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THQ Q1 – Net loss of $38.4M, Red Faction shelved

Wednesday, 27th July 2011 21:26 GMT By Stephany Nunneley

THQ has released its financials for Q1 of FY12, and it finds the firm with net sales of $195.2 million, compared with $149.4 million in the prior-year period, and a net loss of $38.4 million.

Thq Q1 FY12 at a glance

Net loss of $38.4M, net sales of $195.2M for Q1.

Sales of Red Faction: Armageddon and licensed kids titles “were below expectations.”

Q2 releases include WH40K: Space Marine. uDraw HD, WWE ’12, and UFC Undisputed 3 coming in second half of 2011.

Red Faction series will not be carried forward in a “meaningful way.”

Saint’s Row: The Third out on November 15. Pre-orders sailing past previous franchise entries, and it will contain a year’s worth of DLC.

Goal is to increase core title revenue post-launch by 20% with digital offerings.

THQ “disappointed” in Q1 results

For the three months ended June 30, 2011, the company reported a net loss of $38.4 million, compared with a net loss of $30.1 million in the prior-year period.

“We are disappointed in our first quarter financial performance. Sales of Red Faction: Armageddon and our licensed kids titles were below our expectations, and the late release of UFC Personal Trainer also adversely impacted the quarter,” said Brian Farrell, THQ president and CFO.

“Despite a light first half, we are looking forward to a strong and profitable second half, including what we expect to be the biggest third quarter, both in revenue and earnings per share, in our company’s history, with proven franchises Saints Row, WWE and the uDraw GameTablet, all launching in November.”

Planned Q2 releases are Warhammer 40,000: Space Marine, Penguins of Madagascar, and Barbie Jet, Set and Style.

Farrell said Red Faction did not resonate with “a sufficiently broad console” audience, which he said proves that even core titles must meet higher quality standards to do so.

He also said better marketing for quality franchises will be a goal going forward.

“In today’s hit driven core gaming business, even highly polished titles with a reasonable following like Red Faction face a bar which continues to move higher,” he said.

“Our core game titles moving forward must meet a very high quality bar with strong creativity and differentiation, appeal to a broader audience, and be aggressively marketed.”

Farrell said in the investors call that followed the figures release that future business will be based less on kids games, with THQ’s HD uDraw Tablet and family Kinect titles ramping up casual support for browser, mobile and Facebook titles.

Only profitable games, no matter if they’re AAA or indie, will be considered in the future.

“We expect strong revenue and profit with Saint’s Row: The Third, uDraw, WWE 12, and UFC Undisputed 3,” he said.

“In fact, we expect Q3 to be biggest in revenue and profit in THQ history. We will focus on better quality with a broader appeal to core audiences and push to drive our digital revenues.

“Our last three launches, we have been disappointed in quality. The entire core team knows it. We’re making sure our next big titles meet the quality bar, and we’re making sure the time and resources are there.”

THQ doesn’t “intend to carry forward” with the Red Faction series, “in any meaningful way,” according to Farrell.

Saints Row: The Third was used as an example of THQ working with the developer to make sure a high quality bar is set, using former Metacritic ratings for the series as something to mirror. Pre-orders for the title have surpassed the previous Saints Row entry, and there are still 15 weeks to go before it’s released.

The previous game has sold 4 million life-to-date, and the upcoming title will have “a year’s worth” of DLC.

Farrell also said THQ doesn’t “intend to carry forward” with the Red Faction series “in any meaningful way,” considering that the “two successive versions just found a niche.”

Volition will instead be focusing on the Saint’s Row franchise and Guillermo del Toro’s Insane.

Farrell said the firm has made “tremendous progress” in “reshaping” THQ, but it has “more to do,” and strong releases in the second half of the year will prove it remains “committed to evolving”.

Q1 FY12 highlights and developments

THQ said in its release it will continue to focus on its “four-pillar digital strategy”:

  1. Create a digital ecosystem around key title console launches such as the November 15 release of Saints Row: The Third, with a “robust DLC schedule, online Season Pass, and in-game store for consumables”.
  2. Create a critical mass of users on social media platforms such as Facebook and mobile platforms including iOS and Android, using THQ-owned or branded content, such as the upcoming fall release of MargaritavilleOnline.
  3. Create an ongoing digital revenue stream with the launch of the company’s MMO, Warhammer 40,000: Dark Millennium Online.
  4. Continue to drive digital end user sales through existing channels as well as the re-launch of THQ.com.

