THQ’s “Strategic Realignment,” Ex-Employee Blasts Company

Unless you happen to work at Activision, times seem pretty tough out there in the world of making video games. Over the last several months, the main storyline has been hearing about one studio or publisher closing after another, while financial earnings expectations are generally lower everywhere you look.

Nowhere is this situation more apparent than at THQ, who last month had to adjust their economic forecast considerably after their gamble with the uDraw Tablet Controller for the PlayStation 3 and Xbox 360 failed to find an audience. Throughout 2011, THQ has been cancelling franchises, closing studios, more studios, and even more studios.

Today, the company has announced yet another “strategic realignment” (having announced such a realignment in August, explained in the last-linked story in the previous paragraph), focusing on “core game franchises” and eschewing the more kid-friendly material.

The company’s president and CEO, Brian Farrell, explained the situation, and boasted some nice numbers for Saints Row: The Third, in a press release published today:

“THQ will be a more streamlined organization focused only on our strongest franchises. The success of Saints Row: The Third is an example of what our revised strategy and focus can achieve. We have now shipped 3.8 million units globally and are currently expecting to ship between five and six million units lifetime on this title. Additionally, our robust digital content offerings for this game have resulted in the highest digital revenue of any console title in our history.”

However, an anonymous letter was sent to THQ’s management—and video game press outlets—that lambasts the company’s management, specifically calling Farrell out for the company’s downward slide over the last few years. The letter explains that the company’s complacency and lack of direction has led to its current state.

“THQ had been known through the years for having a formula,” explains “The Formerly Mismanaged.” “They find a hot license, make a cheap game, barely advertise it, and make money. This formula worked during the Playstation and Xbox and Gameboy days and made the company a lot of cash. Unfortunately, THQ’s old guard executives seem to be stuck trying to manage the company the same way they did back then and haven’t realized the industry has changed.”

The letter goes on to elaborate on the company’s current state of affairs:

“The beginning of the end came years ago as Brian Farrell lead an executive team to acquire a large number of studios. A large amount of cash was used in the acquisition or setup of game developers with different degrees of talent. The problem was they were bought without strategic reasoning or specific plan on to use them. So after awhile another large amount of money was spent as those studios failed and were sold off and shut down. The executive team at the time were an entirely different group of people with one key exception in the CEO. The CEO/the then executive team wasted the cash that the company had built up with these massive investments and selloffs.

“The studio purchase errors were not helped by the mistakes in the licensing deals that were signed by the same CEO. Millions and millions of dollars were wasted on acquiring licenses at the same time the kids, family, casual business was declining at a rapid rate. Instead of slowing those acquisitions he overpaid for more of them until again cash was wasted in paying for brands that didn’t sell well anymore.”

The letter also goes on to point the finger at Farrell and the board of directors for the company’s stock price tumbles—going from $30 a share to $0.70, says the letter—and also explains that the uDraw Tablet’s failure is only a piece of a larger set of mistakes. This would corroborate the conclusions arrived at by financial analysts back in December, when Cowan & Company said, “The $130 million revenue downside suggests that there was likely some incremental weakness elsewhere. At a roughly $50 for uDraw across all platforms, including the Wii, it would take a 2.6 million unit shortfall to account for the full revenue miss; THQ’s planning implied less than 2.6 million units of total uDraw sell-in.”

All in all, despite the “realignment,” today’s not a great day to be THQ. The full text of the anonymously written letter can be found over on Joystiq. As with any letter of this kind (seems there’ve been a few lately, what with all the layoffs throughout the industry), there’s plenty of juicy allegations to sink your eye-teeth into.

As to what response, if any, THQ will offer to the “Formerly Mismanaged,” remains to be seen.

Via THQ and Joystiq

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