Reacting to THQ's lowered revenue guidance for the third quarter, Wedbush Securities analyst Michael Pachter predicted the publisher will suffer a "substantial loss" for the current fiscal year and may run out of cash by the first quarter of the next.
Though the publisher did not update its $925 million to $1 billion guidance for the full 2012 fiscal year (ending March), Wedbush forecasted that "the magnitude of the Q3 miss suggests a large downward revision."
Pachter pointed out that if this becomes another unprofitable year for THQ, it would be the company's fourth in the last five years. He added that its cash balance would "become an issue if it is unable to turn a profit in the first half of FY:13."
"Given its declining licensed and core properties (apart from Saints Row), and an uncertain release schedule next year, we remain unconvinced that FY:13 will be profitable," said Pachter.
"We think its cash position may be compromised. The company's debt covenants suggest to us that its line of credit must be repaid to avoid default, and we think that THQ is at risk of running out of cash by the June 2012 quarter."
Cowen & Company analyst Doug Creutz also weighed in, reducing THQ's full-year revenue estimate to $844 million. Despite the Q3 miss and Pachter's concerns, he did not believe the publisher is in any imminent balance sheet danger.
The investment firm, however, did express that THQ's "revenue downside was even worse than [it] had feared", and that there could be more problems around the uDraw GameTablet than the publisher is letting on.
"Management blamed poor sales of uDraw on the Xbox 360 and PlayStation 3 for the miss," said Creutz. "However, the $130 million-ish revenue downside suggests that there was likely some incremental weakness elsewhere."
Creutz continued, "At a roughly $50 ASP for uDraw across all platforms (including the Wii), it would take a 2.6 million unit shortfall to account for the full revenue miss; THQ's planning implied less than 2.6 million units of total uDraw sell-in."
Pachter concurred on that matter, "We note that the Q3 miss reflects a shortfall of almost all of the 2.3 million uDraw units we modeled, suggesting that either guidance is overly conservative, or that there is a bigger as yet undisclosed problem."
It'll depend on a few variables: what happens with the Warhammer MMO that they've sunk ungodly amounts of $ into; when/if the Online group realizes that they have no idea what they're doing and rejiggers themselves into some kind of social skunkworks, and what kind of madness Patrice is working on up in Montreal.
If I were them, I'd liquidate every remaining US asset and relocate to Montreal, where the syrup is mapley and the poutine comes with a side of government tax breaks. Then I'd huddle together with the remaining survivors in my secluded frozen palace, slowly bleeding resources, until the stark Canadian sky fills with white winter and the memory of the random acronym that is THQ fades from this world.
Also in this scenario Bilson would be working for Zynga at this point, making a big media fuss about how he's going to "take social gaming to the hardcore gamer" with "fresh ideas" on how to quickly and efficiently lose massive sums of money.
1. I think Vigil now realizes it's up the creek as the execs at THQ killed the entire Online group ages ago (again);
2. Warhammer should have been cancelled years ago - many credible people agree;
3. The core issue is - no credible long term plan that is rational and mass exodus due to a complete lack of confidence in the leadership.
4. As for Danny and his burgeoning social games career - go have a look at Margaritaville - that is 100% his brainchild and a great example of how he really "gets" that space.
The real problem with THQ always was, that they completely ignored the platforms, they were successful on. In November 2010, they revealed the following revenues for 2010:
- PS3- $12 million
- Xbox 360 - $14 million
- DS - $17 million
- Mobile - $1.2 million
- Wii - $34 million
But instead of focusing on making games for the Wii and the DS and the newly launched 3DS, they concentrated on making expensive games for the core consoles. The same thinking, that is responsible for the catastrophic shape the whole industry is in (3rd year in decline).
probably not a good idea from a business/shareholder standpoint, but i do give THQ credit for getting away from licensed shovelware and making an effort to get into the AAA space. hopefully Saints Row will signal a turnaround?
"probably not a good idea from a business/shareholder standpoint, but i do give THQ credit for getting away from licensed shovelware and making an effort to get into the AAA space. hopefully Saints Row will signal a turnaround? "
Since when are uDraw and deBlob licensed shovelware?
And why do you speak of the "effort to get into AAA space"?
THQ is present in AAA space for years now, Saints Row just got it's third installment and Red Faction is trying to be a succesful AAA title since the PS2 days. There AAA titles never sold, but that never stopped THQ from making them.
yes, the execution was poor but IMO i see only big budget AAA and cheap social games surviving in this market, and the middle is getting obliterated. THQ is in the middle, trying to get out. too much copycat syndrome going on there though.
"I think Dave's point about AAA titles is SUCCESSFUL AAA titles."
Anthony, you should look up, what the definition of an AAA title is, successful is no neccessary part of the definition of AAA. This category is defined by it's budget and nothing else.
If THQ makes Wii games or not is not pleasing/displeasing me, I am arguing from a business perspective, you are arguing from a gamers perspective. Arguing how a company should act only from a gamers perspective and ignoring the business side like you constantly do, is a perfect description of fanboyism.
@ Dave
I think a market divided in AAA and cheap social games won't work. The market for AAA is oversaturated as this holiday season shows. AAA titles like Rage are underperforming, because of this oversaturation. Additionally the financial risk for an AAA title became much to high over the last years. Every CoD sells more, then it's predecessor, but it cannibalizes the AAA market, because the typical AAA customer won't buy more games, then he did in the past.
@Christian: the problem is that the sales for the Wii in 2010 were distorted by the high retail price of uDraw, which had an RRP of $69.99, or double the price of a standalone Wii game. Then too, sales of the uDraw should be considered a one-off: it's (perhaps unsurprisingly) not attracted attention on other platforms and has been effectively made obsolete by the Wii U's controller.
(and yes, I know the Wii U isn't out yet, but word about the touchscreen controller will have spread by now)
Also, much of their revenue on the DS and Wii comes from licenced properties, which means that they have to pay for use of the IP. And in addition, a quick look at amazon.com shows that the majority of their "licenced IP" games is sold at a very low price point - there looks to be a 50:50 split between the $20 and $30 price points. So their "licenced IP" games generally have higher costs and lower revenues than in-house titles.
And both the DS and Wii markets are shrinking while the X360 and PS3 markets are continuing to grow. And it remains to be seen how balanced the 3DS eco-system will be; it could well end up like the Wii, where the vast majority of non-Nintendo IP generally attracted little or no attention.
So, for all that the DS and Wii look to be the best markets on paper, there's good reasons for THQ to be looking at other markets.
Unfortunately, I'm not entirely sure what THQ could do to improve matters. Except for jumping in a time machine and cancelling the PS3/X360 versions of uDraw. Seriously: did they not do any market research before launching this?
