JAN. 25, 2012 • THQ announced that is refocusing its business model to focus on core game franchises developed in-house, and building its digital content business on emerging platforms. As a result, the publisher will be exiting its long-time business of kids’ licensed video games in partnership with entertainment firms such as Disney and Nickelodeon. Certain existing catalog titles in the kids category will continue to be sold.
Impact: While THQ’s kids’ licensed games have been an important part of the company’s business for years, the annual sales for these products has steadily decreased on all platforms for THQ and other publishers. With an ever increasingly fractionalized kids media and toy landscape, kids brands no longer have the staying power they once had, and royalty costs typically have not migrated downward – making the overall business less attractive. To compensate, THQ has been on a long term realignment around new internal IP like Saints Row, Homefront and Darksiders to complement existing licenses such as WWE, UFC and Warhammer. Focusing on this core game business, along with THQ’s expressed interest in growing digital revenues on new platforms, could be sustainable for the company. THQ, however, will need to execute at a higher level on game quality and innovation. While consumers have responded well to some of THQ’s recent franchises, the general consensus is that publisher has been a market follower, rather than a leader in exciting content. Without real innovation and high-fidelity execution, THQ will likely find it difficult to grow its way to profitability.