THQ boss Brian Farrell said last night that it’s harder than ever to make money on core game development – and he should know, because his company managed to lose over $430 million in its previous fiscal year.
It was a rough one for THQ, culminating in a total loss of $431 million in the fiscal year that ended in March, a significant worsening of the $35.3 million it dropped the year before. Sales were also down, dipping to $830 million compared to $1.03 billion the previous year. Despite the ugliness, THQ CEO Brian Farrell said the company had “substantially completed a significant realignment” and was in a good position to return to profitability and positive cash flow in 2010.
“We have taken decisive actions to achieve our cost saving objectives, eliminating $220 million in cash expenditures while at the same time implementing a focused product strategy,” he said. “We are investing in the brands and products with the highest potential to drive THQ’s long-term profitable growth.”
In an earnings call to investors last night, Farrell said one of the difficulties facing THQ is the rising break-even point of core game development. “On the core titles, yeah, 700,000, 800,000 units, those days unfortunately we think are over,” he said. Conversely, he noted that break-even points in the “kids segment” are very low. “Depending on the title, how many SKUs you do, per SKU your break-evens are, depending on the platform, could be somewhere between even 100 and 400,000 units,” he added.
His comments reflected a decision announced in February to reduce the number of “core” titles being developed and focus on casual franchises and online gaming instead. Nonetheless, not everyone shares Farrell’s optimism for the future; in March, analyst Mike Hickey said THQ had a 50/50 chance of going bankrupt, saying it had “mediocre product and [was] running out of cash.”