Interesting remarks, you are right, for licensed properties you have to pay licence fee and they are sold at a lower price point, but they come also at much lower development costs. So I don't know, why you say, they "generally have higher costs", I am sure, the development costs for "Homefront" were a lot much higher then for the last "Sponge Bob" game.
And besides it doesn't matter at which price point they are sold, when it comes down to THQ's revenues, which were the point I was arguing from.
If THQ's revenues on Nintendo platforms in 2010 made up over 60% of all revenues, it is of no interest at which price point the individual game is selling.
In the end, the concentration on the 360/PS3 market didn't paid off for THQ, this was all I was saying. And it is not necessarly interesting, if the Wii/DS market is shrinking, as long, as you play such a minor role in this market, as THQ did in the last years. For a company like THQ, there still would have been much possible growth inside this market, even if it is shrinking. Instead, they delayed the release of the uDraw tablet outside the US till march 2011. I agree with you on the 360/PS3 uDraw versions, didn't saw the need for it either,
@ Anthony
"I know what AAA title is. The point was they were making unsuccessful AAA games and that hurt them. If they had made successful AAA games, they would be better off. It's not hard to figure out."
It's hard to figure out what you are trying to say, because you have the tendency to explain your earlier remarks, by interpreting them, so that they say something, that is so obvious, that it becomes completely useless to speak out at first.
What you are saying here, that you tried to say, Dave's argument was, they should have better made successful games instead of flops. I think Dave didn't try to say something commonplace, but instead something, that was worth reading.
And by the way, you should learn the difference between a definition and a description, I wrote "description of fanboyism", not "definition"
"Interesting remarks, you are right, for licensed properties you have to pay licence fee and they are sold at a lower price point, but they come also at much lower development costs. So I don't know, why you say, they "generally have higher costs", I am sure, the development costs for "Homefront" were a lot much higher then for the last "Sponge Bob" game"
That might be true - only THQ knows for sure if "IP licence + short dev" costs more or less than "long dev" (given the assumption that more resource is used to develop in-house IP). However, given that the majority of THQ's in-house games are budget affairs (e.g. Deadly Creatures, World of Zoo, Gallop & Ride, Neighbourhood Games, etc), I think it's fairly safe to assume that the cost of developing the licenced titles is higher than the cost of the majority of THQ's in-house productions.
And THQ themselves have stated that recent licenced-IP titles have failed to generate strong profits (http://www.insidegamingdaily.com/2011/08/10/thq-lays-off-200-closes-two- studios/):
"As we have outlined in our business strategies, we are making shifts to reduce movie-based and licensed kids’ video games in our portfolio, which underscores our strategy to move away from games that will not generate strong profits in the future"
Admittedly, it's debatable as to whether this is because of the choice of IP, the game quality or the general decline of the Wii market. Either way: high costs and low sale points makes for thin margins...
"And besides it doesn't matter at which price point they are sold, when it comes down to THQ's revenues, which were the point I was arguing from."
It does, if you're using it as a metric on where THQ should be focusing their development efforts - how much of that revenue came from uDraw hardware ($70 per unit - it's still $70 on Amazon.com) and how much from software ($25 per unit, on average)? If hardware consists of a significant percentage, then that's something to worry about, as it's highly unlikely they'll be able to reproduce the uDraw's success.
As such, THQ's strategy of shifting focus to titles with cross-platform appeal makes perfect sense; the issue seems to be that they threw resources at something (the uDraw ports) which was almost certainly doomed to failure...
I don't think the problem of THQ is the uDraw tablet for the PS3 and 360, this was a cheap conversion of the Wii tablet to other platforms.
I am pretty sure, it costed more to develop the whole tablet, then to convert it to 360 and PS3. The problem were the expensive AAA titles like Homefront and Red Faction.
Those games had huge development budgets, huge marketing budgets and flopped horribly. The 360 version of Homefront (released March 2011) has a suggested retail price of $29.99 right now and is sold at Amazon for $20.97, the PS3 version goes for $27,50 and the PC version for $7.44! Talking about profibility, Red Faction Armageddon (released June 2011) is sold at Amazon for $19.99 for both PS3 and 360 and $20.99 for the PC version.
I think $25 for a uDraw game is fine under this circumstances, because no uDraw game ever will have such development and marketing costs, same goes for the Spongebob uDraw game (released April 2011), which is sold at $29.45 for the Wii.
The suggested retail price for Homefront is the same as for Spongebob uDraw and the suggested retail price for Red Faction is even higher, but both are sold at a lower price point, which I think is an indicator, that both games are not as profitable for THQ as Spongebob uDraw, which has the advantage of having a stable price since April.
"I don't think the problem of THQ is the uDraw tablet for the PS3 and 360, this was a cheap conversion of the Wii tablet to other platforms. I am pretty sure, it costed more to develop the whole tablet, then to convert it to 360 and PS3. The problem were the expensive AAA titles like Homefront and Red Faction."
Not sure I agree. The PS3/X360 uDraw HD tablets are significantly different to the original uDraw tablet. They have new technology built in (tilt controls, multitouch) and require more hardware - on the Wii, the Wiimote handled input/output, whereas the PS3/X360 versions need a comms controller (plus the associated licencing costs - and according to one review, the PS3 version uses a USB dongle, further increasing costs). And the new hardware would have to go through separate, full certification tests for both Sony and Microsoft. Similar applies to the games: not only do they need to be tweaked for the new hardware, but they probably need new HD-quality art assets and will have to go through full certification for both consoles.
All told, I wouldn't be surprised if both the initial development costs *and* the per-unit production costs were both significantly higher than with the original Wii uDraw model.
In any case, I suspect THQ's main problem is that they've significantly overestimated interest in the "uDraw HD" and have sunk far too much money into manufacturing the hardware; THQ themselves claim that their $130 million loss is due to the uDraw HD and some fairly simple cost estimating indicates this may not be too far from reality. E.g. if we assume that the (RRP: $80) uDraw HD tablets cost an average of $40 to produce, and that the analyst estimates (2.3 million units produced) are correct, this would mean that THQ has invested $92 million!
(It's reminiscent of Atari's bad planning back in the 1980s, when they produced 12 million Pacman cartridges, despite the fact that only 10 million consoles had been sold - http://www.snopes.com/business/market/atari.asp . Though hopefully THQ won't end up bulldozing the uDraw tablets into landfill...)
