Making sense of THQ's bankruptcy filing
A lot of noise has been made of THQ’s supposed downfall recently. Yesterday the company revealed that they have filed Chapter 11 bankruptcy, and as can be expected within the confines of the video game industry’s supposed journalistic quarter, articles started coming out wondering where some of THQ’s assets and IPs would be heading in light of its complete and utter decimation.
Yesterday’s news and more specifically the reporting concerning said news revealed just how immature video games journalism is today. IGN, the largest purveyor of video game related news in the world, published an opinion piece that set to guess where certain IPs would end up under the pretext that the “strong possibility exists that the company’s assets (read: game franchises and development studios) will be auctioned off to the highest bidder.” While this is understandably an opinion piece, it goes to show that the author, and editors that allowed it to be published, have absolutely no idea what exactly Chapter 11 bankruptcy entails.
When most people hear the word “Bankruptcy”, they assume that it means the end for whatever company ends up filing for it. At times this is true – those that file Chapter 7 would liquidate their assets, selling off pieces to whoever will buy, shutting down facilities, laying off people and essentially going out of existence. This happens, but it isn’t the case with THQ.
Filing Chapter 11 essentially means that the company is throwing its hands up in the air and saying, “We have too much debt; so much in fact that we can’t afford to pay it off if we’re only bringing in the income we are currently generating.”
It’s a reset button that allows for a company fallen on bad times – a means of protection from creditors.
It should be noted that it isn’t a free pass; not just anyone can file chapter 11. You have to have investors (which THQ has found and could still find more) and you have to provide a sound financial restructuring plan. Part of this plan is to show which assets can be exploited to prove that you still have the means of turning a profit. Selling assets and IP doesn’t do that – keeping them does.
In 1996 Marvel Comics filed Chapter 11 and now they’re part of the biggest entertainment conglomerate in the world. In 2010 MGM Studios filed for bankruptcy and they have just released two of the biggest movies of the year in Skyfall and The Hobbit: An Unexpected Journey. These companies, and countless others, were not expected to give up their money making assets. Why would Marvel sell Spider-man or The Avengers? Why would MGM sell James Bond or the movie rights to The Hobbit? They wouldn’t. They didn’t. And now they are sitting pretty, haven been given the chance to restructure the company, exploit those assets and then finally turn a profit.
THQ is NOT selling South Park: The Stick of Truth, Metro: Last Light, or Company of Heroes 2. Nor are they likely to sell lucrative franchises like WWE and Saints Row. These franchises are essential to the publisher getting back on their feet, especially when those games are all being released in less than 6 months.
Could THQ sell off some of their assets? They certainly could, but anything sold would likely be high risk IPs or those that don’t currently turn enough profit to continue making. It’s not likely that anything you, as a gamer, actually care about will be sold to Activision, EA or Ubisoft.
Filing Chapter 11 does not mean, by any stretch, that THQ is safe. If the restructuring fails and the company is still unable to operate with fiscal responsibility, they may have to file Chapter 7 and have the fire sale a lot of people think is going to happen now. But until that time, if that time comes at all, please remain calm, don’t panic and remember to respect Cartman's authoritah.
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