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Opinion: Despite Zelnick's prediction, THQ not quite on life support
Opinion: Despite Zelnick's prediction, THQ not quite on life support Exclusive
April 9, 2012 | By Chris Morris

April 9, 2012 | By Chris Morris
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    4 comments
More: Console/PC, Exclusive, Business/Marketing



Industry watchers were treated to a rare bit of executive candor Thursday from Take-Two Interactive Software's CEO.

Strauss Zelnick's comment that "THQ won't be around in six months" was shocking not so much because of his prediction, but because they seemed less like the contrived back-and-forth between Electronic Arts and Activision-Blizzard - and more honest opinion. The bigger question is: Was he right?

The aftermath of the comments was pretty much what everyone knew would happen. THQ took umbrage at the remark, calling Zelnick's thinking "outdated and inaccurate" and his comments "irresponsible and false." Zelnick, in turn, issued an apology that was worded much like something a politician would say.

For those who haven't been following THQ's travails too closely, though, Zelnick's comments were a wake-up call. Will the publisher of Saint's Row be nothing but a memory before the end of the year?

Odds are: No.

Zelnick is a smart businessman - and THQ's fate may, in fact, be ultimately terminal. But if it does call it quits or is forced under, it's not likely going to be within the next six months.

THQ has made a series of mistakes over the past few years. The company has been unfocused. It has made crucial business decisions years later than it should have. And it has undermined its successful properties with cheap stunts.

That said, the biggest threat THQ is facing right now is a delisting on Wall Street. (Company shares are still stuck under $1 - the cut-off point for exchanges to start the delisting process.) And it's not the first company to find itself in that position.

Two years ago Majesco received a delisting notice from Nasdaq, but avoided it on the strength of one good quarter. Today the company is hardly an industry powerhouse, but is still around - and has recently struck gold with its Zumba fitness games.

Even Take-Two faced delisting in 2006, after it failed to report earnings in a timely fashion amid an investigation into stock option grants.

The truth is we really don't know exactly how THQ plans to crawl out of this hole it has dug for itself. It has severed ties with its licensing partners for children's games. It has cut hundreds of jobs. And it has slashed executive salaries (well, for a year, at least). But as far as an action plan to move the company forward, there hasn't been anything concrete laid out. (The company's stated intention of "a realignment of the organizational structure" is as rehearsed as Zelnick's apology.)

The general public - and investors - will get its first hint as to whether the company is turning things around at E3 this year. A weak line-up of titles could be devastating to THQ, but if it shows one game that has solid hit potential, investors might be willing to give it some rope.

Couple that with a reverse stock split and the delisting threat will likely disappear, giving THQ some breathing room. The trick, from that point, is execution.

"Quality really, really, really matters," Zelnick mentioned in his comments Thursday. "THQ has had some good games, but their quality levels aren't even remotely...the quality hasn't measured up."

He's right. Games that should have been polished and AAA titles (like Homefront) have been mid-tier, and have hurt THQ badly. If the company can truly learn from those mistakes, though, Zelnick's six-month forecast will evaporate.

The question is: Has it learned? And does it have someone on staff that is qualified to act as an arbiter about game readiness? There is an opportunity at THQ for someone to step up and become a design leader at the publisher. If THQ is, in fact, going to survive - and thrive - the salvation isn't going to come from management. It's going to come from the creative side.


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Comments


Rodolfo Rosini
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Delisting is not a threat. At $35m cap it's a fact. Their only chance is going private via a takeover from a private equity firm, problem is that they do not have strong franchises that they own, AAA games have poor return of capital, and last and more important THQ does not have a vocal rabid fanbase.

Basically they are fucked.

Question is why the board and the investors have not fired the management that took this company to 1.5% of its peak value.

Jonathan Murphy
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I'm sorry they closed how many dev teams? How many people did they lay off? Not on life support? They are dying! If Darksiders 2 doesn't sell well they could share the same fate as Acclaim, Midway, and many others. THQ needs an original blockbuster sales game, not more external license deals.

I'm not being rude. I'm being realistic. The math says they are boned.

Rob Wright
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When I look at THQ, the first thing that comes to mind is 2006 -- with the release of both Company of Heroes and Supreme Commander, not to mention another excellent Warhammer expansion, I thought THQ was poised to OWN the RTS market for the next five years. That didn't happen, and I'm not sure why. Did those games, despite critical acclaim, not sell enough to satisfy the company's board? Did THQ not advertise and market those titles? Should the company have done more to promote them at RTS tournaments and even professional competitions?

Whatever the reasons, I think it's clear the company sacrificed the potential to own a smaller, niche market in PC gaming for more mass audience console titles. And that bet did not pay off. THQ would have been better off rallying around the RTS and building up a core of loyal fans. Sure, they would have been smaller in terms of overall revenue, but their brand would have been stronger.

dude od
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Rob Wright you are correct and all those games were great, relic was in a position to take over or compete with blizzard. Relic is now in its last throws as a studio, years of poor choices in managers and leads from THQ, and the bleeding of the people that built these original great games, has left Relic, now in the hands of a few inexperienced people who had little or nothing do with its original success, but to inherit egos by association. DOW2 was the first signs of the decay, as a few poorly informed people with lots of theories and no practical experience completely took the company in the wrong directions both creatively and technologically, DOW2 was poorly received by the original fan base, and dropped all the advancement that Company of Heroes developed, and game play of the original DOW series. Company of Heroes, considered by many to be one of the finest PC games ever, was res-designated by THQ to become a free to play micro transactional game called Company of heroes online, neither THQ or Relics management had any idea or experience in this business model but with no foresight then attempted to make it work with an RTS strategy game. When release first in china, then Korea, the concepts of European ww2 or that of a hard core strategy game didn't resonated with in the Asian gaming community, or convert to a micro transactional game and thus failed. The final nail to this once proud studio was to leave PC games and Create a 3rd person action game on a console (SpaceMarine) the studio had little experience in doing this and the console cycle was in its late stages, to attempt to bring a game like this with no studio experience and go up against studios that were on their 3rd generation action titles ( gears of war ), was just foolish, add in GamesWorkshop royalties and this was absurd. After SpaceMarine's failure and its neglect for its 2 premier RTS franchises combined with the exodus over the years of its top talent, you now have a broken and gutted studio with no sense of identity, hopelessly behind in technology and with the layoffs recently no morale. Relic is a sad testament of the poor management of THQ and a sad reminder of what their foolishness has done to one of the premier developers of the gaming world. IMHO


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