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Armchair Analysis: Five Observations From THQ’s FY 2012 Earnings Call
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Armchair Analysis: Five Observations From THQ’s FY 2012 Earnings Call

Peter Skerritt shares his top five observations and analysis following THQ’s FY 2012 Earnings Call.

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THQ has released its Q4 and full-year financial data for its 2012 fiscal year and conducted a conference call to discuss it and reveal even more information. Here’s a list of five things that I took from the call:

1. Devil’s Third Is In Release Purgatory.

It was announced during the call that THQ was looking to sell off Devil’s Third to other interested publishers, citing challenges including financial troubles with the company who created the game’s engine, appreciation of the yen versus the dollar, and low probability of profitability. It may be a difficult sell to another publisher so late in this console generation, especially with Gen4 (the next generation of consoles) not too far down the road. The future of the game at this time is murky at best, but it seems more likely that the game may not see release for another year or so.

2. Cartman and Company Will Miss The Holidays.

THQ revealed before the call via press release and its 8-K financial filing that South Park was pushed to the 4th quarter of this fiscal year. That translates to a calendar release of January 2013 at the earliest. While the delay may seem smart on the surface, avoiding conflicts with Black Ops II, Halo 4, Wii U, and other major releases… the first three months of 2013 present their own big games. Bioshock Infinite and Tomb Raider are both strong IPs that will command plenty of attention in a period with more restricted consumer spending after the holidays. Missing a major release window like the holiday season is arguably a lost opportunity, but I guess we’ll see if the move pays off from quality and strategy standpoints.

3. WWE Is Big Business.

THQ is relying on this year’s WWE title (yet to be named) to carry its holiday period. It’s the only release of the October-December period for the publisher. The earnings press release and Form 8-K praised WWE ‘12 sales, noting that the title has shipped more than 2.2 million units since its launch back in November of 2011 and that sell-through of those shipments (units sold) has been some 20% better than Smackdown vs. RAW 2011 on the PlayStation 3 and Xbox 360 platforms. There’s a lot of confidence in this IP being shown here, based on the strength of the WWE fanbase. The pressure is on for a big seller.

4. Darksiders II Will Hit Stores August 14th.

The decision to move Darksiders II to August was initially met with some criticism, but it makes sense from a quality standpoint. August was a slow period for sales last year, but Darksiders II will have to compete against Square-Enix’s Sleeping Dogs on the same release date this year. It’s possible that Darksiders II still sells well; pre-orders for the game are more than five times higher than the original Darksiders, and THQ is promising an aggressive marketing campaign for it. Sales potential is strong, given the generally positive reaction to the first game from reviewers and the gaming community at large. Perhaps the game will have a tail with discounts in time for the holidays, though THQ would certainly prefer a more front-loaded sales trend. This will be THQ’s first significant release of its 2013 fiscal year, so investors and analysts will be watching sales data very closely.

5. What About Gen4?

THQ CEO Brian Farrell claimed that THQ will have software ready for Gen4 consoles, either at launch or shortly thereafter. He really didn’t elaborate on what games to expect and danced around questions asking for more detail. THQ CFO Paul Pucino went on to say that, while it’s premature to talk about Gen4 development costs, he assumed that the cost would be “relatively equal” to this console generation… but conceded that “it’s tough to comment.” We know now, based on comments from EA, Activision, and now THQ, that Gen4 development is ongoing. It’s now a matter of when Sony and Microsoft remove their veils and show us what’s underneath.

Armchair Analysis – and yours truly – will be covering two more earnings calls this month before preparing to trek out to E3 in June. GameStop will be holding its earnings call on May 17th, and then Take Two will be holding its own call on May 22nd.

About the Author: Skerritt