After a tough couple of years THQ appears to be on the road to recovery. How have you managed it?
The whole restructuring has been focused on the right titles. I think the entire industry realised that there were too many products.
Back in October 2008, we said we were only going to do between two and four core games a year, we were going to focus our kids, family and casual business on just those titles we were sure would be successful, and that we will continue to build our online business. Then I heard all of our competitors, all of them, say the same thing within six months.
The market changed. And I think we were the first to see the changes. It was a very difficult two years – no one likes restructuring or reducing headcount, but it had to be done. And now if you look at our line-up, the things we kept are right on strategy. We have presented this line-up now for the next 24 months: Homefront, WWE All Stars, Red Faction: Armageddon, Space Marine and my personal favourite, Saints Row. And that doesn’t even include the regular WWE and UFC titles, or our MMOs planned for 2012. It has been a tough few years but it feels like we are there.
Also, I’m sure you’ve seen our UDraw game tablet. I’ve been in the industry a long time, and I’ve never seen a reaction to the product like this be so universal. Retail loved it and said Oh, Nintendo should have done this.” This is exactly the reception we wanted. I don’t draw well but even I can doodle on the screen.
THQ started off as a toy company and here you are making a new toy…
It’s funny. I challenged the team because a couple of years ago, when Guitar Hero was doing so well, people were saying peripherals, this is where the business is going”. So I asked the team what sort of peripheral makes sense from an entertainment standpoint? I did not want Violin Hero. And when this idea came up, I realised this was it. Drawing is as universal as music right?
You have said that this is THQ’s rebuilding year. But UFC didn’t perform as well as you had hoped. So is everything still on track?
Oh yes. When we began the restructuring two years ago, we said that calendar year 2009 was the turnaround year; it was the cost-cutting and refocusing effort. And as we’d cut so much, 2010 was just about executing on the products that we had.
High quality and getting real mindshare for our titles are the metrics we’ve had for 2010. Unfortunately because we don’t have many products, financially I think re-building is the right way to put it.
In terms of UFC, we were hoping for more. In fact the market was telling us it’d do more. That leads us to believe that the economy hurt us. But we’ll still do over 3m units – we were just hoping to grow off of last year. It got an 85 on Metacritic, as have all of our core games this year.
So 2011 will still be the year we see the ‘new THQ’?
I know there are a lot of people in our organisation that will say that. But that’s just our industry, right? It’s constant rebirth. I’ve seen Nintendo pronounced dead three times in 20 years. In this industry you are as good as your next product. He who has the best game wins. I don’t want to call it the new THQ because we’ve been on top before, but it feels good to be returning there.
Where do you want THQ to be in three to five years?
I think the biggest thing we can do is build our presence in digital. That’s where gamers are going. And that’s one of the things where we need to be Goldilocks right? Not too far ahead of the consumers and not too far behind. I don’t know if you’ve played Company of Heroes Online – the free-to-play microtransaction game – but I believe in that model. It is an experiment, but a noble one. We also have our Red Faction downloadable mini-game on XBLA and PSN. It is a bit of a marketing tool to keep the brand alive before the big retail launch.
Wii appears to be in a tough place at the moment. Do you need to be more cautious with Wii?
In a way, quite the opposite with the UDraw game tablet. Some times you have to take a step back. This time last year hardware numbers on Wii weren’t good, and people were saying it was dead. But then holiday arrived and sales shot up. Consumers still know about Wii, it’s still good value, it is still a mass-market product. I love it when competitors say they’re going to de-emphasise it. There’s still a huge Wii market – over 70m users worldwide. With UDraw we don’t need a huge attach rate to do very well.
Do we see big growth prospects on a platform that’s been out for so long? No. But are there opportunities? Absolutely.
You’ve mentioned you might wait longer between UFC releases in the future. What is this reason for this?
Like most responsible companies, we sat down after the last UFC and asked ‘What can we do differently next time.’ We think we got the hardcore UFC fan, but sales weren’t as high because of the competitor set – with Red Dead launching just before us and taking a lot of money out of the market.
The previous year we were the sexy new girl on the street. We were a sequel this year. So we thought perhaps we should give the franchise a little more time. We are not taking a step back, but trying do more over a period of 15 to 18 months rather than just be a day and date annual franchise.
Back when you announced Homefront you said it would have a ten-year lifespan. How can you plan a ten-year franchise?
What we are bringing to gamers with Homefront is that story and emotion. We have all played shooters, and there are some great executions of shooters, but in Homefront you are made to care.
You are not a soldier, you are a civilian fighting the bad guys. We haven’t set anything in stone, but this game is about defending the US homeland, and there are a lot of homelands we could be defending over time.
Our whole goal is to build franchises, but that doesn’t mean that every year we are going to pound on that franchise. That is how you kill things in this industry. But if we treat the franchise right, we think we can have a long run with it. If it is eight, ten, 12 years, we will find out.
You’ve been outspoken on pre-owned. How much of an impact has pre-owned had on THQ’s business?
It is one of those things of how much money could you have made if it wasn’t for piracy or used games? It’s a tough question because you don’t know.
What we saw when we did the online charge for the second purchaser of UFC, we found a pretty good attach rate – it confirmed our suspicion that there are a lot of people participating in used games.
We work with GameStop in the US and GAME in the UK. We understand their business models. Our point is that we are making these huge investments in project development, sometimes in licences and marketing, and we need to make sure we capture that value chain.
Retail is now thinking about how they can participate in DLC and some of these second user charges that we’re doing. We are not trying to push retail aside. We just need to monetise because it is our investment. We will work with retail, but it needs to be more of a give and take.