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THQ: Fewer Studios Is Better
THQ: Fewer Studios Is Better
September 8, 2011 | By Kris Graft

At the Citi 2011 Tech Conference in New York City on Thursday morning, THQ's EVP and CFO Paul Pucino showed off sizzle reels of games like Saints Row: The Third and a Jimmy Buffett Margaritaville Facebook game.

But when the mic was handed over to attendees for questions, Pucino had to get serious as to why THQ has been changing its studio strategy so drastically in recent months.

Asked why THQ failed to mention at its investor meeting this year the impending closure of two Australian studios, Pucino said, "We changed for a reason, because we think it's the right thing to do."

"With respect to [not] talking about studio closures at our annual meeting this year, then making an announcement two or three weeks later, it was simply because we weren't ready to announce it at that point in time," he added.

Pucino said THQ is focusing on a lean cost structure, and that is reflected in how many game studios the company currently operates.

"We think the best position we could be in with respect to studio structure right now, fewer is better," he said. "A year ago we had about 11 [studios], now we're down to five. We think that's the right number."

"The two that we just shut in Australia, they were working on games that were not consistent with our strategy any longer," Pucino said. "One was working on a movie-based console game -- again, not part of our strategy. The other was working on a kids' licensed game -- not part of our strategy either. That's what drove that decision."

He said that when THQ bought those studios 10 years ago, the Australian dollar was "about half the U.S. dollar." Now that exchange rates aren't as favorable today, operating those studios was not cost effective, he said.

Pucino said that managing the cost structure at THQ while still releasing triple-A games is a priority for the publisher. THQ's new Montreal studio, opened in August last year and led by ex-Ubisoft Assassin's Creed creative director Patrice Desilets, will eventually be THQ's biggest studio. It currently houses around 150 employees, and will grow to 400 employees "over the next couple years," according to the exec.

Pucino said THQ was given "significant" tax incentives from the Canadian government to found and operate a Montreal studio. "We're going to be able to make games there for almost a 40 percent discount, or 40 percent less, than some of our other studios."

"It's much more cost effective to have a studio there than [Homefront developer] Kaos Studios, which we closed here in New York City, which was very expensive to run."

"The industry has changed a lot, our strategy has shifted along with the industry, and unfortunately, that resulted in closing some studios."

THQ is betting big on the holiday quarter this year, expecting a record fiscal Q3 for the company in terms of revenues and profits. The company is launching Saints Row: The Third, the next WWE wrestling game and a multiplatform, multi-territory push for its uDraw game tablet controller.

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Elizabeth Boylan
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It should be an obvious for governments to give huge tax breaks to non-polluting creative industries. They're already taxing the employed individuals, and then there's sales taxes, when is it enough?

Johnny LaVie
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I wouldn't say that we are a non-polluting industry. It's arguable that we use tons of electricity to power our studios (and the consoles in the homes of gamers) which are most likely coming from coal electrical plants, and that our console disk products, for the most part, come in plastic boxes that take centuries to decay.

It would be great to have some cities in the country to a similar initiative to Montreal like you suggest but the states are dead broke and even if we had that kind of break, other industries with more power lobbies would lose their minds and sink the whole thing before it started.

Mathieu MarquisBolduc
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No coal plants in Quebec, its hydro-electricity central, with some wind turbines popping up recently. By the way, power is dirt-cheap in Quebec, which also helps to reduce studio costs.

Nothing But Homeruns
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Check out what Baton Rouge is doing.

Daniel Campbell
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The problem is that THQ doesn't seem to know WHERE to trim the fat. They close studios with a lot of talent, and keep open others that have not proven themselves. They get a studio that produces a well reviewed project, and then shuts it down when the game fails at . If a game is reviewed well, then the majority of the blame is often due to marketing.

Maybe I'm just bitter but with my time in the industry I've not seen a marketing department miss the mark as often as THQ's does. This is more directed at the US marketing team as they often fail to see what will make a real impact on gamers' opinions.

