THQ: Console Makers Must 'Adjust Business Models' For New Consumer Experiences

THQ is in the midst of a turnaround, working on increasing revenues, slimming losses and pumping up a product pipeline with triple-A titles. But like most major publishers, much of THQ's continued success relies on the decisions made by platform holders Microsoft, Sony and Nintendo. At the Goldman Sachs Technology and Internet Conference this week, THQ CEO Brian Farrell said the console makers must take the lead and start thinking about new strategies that accommodate emerging business models, and go beyond the $60 retail packaged game. "What we really need, and we've been talking to them about it, is for Microsoft, Sony and Nintendo, if they really want to stay at the cutting edge of the games business, they need to adjust their business models to allow for these new consumer experiences. Consumers are going to demand it, in our view," he said. "We're platform agnostic," Farrell added. "If someone else comes with some sort of a cloud system or ... a competitive platform takes off that allows consumers to consume the way they want, that's going to be the winner at the end of the day, and that's where we'll migrate our content." THQ is preparing to release MX vs. ATV Alive this year for $39.99, instead of the standard $60. THQ says it will be a full game, but the publisher will also release a wide variety of free and paid downloadable content that lets gamers customize their in-game experiences. "The concept is to get the [average revenue per user] up and in a higher margin way," he said. "I think we're cutting edge here, it may or may not be successful but we think that's the way consumers are going to consume entertainment over time." One of THQ's biggest upcoming releases is the MMO Warhammer 40,000 Dark Millennium Online, a game Farrell expects to build on 6 million units shipped of THQ's Warhammer 40,000 PC strategy games. "What's transformative about an MMO is if you get it right, you could have a three, five, seven, 10 year run if you really get aggressive, [and have] multiple years of revenue and cash flow from the subscriptions." he said. "So it could really be transformative, especially for a company like ours going into fiscal '13 and beyond," Farrell added. The MMO is in development at THQ-owned Vigil Games. The executive also commented on recent remarks from Electronic Arts CEO John Riccitiello regarding the upcoming launch of the highly-anticipated BioWare Austin-developed Star Wars: The Old Republic. "I loved our competitor's comment that with ... half a million ... subscribers, they're going to make great money, and then with 1 million subscribers, they're printing money, something to that effect. That's true about the MMO business, but the caveat is that you have to get the creative right." Last year in an earnings call, Farrell said THQ's Warhammer 40,000 MMO doesn't have to reach 1 million subscribers to be successful. He said at the time, "You can imagine that given the fact that we have a lower initial investment than some of our competitors talk about... we don't need the kind of subscriber levels that people throw around, like a million subscribers, to make a lot of money on this title. If we get anywhere near that level, we'll be making a lot of money."