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[Ignis Fatuus]

what is udraw and why is it the doom of thq?

It's a shitty drawing tablet peripheral for children which did modest numbers on Wii before THQ decided to make it the cornerstone of their business and bring it to PS3 and 360, where it then failed so hard that THQ is now very likely going to die.

 

[BrokenEchelon]

Homefront(R) 2 - Crytek (external)

This makes so much sense. They are the leaders in North Korean abuse physics.

 

[Phonomezer]

what is udraw and why is it the doom of thq?

Exactly. I didn't even know it came out on the 360/PS3 until a month ago. I still don't know what it is.

 

[Tempy]

what is udraw and why is it the doom of thq?

Sold gangbusters.

Unfortunately, their marketing research indicated that it would also be a success on the PS3 and Xbox 360.

They were very very very wrong.

 

[Barack Lesnar]

I don't understand, how did the 360/PS3 udraw cost them a couple hundred million dollars? did it cost that much to develop the ports? did they sink like a hundred mil in marketing? what happened

 

[StevieP]

Eh, the two big complaints about the first game were 1) the shitty Wii resolution compromised the game's visuals, and 2) the Wii remote made the game control like shit. Releasing the sequel on modern consoles was the answer to both of these and was really all they could do if they didn't want to dump the series. I think the real problem with the sequel was the horrid release date. It released the same day as Bulletstorm and Killzone 3.

The game looked and controlled great on Wii. Unless I was playing a completely different game than everyone else in the world.

 

[Ignis Fatuus]

I don't understand, how did the 360/PS3 udraw cost them a couple hundred million dollars? did it cost that much to develop the ports? did they sink like a hundred mil in marketing? what happened

Marketing and manufacturing and overproducing, I would guess.

They were expecting a hit so they made a lot of them.

 

[Auto_aim1]

I don't understand, how did the 360/PS3 udraw cost them a couple hundred million dollars? did it cost that much to develop the ports? did they sink like a hundred mil in marketing? what happened

They had 1.4 million stock left unsold in the inventory, that itself cost them $100 million.

 

[Nirolak]

I don't understand, how did the 360/PS3 udraw cost them a couple hundred million dollars? did it cost that much to develop the ports? did they sink like a hundred mil in marketing? what happened

It actually only resulted in a $30 million operating loss.

They were expecting hundreds of millions in revenue though which they missed out on.

This caused more of the loss since they were counting on the profit to pay for the rest of their development.

 

[Vinci]

Eh, the two big complaints about the first game were 1) the shitty Wii resolution compromised the game's visuals, and 2) the Wii remote made the game control like shit.

What the hell are you talking about? deBlob was great on the Wii.

Releasing the sequel on modern consoles was the answer to both of these and was really all they could do if they didn't want to dump the series. I think the real problem with the sequel was the horrid release date. It released the same day as Bulletstorm and Killzone 3.

Yes, releasing a game that shared absolutely nothing in common with two other games was the key failure.

 

[Ignis Fatuus]

So what are the odds of the THQ stock price recovering above $1 before the July 23 deadline?

 

[Nirolak]

So what are the odds of the THQ stock price recovering above $1 before the July 23 deadline?

They can reverse stock split to get it up there.

Running out of cash is their much bigger long term issue than the delisting threat.

 

[Tempy]

For the longest time I thought the uDraw was made by Ubisoft.

 

[Ignis Fatuus]

Running out of cash is their much bigger long term issue than the delisting threat.

So what kind of time frame are they working with here? At what point do you think we'll be able to say, definitively, that they've crossed the point of no return?

 

[zomgbbqftw]

I don't understand, how did the 360/PS3 udraw cost them a couple hundred million dollars? did it cost that much to develop the ports? did they sink like a hundred mil in marketing? what happened

Production of the peripherals and ensuing writedowns of inventory they have taken. The way it works, in simple terms, is that THQ go and buy 2,000,000 uDraw PS360 tablets for $50 a piece, they take delivery of the units and book the sale value of these uDraw tablets at the same $50 and hold them on the balance sheet under the inventory column. The problem is that uDraw PS360 bombed hard and they had to discount the game massively meaning the sale value of the uDraw tablets they were still holding had to be written down to something like $20 losing them $60m in the process. Those aren't the real figures, they are my back of the fag packet estimates, but you can get the picture. They may also have had to buy out production contracts which will have incurred some kind of loss.

