THQ - A Victim Of Market Change And Corporate Inertia

I'm not sure if anyone really expected THQ to weather the storm. Hoped, certainly, but hope and expectation are not the same things, and it would have taken equally huge doses of optimism and delusion to believe that THQ's business could continue in its present form. Placing Jason Rubin at the company's helm was unquestionably a good move - the Naughty Dog founder has an enviable track record and quite rightly commands the respect of the industry - but by the time he took the role, THQ's stock had already crashed and layoffs were well underway. The company was mortally wounded; Rubin's failure to resuscitate his terminally ill patient should not reflect in any way on his own talents and abilities.

In the end, THQ's fate has been moderately ignominious, with the firm's development studios and intellectual properties being carved up between industry rivals in a widely reported asset sale. A smaller offer was on the table to take on the entire THQ business and keep it operating as a publisher, and there has been some unhappiness about the fact that this offer was rejected in favour of the asset sale. However, I'm convinced that the firm's administrators made the right call here. A "rescued" THQ would have limped on like a crippled animal, shedding talented staff already spooked by one brush with corporate death. Games would have been sent out to die. Studios would have been shut down and developers laid off before they could find new paymasters. THQ may cease to be in an auction, but at least superb studios like Relic and Volition have stayed largely intact and found new homes.

"A 'rescued' THQ would have limped on like a crippled animal, shedding talented staff already spooked by one brush with corporate death."

Even after the asset sale, the skeleton of THQ still has to go through Chapter 11 proceedings (including a handful of remaining assets, such as Vigil Games and the Darksiders franchise), but it's fair to call time on this one at this point. Stripped of assets like Saints Row, Company of Heroes, Warhammer 40,000: Dawn of War, and upcoming titles Metro: Last Light and South Park: The Stick of Truth, there's no viable business left here, and the THQ brand itself has never had the kind of resonance enjoyed by the oft-resuscitated Atari. Indeed, if we're to write an epitaph for the company, it's worth lauding its success in the latter years in shaking off the poor reputation it once suffered, back in the bad old days when gamers joked that the name stood for "To Hell with Quality". The very fact that its passing is being lamented at all reflects very well on those who helmed it through the tough final years and established a positive reputation even as the ship sank beneath them.

What, though, are we to list as the cause of death? Market transition, perhaps? There's no doubt that the console market is feeling the squeeze - not at the top end, where Call of Duty and its ilk still shift by the bucketload, but second-tier titles, Double-A with aspirations to the Triple, have been badly hit in recent years. Once, these were the meat and potatoes of the games business - reliable titles, satisfying popular genres or based on popular licenses, which would rarely achieve wild success but equally rarely failed to turn a profit. Today, the "Double-A" market is a wasteland. Moderate success no longer happens; success has become more binary, more polarised than ever. THQ is neither the first nor the last victim of this change - I've recently been playing Kingdoms of Amalur: Reckoning, a solidly made and perfectly serviceable (if rather soulless) RPG title which would, ten years ago, have been a decent business prospect as a second-tier title. In today's market, its failure to achieve breakout hit status doomed its creators at 38 Studios to bankruptcy. The modern console game business is a harsh mistress indeed.

It stands to reason that bigger companies weather market transition better than their smaller rivals. Activision or Electronic Arts can afford to haul products that don't match up to AAA status back into development until they do so; they can afford to invest heavily in marketing and flex distribution muscle to ensure their products get pride of place at retail. The decline of the second tier of console game has impacted on them, making their business riskier, but enough scale and financial clout can paper over some of the cracks, at least. THQ, far smaller than such giant publishers, enjoyed no such comforts.

"Second-tier titles, Double-A with aspirations to the Triple, have been badly hit in recent years."

However, being small doesn't have to mean throwing in your cards. Being small can also mean being agile - and it's worth observing that in some regards, THQ did exploit that agility. The firm's relatively small product slate allowed it to swing its reputation around much faster than EA or Activision might expect to, as observed above. Market transition has opened up new evolutionary options for game creators and publishers - one set of doors may have slammed shut in their faces, but others have opened at the same time, new markets and new business models that offer a chance to capitalise on change rather than being destroyed by it.

If anything, THQ's great failure may be that it lacked the confidence to pick one of those doors and walk through it. The company focused much of its effort on creating core gamer titles on console and PC which would give it a stock of valuable, self-owned franchise IP and a solid reputation among gamers. In this, it had some reasonable success - far from a spotless track record, either commercially or creatively, but success nonetheless. However, THQ, perhaps in denial of its own lack of scale (a pretty small company can nonetheless feel very big from the inside), also tried to open lots of other doors. It made a significant investment in mobile games, actually diving into that market well before many of its rivals, but didn't adapt well to the App Store business model or to the demands of social gaming. It invested heavily in the uDraw tablet device for the new demographic of casual console owners, primarily aimed at the Wii - an expensive input device which was admittedly a good idea, but for which even a company five times THQ's size would have struggled to build a viable market. It was slow to recognise the collapse of the kids' console game market, throwing good money after bad on the Nickolodeon and Pixar licenses long after children had turned to mobile and online games for their franchise fix.

"Even a huge company would struggle to maintain a serious and successful interest in so many different sectors, and THQ was not a huge company."

Hardcore PC and console titles; mobile games; a hardware and peripherals business focused on the casual console market; children's entertainment... These are disparate and far from complementary businesses, and the fact that they sit under the broad umbrella of "videogames" doesn't mean very much any more. Even a huge company would struggle to maintain a serious and successful interest in so many different sectors, and THQ was not a huge company. Yet for managers trained in business schools that often preach a mantra of "diversify!", the notion of focus is a frightening one, conjuring up images of eggs in one basket, chickens counted prior to hatching, and probably various other poultry-related admonishments. By the time Rubin, a veteran steeped in product experience and no doubt keenly aware of the value of focusing your efforts, arrived at the helm, it was too late. THQ spent too long trying to be everything at once, and ultimately, ended up being nothing at all.

The best thing to come out of all of this, which bears reiterating, is that THQ's studios mostly look like they'll survive. Relic, Volition and THQ Montreal have all been taken on as going concerns by successful rivals (Volition, interestingly, goes to German firm Koch Media, whose slow and patient growth as a publisher has been underscored by last year's success with horror title Dead Island). There's some hope that Vigil Games, too, will find a new home. If THQ has accomplished anything in recent years, it has incubated these talented studios and, in its final days, has secured a future for them. For that, at least, the company will be missed. I only hope that the hard work and dedication of the staff who made it happen, and turned THQ's reputation around under some very tough conditions, will be recognised by the rest of the industry - and appropriately rewarded when the time arrives for them to seek new employment. I wish them all the very best for the future.