Q&A: THQ's Sorensen talks acquisitions
VP of product development opines on his company's growing pains, industry consolidation, and iPhone development.
The flurry of major acquisitions and mergers by the likes of EA and Take-Two, and Activision and Vivendi, have overshadowed much of the other news going on in the game industry. One of the more interesting stories playing out is the change going on at major publisher THQ.
Facing several quarters of lackluster growth, THQ has made a number of sweeping changes to its organization in recent months. Last October, the publisher opted to delay much of its early 2008 lineup, including Destroy All Humans!: Path of the Furon, de Blob, and Frontlines: Fuel of War, with THQ chief Brian Farrell citing the publisher's "commitment to delivering quality products" as the primary cause. In January, THQ took even more drastic actions, killing off the underperforming Stuntman and Juiced franchises, as well as Frontlines on the PS3, and Destroy All Humans! Big Willy Edition for the PS2. It also shuttered its Carlsbad, California-based Concrete Games studio, which had been at work on an unannounced game.
The cancellations initially appeared to be severely bad tidings for the publisher, reflected by THQ's stock price plummeting by as much as 30 percent following the announcement. However, the move has since been interpreted as a reappropriation of funds. Following the acquisition of Big Huge Games, which is creating an unnamed role-playing game for the publisher, THQ binged on game announcements that catered to the entire gaming spectrum.
For the traditional gaming sect, THQ has announced several new games since January, including Red Faction: Guerilla for the shooter crowd, Baja and the next WWE SmackDown! vs. RAW wrestling game, and the next installment in Relic Entertainment's acclaimed Warhammer 40K: Dawn of War real-time strategy franchise, slated to arrive during the first part of 2009. THQ has also catered toward the expanded gamer audience, announcing a number of original properties for Nintendo's Wii, including Deadly Creatures, Big Beach Sports, Battle of the Bands, and All Star Cheer Squad.
With the publisher in a dramatic period of transition, GameSpot had a chance to speak with THQ vice president of worldwide studios Jack Sorensen at the publisher's Gamers' Day yesterday. During the chat, Sorenson addressed the publisher's preference for acquiring developers, rather than publishing houses; how the company plans to emerge from a financial downturn; iPhone development and casual support; and why EA and Activision Blizzard's arms race is positive for THQ.
GameSpot: THQ is going through a significant amount of transition right now. You've canceled some games such as Stuntman and Juiced, announced several more, and also brought on a number of new studios, including Big Huge Games. What exactly is prompting all of this change?
Jack Sorensen: Well, you know, it's the industry, right? Obviously, we don't want to be just a player. We want to be one of the majors and participate across the board. Obviously, there's these big conglomerations coming with Activision Blizzard and then whether EA makes it with Take-Two or not. I think that all that is part and parcel with a maturing industry, but it really does come down to more--there are survivors and big players. You can see our strategy has been around acquiring high-quality developers. We think that's where all the value long-term is, and not necessarily just acquiring another publisher. You see a lot of publishers every generation go away. And you have to go big or go away. Our strategy is, of course, we want to be everywhere, ubiquity of gaming, and we have to play in all the genres we can.
GS: When do you think this strategy will start paying off for THQ?
JS: We had to come a long way from being behind in the last generation to really trying to be a leader here. It's expensive to do, competing with others that are on their fifth, sixth generation of games. So there's a long way to go. Certainly this year you're going to see at least some of our games are going to be major hits. And, you know, it's entertainment, you never know how a game is going to do. Something could go off and sell a million units or sell four million units. And the relative success of that is either, "Hey, that was good," or "Wow, you're a genius." So, that's just the entertainment industry. We feel good about the portfolio, we feel good about what's coming next year, and stuff in the pipeline is all growing. So I think certainly we'll see some payoff this year, just because of the scale.
GS: Are you all planning any other major moves?
JS: Well, I obviously can't comment on anything even if we were, but we're always looking at our business and looking at new opportunities. When we canceled some franchises, I think it was almost the same week that we bought Big Huge. The difference, in my mind, between the haves and have-nots is whether or not you're in control of your destiny. And frankly, to be in control of your destiny is financial.
So we've got, what, $400 something million in the bank, and we can make our own decisions. We're not going to go away; there's no bet-the-farm aspect of our business. If we go and decide something's not working, we still have the freedom to go in and still move forward afterward, so you're going to see the continuation of that. Part of this is industry-driven, where it really is if you're not in the top 10, forget it. If you're not in the top 10 on a franchise, even if it is profitable, it may not be worth it. Five years ago you would have kept going, but now you just say it's probably best to put our money elsewhere.
GS: Changing gears a little bit to yesterday's acquisition of Elephant Entertainment, is THQ putting more of an emphasis on casual gaming, or does this tie in to your approach to the Wii?
JS: What the Wii has done is obviously try and get a broader audience, and I think it's done a very good job at that. But I think so has mobile phones--we have a mobile-phone business--so has online casual games. I think of it much more as the ubiquity of gaming. As we progress along, gaming becomes more of a normal pursuit for any age group. It's just a device. So, what's your device? We're doing things on the iPhone; everyone's doing a little bit of everything. It depends on how far you're betting your business on any one aspect.
