The Great THQ Fire-Sale: What We Know So Far

Upon hearing that the New York Journal had published his obituary in 1897, Mark Twain is said to have written to his brother-in-law, “The reports of my death have been greatly exaggerated.” In the case of THQ? Unfortunately not so much. By now you’ve likely heard the news of THQ’s ongoing financial issues, their bankruptcy filing last month and their rather dizzying spiral through the bankruptcy process, culminating last week in the auctioning off of their most prized assets to their former competitors. Well loved and successful franchises like Saints Row and Company of Heroes along with renowned developers Volition and Relic now have new homes. For all intents and purposes THQ is no more.

THQ’s financial difficulties (i.e. massive debts) have been gaining on them for quite some time, so their bankruptcy filing in December wasn’t actually much all that much of a shock. Without getting too much into the weeds, a misplaced emphasis on licensed children’s shovelware and a huge gamble on their failed uDraw line of games and peripherals led to mounting and ultimately unsustainable debt. The creditors eventually came calling and, despite relative successes in their core games lineup and even a bona fide hit in Saints Row: The Third, they were never able to claw their way back out of the red.

Up until a few weeks ago though, there was some small hope that THQ might survive the ordeal relatively intact. When stalking horse investor Clearlake Capital Group agreed to buy the company as a whole and keep the publisher and, more importantly, their development pipeline operational and moving forward out of bankruptcy, hope turned to guarded optimism. Said creditors objected to this though (understandably it must be said), since the roughly $60 million Clearlake bid was unlikely to match what could be garnered by a piecemeal auctioning of the company’s various assets. The presiding judge agreed it was worth trying and the auction process was set in motion. Last Tuesday, January 22nd, all of THQ’s in-house developers and in-production projects went on the block and within 24 hours it became clear – to the surprise of no one familiar with the games industry – that the creditors had been correct. The selling prices of the various assets easily eclipsed Clearlake’s bid and, just like that, THQ was torn apart at the seams. Reportedly those properties not currently in active development were deemed “legacy titles” and not included in the proceedings, though they are all now undoubtedly up for individual sale as a part of the ongoing bankruptcy process. Here’s what we know so far.

Sega buys Relic Entertainment

With a bid of $26.6 million Sega narrowly beat out Zenimax Media’s bid of $26.3 million (Zenimax is the parent company of publisher Bethesda) to secure the purchase of Relic Entertainment and all of THQ’s IP’s (intellectual properties) related to projects in development at the studio, including the nearly complete Company of Heroes 2. Sega already owns The Creative Assembly, developers of the Total War series, and with the purchase of Relic, have cemented themselves as an industry leader in the RTS (real time strategy) genre. As of last week there was some uncertainty as to the fate of the licensed Warhammer 40k IP franchise. Sega had previously purchased the rights to sister IP Warhammer from a then still operational THQ back in December, so it seemed only fitting and in everyone’s best interests to reunite the two licenses. In fact Sega announced Wednesday that they have done just that and now own the rights to all formerly THQ related Warhammer and Warhammer 40k properties, including the Dark Millenium project previously in development at now defunct Vigil. (more on them later) As of today, Sega now controls every Warhammer gaming related property save for the struggling Warhammer Online.

Points of Interest

• Mentioned in passing this week, along with the Warhammer 40K announcement, was the news that Sega had also acquired the Homeworld IP, Relic’s classic three dimensional space RTS, of which the last installment was released in 2003. Fans are sure to be pleased. Except for these guys probably.

Koch Media buys Volition, Saints Row and Metro IPs

Germany based Koch Media has been the recipient of much attention over the past week since their splashy and somewhat surprising arrival onto the core gaming radar with the purchase of developer Volition along with their Saints Row franchise and the 4A Games developed Metro franchise. It’s important to note to those unfamiliar with Koch that they are the parent company of fledgling publisher Deep Silver. Koch is to Deep Silver as Zenimax is to Bethesda or Take Two is to Rockstar and 2K. Deep Silver had perhaps previously been best known for their Sacred and Risen RPG series and recently enjoyed their first #1 hit with Techland’s Dead Island.

While Sega narrowly edged out Zenimax’s bid for Relic, reports indicate that Koch Media beat out the next closest bid for Volition by a wide margin; Koch’s bid of $22.3 million for the Champaign, Illinois based developer and the Saints Row IP far outpaced Ubisoft’s bid of just $5.4 million. These figures not only potentially shed some light on what appears to have been a “blind” bidding process of some sort, but begs the question why there wasn’t greater interest in one of the industry’s most talented and consistent developers? From a sales standpoint Saints Row far outpaces any of Relic’s franchises, but as previously mentioned, Company of Heroes 2 is near completion whereas Saints 4 is still quite some time and presumably tens of millions of dollars of further production costs from release.

Another consideration is Volition’s relative geographic isolation from the greater game development community. They are the only developer of note in Champaign and, while some might view this as a liability in the hiring of fresh talent, the flip side is that attrition both immediately after the sale and going forward is likely to be low, as taking a job at one of the many studios in the Seattle, Austin, Vancouver or Montreal areas would require a full pack up and move.

