THQ Talks Layoffs, Won’t Ship Darksiders II and South Park Until They’re “Perfect”

RIPTEN EXCLUSIVE INTERVIEW WITH DANNY BILSON

The past six months haven’t been kind to THQ.

While their stock prices have declined steadily for the past two years, things took a turn for the dreadful last fall when the company announced that it was killing the uDraw tablet. That left over a million units ensconced in a warehouse, worthless and doomed to a desert hole next to the Atari 2600′s E.T. cartridges. In combination with the announcement that the publisher was withdrawing from the kids game genre, the news caused a precipitous plunge that started the publisher on the road to a letter no publicly traded company wants to receive.

In January of 2012, THQ received a delisting notice from NASDAQ for trading below the minimum threshold of $1.00 for 30 days. In order to recover, the publisher’s stock must trade above $.99 for a minimum of 10 consecutive business days before July 23, 2012. If they don’t comply, they wouldn’t be the first in the industry. Atari was delisted, bought out by Infogrames, who then reincorporated as Atari, S.A. in 2009. While the company survived, they have yet to return to their former glory. Delisting isn’t a death sentence, but the results typically aren’t pretty.

Since the announcement of the Warhammer 40,000: Dark Millennium ”shift” from MMO to single-player/multi-player title, the company’s stock has slid from $.63 per share to $.50 (as of this writing): a 20% drop. One of the ways that the company can pull out if prices don’t rise naturally is a reverse stock split. However, if the price drops any further, it will have to be more than a 2:1 reverse split in order to trade above $.99 per share. While things look bleak, Executive Vice President for Core Games, Danny Bilson, is optimistic. We had the chance to speak with him about the company’s upcoming titles, the tragic layoffs at Vigil Games and Relic Entertainment and how THQ is setting themselves up to become stronger than ever.

Michael Futter: First, thank you for taking the time to speak with us, I know you’re extremely busy.

Danny Bilson: Yeah, it’s a busy time.

MF: I’m sure. My first question is, at the end of January, THQ received a delisting notice from NASDAQ. You have until July 23 to bring the company back into compliance (10 consecutive days trading above $.99). Since the announcement about the Warhammer MMO [Dark Millennium] “shifting,” stocks are down as of right now about $.13, which amounts to 20%. They are trading right now at $.50. How are you guys going to pull out of this decline?

DB: With our portfolio that we have been working really hard on that rolls out some, what I think, are some great games over the next three years. Absolutely. I think that there is no concern around here about delisting. There are a lot of ways to avoid that, but the best way is to ship great games and to sell them well.

MF: Between now and the July 23 deadline, what is scheduled to release? I know that Darksiders II is currently scheduled for June 26. Is that going to make the June 26 ship date?

THQ PR REP: The two things don’t have anything to do with each other. Shipping the product doesn’t change anything that we’re doing to deal with NASDAQ.

MF: There’s a reaction from the investing community about a critically acclaimed game, though. So, the question is, will Darksiders II still ship on June 26?

THQ PR REP: Honestly, I can’t confirm that right now. The team is actually on the road. I can get back to you.

DB: Darksiders II is looking really, really good. It’s a huge game. It looks like… I don’t want to give the exact amount of hours of gameplay… but it’s a very, very lengthy and involved campaign. We’re going to give that team everything they need to make it as good as it can be.

MF: So there is a chance for a delay?

DB: We haven’t announced anything… but the team is working really, really hard. We’re not going to ship it before it’s done.

MF: What prompted that question is that with the announcement about the Warhammer MMO, based on the information I could find, it was about 40-50% of Vigil Games’ workforce that was cut.

DB: The workforce was reduced and the people that… of course, whenever a studio does that, they will retain the best people and the best talent, no matter what team they were on. The team is still… it’s a pretty large team in there right now. Close to 100 people.

MF: If they retained the best people, were there people on the existing Darksiders II team that were cut to be replaced with people who were on the Warhammer MMO team?

DB: There are. There are. A lot of that was preserving the most senior and experienced talent in the studio. Honestly, no one who was on any critical path on Darksiders was let go, and no one was let go before they finished their tasks on Darksiders. There’s absolutely no compromise on the Darksiders product whatsoever. That was a high priority for us.