For us, we see we need to play again not only in every device, but in every continent. We've got something going on in China with Company of Heroes, basically turning it into a free-to-play game. I view a lot of that as our ancillary market, like the Hollywood film business has theatrical, and it's really ancillary that pays for everything. We have to find more ways than just boxed products in the US and Europe in order to make the numbers interesting.
GS: You said you're doing things on the iPhone, do you have anything in particular?
JS: No, I'm just saying the kits come out, right, and it's open for people, so we're looking at that. And so some of our stuff from our wireless group will go onto that. And they have some unique things that they'll do for the platform. I can't announce anything for them, it's not my area, but it's no mystery that, well, here's a new device, it's still a phone...
GS: It's very popular...
JS: It's popular, but it's actually not that popular, not popular enough from a hardcore-gaming standpoint, when you compare it to however many million DSs are in the world. But for the mobile phone, that's a legitimate handset and you have to decide if you're going to do something unique for it. So, we see that, I'm sure the same as EA, you know, as part of the broad spectrum of gaming and territories that you've got to be in. And that's all part of being a player.
GS: So you've also announced a game for the Wii Balance Board, All Star Cheer Squad. Do you think the Balance Board is going to catch on and get a lot of support?
JS: We think it's interesting and exciting. Obviously, All Star Cheer is a game focused on girls, and it's a general audience, so we're not looking at that as, "Hey, what is a hardcore gamer going to do with a Balance Board tomorrow." You're going to say, this looks like a fun device, let's do something fun on it. And usually, let's do something fun on it that Nintendo wouldn't do, because they own their own platforms and you have to be careful about them. But I think everything else is fair game. On other games, we're looking at supporting the Balance Board, but not making it the primary feature. But that's part of Nintendo's strategy--they come to you, and they go, "What can you do?" And, of course, if everyone does that, then you have a breadth of product that makes the Balance Board seem like an interesting product to buy, and then we all benefit.
GS: So you brought up the EA/Take-Two and Activision Blizzard merger. What's your take on this?
JS: As I said before, it's usually a sign of a maturing industry. When I started in 1990, the industry was really pretty immature, let's put it that way. We were all just kind of running around, doing stuff--very small businesses. For us, we look on it as it is a means to grow. Often times, it may be the best means they have to grow because their own growth prospects internally aren't as interesting.
I think oftentimes where it's looked on as this very exciting, progressive thing, sometimes you should look on the other side and say, "Well, why did they have to do that?" Because it's a lot of money, right? Activision effectively sold themselves to Vivendi. Now, they're still an independent, public company, but that's a big deal. I've known [Activision CEO Bobby Kotick] for many years, and so I'm sure he had to think hard about that. And he thought strategically or whatever else that that was the best thing for them.
EA/Take-Two, we also see that as, you know, obviously EA got surprised by the Activision deal and so we think, "Is it about that they want to prove something?" Everyone talks to each other, these deals are all out there. It just depends on whether you feel you've got enough growth prospects in order to still maintain control and direction that you want to go on.
GS: Do you think it positively or negatively impacts THQ if everyone else is consolidating, or does it have any impact whatsoever?
JS: It would be a cliche to say it is positive, but frankly, I think it is, because we can go and talk to all kinds of people and say, "How much attention are you going to get? Where do you fit in to their portfolio?" That's the licensors, that's the developers, and that actually works, because everyone is nervous. It's not even just that they're distracted by, with Activision for example, them having World of Warcraft, but they're also distracted by the incredibly complicated stuff of merging two big companies together. So is everyone else going to get the kind of attention that they got before when they were on their way up? So, we think that's actually good for us, because we're positioned as one of the survivors who's got weight, we've got global distribution.
You know, at some point the size just doesn't matter. It's like, "Oh, we're in Saudi Arabia direct," but who cares? We're already direct in 38 or so countries, and EA is in 42. It just doesn't matter anymore, unless you're small, like, say, Bethesda is trying to become a global player, but they have no real sales and marketing organization, so they'll always be an affiliate label, so you're not in total control of your destiny. But we think then that we're positioned perfectly to say, "Hey, let the big boys do their thing. We can still do business with you and still give you attention."
It would be bad if it seemed like suddenly their size meant something for us. But it doesn't. I mean, I ran LucasArts for almost 10 years, and the problem at LucasArts is that it is still so small, and it had to make that leap to be a global publisher, but it never did. Without that, you're just kind of at the whim of everything else.
GS: So as long as you're at the global level, it really doesn't matter how big the company is?
JS: Yeah, that's what I think. And then it all depends on how you want to position yourself. We think we're a great partner on licensed properties. We think that our stable of developers internally, how we do it, you know, they keep their culture and their name, all that. What I always did when pitching an external developer that we liked, I'd go, "Hey, we're not sending business guys in there. Go and talk to our studios. Call and ask them what you want." I'm not going to script it. You tell me if you can do that at EA or Activision, and they can't. So, that's not a technique, it's just truthful.
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