In a conference call concerning THQ’s fiscal 2012 First Quarter results, sales of Red Faction: Armageddon, licensed kids titles (Penguins of Madagascar, Barbie Jet, Set and Style), and UFC Personal Trainer have “adversely impacted the quarter,” according to CEO Brian Farrell.
As a result of the bad performance and an increase of net losses, from $30.1 million in fiscal Q1 2011 to $38.4 million this past quarter, Farrell noted that “given that that title, now in two successive versions, has [only] found a niche, we do not intend to carry forward with that franchise in any meaningful way.”
Farrell went on to say that the game “did not resonate with a sufficiently broad console gaming audience” and that “in today’s hit-driven, core gaming business, even highly-polished titles with a reasonable following like Red Faction face a bar that continues to move higher and higher.”
It looks like the move to turn the well-received Red Faction: Guerilla, with its open world gameplay, into a more linear shooter affair with Red Faction: Armageddon to release alongside Duke Nukem Forever has not paid off. I don’t think anyone did not see that coming.
It’s a shame to see the destruction-fest of Red Faction disappear from the gaming landscape, and perhaps Volition will be able to license it’s Geo-Mod engine to other developers so we’ll see it return in other games.
Worth pointing out is that the additional $8.3 million net loss compared to the same quarter last year comes alongside an increase of net sales revenue from $149.4 million to $195.2 million. These are GAAP numbers, or a standardized set of accounting principles that make financial reports by companies more comparable.
On a non-GAAP basis, which in this case includes impact of deferred revenue, business realighment expenses, stock-based compensation and related costs, and capitalization of interest, THQ actually reports that quarterly net sales went down to $141.2 million from $160.3 million and net losses increased to $64.4 million compared to $14.4 million in the same quarter last year. The vast majority of the difference between the GAAP and non-GAAP reported numbers is due to deferred revenue (costs in this case) — money THQ is set to receive or lose on titles for which the online service is “determined to be a deliverable over the estimated online service periond” — so take that as you will.
While THQ has been evangelizing a transmedia strategy for it’s franchises, it also makes one wonder if making that Red Faction: Origins SyFy movie — which wasn’t terrible by SyFy standards but still pretty bad — was a worthwhile investment. Especially since the franchise is now dead for all intents and purposes with nothing to gain from an increase in consumer awareness.
Since Ubisoft and EA have had success with it a more cross-platform approach to franchise integration through the Assassin’s Creed‘s Project Legacy and Dragon Age Legends Facebook games, and Insomniac’s upcoming Global Resistance looking like another solid example of promoting a new title, perhaps using a movie to promote a game was not the best idea.
The same can be said for iOS games as EA’s Q1 2012 fiscal report recently revealed that on a non-GAAP basis, the publisher’s quarterly revenue for its mobile division makes up for 11% of the total — more than half the PS3’s 21%. Between EA’s mobile offerings for its franchises (Dead Space, EA Sports) and other publishers’ adoptation of mobile platforms to strengthen their brands across multiple platforms, which does not necessarily cut into console or PC sales but might actually increase them, perhaps THQ would be wise to adopt a more cross-media approach in addition to its transmedia strategy.
As for Volition, the studio is still busy with its Saints Row games, as well as the Insane game-that-might-be-a-trilogy they are making in collaboration with Guillermo Del Toro. Perhaps now they can work on a new downloadable episodic Descent or Freespace title with the team that was focusing on Red Faction? The numbers don’t seem to be in favor of such a thing, but one can hope.
Fun fact: “gaap” means “yawn” in Dutch.