THQ changes focus to quality over quantity

Saints Row publisher realigns priorities in wake of studio closures, layoffs of 250 confirmed; Red Faction: Guerrilla and Darksiders delayed.

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Drastic times call for drastic measures. Having already completed the "drastic measures" with the closure of five owned studios as well as layoffs at two others this week, THQ today shed light on the "drastic times" that necessitated the move.

In the publisher's quarterly report for the three months ended September 30, THQ posted a net loss of $115.3 million, significantly worse than the $7 million net loss it posted over the same period last year. Sales for the company were also down sharply, as THQ reported quarterly revenues of $164.8 million, down more than 28 percent year over year from $229.3 million.

THQ pointed to a lighter release schedule that included de Blob and international launches of Wall-E as a culprit in the lowered sales. For the same period the previous year, the publisher's lineup was spearheaded by Ratatouille, Stuntman Ignition, and Juiced 2: Hot Import Nights. The latter two of those games both underperformed at retail, leading THQ to shelve the franchises.

Relating to the aforementioned studio closures and layoffs, THQ said it let go roughly 250 product development personnel, or 17 percent of its developers. The publisher lowered its projected product development costs for fiscal 2010 by $100 million. In a conference call with investors, THQ CEO Brian Farrell said cost reductions including layoffs are on the way for the company's corporate structure as well.

"Several titles" were canceled in connection with the closures, but THQ said none of the axed projects had been publicly announced. The closures, cancellations, and job cuts were part of "a significant business realignment," the publisher said.

"As part of this realignment, THQ plans to focus on fewer, higher quality titles, and to align its organization and cost structure accordingly," the publisher said. CEO Brian Farrell added in a statement that the moves are part of an attempt "to be more competitive in key consumer segments and address the current business environment."

That new focus can be seen in a pair of delays the publisher also announced today. Two games previously expected by the March 31 end of THQ's current fiscal year--Red Faction: Guerrilla on Xbox 360, PlayStation 3, and PC, and Darksiders: Wrath of War--have been pushed back. THQ expects the move to cost it $125 million in sales this year. Red Faction will arrive in the April-June quarter next year, with Darksiders is now expected to hit between July and September.

Farrell said other focal points for the publisher include growing its presence in the fighting category, which includes its WWE wrestling titles and the UFC games. The publisher also wants to reduce the number of core games in its pipeline, but increase their production budgets "where appropriate." The company plans to release fewer--but bigger--titles for the core market. The casual market is also being targeted by THQ, although the publisher said it was going to "rationalize" product lines in its children's gaming business, reducing costs by outsourcing development.

Investor reaction to the news has been swift. As of this writing, THQ stock has lost nearly 22 percent of its value in after-hours trading, down $1.44 to $5.11 after ending the day at $6.55.

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