Midway Games (NYSE:MWY) completed another level -- er, quarter -- recently. The video game company racked up a nice total in net sales, but the rest won't exactly make the high-scorers list. Let's take a closer look.

For the third quarter, Midway took in $29.5 million, a 74% improvement over last year's net sales number. From there, things aren't too pretty. The company posted a loss in operating income of $28.2 million, more than twice the previous year's Q3 loss of $13.9 million. Net loss for shareholders in the quarter, meanwhile, was $29.1 million ($0.33 per share), compared with $16.1 million ($0.20 per share) during the same period in 2004.

Any solace in the nine-month numbers? Not really. In fact, net sales revenues declined 4.9% to $80.3 million from the comparable period one year ago, while the operating loss just about doubled to $72.2 million. Finally, the net loss for shareholders during the past nine months was $75 million ($0.87 per share) versus $42.3 million ($0.62 per share) in the previous year's equivalent timeframe.

As seen in the earnings release, Midway's costs and expenses rose precipitously across many lines. As in the movie business, inflation of product-development budgets is wreaking havoc with the business model. The best antidote to such a conundrum is to possess a portfolio that's overweight with great brands. And Midway certainly has some cool brands, such as Mortal Kombat and its various arcade collections, but its stable of franchises just isn't in the same league as the ones kept by publishers such as Activision (NASDAQ:ATVI), Electronic Arts (NASDAQ:ERTS), and THQ (NASDAQ:THQI).

Of course, there's another angle to the Midway story. Sumner Redstone has accumulated a vast majority of the company's shares (more than 88%) because he thinks that the publisher represents an important piece of synergy for his Viacom (NYSE:VIA) conglomerate. This reasoning makes sense, especially since Redstone proved that Viacom's MTV division can easily cross-promote a Midway game. The stock, in fact, has risen over the past year, and it may just be due to Redstone's interest in its shares. So there's no question that this was a good trade for many people.

Midway had a messy quarter, and it seems that the red ink will continue to run for a while. Perhaps the company will regain some former glory in the future, but for now, I'd think deeply before buying, since the stock might present a significant quantity of risk. Buying shares of Midway might be a bet on future synergies -- though it would be more speculative than a stake in Activision or EA.

Ready for some more video game info?

Activision and Electronic Arts are Motley Fool Stock Advisor recommendations.

Fool contributor Steven Mallas owns none of the companies mentioned. The Fool has a disclosure policy.