Future of THQ is in question...

kuddles wrote:

Based on that Polygon article, it sounds like the money sink that was Homefront development around the same time as the uDraw debacle didn't help things either.

Definitely. Homefront and uDraw on the 360/PS3 was a bit of a one-two punch that they're having a hard time recovering from. Either one on its own wouldn't have done the trick, but both at the same time...

Just for the record, you can bet big on opposite things. You're not required to only make one bet.

Not sure why anyone would waste money on TV and commercials in this age. Well, ok, I get that microsoft doesn't like money, everyone else I don't understand.

ibdoomed wrote:

Not sure why anyone would waste money on TV and commercials in this age. Well, ok, I get that microsoft doesn't like money, everyone else I don't understand.

The amount of marketing of a thing is most often directly proportional to the amount of a thing you sell. MS, EA, Activision, Ubisoft, Bethesda, etc, wouldn't buy TV/billboard ads if they didn't work. For all the people who buy a game, there are a significant amount of those that wouldn't buy it if it wasn't shoved in their faces in the ad break or while going from A to B daily.

Scratched wrote:
ibdoomed wrote:

Not sure why anyone would waste money on TV and commercials in this age. Well, ok, I get that microsoft doesn't like money, everyone else I don't understand.

The amount of marketing of a thing is most often directly proportional to the amount of a thing you sell. MS, EA, Activision, Ubisoft, Bethesda, etc, wouldn't buy TV/billboard ads if they didn't work. For all the people who buy a game, there are a significant amount of those that wouldn't buy it if it wasn't shoved in their faces in the ad break or while going from A to B daily.

This. Just because it doesn't work on you (which it might, to be honest) doesn't mean it doesn't work.

LobsterMobster wrote:
Scratched wrote:
LobsterMobster wrote:

On one side I'm hearing that they bet big on the Wii and the other, that they bet big on core gamers. Wii. Core gamers. Anyone else see the problem here?

I think I need a venn diagram.

Imagine two big circles with about half the overlap you need to fund a game publisher.

/big clap

I've been following the THQ saga mostly out of interest into how the video game industry is working (or rather not) and from what I've read, the story of their death spiral goes back a long time. I read a lengthy comment somewhere (I can't remember where) from someone who I think used to work in the business side of the company. He said that THQ's been badly managed for years and that Farrell and a lot of the leadership team haven't had a clue what they're doing for most of that time. What kept THQ going in spite of themselves was the cash cow that used to be licensed and kids titles. They were able to continually crap these out and be guaranteed predictable returns which largely funded their attempts to break into the AAA space.

Then the bottom suddenly fell out of the licensed/kids market and they had no idea what to do from there. They tried to get back into that market with the uDraw and after it met with some fad success on the Wii, they decided to not only put it in 360 and PS3 but manufacture massive amounts of it. What they ended up doing was putting out a tablet that only had a handful of titles and only worked with a certain console out the year after we got the iPad. Think about that. They thought they could piggy back off the iPad's success when in reality, the iPad's success is what rendered the uDraw obsolete before it ever came out.

This commenter said that THQ has been on a path to this fate for a long time but the press (and more importantly analysts) never saw or said anything about it back then but as usual, hacks like Pachter and Dent are acting as if they knew all along when in reality, they're just stating the obvious. This is why they brought in Jason Rubin this year, because the leadership of THQ has no idea how to make quality AAA games and manage projects of that scope (as Homefront clearly showed, see the Polygon article). Had they brought him in a couple of years ago, maybe they'd be better off but for as committed as Rubin is to quality (and I agree with him that only top-shelf quality games will sell the numbers they need to), I think it's way too late. Assuming they can even survive long enough to get all their announced titles to market, they all have to be blockbusters successes to have a chance of turning things around. If even one of them fails, they're done. And let's not forget that next-gen is a year away and budgets are only going to go up further when that happens. Even once these games come out, how do they make more for future systems?

