Industry watchers were treated to a rare bit of executive candor Thursday from Take-Two Interactive Software's CEO.
Strauss Zelnick's comment
that "THQ won't be around in six months" was shocking not so much because of his prediction, but because they seemed less like the contrived back-and-forth between Electronic Arts and Activision-Blizzard - and more honest opinion. The bigger question is: Was he right?
The aftermath of the comments was pretty much what everyone knew would happen. THQ took umbrage at the remark, calling Zelnick's thinking "outdated and inaccurate" and his comments "irresponsible and false." Zelnick, in turn, issued an apology
that was worded much like something a politician would say.
For those who haven't been following THQ's travails too closely, though, Zelnick's comments were a wake-up call. Will the publisher of Saint's Row
be nothing but a memory before the end of the year?
Odds are: No.
Zelnick is a smart businessman - and THQ's fate may, in fact, be ultimately terminal. But if it does call it quits or is forced under, it's not likely going to be within the next six months.
THQ has made a series of mistakes over the past few years. The company has been unfocused
. It has made crucial business decisions years later than it should have
. And it has undermined its successful properties with cheap stunts
That said, the biggest threat THQ is facing right now is a delisting on Wall Street. (Company shares are still stuck under $1 - the cut-off point for exchanges to start the delisting process.) And it's not the first company to find itself in that position.
Two years ago Majesco received a delisting notice from Nasdaq, but avoided it on the strength of one good quarter. Today the company is hardly an industry powerhouse, but is still around - and has recently struck gold with its Zumba fitness games.
Even Take-Two faced delisting in 2006, after it failed to report earnings in a timely fashion amid an investigation into stock option grants.
The truth is we really don't know exactly how THQ plans to crawl out of this hole it has dug for itself. It has severed ties with its licensing partners for children's games. It has cut hundreds of jobs. And it has slashed executive salaries
(well, for a year, at least). But as far as an action plan to move the company forward, there hasn't been anything concrete laid out. (The company's stated intention of "a realignment of the organizational structure" is as rehearsed as Zelnick's apology.)
The general public - and investors - will get its first hint as to whether the company is turning things around at E3 this year. A weak line-up of titles could be devastating to THQ, but if it shows one game that has solid hit potential, investors might be willing to give it some rope.
Couple that with a reverse stock split and the delisting threat will likely disappear, giving THQ some breathing room. The trick, from that point, is execution.
"Quality really, really, really matters," Zelnick mentioned in his comments Thursday. "THQ has had some good games, but their quality levels aren't even remotely...the quality hasn't measured up."
He's right. Games that should have been polished and AAA titles (like Homefront
) have been mid-tier, and have hurt THQ badly. If the company can truly learn from those mistakes, though, Zelnick's six-month forecast will evaporate.
The question is: Has it learned? And does it have someone on staff that is qualified to act as an arbiter about game readiness? There is an opportunity at THQ for someone to step up and become a design leader at the publisher. If THQ is, in fact, going to survive - and thrive - the salvation isn't going to come from management. It's going to come from the creative side.