Mad Catz Couldn't Change Quickly Enough to Save Itself
Image: Mad Catz

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Tech

Mad Catz Couldn't Change Quickly Enough to Save Itself

The gaming hardware designer, known for both cheap and state-of-the-art peripherals, takes a final bow.

Video game peripheral maker Mad Catz—the company that made the off-brand Xbox controller you never wanted to use at your friend's house—is filing for bankruptcy. It will not be sold to a third party; accounting firm PricewaterhouseCoopers will be liquidating the company's assets to pay off its debts. As of March 30, its entire board of directors and company officers had resigned.

This was not unexpected. Mad Catz had posted an operating loss every year since 2011. The audience for gaming peripherals had become more discerning, and the quality control from the first party brands had improved. Budget, third party alternatives were not viable amongst customers willing to pay extra for quality.

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In 2015, Mad Catz pinned its hopes on Rock Band 4, the music rhythm game it co-published with Harmonix. It also designed the official game peripherals for the title. If all went well, the game would sell enough copies to fulfill a credit agreement it reached with the bank Wells Fargo that same year.

But all didn't go well. Maybe rhythm games were truly dead, and the late 00's glut of Guitar Hero and Rock Band spin-offs had killed the genre for good. Maybe it was the high price point; a full set of music peripherals originally cost $250, the current cost of a PlayStation 4 Slim.

But regardless of the reason, in February 2016, right before the release of the most recent earnings report, Mad Catz announced that its chairman, its CEO of 12 years, and its chief counsel had all resigned. It offered no explanation for this overturn. And in the immediate aftermath of those resignations, the stock took a dive, and the company laid off 37 percent of its staff.

In March 2016, Harmonix terminated its Mad Catz partnership. In a harsh, embarrassing statement to the press, Harmonix stated its need to partner with a "truly world-class manufacturer" (emphasis is ours).

In February 2017, a corporate conference call revealed that the company was still operating at a loss of $3 million per year. And right before announcing that it would be ceasing operation in March 2017, Mad Catz was delisted from the New York Stock Exchange due to its "abnormally low trading price."

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Founded in 1989, Mad Catz initially benefitted from a booming video game market. The Nintendo Entertainment System and Sega Master System were winding down, with the Super Nintendo and Sega Genesis on the horizon. It was the dawn of the unofficial "console wars" that would push hardware and software manufacturers to achieve greatness.

Mad Catz also benefitted from low information consumers, who did not have the internet at their disposal to quickly assess and compare their peripheral options. For many years, the company specialized in making "replacement controllers" for popular consoles—cheap, third party knockoffs that worked, after a fashion, but broke under the strain of repeated use.

Game controllers are a type of product known as "experience goods"; consumers must use and "experience" the product for some length of time before they can form an opinion of it. And because these products cannot be experienced in a store, experience goods' most determining sales factor is their packaging—the look of the boxes and the plastic design of the controllers. Many Mad Catz controllers valued visual flair over ergonomics. Like this Xbox controller, with its ribbed handles (for grip?) and clear casing:

Image: Museum of Play

Or this corresponding PlayStation controller:

Image: Museum of Play

Because the price was right—usually about 60 percent of a first party replacement—and because they were eye-catching, these controllers did good business. Even as late as 2006, Mad Catz (and its various holdings such as Saitek, Joytech, and GameShark) made up about a quarter of the gaming aftermarket.

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But consumers became more savvy. Over time, experience goods develop a reputation; impulse buyers who have been burnt once or twice will not be repeat customers. And Mad Catz responded by attempting an image overhaul.

Image: Mad Catz

It started with a line of Street Fighter IV fight sticks. Mad Catz's high-end Tournament Edition controller used the same Sanwa parts that were also used in high-end arcade cabinets, providing the most authentic experience possible. It was the official controller of the prestigious Evo 2010 tournament, and Mad Catz sponsored eventual winner Daigo Umehara, widely considered one of the best Street Fighter players of all time.

Mad Catz's sponsorship of Daigo lasted until 2016; by that time, they had created a line of similarly acclaimed Street Fighter V fight sticks to keep with the times.

Despite this niche success, it wasn't enough to make the company profitable. Even an acclaimed line of gaming mice (humorously named RAT) didn't stem the tide.

Image: Mad Catz

There are other high-end gaming peripheral manufacturers out there. Hori is one. Razer is another. But neither company has the American youth culture ethos of Mad Catz; even the name of the company is a throwback to the early 90's, when a backwards 'Z' was still an acceptable form of coolness.

And in a real way, the company's history mirrored the game industry it was inextricably linked to. Once a mere curiosity, games—and their peripherals—were dismissed as children's toys, and many of them were equally cheap and disposable.

But eventually, games gained cultural currency in mainstream culture. Hardware companies sharpened their products to meet that higher perception and stay solvent. Mad Catz tried and failed to bridge that gap. But the future, in part thanks to them, will move on without them.