 

[Nirolak]

So what kind of time frame are they working with here? At what point do you think we'll be able to say, definitively, that they've crossed the point of no return?

Well, they expect to have $25 million in cash and no debt by the end of March.

So, if they get $75 million worth of losses past that, they have $0 cash and are maxed out on their credit limit, and thus will have to start selling off studios and/or IPs.

 

[Ignis Fatuus]

Well, they expect to have $25 million in cash and no debt by the end of March.

So, if they get $75 million worth of losses past that, they have $0 cash and are maxed out on their credit limit, and thus will have to start selling off studios and/or IPs.

Am I to guess that current development has the potential to burn through 75 million fairly quickly? No revenue is the problem, I assume.

 

[Glix]

Fucking insane. So irresponsible to bet so big on Udraw after seeing how other wii-esque stuff sells on the HD twins.

If you're too blind to see the cautionary tale of the Move, or at least understand why the Udraw was popular on Wii, and would be less so on the HD's, then you DESERVE to have your company go out of business, sorry.

 

[VVIS]

Un-named Original Title Turtle Rock Studio (external)

Damn I forgot about this - is Turtle Rock wholly independent?



and- what the hell are they going to do with this giant empty building?
http://www.youtube.com/watch?v=NxI_gn94OXU

 

[Nirolak]

Am I to guess that current development has the potential to burn through 75 million fairly quickly? No revenue is the problem, I assume.

Their burn rate for next year will most likely be somewhere in the $700-$800 million range.

How much money do you think Devil's Third, Metro: Last Light, Darksiders 2, South Park, WWE, Dawn of War III, and one mystery game can earn?

 

[Ignis Fatuus]

Their burn rate for next year will most likely be somewhere in the $700-$800 million range.

How much money do you think Devil's Third, Metro: Last Light, Darksiders 2, South Park, WWE, Dawn of War III, and one mystery game can earn?

Well I think a couple of those have the potential to do really well, but point taken. Grim outlook.

 

[erragal]

Their burn rate for next year will most likely be somewhere in the $700-$800 million range.

How much money do you think Devil's Third, Metro: Last Light, Darksiders 2, South Park, WWE, Dawn of War III, and one mystery game can earn?

Even if they have 2 million full price sales on average between those titles they just barely make that much in revenue. Only two of those games can even possibly sell that well.

Game companies can't get that cash poor when they operate on multi-year development cycles; it's a recipe for disaster.

 

[Nirolak]

Well I think a couple of those have the potential to do really well, but point taken. Grim outlook.

So, I decided to use some math that would be as favorable to THQ as possible.

$700 million burn rate / $60 per game = 11.67 million copies

This is assuming they sell everything at full price and get every dollar themselves.

Even if they have 2 million full price sales on average between those titles they just barely make that much in revenue. Only two of those games can even possibly sell that well.

Game companies can't get that cash poor when they operate on multi-year development cycles; it's a recipe for disaster.

Yeah, I'm really not seeing a way forward here.

 

[Smokey]

now that i know what udraw is....lolz thq

 

[benzy]

Devil's Third on PC, oh shii

 

[ape2man]

Their burn rate for next year will most likely be somewhere in the $700-$800 million range.

How much money do you think Devil's Third, Metro: Last Light, Darksiders 2, South Park, WWE, Dawn of War III, and one mystery game can earn?

$800 million? that is insane. where is the money going.

anyway this is the potential of THQ,

Darksiders 2 - release june, max sell 2.1m i think,
Metro: Last Light - release 2013Q1, max sell 0.5m,
Devil's Third - release date ???, max sell ???
South Park - release date ???, max sell ???
WWE - release date ???, max sell ???
Dawn of War III - release date ???, max sell 1.3m??? ,

there fucked

 

[Dalthien]

So, I decided to use some math that would be as favorable to THQ as possible.

