THQ (Nasdaq: THQI) has filed for bankruptcy. That comes as a disappointment for me, because I was hoping it would be able to turn things around. I say that as a fan of the company’s games rather than as a fan of its stock. If Ubisoft buys THQ IPs, I will be buying Warhammer 40k and Darksiders games if they release them, because I really like those worlds. There were lots of things the company had to do before it became one of those nice turnaround plays, but looks like it just ran out of time. I was hoping that Metro: Last Light would give the company some much needed profits. Considering the quality of Darksiders II, which was good but showed serious signs of being rushed on the back half, I think it would be better to preserve the IPs and look for a buyer.
For a while now I have been reading about the rise of mobile and tablet gaming is changing the face of the video game industry. The suggestion is that only Activision-Blizzard‘s (Nasdaq: ATVI) Call of Duty games or Take-Two Interactive‘s (Nasdaq: TTWO) GTA series will be successful. The cause of this is games like Electronic Art‘s (Nasdaq: EA) fantastic The Simpsons: Tapped Out game for mobile. I think the focus on mobile gaming ignores the effect of the economic slump for the last few years. Mobile gaming was salt in the wound, but it is a parallel gaming sphere not a replacement. Traditional video games on consoles and PCs will feel the hurt for a bit, but an equilibrium point will be reached and both segments of the market will grow.
Try to remember back when World of Warcraft came out, and MMORPGs or just MMOs in general were heralded as the future. Cut to now and multiplayer is an important component to a game, but the industry has not shifted toward monthly subscriptions to perpetual games. We still have new titles with new settings, stories, and game play.
I think mobile gaming will disappoint people that think it will be the next big thing in gaming. Many mobile games have almost no gameplay and the social aspect is not enough to carry it. I do not see Angry Birds or Tapped Out replacing Batman: Arkham City. Mobile gaming will have its place because there is the potential for serious revenue. Tapped Out is a great game and is bringing EA plenty of revenue. However, Draw Something showed that what works on the garage level might not work on the corporate one.
The middling franchises are not dead. Every company needs to have flagship titles, but the companies need to do a better job of managing development and marketing costs. I do not think extremely successful games owe their success to marketing. In a wired world where everyone is facebooking and tweeting getting the game’s name out there is easier. Nice trailers on YouTube allow people who hear about the game to see if it’s interesting. Every company wants to push every title to become like a Black Ops, but it was not the marketing budget that made Black Ops a success.
For Take-Two, keep an eye out for the next GTA game, because it will be a big seller and the stock should perform well, but long-term price appreciation requires more than one title to be successful. It requires a well run company and multiple successful products. I would keep an eye on BioShock: Infinite before investing. I feel like the company will try to push the game with a big marketing budget, but after the second game I think the franchise does not have the star power that it is expected to have by the company. I did see a Bioshock: Infinite trailer in the movie theater, and while it looks interesting it does not look like something I must buy.
Take-Two projected an increase in marketing costs, but I question whether that will lead to increased sales. Especially, when it comes to sequels of successful games. I understand marketing titles of brand new IPs, but does GTA need an extensive marketing campaign when it is so anticipated? If the company is not rolling in cash, then they can go with a smaller marketing plan.
I think the problem with THQ is that while it had numerous good and critically acclaimed titles, it did not have any titles that really sold. Dawn of War was lauded and won awards , but the critical success did not translate into sales. Generally, being reviewed well is not enough.
I see a much-needed culling of the field in the video game industry while mobile gaming is ascendant. There will always be consumers out there that will buy titles that will never become smash hits. Always question sentiments that are as definite as some I have been reading. The video game industry will remain varied, but more focused than it is now. Analysts once loved social gaming, but Zynga is turning to gambling. The blame may be on the shift in focus to mobile gaming from web-based social gaming, but I expect mobile gaming to disappoint eventually as the market is flooded with awful titles and ridiculous expectations.
I say all this now, because eventually this “mobile thinking” will turn to the big franchises too. You might read something about them being solid, but not growing or being as impressive as they used to be. I definitely think that is false. Do not let smartphones scare you away from ATVI, which is a fantastic company with a strong collection of properties.