"Those games had huge development budgets, huge marketing budgets and flopped horribly. The 360 version of Homefront (released March 2011) has a suggested retail price of $29.99 right now and is sold at Amazon for $20.97, the PS3 version goes for $27,50 and the PC version for $7.44! Talking about profibility, Red Faction Armageddon (released June 2011) is sold at Amazon for $19.99 for both PS3 and 360 and $20.99 for the PC version."
By all accounts, RFA has not done well, but Homefront has apparently sold over 2 million copies ( http://www.thetechherald.com/articles/THQ-trumpets-Homefront-as-sales-mov e-past- 2-million-units ) and its price drop is on a par with other games released at the same time (e.g. Dragon Age 2, also released in March 2011; amazon.com lists the RRP as $29.99; the X360 version is being sold at $25, the Ps3 version at $22 and the PC version at $17).
Therefore, I don't think Homefront can be considered a commercial failure; it's not a runaway hit, but for a new IP, it's pretty respectable!
Instead, I think the issue is that THQ made the following mistakes:
1) They've spent too long focused on licenced IP titles; not only do these have low profit margins, but the "quick and cheap" nature of these productions may mean that their development teams are not geared up for producing more expensive, higher quality productions
2) They've been too focused on the Wii/DS, which are both fading markets, whereas the PS3/X360 still have some growth left in them
3) They've invested too much money into the "casual" uDraw HD, rather than trying to produce new IPs better designed to attract attention from the "hardcore" userbase on the PS3/Xbox 360
4) They done an incredibly bad job of following up on the Wii's uDraw success: they've released very few games and those that have been produced have not been well received (e.g. http://uk.wii.ign.com/articles/117/1171589p1.html)
And sadly, having spent so much on the uDraw HD, it may well be that they don't have the money to sort things out...
With Homefront we disagree strongly, and I think we disagree here on a fundamental basis. You are right, Homefront sold 2 million copies, but for an AAA title, this long in the making and put on the market with such enormous Marketing, this obviously isn't enough, otherwise THQ wouldn't have reported such losses in the two quarters, the game sold.
Development costs for a title like Homefront became to high, so that you have to sell an ridiculous ammount of copies to break even, a game selling 2 million copies simply isn't enough, even more, if you consider, that THQ initially shipped 2.6 million copies of the game.
To compare the game with Dragon Age 2 is probably right, because this game also sold well below expectations. Some analysts predicted 4.5 million units during the first 6 months, a number DA2 never managed to sell.
Despite you, I am sure, the developers at THQ are pretty much capable of making games with a higher budget, as anybody else in the market, I don't see, why making licensed games should cripple your ability to make AAA titles, sounds like snobism to me, even if I think, taking in consideration all the other posts you wrote and that I read, you don't mean it that way.
I don't think the example of Atari and PacMan is helpful either, those were completely different times and at the time, Atari produced these cartridges, the idea, that a game can only be sold a limited time, because of technical advancement, simply didn't exist. When Atari produced 12 million PacMan cartridges, the idea was to sell these cartridges to coming player generations. Didn't happen, market crashed, after that everybody was wiser, but it's a little bit unfair to bring this up as an argument today, when the market then was so new and different, that nobody could predict how it will evolve.
Fading markets is a strong term, the installed user base of the DS isn't fading, neither the user base of the Wii and the user base of the PS3/360 isn't growing. There's a constant stream of consumers leaving as potential costumers and people coming onboard as new customers. You are right, the dollar share for the Nintendo platforms isn't as big, as it was and is shrinking, but for somebody like THQ it maybe would be wiser to stick in this market, especially, if you see, that the big players like EA, Activision and Ubisoft are still investing in this platforms, instead of trying to abandon it in favour of a market, where you need much more money for development and marketing to play an important role.
I think we will continue to disagree, what caused THQ's current situation, but I really liked to read your view, because I found your arguments interesting, even if I don't follow them most of the time (at some points I do, e.g. bad management of uDraw success).
"With Homefront we disagree strongly, and I think we disagree here on a fundamental basis. You are right, Homefront sold 2 million copies, but for an AAA title, this long in the making and put on the market with such enormous Marketing, this obviously isn't enough, otherwise THQ wouldn't have reported such losses in the two quarters, the game sold."
On the article I linked above (note: you need to remove the space in "mov e" that Gamasutra added!), THQ stated:
"Homefront has sold beyond 2 million units, which now leaves the company raking in 60 percent profit on every copy passing through store checkouts ... Homefront’s sales figures won’t be included in THQ’s revenue stream until the company reveals its results for fiscal Q1 and Q2 of 2012 ... If the game’s numbers had been added to the current Q4 report, THQ’s sales would have been boosted to $248.6 million USD, a healthy 26 percent year-on-year improvement."
So: if this article is correct, THQ had already sold 2 million copies and earned $125 million in revenue from the game as of April 2011 and were claiming 60% profit (i.e. not revenue!) on all copies of HF sold from May (or possibly earlier) onwards. And this revenue won't be included in their figures until Q1 2012.
It could well be that THQ was hyping things up, but that sounds like the game has comfortably recouped it's costs! And it also shows that there is significant money available in the "mature" PS3 and X360 markets.
"Despite you, I am sure, the developers at THQ are pretty much capable of making games with a higher budget, as anybody else in the market, I don't see, why making licensed games should cripple your ability to make AAA titles, sounds like snobism to me, even if I think, taking in consideration all the other posts you wrote and that I read, you don't mean it that way."
It's certainly not meant to be snobbism! What I meant was that their development teams and processes are geared up to produce casual/child-orientated titles quickly and cheaply: shifting to produce "mature" titles (which by their nature require more assets and greater "depth" of gameplay) may well require changes to processes, management strategies, etc. And this sort of cultural shift takes time - to (mis)use an analogy, you couldn't take the staff from your local Chinese restaurant and expect them to deliver haute-cuisine meals in a 5* hotel on the very next day!