Titles slated for the second half of the year include: Saints Row: The Third, uDraw HD GameTablet, WWE ’12, and UFC Undisputed 3.

UFC Undisputed titles have moved 7 million units life-to-date.

Q4 will be anchored by UFC: Undisputed 3 – enhanced with new features like the pride fighting league – and THQ plans to market it for both the causal and core. The series has moved 7 million units life-to-date.

Darksiders 2 is still on the slate for the first half of 2013, as is Metro: Last Light: Farrell said the firm plans to provide better marketing for the title than it did with its predecessor, Metro 2033.

FY13 will include the MMO WH40K: Dark Millennium Online, Devil’s Third, and an unannounced core title.

Insane is still slated for calendar 2013 along with THQ’s unannounced Turtle Rock title, and while there isn’t a schedule for Patrice Désilets’ original core game as yet, Brian Farrell said the developer is currently running ideas by the firm as it is still in the planning phase.

Farrell said it will be “very” creative and unique.

“We have already assembled a team in Montreal,” said Farrell. “I have not personally discussed the IP that he has in mind. I know he has several ideas that we want to run through our greenlight process. The idea is to create a AAA, core gaming experience using the best of his creative abilities.”

Farrell said the firm is always revamping the greenlighting process, and any changes made to it hitherto will not be based on the less-than stellar launches of the firm’s last three games. Speaking bluntly, Farrell said that Homefront 2 would at least have an install base when it releases.

Digital and Dark Millennium Online

Farrell said that online and digital is a strategic area for THQ, and it’s targeting double-digit digital year-on-year growth for 2012 and FY13.

He plans to build a “robust digital ecosystem” around its console games, with 20 percent of sales derived from post launch digital offerings. This will be achieved either through DLC, microtransactions, season passes, add-ons and or through consumables.

“Success with [WH40K:DMO] depends on what we can do to break it out beyond the core Warhammer consumer.”

THQ plans to use triple-A MMO Warhammer 40,000: Dark Millennium Online to help it achieve this goal. The Warhammer franchise has moved 6.5 million units for the firm, and with the MMO’s release, THQ believes it will offer new play incentives and excitement for the broader MMO fan, as well as fans of the IP.

Success would mean a robust multi-year digital revenue stream for the firm, and it plans to market the game to more than just the core Warhammer fan in order to attain this success.

“The universe is rich and deep with a strong following, and our goal is to appeal to the core fans and then break out beyond them,” said Farrell. “Our success with it depends on this – the key is to see what we can do to break it out beyond the core Warhammer consumer.”

Farrell also touched upon how the firm did with MX vs ATV: Alive, which released at market with a lower price point of $39.99, build a large install base in a quick manner, and rely on digital content to make up the difference. Farrell said the experiment was “noble” but not a success due to the fixed cost of offerings on the market, but he believes the game will have a long shelf life.

“The $39.99 price point, while good just wasn’t enough to drive the install base to where we wanted it to be,” he told investors. “Obviously the correlary to that, is that on a lower install base, the amount of DLC sales are not what we anticipated.”

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21 Comments

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  1. Razor

    I blame that logo.

    #1 3 years ago
  2. DSB

    Definitely the logo. And failing to capitalize on Relic, and betting a lot on something as terrible as Homefront.

    Saints Row the Third – In-game store? Wait what?!

    #2 3 years ago
  3. Johnny Cullen

    Blame the logo. If there’s nothing else, blame the logo.

    #3 3 years ago
  4. The_Red

    Saint’s Row the 3rd. Nothing else matters.

    #4 3 years ago
  5. DarkElfa

    It’s the used game market’s fault!
    No, no, it’s the pirate’s fault!
    No, wait, it’s the….

    …fact that your games and management sucks.

    #5 3 years ago
  6. Dark

    Thq is joke.. Metro and Warhammer won’t save you forever THQ!

    #6 3 years ago
  7. pukem0n

    bring Homefront 2, and actually make it good this time

    #7 3 years ago
  8. GrimRita

    Its about time they started to think outside the box and look at mobile, online, social networks and churn out some new IP instead of the same old shit no one clearly wants.

