Archive for the ‘Feature’ Category

Following the tragedy in Newtown, Connecticut, video games have been front of mind for many Americans. Unfortunately, the focus has been almost exclusively on violence (even those titles are only minimally focused on firearms). EA put a smile on my face yesterday when they announced that the upcoming SimCity, one of my favorite titles from E3 2012, would be utilized for more than a solid entertainment experience. Specifically, Maxis and EA will be using the ambitious urban planning game to support STEM education initiatives. 

STEM (Science, Technology, Engineering and Mathematics) is designed to ensure that America’s students have the tools to compete and lead in innovation-focused fields in the 21st century. Traditional education funding is focused largely on classroom learning, but STEM advocates believe that extracurricular activities are crucial, providing a different setting and tone for learning and applying concepts. The United States Government is on board with the program, as it aligns with much of what President Obama and Department of Education Secretary Arne Duncan have been saying for years.

In 2009, the Administration launched the $4.35 billion “Race to the Top” grant program, placing emphasis on those proposals that included planned improvements in STEM education. Later that year, the “Educate to Innovate” campaign added $260 million to the effort to improve student learning in these areas. Of note, was the following initiative:

Five public-private partnerships that harness the power of media, interactive games, hands-on learning, and 100,000 volunteers to reach more than 10 million students over the next four years, inspiring them to be the next generation of makers, discoverers, and innovators.  These partnerships represent a combined commitment of over $260 million in financial and in-kind support.

One of the private “Educate to Innovate” partners, the MacArthur Foundation, has put its support behind GlassLab (The Games, Learning and Assessment Lab), located at EA’s Redwood Shores campus and also funded by The Bill and Melinda Gates Foundation. The program was announced in June 2012 as a partnership between those organizations, the Entertainment Software Association (ESA) and the Institute of Play, a 501(c)(3) nonprofit formed by a number of Gamelab game designers.  It is not easy to secure funding from either the MacArthur Foundation or the Gates Foundation. Both have rigorous review processes, and the fact that both have shown confidence in use of interactive gaming as a mechanism to further education in the areas of science, technology, engineering and mathematics is significant.

EA will be participating in two events that will demonstrate how interactive entertainment can play a role in furthering STEM education and, specifically, how SimCity will be used to promote civic engagement. EA’s Senior Director for Government Affairs, Craig Hagan, will be participating on a panel with the MacArthur Foundation’s Director of Education Connie Yowell and Special Assistant to the President for Education Policy Roberto Rodriguez. The session, entitled “Learn. Build. Create.: Connected Learning Over the Next 4 Years” will be moderated by Philadelphia Mayor Michael Nutter. Later on, EA will be conducting demos and explaining more about the GlassLab partnership.

Opportunities to evidence the broad diversity and impact of interactive entertainment are crucial, especially right now. Video games have more to offer than a soundbite for 24-hour news networks, and partnerships like GlassLab should be held up as shining examples of the good that comes from the industry. I look forward to the expansion of this conversation and the day that SimCity, Civilization and others like them are required playing in schools.

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The story of THQ has played out over the past twelve months like a Shakespearean tragedy. As the curtain opened, THQ was (apparently) riding high on the sales of Saints Row: The Third, WWE ‘12 and their uDraw peripheral and related child-focused titles. As in all tales like this, the veil of success and happiness was rapidly punctured. The first dramatic turn came in February of 2012, as the publisher revealed that the uDraw had actually failed spectacularly.

The peripheral caused the company $56 million in overall losses for Q3 2012, with the tablet itself yielding $100 million in unrealized sales (split between discounts and the 1.4 million units soon to inhabit a hole next to Atari’s E.T.) It’s important to note that while the uDraw was that last little big push toward collapse, things hadn’t been going well throughout the 2012 fiscal year.

At the start of that period (April 1, 2011), stocks opened at $4.78 per share (already down $1.32 from the start of the calendar year). When the rest of us were ringing in 2012, things were already looking bleak. On January 3, 2012, when trading resumed for the first time in the new year, the share price had plummeted to $.68 (having already been under $1 since December 9, 2011). 

On January 31, NASDAQ sent THQ a delisting warning: either the stock trades over $.99 for 10 consecutive business days by July 23, 2012 (180 days) or it’s game over. As a result, the publisher started taking steps to right the ship. The long beleaguered Warhammer 40,000 MMO, entitled Dark Millennium, underwent a dramatic shift to a traditional single-player/multiplayer game. In the process, 118 employees at Vigil Games and Relic Entertainment lost their jobs. At the same time, financial analyst Kevin Dent, who was vilified for predicting this very thing at the start of the year, saw his statements verified. Not only was he proven correct, but he also took the opportunity to help coordinate efforts to pair those talented individuals with new employment.

I was fortunate to have had the opportunity to interview Danny Bilson, (now former) Executive Vice President for Core Games at THQ shortly after this took place. I was intending on focusing largely on the layoffs, and especially how THQ had positioned them as a positive thing for the project. Oddly, my first questions, intended to ease into the discussion, caught the most attention. THQ all but confirmed a delay for Darksiders II. In the wake of these layoffs and under threat of NASDAQ delisting, delay of a major title could no doubt be damaging. Worse, after previously confirming the original release date of June 26, I was told,

“We haven’t announced anything.”

I found it odd, since the June release had in fact been announced. I pressed, but got no further response. Stay tuned though, because like in any good Shakespearean play, this is foreshadowing. You’ll hear that line again later.

