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A long road to recovery for once-mighty THQ
A long road to recovery for once-mighty THQ Exclusive
July 2, 2012 | By Chris Morris

July 2, 2012 | By Chris Morris
More: Console/PC, Business/Marketing, Exclusive

Brian Farrell knows his company has something to prove.

Once the industry's third-largest publisher, THQ has tumbled in a very public fashion. Monday's announcement that the company's board has approved a 1-for-10 reverse stock split should stave off the threatened Nasdaq delisting, but it's just one step in a very long road.

"We want to show the shareholders that the heavy lifting is done," says THQ CEO Farrell. "The last six months have been an exercise in great pain and suffering. We feel like we're getting there. We've taken a lot of negative things in the press – and frankly a lot of that was deserved. This company has changed. We have strong, new leadership. Look at our fourth quarter earnings. … It's starting to come together."

While the reverse split will take care of one very public problem, it's not a cure-all. Some investors have questioned whether THQ pulled that trigger too quickly, rather than asking Nasdaq officials for an extension to the deadline (a request that is typically granted by the exchange).

Farrell won't say whether THQ made that request, noting that while the company has had discussions with Nasdaq, he doesn't want to make those talks public. However, he notes, the stock price is just one component of a larger issue at the company.

That couldn't be truer. While a reverse split eliminates the delisting threat for a while, at least, if the company can't deliver on earnings and quality products, the stock won't stay at a reasonable level for long. With titles like Metro: Last Light and South Park: The Stick of Truth both garnering praise at E3, THQ is hopeful that it can deliver games that will strike a chord with players.

"I've been doing this long enough to know that …at the end of the day, the product will drive the stock price," he says. "When it will happen, we don't control that. So the focus is on getting great products both in the near term and the long term."

To some extent, those games will be the AAA titles that are the prime battleground for core players today. THQ is already planning a new Saints Row installment for next year and Crytek is working on the follow-up to Homefont.

But Farrell says THQ's not betting its entire future on AAA.

"I think there's a real opportunity in the changing business models we see happening in the marketplace for a smaller and more agile company like us to position ourselves quite differently," he says. "We think there's a real opportunity - particularly in the digital space on the core gamer side [and] especially on emerging platforms like the PC and some of the things we see coming down the road, where there's an opportunity for core games that are not just [made with] the highest budgets, but [offer] alternate pricing and business models There's a place to attract the core gamer there."

Of course, vision and opportunity only get a company so far, especially when it's facing skepticism from investors, analysts and players. Actually bringing those plans to fruition is the hard part.

Farrell acknowledges that the company's biggest problem in the past has been "spotty execution" – and says he realizes that's a luxury THQ can no longer afford.

"We don't have a lot of room to run, so we've got to execute flawlessly," he says.

A lot of that execution comes from the studios, of course, but as CEO, Farrell is ultimately held responsible. And in a gaming universe that is filled with executives who are so visibly competitive (such as Activision's Bobby Kottick and EA's John Riccitiello), Farrell can come across as almost mild mannered.

That style has sometimes been interpreted as a lack of fight, but Farrell says it's purposeful.

"We have a very deliberate approach," he says. "I learned mine from my dad. I think people would agree I'm an intensely competitive person. I don't like losing at all, but it doesn't mean you have to be an asshole. … There is a purpose to our style but people that mistake that for a lack of intense competitive desire are severely mistaken."

Farrell has also taken a few very public lumps from developers who were laid off from THQ in its recent house-cleanings for his management decisions. Similarly, investors have called for his head as well.

While he acknowledges his accountability for the company's situation, he says those who are expecting him to resign are going to be disappointed.

"There is no question who is responsible for where THQ is right now. That's with me," he says. "That said I feel equally responsible for getting this company out of it.

"When I first took this company over and in other times in our 21-year history, we've been in some tough spots with some angry shareholders and angry employees. I understand. I don’t like it either. I'm a shareholder. But I feel responsible to fix it. And I'm committed to do it until I'm relieved of my duties. That's the way I'm built and I'm going to keep pushing forward to get this company to where it needs to be. That's the mission and I think the actions speak for themselves. I think the path we're on right now is a good one. I don't expect any one to believe that until we do it - but my intention is to do it."

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mike madden
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Keep fighting the good fight THQ. I think there are some good points in this article that will allow THQ to find its way back.

Joe McGinn
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Would like to see it, but the odds of THQ operating flawlessly? Hell I'd be impressed if they could execute flawlessly on even one game!

TC Weidner
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"I've been doing this long enough to know that …at the end of the day, the product will drive the stock price," he says. "When it will happen, we don't control that. So the focus is on getting great products both in the near term and the long term."

yep, companies and their heads so often get caught up in the financial side of things, they forget what they are there to do in the first place. Create a nice product. Companies really need to stop tying executive bonuses to trivial quarterly and annual numbers. It creates this atmosphere of short term numbers manipulation, instead of long term product prosperity and creation.

Brandon Sheffield
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I want to believe, but I've heard "we've turned the corner" so many times from THQ... just reminds me of Midway's constant assurances.

Mike Lopez
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The irony is the stock would have popped up had he announced his resignation.

Joe kennedy
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Yeah Mike I agree!!!!!
Stocks would've been on an up if he resigned. He allowed Danny Bilson and his men to come in and reign control for a long time without intervention.

They steered the ship down this path of destruction and wasteful spending and hurt the creative fiber of success within the studios. That being said, Brian is responsible for this mess and he should step down.
That would be the best thing to do.

I still feel its a little too late for THQ.

Good luck though, I hope all the talent is saved.

kevin williams
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I am concerned that we are seeing a lot of puff pieces not aimed at us readers - but hoping to influence indirectly the stocks and shares side of their business. Claiming lots but really just being smoke and mirrors.

The fundamental fact is that management was dropped into the company replacing previous incumbent that claimed lots and failed to deliver - they were linked to the top management and so all have to take responsibility for the failure. They should be replaced in turn and a more appropriate direction be taken.

But in reality - these executives are like leaches - they will not let go, and they will do anything to hype their position and secure their position. The investors see this and abandon the company - so leaving the player / customer with a imploding company and a hype filled company proposal.

I just wonder if it is not the media's job to be more critical of what it reports - rather than just being a soapbox for executive commentary - you should be more observational, and critical of what is being said or you will be worse than useless (may be why these comment sections are added for people to say what the journos feel they can not?)

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Ian Uniacke
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The "kiddie crap" that you talk of was amongst their most successful business. The problem as I see it was bad decision making in thinking that those properties would sell on hardcore platforms like PS3.

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