$700 million burn rate / $60 per game = 11.67 million copies

This is assuming they sell everything at full price and get every dollar themselves.

Being more realistic (I realize that you knew your scenario was complete bollocks), if you are including marketing and dev costs (which I assume you are) in your burn rate, then THQ can probably expect to get back about $35 on each game sold. And that is assuming that the games all sell at full price and not at discounted prices where THQ has to fork back money to retailers for price protection.

 

[CrunchinJelly]

Did they cancel WWE Brawl?

Any mention of it? Doesn't seem to be in their release schedule.

 

[Nirolak]

Being more realistic (I realize that you knew your scenario was complete bollocks), if you are including marketing and dev costs (which I assume you are) in your burn rate, then THQ can probably expect to get back about $35 on each game sold. And that is assuming that the games all sell at full price and not at discounted prices where THQ has to fork back money to retailers for price protection.

Yeah, this is based on what they were reporting for this year and what they were indicating as reductions, so I have to assume it includes marketing.

 

[Kusagari]

THe only big selling franchise they have is Saints Row. They're screwed, because they need some kind of huge hit.

 

[Dalthien]

Yeah, this is based on what they were reporting for this year and what they were indicating as reductions, so I have to assume it includes marketing.

Then that means they need to sell about 20 million copies (at full price) of those 7 games that you listed, minus whatever they can scrounge up from DLC and back-catalog sales.

 

[Ignis Fatuus]

Then that means they need to sell about 20 million copies (at full price) of those 7 games that you listed, minus whatever they can scrounge up from DLC and back-catalog sales.

Okay, so, if you were the head of THQ what would you do? Start cancelling titles? Sell off assets to streamline?

They're obviously already trying to pawn off the MMO.

 

[fernoca]

uDraw was really nice. The games were fun: Pictionary was a nice multiplayer, Dood was cool but weird to draw since it was pressure sensitive).

They made a huge mistake assuming that because it was a success on Wii, that it was going to auto-translate into success in the others.

 

[Nirolak]

Okay, so, if you were the head of THQ what would you do? Start cancelling titles? Sell off assets to streamline?

They're obviously already trying to pawn off the MMO.

I guess they could try and reduce costs more, but if they cut into their marketing, their titles sell less, so it's a catch 22.

 

[Ignis Fatuus]

I guess they could try and reduce costs more, but if they cut into their marketing, their titles sell less, so it's a catch 22.

Then I guess the big question is if they get sold off as a whole or in pieces.

 

[DrLazy]

They are a huge takeover target. I just don't know who is buying right now...

Sony has too many studios as is. Microsoft has been getting rid of 1st party developers not vice versa. Nintendo doesn't typically buy companies -- they partner with them.

That leaves the third party studios. With their "core" audience focus, I can't see them being targeted by EA / Activision, etc, as they conflict with existing franchises.

I’d speculate they’re best hope is an investor outside the game industry or one from the casual market – like Zynga – that wanted to gain some traditional game resources. Or a Japanese company hoping to get a foothold in the west.

 

[Jocchan]

There's not much they can do at this point, besides looking for a buyer for either their teams/IPs or the whole company.

 

[Kusagari]

I doubt anyone will want to buy the whole company. Their franchises are going to get sold off in a fire sale.

 

[Father_Brain]

Would it be an exaggeration to say that THQ will be lucky to survive even Q1 FY2013 at this point?

 

[SolidSnakex]

Did they cancel WWE Brawl?

Any mention of it? Doesn't seem to be in their release schedule.

Probably. I don't think that All Stars sold like they were expecting so it would make sense to just quietly can a game that's even more over the top than that.

I'd still like to know why they haven't worked with syn Sophia (AKI) since the N64 days. Fans are constantly asking for wrestling games that play like that and sS have said that they'd like to make another wrestling game. THQ even had 4 wrestling games in development at one point (Smackdown Online, WWE 12, Brawl and All Stars), so it's not like they aren't interested in developing multiple games. I know that AKI was tired of developing releastic games and that's why they moved on to Def Jam and Ultimate Muscle, but that isn't the case now.