Some people over on the SaveTHQ.com forums (yes, there is such a place) are speculating that the partner they recently brought in to find "strategic alternatives" is looking to either sell the company (they've apparently been quietly for sale for years but no one wants to take on their debt), possibly have it taken over by a private equity firm (who will fund the current titles, then likely keep all the profits before cutting up the company to sell it off anyway) and one conspiracy theorist even think Farrell and company are trying to crater the stock price so they can take the whole thing private. I think the latter is very unlikely. In any case, they all believe the current titles will be fine, even if the company goes under. The games are all well along in development and are valuable IPs so if they go under, someone else will probably buy the IPs and the internal studios like Relic, Vigil and Volition for pennies on the dollar and keep things rolling. All the games will come out, they just might not all have THQ's banner on them and well, what another publisher will do with those IPs in the future is anyone's guess. No one seems to know why investors haven't called for Brian Farrell's head and many are saying he should have been shown the door right after uDraw. Whether he's always been a bad leader or not, he clearly is one now.

I hope THQ manages to survive because the AAA industry needs more competition but the entire business model is pretty broken right now and anyone who doesn't have the cash to survive the transition to another model is getting left behind. THQ had less money in cash than it takes to even develop one AAA title (forget marketing it) and their market cap is less than many of their publishers have in revenue for a single day. I think if they go down, in a few years we're going to see another long-form article talking about the long road to where they are now.

Parallax Abstraction wrote:

Thats the best analysis I have read on this subject yet.

mcdonis wrote:
Parallax Abstraction wrote:

Thats the best analysis I have read on this subject yet.

Thanks. Keep in mind, I know nothing about business (beyond my own failed company in a completely unrelated field) or the stock market and this is mostly just repeating and paraphrasing stuff I've read elsewhere. I've no dog in this fight, I just find the business interesting.

Parallax Abstraction wrote:
mcdonis wrote:
Parallax Abstraction wrote:

Thats the best analysis I have read on this subject yet.

Thanks. Keep in mind, I know nothing about business or the stock market . :)

I made decisions on stocks when I was a broker on much less info than what you provided. I would have loved to have seen a take on a company like that back then.

They must really be in a bad way with their debt issues. For that kind of market valuation (11M) it would be a no brainer to pick them up. Several of those IP's are worth that from the way I look at them.

I am curious if their creditors feel they would recive more (faster) from liquidation rather than extending them more credit.

Either some people have misinformation or I'm skimming too much. Homefront may have been expensive and not a run away success, but it was in fact profitable, and then after they said that, the next month they shut down the developer.

mrtomaytohead wrote:

Either some people have misinformation or I'm skimming too much. Homefront may have been expensive and not a run away success, but it was in fact profitable, and then after they said that, the next month they shut down the developer.

The thing I always find myself thinking now when I hear about a game scraping over the break even point is that publishers don't invest tens of millions and years of development just to poke their head above water on a project. It might be a net positive, but they were hoping for more and it's that profit that would have gone towards the future.

Scratched wrote:
mrtomaytohead wrote:

Either some people have misinformation or I'm skimming too much. Homefront may have been expensive and not a run away success, but it was in fact profitable, and then after they said that, the next month they shut down the developer.

The thing I always find myself thinking now when I hear about a game scraping over the break even point is that publishers don't invest tens of millions and years of development just to poke their head above water on a project. It might be a net positive, but they were hoping for more and it's that profit that would have gone towards the future.

This is the important point.. you can't survive for long making 1% profits.. Most companies are looking for a 10-20% ROI.

Well and I am sure it is just like the movies where you have something with a $200 million budget that is considered a flop and not worthy of a sequel because it only made $300million.

I think in games especially, new IPs need to be cultivated. If a game does well but not well enough to warrant a sequel there is missed opportunity for some games sequels to be lights out successful. But publishers don't seem to want to recognize that.

Well, break even was 2 million (at what price) and they projected a lifetime of 3 million with 2.6 shipped by that point. No idea what % that might get them to but it seems 10% wouldn't be unreasonable.

On the other hand.... Call of Duty 9 is out this year.

Different companies have different motivations, big publishers isn't where I'd be looking for new innovative stuff, because it's risky. One way to look at Homefront is that THQ got burned on a risk, rather than playing it safe. You know that stereotype scene where a guy bets all his money, his house, his car and his wife on a bet? That's what you don't do. You don't make big bets on risky unproven games, that's for smaller bets. As much as people slam big publishers for being sequel factories, that's their business strategy and it often works, and quite frankly I admire the efficient machine that many of them have become. I also admire smaller companies for trying new stuff and maybe failing, and now is a great time for this.

