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THQ Faces $192 Million Loss, Plans 600 Layoffs
THQ Faces $192 Million Loss, Plans 600 Layoffs
February 4, 2009 | By Leigh Alexander

February 4, 2009 | By Leigh Alexander
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Publisher THQ's sales plummeted in its third quarter, opening up $191.8 million in losses -- and prompting the publisher to plan a 24 percent staff reduction, eliminating 600 positions.

The company's revenue dropped 30 percent to $357.3 million, missing analyst estimates. With the disappointing announcement came the news that Paul Pucino would replace Colin Slade, who is on medical leave, as the company's chief financial officer.

The poor performance comes in the face of what the company defines as meaningful improvements in its product portfolio. Over the fiscal year, the company's Saints Row 2 shipped 2.6 million units and achieved an average Metacritic rating of 82. Its WWE SmackDown vs. Raw 2009 has shipped more than 4 million units to date, according to THQ's data, with an average Metacritic rating of 80.

Wii exclusive De Blob, rated 81, has shipped 700,000 units to date, and Big Beach Sports has shipped more than 1.2 million units, although the company did not provide sell-through figures for any of its games.

"We delivered high quality games to market this holiday season but fell short of our revenue and profit targets in this challenging environment," says THQ president and CEO Brian Farrell, who nonetheless says the strong performance of established franchises and new IP both "give us confidence in our strategy going forward."

The company says it's now implementing a "highly targeted" plan to return to profitability, planning on "investing in games with the highest franchise potential."

The company has already executed a $120 million cost reduction, and hopes that its new cost-cutting initiatives will save an additional $100 million.

In the coming months, the company plans to launch Warhammer: Dawn of War II, WWE Legends of WrestleMania, and its first games based on the Ultimate Fighting Championship franchise, and Red Faction: Guerrilla, but did not specify release windows.

"In this environment, we are focused on what we can control: delivering high quality products, investing in a targeted product pipeline, and aggressively managing costs," says Farrell.

The company has seen its share price fall almost 80 percent year over year, and on news of its loss its shares closed 10 cents down to $4.14.


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Comments


Paul Lazenby
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They Shipped 2.6 on SR2, but I wonder how much they sold.

Hopefully they'll release the new Red Faction with a decent campaign.

Ben Hopper
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"... investing in games with the highest franchise potential."



You hear that line a lot nowadays. Not a good recipe for fun games. No wonder so many are flocking to XBLA and PSN.

David Rodriguez
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Seems like production cost is what hurt them in the end. I'm expecting to see a lot of recycled engines,design and art polished then put into new future games. Downsizing saves money but now they have to strategically use talent to make a game with 60 people instead of 120. I hope the 600 THQ's land somewhere good

Bob Stevens
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"You hear that line a lot nowadays. Not a good recipe for fun games. No wonder so many are flocking to XBLA and PSN. "



"Fun" in games doesn't really have anything to do with whether or not there's a number behind the name. Don't be scared of "franchise potential"....... no one sits there after finishing a game they enjoy and says "I sure hope they never make another game like that."

Lo Pan
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Actually it must be extremely frustrating for EA and THQ to deliver higher quality but not see a translations into sales/profit.



I really wonder if there is now a much stricter limit of gamer resources, especially with game at $59. So their buy quota is lower.

Gabe Carter
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If you do the math on the 4 games they mentioned, they averaged 2.125 million copies sold per game. And they're in the red? That's more than twice the sales per game as what NPD reports for MGS4, as a point of comparison. MGS4 was considered a huge success and has one multiple GotY awards for 08.



This sounds like another company simply doing a poor job of managing it's own costs. If you can't turn a profit on 2 million sales per game across several franchises, you're doing something horribly wrong.

DaFacts1on1 Jack
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Production cost is hurting everyone and here's why EA, THQ, Sony, Microsoft and several other entities are plagued by this trend.



A) Majority to blame for poor choices in Projects or IPs; when green lit, its a hit or miss regarding the direction these companies take in solidifying hit titles.

B) On the inside: The amount of staff on these productions are inflated. Too many Chiefs and not enough Indians, i.e. more producers than you can count doing lord knows what, managers a like. All you need is a small team experienced individuals that know how to make games to solidify all the important design details before "smartly" hiring addition staff to help push the product out the door. That's it. No science there however,.. even in this day in age bigger corporation don't get it yet. They think inflating teams twice or triple the size will ensure AAA status. That is not always the case. This industry is already getting a hard core wake up call! Getting those individuals that have solid track records in developing core titles is vitally important, now more than ever. Simply interfering with that process is strictly suicide.

C) The other issue is that successful titles don't always cover the revolving lucrative cycles these companies rely on in order to cover operating costs due to the hit & miss factor. More bad titles than good thus hampering profit margins. Which is why solidifying stronger & fewer titles is important.

D) Last but not least, keeping core experienced staff in the studio to continue successful trends.





Another contributing factor can be blamed on bad habits of the past that's simply catching up to these companies for quite sometime. Old generation days of shipping as much titles regardless whether they were shaky or not simply to turn over profits. Wasteful spending etc.

Remember, Yeah times are tough, we know there's economic turmoil however this just didn't happen overnight with these developers. Its just become that more magnified.

Look at Activision's portfolio. This is a great example of making sure that you have more successful titles in the market to ensure stability.

Benjamin Solheim
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It is simply they are losing money because of all the exclusive licensing agreements they hold. The profits are all going to the IP holders not the guys making the games. Out of 2008 & 2009 games most of the profit is gone before it is earned.


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