"I don't think the example of Atari and PacMan is helpful either, those were completely different times and at the time, Atari produced these cartridges, the idea, that a game can only be sold a limited time, because of technical advancement, simply didn't exist"
I did say it was reminiscent, not that the two situations were identical :) In Atari's case, it wasn't down to technical transition but instead was due to some spectacular management blunders (http://en.wikipedia.org/wiki/Pac-Man_(Atari_2600) ):
"At the time, Atari projected that 10 million consoles were still actively used [and] decided to produce 12 million game cartridges, anticipating that ***every active Atari 2600 owner would purchase the game***. Management also believed 2 million new people would purchase the system to play it ... Programming was handled by Tod Frye, who completed the task in 6 weeks. The game uses a 4KB ROM cartridge, chosen for its lower manufacturing costs compared to 8KB cartridges, which had just become available at the time ... After seeing the game, marketing manager Frank Ballouz informed Ray Kassar, Atari's president and CEO, that he felt enthusiasts would not want to play it. His opinion, however, was dismissed"
(gosh darn Gamasutra's lack of highlighting)
The uDraw HD may not use underspecc'd components and it may not have been rushed to market, but the same fundamental issue applies: THQ's management team mis-read the market and produced too many units of a product with limited commercial appeal. So in a year's time, there could be a new concrete hill in Texas filled with squished uDraw HD tablets ;)
"Fading markets is a strong term, the installed user base of the DS isn't fading, neither the user base of the Wii and the user base of the PS3/360 isn't growing. There's a constant stream of consumers leaving as potential costumers and people coming onboard as new customers. You are right, the dollar share for the Nintendo platforms isn't as big, as it was and is shrinking"
Um... if the dollar share of the Nintendo platforms is shrinking, then by definition, the userbase must be shrinking too!
Nintendo is reporting a YOY revenue drop of over 30% (http://www.gamasutra.com/view/news/38541/Analysis_How_Nintendos_Contract ion_Has_ Impacted_US_Game_Retail.php), and even their Black Friday Wii sales were still down 32% YOY(http://www.gamasutra.com/view/news/38954/NPD_Retail_Game_Sales_Flat_I n_November_ At_3_Billion.php); sales of the DS have dropped 77% YOY. And their Q1/Q2 results for 2011 show an operating loss of 107 billion yen (http://www.neogaf.com/forum/showthread.php?t=449916); 52 billion of this was due to currency-value issues (and they've managed to offset some of it via tax credits), but this still leaves a $53 billion operational/sales loss.
There may well be other factors involved, but at the most basic level, fewer people are buying Nintendo products than they were. As such, it's not unreasonable to assume that sales of 3rd party games on the Nintendo platforms have also dropped, which leaves THQ in a very bad position, given that most of their Nintendo titles are based on licenced IP and therefore have small profit margins...
"There may well be other factors involved, but at the most basic level, fewer people are buying Nintendo products than they were"
No, it means fewer titles for the Nintendo platforms are purchased, if the user base is affected by this, or if the same ammount of people just buy fewer games isn't clear, but an important factor.
The claim the a game on a licensed IP is automatically generating lesser profits, then one on an owned IP is short sighted, you have to include development costs, development time, marketing and distribution costs, to get a complete picture. You just look at 2 factors the retail price and the licence fee and assumme they are more important, then every other factor.
Unless we have numbers for the other factors involved in the process, we can't say, which is the most important. By the way,neither you nor me know how high the licence fees are, how much it costs THQ to develop a game based on a licence and how much units THQ sells of an licensed game, so the profit for the individual licenced title remains completely unknown.
"THQ had already sold 2 million copies and earned $125 million in revenue from the game as of April 2011"
This can't be the case, 2 million copies can't give THQ a revenue of $125 million, because this would mean, THQ managed to sell the game for $62.50 to the retailer (or better wholesale and internationally the distributor), wich is nonsense, because the retailer doesn't pay more then $30-$40 dollar for every copy of the game, otherwise he couldn't make profit. Additionally Homefront was a game with heavy marketing, that created additonal costs for THQ. Add up to this the development costs and count in the fact, that they had to drop the suggested retail price by over 50% a few months after launch and you will see, that the profit can't be as big, as THQ wants to make you believe.
That Nintendo is making a loss this fiscal year is known, but I don't understand, why you correlate this with a fading market, Sony is reporting a loss for 5 years in a row now, is there market also fading? MS reported in about 80% of all years, the 360 is on the market heavy losses (most of them above the expected Nintendo loss), was the 360 also a fading market?
Losses have reasons, the Nintendo loss is caused by a slowing down (not fading) Wii market and the general transition to the 3DS, which didn't went well (plus the strong Yen, as you noted). But it would be foolish to abandon this market, especially for a "small" Major like THQ, because there is still money in it.
I repeat myself, EA, Ubisoft and Activision aren't abandoning the market, why should THQ do it?
"There may well be other factors involved, but at the most basic level, fewer people are buying Nintendo products than they were"
No, it means fewer titles for the Nintendo platforms are purchased, if the user base is affected by this, or if the same ammount of people just buy fewer games isn't clear, but an important factor."
I think you're clutching at straws here. As per the link earlier, Nintendo has sold 27% less hardware and 35% less software between Sept 2010 and Sept. 2011. The most reasonable explanation for this is that fewer people are buying fewer Nintendo games, having transitioned to other gaming platforms.
Still, I guess we'll have to wait for the full-year FY2011 results to come out before we can get the final answer.
"THQ had already sold 2 million copies and earned $125 million in revenue from the game as of April 2011"
This can't be the case, 2 million copies can't give THQ a revenue of $125 million, because this would mean, THQ managed to sell the game for $62.50 to the retailer, wich is nonsense, because the retailer doesn't pay more then $30-$40 dollar for every copy of the game, otherwise he couldn't make money. Additionally Homefront was a game with heavy marketing, that created additonal costs for THQ. Add up to this the development costs and count in the fact, that they had to drop the suggested retail price by over 50% a few months after launch and you will see, that the profit can't be as big, as THQ wants to make you believe."
I don't know how THQ has derived that figure, but it's clearly marked as revenue, not profit. Assuming they were talking about gross revenue, that works out at $48 per unit ($125 million, 2.6 million units shipped). Given that they're the publisher and this figure came from the first 2 months of retail (i.e. when the game still had an RRP of $60), that's still a bit high but not unreasonable.
THQ themselves have stated that they needed to sell 2 million copies to break even:
Given that they'd sold 2 million copies by the end of April 2011, their statement that they're making 60% profit on all units sold since is therefore entirely reasonable.
As regards the price drop: a quick look at amazon.com shows that GOW3 has dropped to $40, 3 months after launch: is that game a failure, too? Price drops occur naturally over time, and may not be due to poor sales - given that HF sales are now "pure" profit, THQ may have elected to drop the price below $30 to try and increase sales - look to Steam for examples of how dropping game prices can lead to exponential sales growth.
"That Nintendo is making a loss this fiscal year is known, but I don't understand, why you correlate this with a fading market, Sony is reporting a loss for 5 years in a row now, is there market also fading? MS reported in about 80% of all years, the 360 is on the market heavy losses (most of them above the expected Nintendo loss), was the 360 also a fading market?"
I'm starting to feel like I'm repeating myself:)
Nintendo has gone from $4.7 billion profit in 2008 to $2.5 billion profit in 2009, $0.95 billion profit in 2010 and is potentially looking at a multi-billion loss in 2011. That's a pretty clear, continual and sharp decline.
