payment, so it should initially be characterized as a reduction of revenue. Because the contract includes a commitment to make purchases, Company C should consider those committed purchases in its determination of whether it is appropriate to recharacterize the payment as an expense. As the committed purchases are greater than the up-front payment, the payment should not be recharacterized as an expense. In this case, Company C would likely conclude that the purchase commitment from Customer D represents an asset. The $500,000 would therefore be capitalized and amortized pro rata, as a reduction of revenue, over the $800,000 in purchases by Customer D.

Thanks TotalWar, it was interesting learn about negative revenue.