I'd also be very cautious about comparing games finance with Hollywood.

And the problem in today's AAA environment is that there's no such thing as a small bet. AAA is go big or go home. So if you're going to launch a new IP, you either bet the farm or you guarantee it's failure. It's a no-win situation that most publishers in that segment are facing now.

Metro Last Light, and don't let another Vancouver studio close, kthxbye.

Man, the SaveTHQ.com forums are not a happy place tonight. A lot of people there have lost a lot of money today. It looks like the community has pretty much given up and they seem to believe that THQ will go bankrupt or be sliced up and sold off before they can release most of the announced games under their banner. Yesterday's earnings call where they suspended guidance, refused to take questions and basically hung up on everyone confirmed for many there that leadership has known there was no saving the company a long time ago and has just been trying to keep it strung along as long as possible to keep themselves employed. Basically, scamming investors in order to loot the place. Sounds a lot like what happened with Interplay a number of years back. I really hope the games and studios get picked up, it looks like Farrell and company are leaving them all for dead.

It doesn't really bother me if THQ closes because I am highly confident that their good dev houses will get gobbled up by somebody. Volition, Relic, 4A will all find a home somewhere, there is just too much talent there.

4A Games is still independent, though they don't own the Metro IP. Last Light is almost done though so someone will release it. Turtle Rock is a small team though and probably isn't flush with cash. Unless their game is far enough along in development that another publisher wants to put it out, it could be bad for them. Hopefully they all come out of it OK.

I think the South Park game will get gobbled up quite quickly as well. Press and consumers alike were rather excited about it after the E3 showing this year, so I imagine it might be one of the faster things to get swiped up.

I'm concerned about Vigil myself, and what will happen to Darksiders. Jokes aside, I really dig the series, and though I have some issues with Darksiders 2 I really like how it feels different from the first game. One of the devs mentioned wanting Darksiders 3 being four player co-op, and that just sounds exciting to me.

In any event, based on what's been said, you're right, it doesn't really matter what Darksiders 2 sales could have been. It doesn't seem like there was any saving this company.

Very interesting, financially technical article on why THQ could be an undervalued buying opportunity and why he thinks bankruptcy is unlikely. It also takes the piss out of the clueless analysts and a lot of what's been making headlines the last couple of days, though it unfortunately doesn't call them out by name.

That graph reminds me of why as a random guy on the street with no investment, I don't like stocks all that much. They are a measure of worth, but not the only measure. There is some value in THQ, the trick is delivering it in a way to please the people bankrolling the operation.

That was an interesting read, though I basically didn't understand anything with a percentage sign.

Relic Kickstarter stat!

Parallax Abstraction wrote:

Very interesting, financially technical article on why THQ could be an undervalued buying opportunity and why he thinks bankruptcy is unlikely. It also takes the piss out of the clueless analysts and a lot of what's been making headlines the last couple of days, though it unfortunately doesn't call them out by name.

Unless I totaly missed it I dont think he made a call on what their real situation is. (Are they cut off from credit, what are their cash reserves)

To me that is the real question

I know they already did a lot of layoffs earlier in the year so they probably dont have a lot of room to do more without hurting the release dates more.

By acting like the way the did in the conference call it tells anyone lisenting that those two things are in very bad shape. There really isnt any good reason to lie and make it seem they are worse off than they are. To do so is I believe a violation and they can be sued on that by the stock holders. (the idea here is they lie and get the price lower so they can take the company private for cheep)

My guess is they know they dont have enough cash or credit to make it to release and they were just told no when they asked their creditors for some sort of relief. Thus they are exploring some sort of option that is drastic.

Its a darn good stock to watch in the next 6 months but I dont think the odds are great they make it to release.

mcdonis wrote:

Its a darn good stock to watch in the next 6 months but I dont think the odds are great they make it to release.

That's pretty much it, THQ have something to them, but it's a survival job until they can get some revenue from those so-called quality titles, and after that can they actually start more projects for long term survival.

fangblackbone wrote:

Relic Kickstarter stat!

Homeworld 3!!

NathanialG wrote:
fangblackbone wrote:

Relic Kickstarter stat!

Homeworld 3!!

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