Meanwhile, overall hardware/software sales have not dropped (as per the NPD article linked earlier). This suggests that people have moved from Nintendo to Sony/Microsoft.
"Losses have reasons, the Nintendo loss is caused by a slowing down (not fading) Wii market and the general transition to the 3DS, which didn't went well (plus the strong Yen, as you noted). But it would be foolish to abandon this market, especially for a "small" Major like THQ, because there is still money in it.
I repeat myself, EA, Ubisoft and Activision aren't abandoning the market, why should THQ do it? "
Because it's a diminishing market with low profit margins? Seems pretty clear-cut to me!
Space Marine and Kill Team where one of the few games I actually did enjoy this year. THQ has put quality to the games but lack the firepower to get people to buy them.
What I enjoy are long authoritative and yet wholly speculative analyses about "what's wrong with THQ" by people that have really, no idea whatsoever, about what the root causes of THQ's problems are. THQ has been in trouble since about 2007 - what you are seeing is the tail end of a long, painful decline that is the result of both neglect, ego and systematic mismanagement by the senior executive.
There is no clever secret here folks - it's the people RUNNING THE COMPANY. This is not about market conditions, this is not about any specific gamble they took - it's about having egomaniac children running a a company with enormous potential systematically into the ground and putting hundreds of talented people out of work. It's disgusting to watch and totally unnecessary and, believe me, nothing will change.
There is a vast amount of decay with in, not just THQ corporate, but right down to the studios. The constant bleeding of experienced professionals since 2007 has left many of the Dev teams loaded with very inexperienced individuals being placed into critical mid management rolls, ( art directors, leads etc ), this a big part of the reasons seeing mid 70's metacritc scores and over spending on amateur quality products. There are examples of DEV testers, that right game testers, moving up into Producers positions in a few short years, and while there's nothing wrong with experience and moving up, working as DEV tester is not a substitute for Business or Management Degree and years of experience in managements rolls. UDraw is just a symptom, COH online was just a symptom, Dark Millennium is another symptom. It unlikely THQ can pull out of this current slide or will be bought out, and there is nothing to buy out except 2 mid level properties, Saints Row and Darksiders (they might have something from THQ Montreal, but what are the chances this will be ground shaking), everything else is just a license with owners.
Here's the tale of the tape since Danny Bilson took over as EVP and started adding his own special brand of magic to the projects.
Metacritic scores:
Homefront – 70
Red Faction: Armageddon – 71
Space Marine – 77
THQ’s stock price when Danny Bilson was hired – $18-19.00
THQ’s stock price now – 1 to 3 - about a 92% drop
Stock price today - http://finance.yahoo.com/q?s=THQI ($0.95 cents)
Wake. Up. People. Until those in charge are forced to leave - nothing will change there. Ever.
If I were them, I'd liquidate every remaining US asset and relocate to Montreal, where the syrup is mapley and the poutine comes with a side of government tax breaks. Then I'd huddle together with the remaining survivors in my secluded frozen palace, slowly bleeding resources, until the stark Canadian sky fills with white winter and the memory of the random acronym that is THQ fades from this world.
Also in this scenario Bilson would be working for Zynga at this point, making a big media fuss about how he's going to "take social gaming to the hardcore gamer" with "fresh ideas" on how to quickly and efficiently lose massive sums of money.
2. Warhammer should have been cancelled years ago - many credible people agree;
3. The core issue is - no credible long term plan that is rational and mass exodus due to a complete lack of confidence in the leadership.
4. As for Danny and his burgeoning social games career - go have a look at Margaritaville - that is 100% his brainchild and a great example of how he really "gets" that space.
Exclusively home runs.
- PS3- $12 million
- Xbox 360 - $14 million
- DS - $17 million
- Mobile - $1.2 million
- Wii - $34 million
But instead of focusing on making games for the Wii and the DS and the newly launched 3DS, they concentrated on making expensive games for the core consoles. The same thinking, that is responsible for the catastrophic shape the whole industry is in (3rd year in decline).
Since when are uDraw and deBlob licensed shovelware?
And why do you speak of the "effort to get into AAA space"?
THQ is present in AAA space for years now, Saints Row just got it's third installment and Red Faction is trying to be a succesful AAA title since the PS2 days. There AAA titles never sold, but that never stopped THQ from making them.
Anthony, you should look up, what the definition of an AAA title is, successful is no neccessary part of the definition of AAA. This category is defined by it's budget and nothing else.
If THQ makes Wii games or not is not pleasing/displeasing me, I am arguing from a business perspective, you are arguing from a gamers perspective. Arguing how a company should act only from a gamers perspective and ignoring the business side like you constantly do, is a perfect description of fanboyism.
@ Dave
I think a market divided in AAA and cheap social games won't work. The market for AAA is oversaturated as this holiday season shows. AAA titles like Rage are underperforming, because of this oversaturation. Additionally the financial risk for an AAA title became much to high over the last years. Every CoD sells more, then it's predecessor, but it cannibalizes the AAA market, because the typical AAA customer won't buy more games, then he did in the past.
This means CoD+1 equals OtherAAATitle-1.
(and yes, I know the Wii U isn't out yet, but word about the touchscreen controller will have spread by now)
Also, much of their revenue on the DS and Wii comes from licenced properties, which means that they have to pay for use of the IP. And in addition, a quick look at amazon.com shows that the majority of their "licenced IP" games is sold at a very low price point - there looks to be a 50:50 split between the $20 and $30 price points. So their "licenced IP" games generally have higher costs and lower revenues than in-house titles.
And both the DS and Wii markets are shrinking while the X360 and PS3 markets are continuing to grow. And it remains to be seen how balanced the 3DS eco-system will be; it could well end up like the Wii, where the vast majority of non-Nintendo IP generally attracted little or no attention.
So, for all that the DS and Wii look to be the best markets on paper, there's good reasons for THQ to be looking at other markets.
Unfortunately, I'm not entirely sure what THQ could do to improve matters. Except for jumping in a time machine and cancelling the PS3/X360 versions of uDraw. Seriously: did they not do any market research before launching this?
Interesting remarks, you are right, for licensed properties you have to pay licence fee and they are sold at a lower price point, but they come also at much lower development costs. So I don't know, why you say, they "generally have higher costs", I am sure, the development costs for "Homefront" were a lot much higher then for the last "Sponge Bob" game.
And besides it doesn't matter at which price point they are sold, when it comes down to THQ's revenues, which were the point I was arguing from.
If THQ's revenues on Nintendo platforms in 2010 made up over 60% of all revenues, it is of no interest at which price point the individual game is selling.