    Take Dawn of War back to its ROOTS where it belongs and it will outsell the original by miles and the crappy DoW2

    #8 3 years ago
  9. DarkElfa

    @9, You said it tddhhen, maybe THQ should go into the clothing and apparel business.

    #9 3 years ago
  10. frostquake

    Explains the THQ Sale on PSN…though running the sale after the fact doesn’t really help, but maybe will help with the next quarter.

    I think Saints Row 3 will be their BIG Highlight of the year and if they “REALLY” have “ROBUST” DLC planned for it, and not just plain CRAP..then it will do really well!

    Volition Could release a FreeSpace Redux, at least as DLC, I think that definitely has a market as well.

    Red Faction Arm. was a Huge let down, and felt like a step backwards, they could have done quite a bit better..and the DLC sucked!

    #10 3 years ago
  11. Christopher Jack

    @8, 100% agreed, I’ve played Soulstorm more times then I care to admit. Definitely my favourite PC game of all time :)

    Hope they fuse the traditional RTS formula in DoW1 with DoW2′s combat mechanics & then just supe up the graphics. Not sure what I would hope they do with the campaign but I definitely want that conquest mini-game back but much more involving this time.

    #11 3 years ago
  12. mojo

    its definately the logo.

    That logo sais to me: “Hi we are THQuestionmark and we are morons”

    #12 3 years ago
  13. Christopher Jack

    I don’t like their new logo myself, I reckon they should have just made their old one shinier :P

    #13 3 years ago
  14. ejams

    Red Faction sold so terribly because they took a potentially great idea which I thought was going to be one of the greatest games this year (because of my enjoyment of Guerilla, destruction was FANTASTIC)and totally fucked it up with a few stupid ideas. 1. Its underground. What is wrong with that just by knowing what Red Faction is known for? DESTRUCTION and free roaming to other places to DESTROY more shit, armageddon is stuck underground in a supposed more linear environment. Who thought that was a good idea? 2. Aliens. Why? I’m not entirely sure. They took out the tactical part of Guerilla where you could destroy walls and sneak up on your enemies and get the upper hand, now they’re fucking spiders and shit. When you put those together you get almost Dead Space 2.5

    #14 3 years ago
  15. DarkElfa

    @14, But that’s what THQ has always done, they take a great idea and then think up new and amazing ways to fuck it doggy style until it breaks.

    #15 3 years ago
  16. FadeLive

    Give me another proper Company of Heroes title and all will be forgiven THQ. Even the terrible mess of a game that goes by the name Homefront.

    #16 3 years ago
  17. GrimRita

    @11 I know what you mean. I purchased the original DoW while waiting for Rome:Total War to be released and was totally blown away by it. I purchased ALL the expansions and spent endless hours online playing.

    With DoW2 I barely touch it, despite having great combat as you mentioned but it just doesnt have the lasting appeal like the original imo. Relic are an extremely talented team and deserve to given the creative time to make something like the original. Come on THQ…pull your finger out of that Orcs arse!

    #17 3 years ago
  18. RandomTiger

    THQ doesn’t “intend to carry forward” with the Red Faction series, “in any meaningful way,”

    Total idiots. It was totally obvious from the first trailer that Armageddon was going to be a let down for Guerilla fans. I’ve actually seen several people playing Guerilla after the launch of Armageddon, the latter I’ve seen no one play.

    This was a total failure to understand their own market: people who like knocking down buildings in a sandbox. I would happily buy another Guerilla with a few changes and bigger buildings to knock down. In protest I may play Guerilla again, its a gaming gem.

    #18 3 years ago
  19. rainer

    After making a successful GTA style game with Guerrilla they follow up with a linear third person shooter, yeah that made sense THQ!

    Also they jumped ahead into the future for the next game which is almost always a kiss of death to any franchise.

    #19 3 years ago
  20. Blerk

    Seems a shame for Red Faction. I agree that the Armageddon looked half-baked from the initial reveal, although I did quite enjoy the demo. Just not enough to actually buy it.

    Guerilla wasn’t perfect but it was a lot of fun and had a lot of promise. If they’d built on that instead I suspect they’d have had a much bigger hit.

    #20 3 years ago
  21. NeoSquall

    Speaking as a 40K fanboy, who will surely purchase the game in the most exclusive SKU available, capitalizing on digital revenues from a MMO is a bad omen, even if the franchise itself is glorious and all.

    #21 3 years ago