THQ, Brain Farrell, The Scarlet Letter of the Games Industry

I got an assignment from my English teacher. It was to write an analytical paper in relation to The Scarlet Letter which we have just finished reading. Find someone in society who has been shunned or sinned and write about them. Seizing the opportunity, I wrote this. Here is Brain Farrell: Bad at Business in its entirety.

“I feel personally responsible for where THQ is right now. I take full responsibility for that.”  –Brain Farrell

            Brian Farrell is the now former CEO of THQ, a videogame publishing company. The company filed for Chapter 11 bankruptcy in December of 2012. After a twenty-tree year history of publishing games, the most prominent mid-level publishing house in the games industry, sold off its assets one by one and laid off all of its remaining staff. The bankruptcy was a slow process that took two years to come to its company toppling climax; a decline in the number of games and/or accessories sold eventually compounded to put the publisher out of business. Brain Farrell as CEO had direct control over the entire company. It is his bad business practices within the society of the videogame industry that led to the downfall of THQ.

            THQ originally started as a toy production company. The name stands for “Toy Head-Quarters” and in the early 1990’s they did produce toys along with a few minor videogames. Brian worked at THQ during those earlier days beginning his career as Vice President, Chief Financial Officer and Treasurer in 1991. The company moved out the toy business in 1994 to fully focus on videogame publication. Brain Farrell became CEO in 1995, effectively leading the company throughout all of its time as a videogame publisher. Because of its origins in the toy business THQ had exclusive rights to publish videogames with the IP’s (intellectual properties) of Disney, Pixar and Nickelodeon. This gave THQ a public presence and business focus as the publisher of games for children. With this strategy they found moderate success. However a child focused approach to videogame publishing did not carry THQ very far. The company began to expand its development and publication options by breaking into the more adult game market. IP’s were either created in house by THQ owned studios such as the Saints Row franchise or bought from other publishers such as the Red Fraction franchise.  THQ posted its highest ever financial gains for the fiscal year of 2007. Over one billion dollars in revenue was earned.

            One thing about the games industry, large publishers in particular, must be accounted for however. One billion dollars is nothing. That singular fact cannot be stressed enough in relation to development and publication of what are generally considered AAA large budget titles. The total equity of Activison Blizzard, the top third-party game publisher in the world, is currently 11.49 billion. Electronic Arts, EA, is currently the third most successful game publisher in the world with a total equity of 2.458 billion dollars. The comparison of current day financial standings to that of THQ’s in 2007 may be a bit unfair, but it goes to prove the point that the money and financial prospects of the videogame industry are obscene. One billion dollars in 2007 was THQ’s highest revenue. Comparatively, that is barely a drop in the bucket. The videogame industry is broken and corrupted with greed and exorbitant amounts of money. It is a society built by the rising tide of technology that shows no signs of slowing down. The CEOs of these companies sit so high as to never see the ground.

            Brian Farrell, by all standards of the society of videogames publishers in an industry dominated by money, was bad at business. That is his sin. Brian receives a scarlet letter B and must wear it for the rest of his life. Whether or not the B is deserved is a question that is not so easy to answer. It is true that his business practices were shaky at times and the value of the company was very often close to nothing. Yet, a larger examination must occur before a final judgment on the sin of Brian Farrell can be considered. This writing prompt specifically asks to examine what the person’s sin was and why they would be shunned for it within society. The society of the videogame industry is much like that of Puritanical New England. Both are highly hypocritical and when viewed from the outside deserve as much scorn as do the people within the society who sinned against it. In The Scarlet Letter, author Nathaniel Hawthorne uses Hester Prynne along with her sin of adultery to criticize Puritan society. Did Hester even commit a sin worthy of scorn? Or is it the very nature of Puritan society that should be shunned? The same questions and criticisms can be applied to Brian Farrell and the games industry. Did he really commit a sin worthy of scorn? Or does the problem lie in the greater society of the industry as a whole?

According to Take-Two Interactive, another videogame publishing company with a total equity of 0.5 billion dollars, CEO Strauss Zelnick the sin is on Farrell and his company. “THQ won't be around in six months,” he said in April of 2012. While THQ did make more than six months, his prediction was accurate. By 2013 there was no longer a THQ. “THQ's strategy was licensed properties, first and foremost,” he criticized. The over dependence on IP’s for kids games without enough original content to supplement it was unfortunately a corner stone of THQ’s policy for years. Brian Farrell even admits it in an interview taken at E3, Electronic Entertainment Expo, 2012: “As you know, for a long time, the kids business was part of our bread and butter. We recognized that the kids business was declining. In fairness, we didn’t move quickly enough out of that business.” It was Brian’s inability to see into the future and predict proper business investments that doomed the company.