In my conversation with Bilson about raising the stock price above $1 and other financial matters, he alluded to other “ways to avoid” delisting. Unsurprisingly, the share value wasn’t raised naturally. The company resorted to a reverse split, creating a new share out of every 10 outstanding. On July 9, 2012, when this took effect, shares opened at an adjusted value of $5.09. (Note: this isn’t the first time THQ used a reverse split to get out of trouble. In February 1995, the company executed a 15:1 reverse split to pull out of a nosedive that saw shares trading as low as $.25.)

Bilson watched this from the outside. On May 29, 2012, THQ announced his departure, along with Senior Vice President of Core Studios Dave Davis. As the pair departed, Naughty Dog co-founder Jason Rubin was brought on as President, with Jason Kay (formerly of Activision, HBO and Columbia House) coming aboard as Chief Strategy Officer. Brian Farrell, CEO of THQ remained in place and largely silent as the empire crumbled around him.

It wasn’t long before Rubin would start taking fire. During E3 in June 2012, EA announced that they had obtained the license to produce UFC titles. This came as a shock, as THQ had held the rights for a number of years. Under cover of the gaming industry’s biggest event, THQ shuttered their entire San Diego studio, laying off staff. Make no mistake, E3 is video game Christmas. Stealthily firing people during the event is callous and cruel.

Additionally, Rubin was picking up the pieces from poor decisions made prior to his arrival. In mid-June, lawsuits started popping up alleging mishandling and improper disclosures related to the failed uDraw tablet. There hasn’t been any news on these cases in months, and the firms involved seem to have dropped mention of it from their websites. 

With the exception of the cancelation of Guillermo Del Toro’s inSane (a deal originally inked by Bilson, who has extensive Hollywood credits) things seemed to be looking up for THQ. Darksiders II released to enormous critical acclaim (and solid sales, as the title was the second most pre-ordered game in company history), and many believed that with a stream of steady releases, including WWE ‘13, Metro: Last Light, Company of Heroes 2 and South Park: The Stick of Truth, the publisher was on the right path.

Only a few days after WWE ‘13 hit store shelves, it became very clear that THQ was not going to recover. First, the publisher announced the delay of every game slated for early 2013. Metro: Last Light and Company of Heroes 2 were now planned for March, with South Park arriving later (pushing it beyond the current fiscal year). Stock value dropped by 50% the following day.

Only days later, to the surprise and chagrin of shareholders and creditors alike, the publisher announced default on a $50 million line of credit held by Wells Fargo. The announcement was timed for after the close of trading on Friday, November 10, 2012, leaving many feeling deceived. At the start of the next week, Rubin issued a statement, but damage had already been done. At close of market, stock price was at $1.11 and never recovered.

By November 20, the writing was on the wall. THQ’s Chief Financial Officer Paul Pucino had resigned, and the publisher issued a statement warning of imminent and severe shareholder devaluation. Negotiations had begun with a financial sponsor (now known to be Clearlake Capital). Investors mistook this as a good sign, with share prices climbing as high as $1.69. Prices were buoyed by a cagey move to sell many marquee titles in the publishers library as a Humble Bundle. The sale raised over $5 million for THQ, charity and the Humble Bundle organizers. It was never about the money, though.

The Humble Bundle initiative accomplished its true goal: evidencing consumer interest in the publisher’s intellectual properties.  The Humble Bundle closed on December 13, 2012. On December 19, THQ filed for Chapter 11 bankruptcy protection with Clearlake Capital serving as the “stalking horse bidder.” The stalking horse is intended to be an opening bid, with others able to weigh in over the following 30 days. The announcement issued by the publisher was extremely (and intentionally) confusing. It painted a rosy picture for the future while avoiding important details, like a requirement that creditors accept the deal before it could be fully executed.

As part of the filing, the company was required to disclose all of the games currently in production. Notably absent is Warhammer 40,000: Dark MIllennium. Kotaku’s Jason Schreier pressed THQ about the absence following the game’s shift from MMO to non-MMO and was told…

I’m saying we have[n’t] made any announcements about what the resulting game would be, if any.

See? I promised you’d hear that line again. Let’s be very clear about this. On March 29, 2012, THQ issued a press release that begins with this very direct, very clear statement:

THQ Inc. (NASDAQ:THQI) today announced that it has refocused Warhammer® 40,000®: Dark Millennium™ from a Massively Multiplayer Online game to an immersive single player and online multiplayer experience with robust digital content, and engaging community features. Further product details, platforms and release timing will be announced at a later date.

That, my friends, is called “an announcement.” For THQ to come out now and say they “haven’t made any announcements” is insulting and deceptive. Thankfully, the creditors and the US Trustee (a representative of the Department of Justice’s department that oversees bankruptcy) assigned to the case have objected. The Judge Mary Walrath, who is overseeing the case, did not approve the bidding procedures after testimony indicated that creditors (including WWE, who is owed $45 million) and parties interested in the IPs (including WB) require more time and more information.

Put simply, this is not over yet. THQ’s arrangement with Clearlake has been exposed as a sweetheart deal that is not in the best interest of those owed money by the publisher. We’ll know more on Monday, as Judge Walrath has given THQ and other parties the weekend to work things out. 

Right now, I suspect we are going to see a repeat of the Midway bankruptcy. It is very likely that WB, Ubisoft and others will swoop in and pick up the titles in which they are interested. What this means for the studios helming those projects is unknown, but my thoughts are with the affected employees. Volition, Vigil and Relic have all produced games of which I am very fond. My hope is that as many of these studios remain intact and fully staffed during and beyond this transition.

Stay tuned early next week as this story continues to unfold.

For gaming news and insight, please follow me on Twitter (@mmmfutter).