In the end, the concentration on the 360/PS3 market didn't paid off for THQ, this was all I was saying. And it is not necessarly interesting, if the Wii/DS market is shrinking, as long, as you play such a minor role in this market, as THQ did in the last years. For a company like THQ, there still would have been much possible growth inside this market, even if it is shrinking. Instead, they delayed the release of the uDraw tablet outside the US till march 2011. I agree with you on the 360/PS3 uDraw versions, didn't saw the need for it either,
@ Anthony
"I know what AAA title is. The point was they were making unsuccessful AAA games and that hurt them. If they had made successful AAA games, they would be better off. It's not hard to figure out."
It's hard to figure out what you are trying to say, because you have the tendency to explain your earlier remarks, by interpreting them, so that they say something, that is so obvious, that it becomes completely useless to speak out at first.
What you are saying here, that you tried to say, Dave's argument was, they should have better made successful games instead of flops. I think Dave didn't try to say something commonplace, but instead something, that was worth reading.
And by the way, you should learn the difference between a definition and a description, I wrote "description of fanboyism", not "definition"
No, you wrote
"Your definition is a brand new one. "
That might be true - only THQ knows for sure if "IP licence + short dev" costs more or less than "long dev" (given the assumption that more resource is used to develop in-house IP). However, given that the majority of THQ's in-house games are budget affairs (e.g. Deadly Creatures, World of Zoo, Gallop & Ride, Neighbourhood Games, etc), I think it's fairly safe to assume that the cost of developing the licenced titles is higher than the cost of the majority of THQ's in-house productions.
And THQ themselves have stated that recent licenced-IP titles have failed to generate strong profits (http://www.insidegamingdaily.com/2011/08/10/thq-lays-off-200-closes-two- studios/):
"As we have outlined in our business strategies, we are making shifts to reduce movie-based and licensed kids’ video games in our portfolio, which underscores our strategy to move away from games that will not generate strong profits in the future"
Admittedly, it's debatable as to whether this is because of the choice of IP, the game quality or the general decline of the Wii market. Either way: high costs and low sale points makes for thin margins...
"And besides it doesn't matter at which price point they are sold, when it comes down to THQ's revenues, which were the point I was arguing from."
It does, if you're using it as a metric on where THQ should be focusing their development efforts - how much of that revenue came from uDraw hardware ($70 per unit - it's still $70 on Amazon.com) and how much from software ($25 per unit, on average)? If hardware consists of a significant percentage, then that's something to worry about, as it's highly unlikely they'll be able to reproduce the uDraw's success.
As such, THQ's strategy of shifting focus to titles with cross-platform appeal makes perfect sense; the issue seems to be that they threw resources at something (the uDraw ports) which was almost certainly doomed to failure...
I don't think the problem of THQ is the uDraw tablet for the PS3 and 360, this was a cheap conversion of the Wii tablet to other platforms.
I am pretty sure, it costed more to develop the whole tablet, then to convert it to 360 and PS3. The problem were the expensive AAA titles like Homefront and Red Faction.
Those games had huge development budgets, huge marketing budgets and flopped horribly. The 360 version of Homefront (released March 2011) has a suggested retail price of $29.99 right now and is sold at Amazon for $20.97, the PS3 version goes for $27,50 and the PC version for $7.44! Talking about profibility, Red Faction Armageddon (released June 2011) is sold at Amazon for $19.99 for both PS3 and 360 and $20.99 for the PC version.
I think $25 for a uDraw game is fine under this circumstances, because no uDraw game ever will have such development and marketing costs, same goes for the Spongebob uDraw game (released April 2011), which is sold at $29.45 for the Wii.
The suggested retail price for Homefront is the same as for Spongebob uDraw and the suggested retail price for Red Faction is even higher, but both are sold at a lower price point, which I think is an indicator, that both games are not as profitable for THQ as Spongebob uDraw, which has the advantage of having a stable price since April.
"I don't think the problem of THQ is the uDraw tablet for the PS3 and 360, this was a cheap conversion of the Wii tablet to other platforms. I am pretty sure, it costed more to develop the whole tablet, then to convert it to 360 and PS3. The problem were the expensive AAA titles like Homefront and Red Faction."
Not sure I agree. The PS3/X360 uDraw HD tablets are significantly different to the original uDraw tablet. They have new technology built in (tilt controls, multitouch) and require more hardware - on the Wii, the Wiimote handled input/output, whereas the PS3/X360 versions need a comms controller (plus the associated licencing costs - and according to one review, the PS3 version uses a USB dongle, further increasing costs). And the new hardware would have to go through separate, full certification tests for both Sony and Microsoft. Similar applies to the games: not only do they need to be tweaked for the new hardware, but they probably need new HD-quality art assets and will have to go through full certification for both consoles.
All told, I wouldn't be surprised if both the initial development costs *and* the per-unit production costs were both significantly higher than with the original Wii uDraw model.
In any case, I suspect THQ's main problem is that they've significantly overestimated interest in the "uDraw HD" and have sunk far too much money into manufacturing the hardware; THQ themselves claim that their $130 million loss is due to the uDraw HD and some fairly simple cost estimating indicates this may not be too far from reality. E.g. if we assume that the (RRP: $80) uDraw HD tablets cost an average of $40 to produce, and that the analyst estimates (2.3 million units produced) are correct, this would mean that THQ has invested $92 million!
(It's reminiscent of Atari's bad planning back in the 1980s, when they produced 12 million Pacman cartridges, despite the fact that only 10 million consoles had been sold - http://www.snopes.com/business/market/atari.asp . Though hopefully THQ won't end up bulldozing the uDraw tablets into landfill...)
"Those games had huge development budgets, huge marketing budgets and flopped horribly. The 360 version of Homefront (released March 2011) has a suggested retail price of $29.99 right now and is sold at Amazon for $20.97, the PS3 version goes for $27,50 and the PC version for $7.44! Talking about profibility, Red Faction Armageddon (released June 2011) is sold at Amazon for $19.99 for both PS3 and 360 and $20.99 for the PC version."
By all accounts, RFA has not done well, but Homefront has apparently sold over 2 million copies ( http://www.thetechherald.com/articles/THQ-trumpets-Homefront-as-sales-mov e-past-
2-million-units ) and its price drop is on a par with other games released at the same time (e.g. Dragon Age 2, also released in March 2011; amazon.com lists the RRP as $29.99; the X360 version is being sold at $25, the Ps3 version at $22 and the PC version at $17).
Therefore, I don't think Homefront can be considered a commercial failure; it's not a runaway hit, but for a new IP, it's pretty respectable!
