The Fall of THQ
December 13, 2014 4:20 AM   Subscribe

At its peak in 2007, the company owned more than 15 game studios, most of which were part of the well-oiled licensed games machine. It had $500 million cash in the bank and revenue exceeding a billion dollars. It was printing cash. By 2013, its shares had plummeted to 11 cents each.
posted by Elementary Penguin (25 comments total) 14 users marked this as a favorite
THQ acquired my company, Genetic Anomalies, in December 1999 for an all-stock transaction worth something like $9MM. I was, if I remember correctly, the 11th employee and while I didn't have a large percentage of the stock from that deal, I did ok. (My honeymoon was *amazing*.)

THQ purchased us because we had acquired rights from (then-called) World Wrestling Federation to make an online trading card game. It was built on top of our patented Collectible Bits engine -- the very first tradeable-digital-objects technology for games.

Our games (Chron X, Star Trek conQuest Online, and WWF With Authority!) were ahead of their time by about a decade. Our business model was too. We weren't free-to-play, but we were close: we were spend-what-you-want-at-least-$10. We tried to give people a great gaming experience for little money. If they fell in love with the game(s), we would give them reasons to keep spending. And, those reasons were generally "options" and not "power" -- once you had spent about $50 you would have enough "powerful" cards in your deck to compete with people who had spent much more than that over the years.

When we were acquired, I was looking forward to making all sorts of games with the licenses THQ had. Rugrats! SpongeBob! Other Nick properties! But all of that was shot down. "If your business model becomes popular," a senior THQ person told me at WrestleMania 16 (April 2000), "we'll be out of business."

So, we did what we did for a couple of years, didn't get lots of support, and then the studio was closed in January 2003. In the three years between the time we were acquired and the time the studio was killed, we were allowed to release exactly zero new games. (Plenty of expansions, though.)

Over a decade later and it still bothers me that we were ahead of the market and it went nowhere. The line of digital card games, including Magic Online and Hearthstone, starts with Chron X. (Especially if one looks back to versions one and two of MTGO.) Oh, what could have and should have been.
posted by andreaazure at 5:32 AM on December 13, 2014 [47 favorites]

To be fair to THQ, there are very few organizations who have actually survived the death of their basic business model. People know how to do what they know how to do, and in some ways that's even truer of groups of people.
posted by PMdixon at 5:52 AM on December 13, 2014 [4 favorites]

It's bizarre to me they'd leave their core competency to chase after a market they weren't proven in. It's even more bizarre the skills and experience they had in the "KFC" market weren't brought to bear on the "Core" side of the house. If anything, this shows that pivots are dangerous and can break a company more often than it can make a company.
posted by Slap*Happy at 5:57 AM on December 13, 2014

But they were already broken. I mean presumably the pivot sped up the end, but the status quo was not one in which the company survived either.

I think there's going to be a lot of similar stories about slot manufacturers in a few years. I used to think that it would take legalized online gaming for that, but Zynga and King have definitely proved you don't actually have to give players any money at all back to replicate the dopamine hit.
posted by PMdixon at 6:18 AM on December 13, 2014 [1 favorite]

THQ long had a reputation for publishing nothing but wrestling games and cheap dreck. Even since the 90s. It was inevitable they'd fuck it up.
posted by Talez at 7:12 AM on December 13, 2014

This is my first time ever hearing of THQ . . . that's how utterly out of the loop I have always been in terms of gaming. But this was a fascinating story -- thanks for posting it!
posted by Annabelle74 at 7:25 AM on December 13, 2014

Is there a single big game publisher that actually adds value? EA and Ubisoft are rightly hated. Take Two / 2K at least doesn't seem to be fucking up, although it's hard to say they add anything useful other than funding to studios. Nintendo, Sony, and Microsoft are kind of doing their thing and I guess we have them to thank for console hardware, but it's hard to love them as game publishers.

On this ranking by Metacritic score, the only top 10 publisher I have any respect for is Activision Blizzard. Valve doesn't make the list, which doesn't surprise me since they don't actually publish many games. Steam sure is a great thing for PC gamers though.
posted by Nelson at 7:47 AM on December 13, 2014

I was at Kaos for the development of Homefront, and left after ship. A sad detail about the closing of the Australian studios is that a bunch of guys from Kaos were moved to Australia about 3 months before THQ closed all their studios down there. Suddenly, I had about a dozen friends who had gone through the life alterations for an international move only to end up jobless half way around the world from everyone they knew.
posted by GameDesignerBen at 7:56 AM on December 13, 2014