MF: Going back to the Warhammer MMO, when you announced the change, you called it a “shift.” How far along was Dark Millennium before the change? In other words, is it really just a cancelation with a brand new project and the same name? Given that you’re talking about taking an MMO, which… I believe, Danny, that you’re a gamer, right?

DB: Oh, yeah!

MF: So… my understanding is that you’re very familiar with MMOs.

DB: Yes. Since Everquest 1, yes!

MF: You know that an MMO is a very different experience than a “single-player/multiplayer game with community features.” Is there really anything usable from the MMO that is going to be included in this new title?

DB: Yes, and the reason is that there was a lot of innovation in that game. In particular, the shooting mechanics are real-time, not turn based. The content is absolutely incredible, and any time anyone ever had any doubts about it, all I had to do was bring them into the room and show them progress on the game. So there’s a tremendous amount of content that was built. At its core, the mechanics are very action based. Nobody has seen this before. We’ve never shown it to anyone. The team is incredibly excited, and this is the truth, about the new direction for the game.

We’re not going to be talking about that game for a while. I know lots about it, and I could talk about it, and I think it’s absolutely incredible. You’ve gotta remember there’s five years of development and careful thinking and testing and prototyping and then building involved there. If you saw it, you would easily understand the vision for the future of the game, and when you see it, I think you’ll get it completely. It’s really awesome. It’s always been one of my favorite games in the portfolio and it still is.

MF: It’s interesting. You mentioned… and I’m a Warhammer fan. I loved Space Marine. I’m excited about that, but one of the interesting things you said about that, though, is that if people had doubts, you showed it to them, and their doubts would be allayed. In the announcement, you said that you were looking for a business partner, and that didn’t happen. I’m assuming that you pitched them with some of the content, and they saw it. If, as a gamer, I’m going to be excited about the game, what was the disconnect between finding a business partner who could get equally excited about where the MMO was going?

DB: Well, I would argue that it’s the business of subscription-based MMOs, and the state of that business right now. That’s what we were building: a big, ideally subscription-based, MMO. I can tell you that, unequivocally, certain people who have shipped MMOs, who saw this… a quote was, “that’s better than anything we’ve ever built.” That’s a quote from a room I was in, and that’s what kept the conversations going. There was a lot of, “how do we make this work economically, because it’s awesome?”

At the end of the day, and I know for myself in particular, I much prefer the route we’re going down than having brought in investors, and possibly diluted some of the controls around it. When you bring in more opinions, things will change. That game is still sitting with the people who invented it five years ago, and honestly, they are incredibly excited about the new direction. That is the absolute truth, and when we announce it, and you speak to them, they’ll be able to tell you themselves. You’ll really like it. If you liked Space Marine, you’re gonna love this thing. It’s much deeper. Space Marine was designed as a console experience. This one has tremendous multiplayer gameplay, and there is a lot going on in this game that’s spectacular.

MF: You talked about investors and, obviously, you have to do what’s right for the business and where you were at the time. However, it seems in terms of stock prices, as I said earlier, that there has been a 20% drop from March 29th until today. The fact is that you’ve gone from streamlining administrative staff to laying off creative staff. It seems that investors are reacting poorly to that. What are you going to do to convince people that play the stock market and let them know that this is the time to turn around and look at THQ seriously?

DB: The thing that keeps me going and gets me up everyday is the portfolio. I, of course, know every single game that’s in production. Some of them haven’t been announced yet. In the future, and you know this, only the best games with really quality marketing and proper investment are going to be profitable or, even, break out. There’s a lot of tough stuff navigating the waters of the industry and the changes in the industry, and transitioning this company to an original IP, core games company.

It takes time and it takes effort. On my laptop, I have the entire portfolio for the next three years, with video, creative and content and things that the public hasn’t seen and that investors haven’t seen. That’s what keeps me going completely. It’s because the portfolio that we’re preserving is, I believe, really, really strong. It’s a lot of games that I want to play very badly, and hopefully, so will a lot of other people. There’s a lot of talent behind them, a lot of investment and a lot of focus. As we roll them out—it’s gonna take some time, and it’s a long-term plan—but, as we roll them out, and each one succeeds, hopefully better than the one before it, the company will regrow.

MF: You mentioned games that people are really excited for. One of the games that has been on people’s radar since December of last year is the South Park RPG that was announced. I have two questions about that. First, is that still on track and moving forward with Obsidian.