Koch also submitted the winning bid of $5.8 million for the Metro franchise which consists of 2010′s Metro 2033 and the soon to be released Metro: Last Light, both from Ukranian developer 4A Games. Last Light had previously been scheduled for a March release, but Deep Silver has yet to reveal how closely their plans will hue to THQ’s timeline.

Points of Interest

• As recently as a few months ago THQ was still engaged in a long term development deal with director Guillermo Del Toro (Pan’s Labyrinth) on an open-world horror trilogy of games to be published under the title inSANE. Volition had been selected to work with Del Toro and develop the series. When their financial troubles mounted this past autumn, THQ pulled out of the deal and returned all rights and work-in-development to Del Toro. He has claimed to have met with a major developer about taking on the franchise, but Volition’s new home leaves open the possibility of a renewed partnership on the inSANE brand.
• Expect to hear of the relative bargain basement unloading of Red Faction, Summoner, Descent and other such properties. Like Homeworld, all of these licenses fall under the previously mentioned “legacy” delineation and will be sold off separately. It would make a ton of sense for Volition to want to retain their IP(s) if they’re available cheap enough, both for potential future use and for protection of their reputation. Any shoddy products released bearing these respective brand names could potentially cause consumer confusion and damage Volition’s brand. Reuniting Volition with Red Faction IP in particular would buy Deep Silver a lot of goodwill with fans of the series.

Ubisoft buys THQ Montreal studio and picks up South Park publishing rights

Before the start of the auction on the morning of January 22, South Park Studios filed a formal objection with the bankruptcy court claiming that their contract with THQ restricted the publisher from transferring the publishing rights for South Park: The Stick of Truth to another party and that they had the right to buy back the rights themselves. THQ claimed that the objection was in error and apparently the judge agreed since the auction was allowed to go forward. Barring any further developments, Ubisoft will buy the rights to publish the Obsidian developed RPG for only $3.2 million. This seems an especially paltry sum for a game seemingly poised to earn well into the nine figures. With the number of consoles on the market at this stage of the generation and the South Park name attached to what appears set to be by far the franchise’s best game adaptation to date, it wouldn’t be much of a stretch to think it might sell upwards of 3.2 million copies. At $60 a pop, you do the math. Although the game had been slated for a March 5th release, Ubisoft has somewhat cryptically widened the release window to “calendar 2013.”

Ubisoft’s other purchase, although not yet tied to a well known franchise, is in some respects the most intriguing of the bunch. Ubisoft bid $2.5 million for THQ Montreal, home to Patrice Désilets and the small cadre of developers he took with him after unexpectedly leaving Ubisoft back in 2010, only to sign on with THQ to head up their new Montreal studio just four short months later. Ubisoft, who has expressed a desire to continue to grow their already massive Montreal operation, was none too pleased with the bleeding of key talent and succeeded in gaining an injunction against THQ requiring them to comply with the non-solicit clause in Ubisoft’s employee contracts. Now they own not only the studio, but their two IP’s in development, including the much speculated about 1666, the title of which is thought to refer to the great London fire which took place that year. The big questions now are whether Mr. Désilets will elect to rejoin his former employer and whether the studio will remain separate or simply folded into Ubisoft Montreal.

Crytek picks up the rights to Homefront, opens Crytek USA featuring ex-Vigil talent

Although the original Homefront was met with mixed critical and fan reaction, in terms of sales it was a solid success. After shuttering original developer Kaos after the game’s release, THQ signed up Crytek for development of its sequal. For Crytek, picking up full ownership of the franchise and all their work-in-development they are already now working on for a mere $544,000 is quite the value proposition given that THQ no doubt spent many times that amount paying them to make it and that they’ll fetch far more in profits from whatever way they elect to publish it.

With their successful CryEngine, their numerous development studios and an upcoming lineup of games that includes Crysis 3, Warface and the aforementioned Homefront 2, the studio has essentially become the Epic of Europe. Their ever-growing empire also got a little bigger this week with the formation of the company’s first American studio, Crytek USA. Based in Austin, the studio is, at this point, comprised mostly of core, senior talent from now defunct Darksiders developer Vigil. Although Crytek has indicated they won’t be pursuing the Darksiders franchise itself, it’s unclear if the much lauded “Crawler” project was a new IP, or if it will be acquired.

Take Two purchases Turtle Rock’s Evolve

Left 4 Dead developer Turtle Rock was once both purchased and amicably dissolved by Valve in the same year. They have since reformed and signed on with THQ to publish their next big co-op shooter, codenamed “Evolve.” THQ once expected the game to sell upwards of 4 million units and produce big profits. Take Two must have felt similarly, bidding $10.8 million for the work in progress. While Turtle Rock put in their own bid of $250,000, presumably as a safety net, the studio says they are “anything but disappointed” and “super-excited to be moving forward with 2K.” Likely for good reason as 2K has a track record of giving its projects both time (in development) and room (from other similar releases) to breath.

-Seth McNitt

Boss Wave

*ATTN Veteran Gamers readers: Although largely finished, I’ll be updating this post with some closing thoughts, edits and new information as it comes in. Any comments, speculation or critique is welcome as always. Thanks, Seth.