 

[Dalthien]

Okay, so, if you were the head of THQ what would you do? Start cancelling titles? Sell off assets to streamline?

They're obviously already trying to pawn off the MMO.

Essentially, my read on it is that they are looking to sell off whatever they possibly can. That's why they are getting out of the casual children's licensed stuff. It's not because they are losing money there, because they aren't. But the profits are small, it uses up cash flow (which they don't have any longer), and there's nothing in it for them to sell. They can't sell other company's licenses - so that part of the business is gone. That helps free up a little cash flow for them to stay in business a little bit longer - hoping that they can use that little bit of extra time to find the best deals possible from potential buyers for the assets that do have value for them.

In my opinion, the writing is already on the wall. This is basically mop-up time for them, just trying to keep a game-face on whilst they try to find potential buyers behind the scenes.

 

[Nirolak]

Would it be an exaggeration to say that THQ will be lucky to survive even Q1 FY2013 at this point?

Well, they'll have $25 million in the bank, no debt, and $50 million available in credit, so I don't think we seriously start looking at a doom situation until Q3.

Edit:

The recording is up: http://edge.media-server.com/m/p/ohmy8abt/lan/en

Double checking what they imply their burn rate is.

Pachter implied it was higher, but this was before their layoffs.

"In our view, THQ's breakeven revenue run rate is $900 million. We have modelled sales of $925 million next year, with positive earnings for the year, but note that the company has not yet announced a line-up of games that is deep enough to generate revenues at this level."

Source: http://www.gamesindustry.biz/articles/2011-12-08-thq-sales-even-worse-than-feared

Edit 2:

I think the parts about burn rate start around 23 minutes.

 

[VVIS]

Zynga

You may be on to something here, maybe not the whole thing but one of the studios. Zynga wants to know what all the fuss is with the core market.

 

[John Harker]

Promoting Danny Bilson to CEO would help.

 

[bigtroyjon]

The company also has in development two unannounced core titles for release in fiscal 2013.

Obviously these are Xbox 720 launch titles, confirming an early 2013 launch.

(Kidding, sort of)

 

[erragal]

Promoting Danny Bilson to CEO would help.

Only if he can create cash out of thin air!

 

[Nirolak]

So the burn rate in full was they were projecting $850 million at some point (for next year it sounded?) but now they're half the company (but had a higher burn rate this year of around $900 million), and not all their expenses come off right away.

Even if we assume they've cut their costs in half (very unlikely), we're looking at $450,000,000 in burn rate and at $35 per copy sold profit (assuming almost all full price and some DLC help for what isn't) we're still assuming 13 million.

So yes, they'd need to average almost 2 million copies sold at full price even in the rosiest of situations.

 

[1-D_FTW]

http://www.eurogamer.net/articles/2012-02-02-metro-last-light-delayed-until-2013

Metro: Last Light delayed into 2013.

EDIT: Or maybe that's known. Didn't know how to read Q4 13. I guess it's accounted for and that's what Q1 13 translates into on THQ's calender?

 

[erragal]

So the burn rate in full was they were projecting $850 at some point (for next year it sounded?) but now they're half the company (but had a higher burn rate this year), and not all their expenses come off right away.

Even if we assume they've cut their costs in half (very unlikely), we're looking at $450,000,000 in burn rate and at $35 per copy sold profit (assuming almost all full price and some DLC help for what isn't) we're still assuming 13 million.

So yes, they'd need to average almost 2 million copies sold at full price even in the rosiest of situations.

Listening to the conference call. This is a new thing for me but am I wrong in assuming that everyone from THQ sounds completely unconfident in everything that they're saying? He certainly doesn't make you want to invest in their 50 cent stock.

 

[Vulcano's assistant]

http://www.eurogamer.net/articles/2012-02-02-metro-last-light-delayed-until-2013

Metro: Last Light delayed into 2013.

EDIT: Or maybe that's known. Didn't know how to read Q4 13. I guess it's accounted for and that's what Q1 13 translates into on THQ's calender?

Fuck no!