The collapse of the licensed games market isn't the most tragic thing as those games were not usually very good, but I really don't like this trend of console games now being either indie titles or AAA nihilistic murder fests. The large companies are now extremely risk averse and as we have seen with Ubisoft are just going to keep repackaging the same crap. Sales of the new console hardware have been surprisingly good, but the necessity of Capcom, for example, to acquire Sony funding for SF5, a core IP, signals a lot of rot to me and I think this generation will end up seeing a further shrinkage of health and dynamism in the AAA space.
posted by selfnoise at 8:08 AM on December 13, 2014 [4 favorites]

In 2011 or 2012 a couple people from THQ came to a law school seminar to talk about how deals between publishers and developers worked, and their process for bringing games to market. Coercive deal structures, tied to sausage-making milestones that amounted to release-or-die. There's a reason that THQ games developed a reputation for being buggy and broken on release.
From TFA:
"That conversation was a non-starter at THQ. It always came back to, 'Well, you said it would be ready on July 15, so you need to ship on July 15.'"

THQ: Early Access pioneers! From a developer-aligned perspective, I'm not surprised this happened.

It was also weird that they thought that a number of crappy unreleased and vaguely explained projects in development that did not sound at all interesting from a (or this) PC gamer's perspective were all more important to THQ's future than keeping the Red Faction franchise updated and regularly releasing as their flagship. It was like if someone from Ubi announced that FarAssBat games weren't that important to them because people have phones now.

When everyone went nuts for Minecraft and voxels, that should have been an 'ah-ha!' moment for THQ, and there should have been a multiplayer follow on to RF: Guerilla that featured persistent environments on private servers, player mods, and building as well as destruction. There also should have been a Red Faction knock-off of Team Fortress, with structure destructibility. Hell, they could have licensed Gamebryo and done a Fallout style FPS-RPG in that setting as well, and further delved into the Total Recall-ish feel. I'll never understand how Red Faction stagnated while THQ burned.
posted by snuffleupagus at 8:39 AM on December 13, 2014 [4 favorites]

Is there a single big game publisher that actually adds value?

Ok independent developer. You make a AAA game that is extensively marketed and subsequently localized and distributed in dozens if not hundreds of countries. They also provide funding to keep the studio going in between game sales in some cases and can also rescue a game from a team fucking it up.

Publishers add value no question. Whether what they take in exchange for that value is fair should be the question.
posted by Talez at 8:40 AM on December 13, 2014 [2 favorites]

As a non-gamer, this still was interesting to me as a case study of how a series of bad decisions can take down a business.

But there's one thing I'm curious about. Why is there no longer a market for games featuring licensed characters?

I get that the popularity of particular types of games will change over time, but given that kids still seem to want t-shirts, action figures, lunchboxes, coloring books, etc. featuring Spider-Man, Spongebob, Scooby-Doo or whomever, why wouldn't they want to play video games featuring them, too?

The article says that THQ had really terrible contracts with the license holders. If they could have avoided (or fixed) that problem, would there have been a way to continue the licensed character business, even if smaller than at its peak? Or was it that the gameplay on most of the titles featuring licensed characters was really that bad?
posted by Nat "King" Cole Porter Wagoner at 8:43 AM on December 13, 2014

I should add to my comment above, for those who don't game or haven't played it, that Red Faction and its successors were generally well received for adding the ability to destroy structures and blow things up in a fairly open fashion, even with the limitations of an FPS. Red Faction and its Geo-Mod engine were pretty remarkable in 2001.

THQ was reportedly unhappy with sales of Red Faction: Guerilla (2009), but keep in mind that there was no RF release from 2002 until 2009. RF:G was a good game, and still gets good press, but was hamstrung by 7 years of silence while its competitors had regular releases as well as the usual unpolished condition of a THQ game at initial release.
posted by snuffleupagus at 8:53 AM on December 13, 2014 [1 favorite]

There is a market for licensed character games, they're just all on phones and THQ was contractually obligated to make these games on consoles, was the impression I got. The console gaming market is increasingly about "core" gamers and license games are definitely "casual".
posted by Elementary Penguin at 8:54 AM on December 13, 2014

I grew up in the 80s around the time Atari tanked. I remember playing those games. Atari had some good "original" titles but tried to cash in on the licensed game market and got burned big time. And for all of the good games that Atari released, it also released a large number of stinkers (E.T was certainly not the only bad game they released; it's merely the most famous example). It didn't help that the home console game market completely tanked and stayed tanked (for years!) until Nintendo and Sony picked up the reins and things started moving again.

The parallels between this story and Atari are compelling, but there are some major differences. Atari was an emerging company in an emerging market. There was no such thing as a "safe bet". Any move it made was by definition risky because no one had tried anything like what they were doing before. THQ, on the other hand, was a relatively mature company in a relatively established market that was moving in a direction that THQ was not prepared to move in. It kept trying to pretend its business model was safe and secure and continued making what it thought to be safe bets. When the management did finally realize something needed to be done, by then it was too little, too late.
posted by surazal at 8:56 AM on December 13, 2014 [1 favorite]

Thanks, Elementary Penguin, that makes sense to me. I know that mobile games are big, but didn't get that THQ was obliged contractually to do console versions only.

