Don’t say I didn’t warn you.
In my last article, A New Era of Video Games: The End of Shovelware, I highlighted THQ (THQI) as a victim of the new discriminating video game environment. In November, THQ warned its investors with bleak guidance and the stock dropped to the 4’s.
Now it’s missing its numbers again and not even providing any guidance – not even for the quarter that we are in right now. Despite all of that, the CEO wanted to take the time to brag about getting an 81 Metacritic rating for its video game “de Blob,” as well as several other titles whose ratings are mostly in the low 80s and below. The CEO was apparently impressed with those review scores, even while admitting that the company is “restructuring” and letting go of 25% of its employees.
But restructuring its business model would be more appropriate. How about not releasing such upcoming titles like: 50 Cent: Blood on the Sand, Deadly Creatures and several others that few care to even know about. How about having one hit that does not involve an expensive license?
But fear not. The company took out a 26 million dollar loan and will surely focus its efforts on titles such as Destroy All Humans 3, Saints Row 3, and more WWE titles than we will ever know what to do with. Call me skeptical, but I don’t see big hits in this company’s future. If Electronic Arts (ERTS), with billions in cash and resources, is struggling to produce wholly owned big hit properties, I cannot see any light at the end of the tunnel for THQ, whose CEO is bragging about games nobody has heard of or is even interested in hearing about.
Indeed, the era of shovelware is ending quicker than even I had anticipated thanks to this intense market condition. Low quality software (unless affiliated with a powerful name like Nintendo (NTDOY.PK)) no longer makes a profit. Hit games today mostly require tens of millions in development cost, which means plenty of risk that few can afford. THQ is at a point of no return where they can no longer afford to take those risks.
The winner is the consumer, who will be less likely to accidently buy a mediocre product. As long as mediocre products are not making money, there will be less of them on the shelf. But who knows? Maybe THQ will stop development on “WWE Legends” and put that money into revitalizing the WWE core product that it regurgitates year after year. Or maybe not, since the CEO was quick to point out that WWE Legends is coming soon to a store near you!
Disclosure: Short THQI.