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Midway Acquires Ratbag, Pacts with Ant Bully

Midway Games Inc. announced that it has acquired Ratbag Holdings Pty Ltd., a game development studio based in Adelaide, South Australia. Midway acquired the privately-held developer in a primarily stock transaction for 418,570 Midway shares. The studio is currently working on several unannounced Midway products for both current- and next-generation systems. The studio will be renamed Midway Studios - Australia.

Midway's president/ceo David F. Zucker commented, "This transaction is consistent with our strategy of adding depth to our internal product development organization and strengthening our ability to deliver high-quality, compelling and commercially successful content for current and future systems. Ratbag brings to Midway a rare combination of development expertise in driving and on-foot combat that they are incorporating into our games now in development."

Midway's svp of worldwide studios Matt Booty said, "We are excited to add this proven studio with solid management and a strong development team to Midway, and establish a firm foothold in Australia, a great location for top entertainment industry talent. We plan to leverage their talent and technology across our internal development studios, which will support our goal of maintaining our leadership in high quality development."

Ratbag is a developer of interactive entertainment products. Established in 1994, Ratbag's first title, POWERSLIDE, was released in 1998 to critical and commercial success. The studio has grown into one of the world's premier racing game developers.

In addition to shares issued as consideration for the acquisition of Ratbag, rights to acquire a total of 38,050 shares of Midway common stock were issued to key Ratbag employees as retention incentives. The rights to acquire the stock will vest in stages over a period of three years, provided the employee remains at the company. Ratbag employees who received the rights were: Tony Albrecht, Karl Burdack, Cam Dunn, Kim Forrest, Franta Fulin, Adam Mackay-Smith, Robin Maddock, Andrew Medlin, Sadhana Pereira and David Todd.

Moreover, Midway and Warner Bros. Interactive Ent. announced a multi-territory publishing agreement that grants Midway the rights to publish interactive games for console, handheld and PC platforms based on the upcoming computer animated motion picture, THE ANT BULLY.

"We are very pleased to be partnering with Warner Bros. Interactive Ent. to bring THE ANT BULLY into the interactive space," said Zucker. "Midway is looking forward to publishing great games based on this exciting film property for a younger audience of players."

"Being a computer animated film, THE ANT BULLY will be an exciting property to develop as a game," said Jason Hall, svp of Warner Bros. Interactive Ent. "THE ANT BULLY is a highly anticipated film and we look forward to working with Midway to create dynamic games based on a movie with mass appeal for young gamers."

From director John A. Davis, of the Academy Award-nominated JIMMY NEUTRON: BOY GENIUS, produced by Tom Hanks, Gary Goetzman, John A. Davis and exec produced by Keith Alcorn, the family adventure features the voice talents of Nicolas Cage, Alan Cumming, Zach Tyler Eisen, Paul Giamatti, Myles Jeffrey, Regina King, Cheri Oteri, Julia Roberts, Meryl Streep, Jake Szymanski,and Lily Tomlin. The film is scheduled for a 2006 release from Warner Bros. Pictures. The movie is being produced by Playtone Production, in association with DNA Prods. Inc.,

These announcements come on the heels of the announcement of Midways lower second quarter numbers. Net revenues for the 2005 second quarter were $36.9 million, compared with 2004 second quarter net revenues of $47.3 million. The 2005 second quarter loss applicable to common stock was $29.9 million or a loss of $0.35 per share, compared with a 2004 second quarter loss applicable to common stock of $11.2 million or a loss of $0.17 per share. The second quarter results were below previously provided expectations primarily due to lower-than-forecasted sales of UNREAL CHAMPIONSHIP 2, as well as the writedown of capitalized product development costs for upcoming releases and the need for additional reserves for markdowns.

Warner Bros. Interactive Ent. Inc., a Warner Bros. Ent. company, is a premier licensor and a developer of entertainment content for the interactive space across all current and future platforms, including consoles, PC-based gaming and wireless applications.

Headquartered in Chicago, with offices in San Diego, Seattle, Austin, Los Angeles, Munich and London, Midway Games Inc. is a leading developer and publisher of interactive entertainment software for major videogame systems. More information about Midway can be obtained at www.midway.com.

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Rick DeMott
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