THQ: Fewer Studios Is Better

At the Citi 2011 Tech Conference in New York City on Thursday morning, THQ's EVP and CFO Paul Pucino showed off sizzle reels of games like Saints Row: The Third and a Jimmy Buffett Margaritaville Facebook game. But when the mic was handed over to attendees for questions, Pucino had to get serious as to why THQ has been changing its studio strategy so drastically in recent months. Asked why THQ failed to mention at its investor meeting this year the impending closure of two Australian studios, Pucino said, "We changed for a reason, because we think it's the right thing to do." "With respect to [not] talking about studio closures at our annual meeting this year, then making an announcement two or three weeks later, it was simply because we weren't ready to announce it at that point in time," he added. Pucino said THQ is focusing on a lean cost structure, and that is reflected in how many game studios the company currently operates. "We think the best position we could be in with respect to studio structure right now, fewer is better," he said. "A year ago we had about 11 [studios], now we're down to five. We think that's the right number." "The two that we just shut in Australia, they were working on games that were not consistent with our strategy any longer," Pucino said. "One was working on a movie-based console game -- again, not part of our strategy. The other was working on a kids' licensed game -- not part of our strategy either. That's what drove that decision." He said that when THQ bought those studios 10 years ago, the Australian dollar was "about half the U.S. dollar." Now that exchange rates aren't as favorable today, operating those studios was not cost effective, he said. Pucino said that managing the cost structure at THQ while still releasing triple-A games is a priority for the publisher. THQ's new Montreal studio, opened in August last year and led by ex-Ubisoft Assassin's Creed creative director Patrice Desilets, will eventually be THQ's biggest studio. It currently houses around 150 employees, and will grow to 400 employees "over the next couple years," according to the exec. Pucino said THQ was given "significant" tax incentives from the Canadian government to found and operate a Montreal studio. "We're going to be able to make games there for almost a 40 percent discount, or 40 percent less, than some of our other studios." "It's much more cost effective to have a studio there than [Homefront developer] Kaos Studios, which we closed here in New York City, which was very expensive to run." "The industry has changed a lot, our strategy has shifted along with the industry, and unfortunately, that resulted in closing some studios." THQ is betting big on the holiday quarter this year, expecting a record fiscal Q3 for the company in terms of revenues and profits. The company is launching Saints Row: The Third, the next WWE wrestling game and a multiplatform, multi-territory push for its uDraw game tablet controller.