DB: Yes. It absolutely is.

MF: When it was announced, it was slated for a 2012 release. Is that still going to happen?

DB: Potentially, but it’s going to be very close. It’s all about… because that game is being written by Matt [Stone] and Trey [Parker]… some of the production process ebbs and flows with their schedule. They are in the middle of a season right now, and as soon as they are done, they get back to the game, and their season takes them out for a couple of months at a time. Again, it’s like I said about Darksiders. We can’t afford to ship it until it’s perfect.

Matt and Trey won’t ship until it’s their vision of this ultimate role playing game, where you’re the new kid in town and it’s like being in a South Park episode. Once all the pieces are together, we’ll announce a date and we’ll ship it. I can tell you from progress and process. I’ve got sections of the game that they’ve completed; they are phenomenal. If you like South Park, and I love South Park, it’s South Park! It’s incredible and it’ll absolutely be the funniest game ever made. There’s no two ways about it.

MF: I’m a fan of Obsidian. Chris [Avellone] and Feargus [Urquhart] are fantastic. It seems like a match made in heaven. When you say that there are segments that have been completed. Are you just talking about dialog, or is there actual gameplay.

DB: No! I’m talking about the game! There are sections of the game where all the voices are in and all the writing and rewriting has been done by Matt and Trey. When you get all the pieces together, it’s what everyone wants it to be. Again, this was their vision. this game came to us. Matt and Trey wanted to do a great game. They had even contracted Obsidian themselves before we came in and, I believe, there was work going on for about a year. They were looking for a publisher to get it involved and pick it up and drive it the rest of the way. That’s what we’ve been doing since the end of last summer; somewhere around there.

MF: Moving back, though it’s broader, is the announcement related to the MMO and how that impacts the business and the perception of the business. One of the things, looking at the release that went out on the wire, there was a quote in there from Games Workshop, and I know it wasn’t a THQ quote, but THQ issued the press release,”We are genuinely excited about the new direction that THQ has taken with Warhammer 40,000: Dark Millennium.” If you just talk about the “shift,” that’s one thing. Right below that, though, is where you announce that 118 jobs have been eliminated. 118 developers at two great studios are now out of work. If you looked online, there was a very visceral reaction from the development community that was, “Wow. How do you have this quote in there about being ‘genuinely excited’ at the same time you are laying off 118 people?” How does that look? What do you have to say to developers, who are at other companies, when you have this rough juxtaposition?

DB: If you’re looking at it on the surface, you could say that, but if you know a little about it or think about it for a minute, it’s a different story. That story is that the game has been in production for five years; five years of many developers working really hard, honing and building something. There’s a tremendous amount of content there. Let’s just take the Games Workshop piece, because there are two separate pieces here. The Games Workshop guys had been to the studio. They had seen the concepts for how all those assets are used in the vision for the new game, and they were genuinely excited about the new game. Those guys are gamers.

Now, let’s talk about the other piece. laying off developers is the worst part of my job by a lot. It is the most painful, horrible, sad thing that comes along, and I don’t know how, honestly… you never get over it. Let’s just say that it’s unbelievably disappointing. Those guys and ladies are tremendous people who have worked unbelievably hard, and all I could do is thank them for their service. That’s what I did. It’s a lot more fun to be on the growth side, when you are bringing new people on than it is laying great people off. It’s absolutely very, very difficult for me personally and for everyone here at THQ.

MF: Because, obviously, the development community is reacting to the surface part. They read that release and you’ve got this “genuinely excited” quote and the laying off of 118 people. Again, I know that there are two different pieces, but looking at the reaction from individual developers—people, not companies—those are people who are going to take that with them. As THQ turns around, and does turn toward that growth, do you see a potential problem attracting those individuals?

DB: It depends how developers look at it. They can look at it like… let’s say you’re a developer that loves MMOs and really loves this game, because there is terrific content there. You could also say, “Look at THQ as they struggled and compressed and compressed, they protected this team for years” beyond where some people would have said, “That’s really risky and expensive. They should get out of that business right away.” So there’s another story of the THQ that kept those guys and ladies employed as long as the absolutely could and did not ever want to make a change, but the market conditions, around MMOs in particular, were starting to influence a rescaling of it. Our own market conditions—the conditions of the company–with our financial status, at a certain point, at the very last point, we had to let those people go. There was nothing capricious about it. It was nothing that any of us wanted to do.