The companies that are now putting out mobile games with licensed characters - are they making money? To do so, it seems like they'd need better deals with the owners of the properties.
posted by Nat "King" Cole Porter Wagoner at 9:11 AM on December 13, 2014

There is still a market for licensed games, but the traditional calculus of making a cheap to develop/shoddy game that unsuspecting pre-teens and grandmas would buy on name recognition alone just wasn't working anymore. I'd like to think that even slightly more savvy customers weren't falling for it, but the real reason is probably the increased time and cost to develop a game on a modern console just didn't make it worthwhile any more. If you want to release the same time as a movie, you need a 2 year lead time now. And who knows if that movie's going to be the hit you thought it was. No more safe bets. Just crank out some tie-in mobile games with micro-transactions instead.
posted by thecjm at 9:14 AM on December 13, 2014

From this article I learned that a developer has most of his experience working in "the SpongeBob ecosystem."

No wonder they went under.
posted by spitbull at 9:27 AM on December 13, 2014

I knew I had played THQ games, but was racking my brain. Thanks, wikipedia. Anyway, it was Titan Quest. Great game. They also made S.T.A.L.K.E.R. which was fantastic.

I never go for licensed games, they have a poor reputation. Now I understand why.
posted by annsunny at 11:11 AM on December 13, 2014

I never realized, until THQ went under, how much dreck it published. In my mind, THQ meant Warhammer 40K Dawn of War, Darksiders, Red Faction, and Saints Row, all great games. Then, when it collapsed, and all the post-mortems started coming out, I realized that what I saw as THQ was just some little tiny corner of the company.
posted by Bugbread at 2:15 PM on December 13, 2014

Nat "King" Cole Porter Wagoner: "The companies that are now putting out mobile games with licensed characters - are they making money? To do so, it seems like they'd need better deals with the owners of the properties."

Just take a look at the top paid games list. The first TV/movie tie-in is at #23, with Adventure Time. Game of Thrones is #44. The third one is at #70. One does not buy branded mobile games for their kids anymore.

Partially, this is because mobile developers figured out in-app purchases. Games like this Big Hero 6 tie in are free to play, and slowly milk parent's wallet over time. Sometimes without them knowing. I'd be curious to know how much of any given free-to-play games' revenues come from people who spend over 50 bucks on smurfberries or eagles or whatever. There's a constant stream of "my kid charged 500 dollars on iTunes because they did not distinguish between gameplay coins and iTunes currency." The move to free-to-play has been a downward spiral, with some people calling it free-to-pay. Dungeon Keeper is a recent example of how microtransactions have warped games into a perpetual mugging.
posted by pwnguin at 2:45 PM on December 13, 2014

The collapse of the licensed games market isn't the most tragic thing as those games were not usually very good, but I really don't like this trend of console games now being either indie titles or AAA nihilistic murder fests. The large companies are now extremely risk averse and as we have seen with Ubisoft are just going to keep repackaging the same crap.

I'm not much of a gamer, but it seems like the technology has got them boxed in a little bit, when it comes to AAA. If people are going to drop $50-$70 bucks on a single game these days, they want something that looks better than the Matrix movies. It just seems like it takes a lot of money up front just to handle the necessary animation and art, never mind whether the gameplay itself is any good. If it's going to cost you X amount of millions no matter what just to get the thing out the door, wouldn't you want some reassurance that people are actually going to buy the thing once it does, beyond: "it's a really interesting idea, and the design team's really excited about it"? So then you end up stuck with the tried-and-true -- it's a sequel to another successful game, it's squarely in the same genre as other successful games.
posted by Diablevert at 3:07 PM on December 13, 2014

In my mind, THQ meant Warhammer 40K Dawn of War, Darksiders, Red Faction, and Saints Row, all great games.

I think many of those were from Volition, which THQ owned for a while, but which had a certain degree of independence from the "SpongeBob Ecosystem."
posted by Harvey Kilobit at 10:09 PM on December 13, 2014

But there's one thing I'm curious about. Why is there no longer a market for games featuring licensed characters?

There is... if they're good. Disney is doing great with Infinity.

Licensed games have historically been shovelware bought for kids by clueless relatives (see: 90% of THQ's back catalog). Now parents, aunts and uncles of young kids are people who grew up with video games and know better.
posted by Reyturner at 10:37 PM on December 13, 2014

Infinity/Skylanders is an incredible and evil business model.

"Okay, so what if we made a Pokemon ripoff... but you had to physically buy all the Pokemon?"
posted by Pope Guilty at 3:35 AM on December 14, 2014 [3 favorites]

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