Take-Two Predicts that THQ Won't Be Around in 6 Months
Take-Two is trash talking THQ, saying the competing game publisher won't be open for business in six months. Them's fightin' words!
The comment came up while he talked about the difference between his company's strategy on core game development, and that of rival publisher THQ. The latter Rayman company just recently revealed a $56 million loss for the fiscal quarter ending December 31, 2011 -- triple the loss seen in the same timeframe the year before.
Prior to the third quarter results, THQ actually thought earnings would be the largest in the company's history. But according to THQ CEO Brian Farrell, they were (obviously) way wrong. He explained that revenues were lower by about $100 million, and that 1.4 million uDraw units were still in inventory (although they're slated to be sold at some point). He estimated about $80 million of the lost revenue was from units the company didn't sell, and the other $20 million was from lowering the price of what they did sell.
"We would have doubled the profitability in the quarter were it not for uDraw," he said.
In speaking about THQ, the Take-Two CEO said that the rival company's strategy centers on licensed properties like UFC, WWE and intellectual properties (IPs) owned by Hollywood studios, and making games based on those licenses. The problem here is that -- even if a publisher does a great job with a property -- it will have to renegotiate the license in a few years. By then its margins will have decreased because the brand it built up in the gaming space will require a higher licensing fee.
Take-Two, on the other hand, deals with 100-percent owned IPs. He said eventually THQ shifted its strategy to partially using in-house IPs like uDraw, but that doesn't happen overnight. Take-Two also has higher quality products whereas THQ has had some good games.
"The most important difference is quality," he told the audience. "Take-Two has the highest quality ratings among third-party publishers, according to Metacritic and most people in the industry. Quality really, really, really matters. THQ has had some good games, but their quality levels aren't even remotely ... the quality hasn't measured up."
Zelnick then moved on to trash THQ's strategy. "Strategy didn't work and the execution was bad. To put it another way: the food was no good and the portions were small."
"THQ won't be around in six months," he concluded.