The people that worked on the game, especially for all those years, they saw us keep funding that and funding that and funding that, and doing everything we could to make it happen until we couldn’t anymore. Your question about would people like to come back and work here; I would like to believe that the best game developers gather around the games they want to build the most and the content they want to be involved in. Unfortunately, one of the hard things about the game development business, is that it is transient. Teams do get laid off, and people move around. One of the reasons that we all know so many people in the business is that we’ve all moved around from company to company and game to game. I like to believe that when we have the right game, the right team and the right place for individual developers, that will attract them. If they have nervousness about being laid off, I guess they’d be like everyone else.

THQ PR REP: I’d like to say that from an administration perspective, when we have an action of that nature at a studio, we do multiple things to help the employees. We did a career fair, at which 28 other gaming companies went to look at the talent that was affected. We have a full-time recruiter working with these guys. We have a massive email distribution list, where these guys are getting access to jobs in the Austin area, or the surrounding areas. All of these people are eligible, if they choose to relocate, to apply for jobs at our other studios. These guys aren’t getting dropkicked to the curb. We handle everyone with the utmost respect, and there is no malicious intent in any of these actions.

MF: I didn’t mean to imply it was the intent, but rather the perception, based on what I’ve been seeing from individual people (and not companies).

THQ PR REP: I understand what you mean about the juxtaposition in the press release, and what you are saying. However, when you talk about the Games Workshop license holder being “genuinely excited” about the continuation of a product versus the factual information of what we had to communicate to our stakeholders about the action and the “shift,” I think you guys are reading a little too much into it.

MF: I understand where Games Workshop is coming from, but THQ issued that press release. I wonder if a conversation between you and Games Workshop about tempering that language out of respect for the affected employees, or even including some of the things you just told me. None of that made it into the press release, which I think would have reflected well on THQ. All the things you are doing… I understand that there is a business and financial message that needed to be communicated with that press release. The fact that, as I’ve said, there are individual people who work in the industry who read that and had that reaction. I’m communicating what I’ve seen and saw immediately following. In fact, there was one person who cited that quote and the layoffs and called you guys “jerks.” It was harsh, but it was to the point.

THQ PR REP: You are talking about blogging and comments. If we responded to everyone’s opinion, then we would be doing that all day.

DB: I think there are a lot of developers that worked on Dark Millennium that would be pleased to know that their work is going to live on, and that the quality of their work has been recognized by the licensor. The repositioning of that work has made the licensor excited about the potential for the game. At the end of the day, that’s what we’re all here for. We’re here to make great games, to entertain people and to give them value for their investment in our games. That is ultimately the most important thing. I’d like to think that there are a lot of people who had worked really hard on that game for years, and are happy to see that their work is going to be played.

MF: We received confirmation that an Obsidian project was canceled in the same week that it was announced the studio had missed their Metacritic bonus by one point. They had to lay off people, as well. It appears, based on what we were able to find, that some of the staff affected worked on the South Park RPG. Obviously, that game is still moving forward, so you weren’t the publisher that canceled the project. It seems like your relationship with Obsidian, and the project they are working on with you, might have been affected by this. How do you deal with that when two other publishers making decisions affect a project you are working on?

DB:  It had no effect. Just like any studio, when you downsize, you keep your best people. Think about it. If South Park becomes the lead sku in the studio, it’s just going to have all the most experienced people on it. It didn’t affect us in any way. Obsidian isn’t our studio. If people were removed from that team, they were replaced by more senior people. There was no negative, except for the negative of any studio having to lay off employees. It’s incredibly painful. It wasn’t a game of ours that was canceled there, and I do like Obsidian. I want to see them succeed, and I don’t want to see them stressed by not having enough games, but Feargus seems to feel that he has a pipeline of stuff coming in. So, the answer is, really, that it had no effect.

MF: Lastly, the Wasteland 2 project that they are working on after laying off staff, does that have an effect?

DB: If you look at what that is and the numbers involved, you’ll see, again, that it’s of no concern to us. Obsidian is not our studio. We’re partnered with them on South Park, and as you said, we believe they are the best studio to make that game. They’ve been great!

MF: Thank you so much for your time.

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