Instead, I think the issue is that THQ made the following mistakes:
1) They've spent too long focused on licenced IP titles; not only do these have low profit margins, but the "quick and cheap" nature of these productions may mean that their development teams are not geared up for producing more expensive, higher quality productions
2) They've been too focused on the Wii/DS, which are both fading markets, whereas the PS3/X360 still have some growth left in them
3) They've invested too much money into the "casual" uDraw HD, rather than trying to produce new IPs better designed to attract attention from the "hardcore" userbase on the PS3/Xbox 360
4) They done an incredibly bad job of following up on the Wii's uDraw success: they've released very few games and those that have been produced have not been well received (e.g. http://uk.wii.ign.com/articles/117/1171589p1.html)
And sadly, having spent so much on the uDraw HD, it may well be that they don't have the money to sort things out...
With Homefront we disagree strongly, and I think we disagree here on a fundamental basis. You are right, Homefront sold 2 million copies, but for an AAA title, this long in the making and put on the market with such enormous Marketing, this obviously isn't enough, otherwise THQ wouldn't have reported such losses in the two quarters, the game sold.
Development costs for a title like Homefront became to high, so that you have to sell an ridiculous ammount of copies to break even, a game selling 2 million copies simply isn't enough, even more, if you consider, that THQ initially shipped 2.6 million copies of the game.
To compare the game with Dragon Age 2 is probably right, because this game also sold well below expectations. Some analysts predicted 4.5 million units during the first 6 months, a number DA2 never managed to sell.
Despite you, I am sure, the developers at THQ are pretty much capable of making games with a higher budget, as anybody else in the market, I don't see, why making licensed games should cripple your ability to make AAA titles, sounds like snobism to me, even if I think, taking in consideration all the other posts you wrote and that I read, you don't mean it that way.
I don't think the example of Atari and PacMan is helpful either, those were completely different times and at the time, Atari produced these cartridges, the idea, that a game can only be sold a limited time, because of technical advancement, simply didn't exist. When Atari produced 12 million PacMan cartridges, the idea was to sell these cartridges to coming player generations. Didn't happen, market crashed, after that everybody was wiser, but it's a little bit unfair to bring this up as an argument today, when the market then was so new and different, that nobody could predict how it will evolve.
Fading markets is a strong term, the installed user base of the DS isn't fading, neither the user base of the Wii and the user base of the PS3/360 isn't growing. There's a constant stream of consumers leaving as potential costumers and people coming onboard as new customers. You are right, the dollar share for the Nintendo platforms isn't as big, as it was and is shrinking, but for somebody like THQ it maybe would be wiser to stick in this market, especially, if you see, that the big players like EA, Activision and Ubisoft are still investing in this platforms, instead of trying to abandon it in favour of a market, where you need much more money for development and marketing to play an important role.
I think we will continue to disagree, what caused THQ's current situation, but I really liked to read your view, because I found your arguments interesting, even if I don't follow them most of the time (at some points I do, e.g. bad management of uDraw success).
On the article I linked above (note: you need to remove the space in "mov e" that Gamasutra added!), THQ stated:
"Homefront has sold beyond 2 million units, which now leaves the company raking in 60 percent profit on every copy passing through store checkouts ... Homefront’s sales figures won’t be included in THQ’s revenue stream until the company reveals its results for fiscal Q1 and Q2 of 2012 ... If the game’s numbers had been added to the current Q4 report, THQ’s sales would have been boosted to $248.6 million USD, a healthy 26 percent year-on-year improvement."
So: if this article is correct, THQ had already sold 2 million copies and earned $125 million in revenue from the game as of April 2011 and were claiming 60% profit (i.e. not revenue!) on all copies of HF sold from May (or possibly earlier) onwards. And this revenue won't be included in their figures until Q1 2012.
It could well be that THQ was hyping things up, but that sounds like the game has comfortably recouped it's costs! And it also shows that there is significant money available in the "mature" PS3 and X360 markets.
"Despite you, I am sure, the developers at THQ are pretty much capable of making games with a higher budget, as anybody else in the market, I don't see, why making licensed games should cripple your ability to make AAA titles, sounds like snobism to me, even if I think, taking in consideration all the other posts you wrote and that I read, you don't mean it that way."
It's certainly not meant to be snobbism! What I meant was that their development teams and processes are geared up to produce casual/child-orientated titles quickly and cheaply: shifting to produce "mature" titles (which by their nature require more assets and greater "depth" of gameplay) may well require changes to processes, management strategies, etc. And this sort of cultural shift takes time - to (mis)use an analogy, you couldn't take the staff from your local Chinese restaurant and expect them to deliver haute-cuisine meals in a 5* hotel on the very next day!
"I don't think the example of Atari and PacMan is helpful either, those were completely different times and at the time, Atari produced these cartridges, the idea, that a game can only be sold a limited time, because of technical advancement, simply didn't exist"
I did say it was reminiscent, not that the two situations were identical :) In Atari's case, it wasn't down to technical transition but instead was due to some spectacular management blunders (http://en.wikipedia.org/wiki/Pac-Man_(Atari_2600) ):
"At the time, Atari projected that 10 million consoles were still actively used [and] decided to produce 12 million game cartridges, anticipating that ***every active Atari 2600 owner would purchase the game***. Management also believed 2 million new people would purchase the system to play it ... Programming was handled by Tod Frye, who completed the task in 6 weeks. The game uses a 4KB ROM cartridge, chosen for its lower manufacturing costs compared to 8KB cartridges, which had just become available at the time ... After seeing the game, marketing manager Frank Ballouz informed Ray Kassar, Atari's president and CEO, that he felt enthusiasts would not want to play it. His opinion, however, was dismissed"
(gosh darn Gamasutra's lack of highlighting)
The uDraw HD may not use underspecc'd components and it may not have been rushed to market, but the same fundamental issue applies: THQ's management team mis-read the market and produced too many units of a product with limited commercial appeal. So in a year's time, there could be a new concrete hill in Texas filled with squished uDraw HD tablets ;)
"Fading markets is a strong term, the installed user base of the DS isn't fading, neither the user base of the Wii and the user base of the PS3/360 isn't growing. There's a constant stream of consumers leaving as potential costumers and people coming onboard as new customers. You are right, the dollar share for the Nintendo platforms isn't as big, as it was and is shrinking"
Um... if the dollar share of the Nintendo platforms is shrinking, then by definition, the userbase must be shrinking too!