 THQ’s decline began in 2010, with the release of the uDraw tablet peripheral. Originally a Wii specific piece of technology it was meant to work in tandem with the Wii’s motion controllers to allow for direct access drawing capabilities on the home consumers television. It was priced at 70 dollars and came with one bundled game; new content was to release for it every couple of months. The games associated with the uDraw were original IP’s to THQ, yet they remained entirely child focused. The uDraw was ported over to the PlayStation 3 and Xbox 360 in 2011. There it received even poorer sales than it did on the Wii. THQ reported a total of around 100 million dollar loses on the uDraw. Losing that much money, in the society of videogame publication is a cardinal sin. That money belongs in stock, in company investments or in pocket. Brian Farrell sinned with bad business practice and for that he was shunned from his society.

The games industry society has just as much sin as Brain Farrell though. It is an overinflated system of rising cost and profits that end up hurting the consumer. Currently in the games industry of 2013 there is a massive dichotomy at work. The industry is broken up into large publishers and developers, such as Activison Blizzard, EA, Take-Two, ect., and small indie development teams. Avoiding over generalization, this split strikes down to the very fundamental core of the games industry. Is it about the money or the games? Activison Blizzard CEO Bobby Kotick said that his company will not publish any videogames that “don't have the potential to be exploited every year on every platform with clear sequel potential and have the potential to become $100 million dollar franchises.” It is clear that the large publishers have profit focused business plans, one that Brian Farrell might have done well to adopt. However, THQ stood at an interesting place in the industry before its collapse. As mentioned previously, THQ was the most prominent mid-level publishing house in the games industry. Brian Farrell and his company, were the only middle ground publisher out there. THQ had the retail connections to market and sell games that competed with AAA large budget titles, but had a more modest development cost akin to the indie or smaller development scene. During the same E3 2012 interview Brian said, “Where can THQ stand out? Competing with 100-million-dollar budgets? Probably not. But a new world you’ve never been to before with a feeling and an ambiance that gamers can’t get elsewhere?  …  And gamers are recognizing it. So again, time, positioning in the market, competitive window release. We’re doing the right thing by our games.” A larger publisher that focused on games instead of profit; that was what THQ was. A publisher devoted to the game is unique within the industry as it stands. It was Brian Farrell’s leadership, positioning and business practices that lead to THQ being distinctive. Unfortunately it is also the main cause of THQ’s failure.   

Competitively, THQ could not contend with the larger publishers. Quality was being overrun with quantity. That is not to say that the large publishers produce bad content, it is an examination of the games as compared to the money they bring in. Online passes, codes that disable internet related features of a game after activation thereby limiting the content a person who bought a used copy of the game would receive, are rampant throughout the large publishers. Only after the consumer buys their used copy do they then pay an additional 10 to 15 dollars for online usage of the product. EA in particular is a great offender in this regard. Micro-transactions, small in-game purchases using real money, are another growing staple of the money hungry publishers. ‘More ammo available with small purchase of 50 cents’. The revenue generated by these tactics is in the millions of dollars. THQ simply did not have the technological or financial means to tap such a market. A smaller number of quality games, however much adored my gamers and critics, without the money breeding business practices of a large publisher ultimately fall behind.

In a last ditch attempt to save his dying company Brian Farrell hired former Naughty Dog, a large development studio, co-founder and game director, Jason Rubin. Rubin had vast experience in not just the games industry but also in business and even comic books. Jason was appointed President of THQ in May of 2012. The company’s fate was already sealed however. That same month THQ reported a net loss of 239.9 million dollars for the fiscal year. Hiring Jason Rubin was a great move on the part of Brian Farrell yet he still acted too late in the confines of the videogame industry. Routinely Brian Farrell’s methods were reactionary and did not solve the problems, but simply postponed them. Jason Rubin said in an interview with Gameinformer:  “When I joined THQ at the end of May, 2012, the company was finishing a massive downsizing. The company had pared itself down to just the most talented teams and profitable assets after being in a largely unprofitable kids and license business for many years. Additionally, uDraw  … created massive losses.” THQ was a sinking ship and the last heroic efforts of both Brian Farrell and Jason Rubin could not save it. In February of 2013 Brian Farrell sold all his remaining stock in THQ for a measly 3,000 dollars.

  The question remaining now is: Who or what is to blame for THQ’s failure? Does the sole responsibility and blame belong to that of Brian Farrell, company CEO? Or does the videogame industry as a whole need to be considered responsible? Again, parallels between Hester Prynne and the Puritan society of The Scarlet Letter and Brian Farrell and the games industry can be drawn. Both societies are harsh places were only those who follow the selfish expectations of their society can succeed. Ask Bobby Kotick or Strauss Zelnick if they believe THQ’s demise is their fault. See if you can get them away from their money. Yet, in the same regard Hester and Brian must be held accountable for knowing the rules of the society in which they lived and outright refusing to follow them. The CEO of a videogame publishing company should know how to make a profit. It is a sad system that feeds off of consumer dollars to satisfy the large publisher. Before sin can be applied anywhere else, the videogame industry itself must look to change.

“The work that you all have done as part of the THQ family is imaginative, creative, artistic and highly valued by our loyal gamers. …  It has been our privilege to work alongside the entire THQ team. …  Thank you all for your dedication and for sharing your talent with the THQ team. We wish you the best of luck and hope you will keep in touch.”  - Brian Farrell and Jason Rubin