Bart Stewart
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Daniel, if I read you correctly you're saying that THQ let studios go despite the demonstrated quality of the team(s) at that studio. But Pucino was saying that the decision was based not on the team but on the game currently being worked on by that team.

Which is it really? Or maybe the better question is, which of these *should be* the basis for retaining or dropping a studio?

Jeffrey Crenshaw
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If we're talking about what *should be*, then developers should decide when publishers lose their jobs and not the other way around. The master-servant structure in this industry is the reverse of what it should be when you stop and ask who is actually providing for society, flow of money (an imaginary service) be damned.

Nothing But Homeruns
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Corporate double speak pseudo babble. Obviously so.

How many more times will their strategy change, fail, the stock price plunge and then the studios and their employees be blamed and fired - before someone OTHER than the studios and their employees are held accountable?

This company has been in serious trouble since 2007 (that's a matter of public record folks) but "don't worry, this next batch of snake oil is the REAL stuff". And then the media and Wall street all scratch their heads and rub their chins and sagely ponder this latest batch of excuses as to why the bus is STILL headed right at the cliff and no one is grabbing the wheel.

It's this exact kind of behavior in companies that causes global recession.


Micah Wright
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Well, there's also studio overhead. Last time I was at THQ HQ in Calabasas, there were a LOT of people around who I would think could be easily outsourced. Publicity and Marketing leaps out at me; why have permanent staff for that, especially when most game marketing is the pits in the first place? Isn't that what Ad Agencies are for? Let Don Draper figure out how to sell your product to the masses, you concentrate on making good games, whydoncha? At every big Publisher like this, the first thing I notice are the glamorous digs: they build tremendous palaces for the executive classes, and then have their game designers working in rented office space next door to insurance agencies. At each one of these companies there are always extraneous VPs, Directors, and Managers of this department or that department. The executive building parking lots are filled with Mercedes, Lexus, BMW, etc., but whenever I visit, it always seems like they're working on 2 games and if one of them isn't a massive hit, then they're going out of business next year. I've yet to see the giant company like this that couldn't have half of its executive overhead just slashed, instead of putting artists, writers, & designers out of work and killing what might be their next big hit. It's easy to look at something weird and say "ewww... that's no good, we better kill that to save some money..." but that's the best way to go broke in existence. Who seriously thought that Katamari Damacy would catch on? No one in the American videogame industry, that's for sure. Yet, these are the same people we allow to steer our careers and decide our fates. Feh.

Nothing But Homeruns
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Jonathan Gilmore
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All 100% true. For some reason, at least in America, there is an assumption that corporate culture is somehow inherently efficient. All you have to do is spend one day in a office owned by a large coporation to see that is a fantasy.

Patrick Haslow
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Yes, fewer studios is better. At least it is better when a company has spent three years in a "turnaround". Better still? A buyout by a more capable publisher.

EA? Want 5 new studios?

Kyle Hodges
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Let me see if I've got this straight. Halfwit exec picks up swathes of crappy licensed projects. Dumps them on us long-suffering Aussie devs. Again. But when the poop hits the fan it's the Aussie's fault? Am I missing something here?

Nothing But Homeruns
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You're missing nothing.

Mike Breault
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Agreed. For the CFO and EVP of a publisher to say that their dev studios were working on games that no longer fit the publisher's strategy, and say that with a whiff that it might be the devs' fault, is disingenuous at best. THQ execs screwed up, either flip-flopping on strategy so erratically that no dev studio could keep up or not intelligently anticipating market trends (again, what are all those marketing and biz dev people for?) and not getting their studios on forward-looking projects. Either way, the execs who screwed up pocket bonuses and the devs who did nothing wrong get pink slips.

I was stunned to see that THQ has only 5 dev studios left (and one of those being their new Montreal studio, which isn't really off the ground yet). I worked at a THQ dev studio from 1999 to 2008 and IIRC they had 16-20 studios around the world. Yikes.

Is there an Occupy Silicon Valley movement yet?