Nintendo is reporting a YOY revenue drop of over 30% (http://www.gamasutra.com/view/news/38541/Analysis_How_Nintendos_Contract ion_Has_
Impacted_US_Game_Retail.php), and even their Black Friday Wii sales were still down 32% YOY(http://www.gamasutra.com/view/news/38954/NPD_Retail_Game_Sales_Flat_I n_November_
At_3_Billion.php); sales of the DS have dropped 77% YOY. And their Q1/Q2 results for 2011 show an operating loss of 107 billion yen (http://www.neogaf.com/forum/showthread.php?t=449916); 52 billion of this was due to currency-value issues (and they've managed to offset some of it via tax credits), but this still leaves a $53 billion operational/sales loss.
There may well be other factors involved, but at the most basic level, fewer people are buying Nintendo products than they were. As such, it's not unreasonable to assume that sales of 3rd party games on the Nintendo platforms have also dropped, which leaves THQ in a very bad position, given that most of their Nintendo titles are based on licenced IP and therefore have small profit margins...
"There may well be other factors involved, but at the most basic level, fewer people are buying Nintendo products than they were"
No, it means fewer titles for the Nintendo platforms are purchased, if the user base is affected by this, or if the same ammount of people just buy fewer games isn't clear, but an important factor.
The claim the a game on a licensed IP is automatically generating lesser profits, then one on an owned IP is short sighted, you have to include development costs, development time, marketing and distribution costs, to get a complete picture. You just look at 2 factors the retail price and the licence fee and assumme they are more important, then every other factor.
Unless we have numbers for the other factors involved in the process, we can't say, which is the most important. By the way,neither you nor me know how high the licence fees are, how much it costs THQ to develop a game based on a licence and how much units THQ sells of an licensed game, so the profit for the individual licenced title remains completely unknown.
"THQ had already sold 2 million copies and earned $125 million in revenue from the game as of April 2011"
This can't be the case, 2 million copies can't give THQ a revenue of $125 million, because this would mean, THQ managed to sell the game for $62.50 to the retailer (or better wholesale and internationally the distributor), wich is nonsense, because the retailer doesn't pay more then $30-$40 dollar for every copy of the game, otherwise he couldn't make profit. Additionally Homefront was a game with heavy marketing, that created additonal costs for THQ. Add up to this the development costs and count in the fact, that they had to drop the suggested retail price by over 50% a few months after launch and you will see, that the profit can't be as big, as THQ wants to make you believe.
That Nintendo is making a loss this fiscal year is known, but I don't understand, why you correlate this with a fading market, Sony is reporting a loss for 5 years in a row now, is there market also fading? MS reported in about 80% of all years, the 360 is on the market heavy losses (most of them above the expected Nintendo loss), was the 360 also a fading market?
Losses have reasons, the Nintendo loss is caused by a slowing down (not fading) Wii market and the general transition to the 3DS, which didn't went well (plus the strong Yen, as you noted). But it would be foolish to abandon this market, especially for a "small" Major like THQ, because there is still money in it.
I repeat myself, EA, Ubisoft and Activision aren't abandoning the market, why should THQ do it?
"There may well be other factors involved, but at the most basic level, fewer people are buying Nintendo products than they were"
No, it means fewer titles for the Nintendo platforms are purchased, if the user base is affected by this, or if the same ammount of people just buy fewer games isn't clear, but an important factor."
I think you're clutching at straws here. As per the link earlier, Nintendo has sold 27% less hardware and 35% less software between Sept 2010 and Sept. 2011. The most reasonable explanation for this is that fewer people are buying fewer Nintendo games, having transitioned to other gaming platforms.
Still, I guess we'll have to wait for the full-year FY2011 results to come out before we can get the final answer.
"THQ had already sold 2 million copies and earned $125 million in revenue from the game as of April 2011"
This can't be the case, 2 million copies can't give THQ a revenue of $125 million, because this would mean, THQ managed to sell the game for $62.50 to the retailer, wich is nonsense, because the retailer doesn't pay more then $30-$40 dollar for every copy of the game, otherwise he couldn't make money. Additionally Homefront was a game with heavy marketing, that created additonal costs for THQ. Add up to this the development costs and count in the fact, that they had to drop the suggested retail price by over 50% a few months after launch and you will see, that the profit can't be as big, as THQ wants to make you believe."
I don't know how THQ has derived that figure, but it's clearly marked as revenue, not profit. Assuming they were talking about gross revenue, that works out at $48 per unit ($125 million, 2.6 million units shipped). Given that they're the publisher and this figure came from the first 2 months of retail (i.e. when the game still had an RRP of $60), that's still a bit high but not unreasonable.
THQ themselves have stated that they needed to sell 2 million copies to break even:
http://articles.latimes.com/2011/mar/15/business/la-fi-ct-thq-bilson- 20110315
Given that they'd sold 2 million copies by the end of April 2011, their statement that they're making 60% profit on all units sold since is therefore entirely reasonable.
As regards the price drop: a quick look at amazon.com shows that GOW3 has dropped to $40, 3 months after launch: is that game a failure, too? Price drops occur naturally over time, and may not be due to poor sales - given that HF sales are now "pure" profit, THQ may have elected to drop the price below $30 to try and increase sales - look to Steam for examples of how dropping game prices can lead to exponential sales growth.
"That Nintendo is making a loss this fiscal year is known, but I don't understand, why you correlate this with a fading market, Sony is reporting a loss for 5 years in a row now, is there market also fading? MS reported in about 80% of all years, the 360 is on the market heavy losses (most of them above the expected Nintendo loss), was the 360 also a fading market?"
I'm starting to feel like I'm repeating myself:)
Nintendo has gone from $4.7 billion profit in 2008 to $2.5 billion profit in 2009, $0.95 billion profit in 2010 and is potentially looking at a multi-billion loss in 2011. That's a pretty clear, continual and sharp decline.
Meanwhile, overall hardware/software sales have not dropped (as per the NPD article linked earlier). This suggests that people have moved from Nintendo to Sony/Microsoft.
"Losses have reasons, the Nintendo loss is caused by a slowing down (not fading) Wii market and the general transition to the 3DS, which didn't went well (plus the strong Yen, as you noted). But it would be foolish to abandon this market, especially for a "small" Major like THQ, because there is still money in it.
I repeat myself, EA, Ubisoft and Activision aren't abandoning the market, why should THQ do it? "
Because it's a diminishing market with low profit margins? Seems pretty clear-cut to me!
There is no clever secret here folks - it's the people RUNNING THE COMPANY. This is not about market conditions, this is not about any specific gamble they took - it's about having egomaniac children running a a company with enormous potential systematically into the ground and putting hundreds of talented people out of work. It's disgusting to watch and totally unnecessary and, believe me, nothing will change.