Game developer and publisher focusing on the PC and console market
THQ Nordic acquires, develops and publishes PC and console games for the global gaming market. The core business model consists of acquiring established gaming brands and gradually improving them. Much of THQ’s soul stems from entrepreneur, founder and CEO Lars Wingefors, who at the age of 16 founded Nordic Games that we today associate with THQ Nordic. The game changer came in 2013 when most of today’s brand portfolio was acquired from THQ Inc’s insolvency. At the beginning of 2018 the company acquired the well-known Koch Media, which focuses on game development and gives it a larger publishing business.
THQ Nordic in brief
The company has a global presence with its corporate headquarters in Karlstad, Sweden, and operating headquarters in Vienna, Austria. As of January 1, 2018, the company had seven internal game development studios, four in Sweden, two in Germany and one in the United States, and contracts with 18 external gaming studios in multiple countries. At the same date the company engaged more than 460 people, with around 50 co-workers in the publishing business, around 180 in internal game development and over 230 at outsourced external game developers.
THQ Nordic’s game portfolio consists of both own brands and publishing titles. The company’s focus is to develop and publish its own brands. On 1 January 2018, THQ Nordic had 91 brands in its portfolio. The company also publishes game titles for various partners and has more than 70 publishing titles in its portfolio.
Its marketing strategy is based on close relationships with leading distribution channels that give the company’s brands a favourable position and placement in these channels. THQ Nordic has access to physical distribution throughout the world through chains like Walmart, Gamestop and Amazon. In addition, the company has agreements with around 50 digital distribution channels such as Steam, PlayStation® Store and Microsoft® Xbox Live.
Acquisition of Koch Media makes it a European titan
Koch Media is an entrepreneurial company that was founded in 1994 and started with computer games in 1996. In April-December 2017 the company had sales of SEK 2,548 million and an operating profit of SEK 296 million, adjusted for impairment of SEK 552 million. Its operations consist of the three business areas: Partner Publishing, Games and Film. The purchase price was EUR 91.5 million while the debt-adjusted purchase price amounts to EUR 121 million. THQ Nordic and Koch Media will be operated as two separate units.
Partner Publishing is the largest business area and accounted to 67 percent of sales in 2017, with a market leading position in Europe. On the customer list we find well-known names like Capcom, Paradox, Sega, Square Enix and THQ Nordic, to name but a few. It is talented when it comes to physical distribution, marketing and sales campaigns, and likes to replace the publisher’s local sales and marketing office. In total, the segment has 11 offices worldwide and over 50 partners. The direct synergies after the acquisition are contained in the cooperation agreements that already exist with THQ.
The Games segment has more direct similarities with the existing operations at THQ. The games are published under the names Deep Silver and Ravenscourt, and the segment has a global presence similar to THQ. One difference, however, is that the focus has been more on producing AAA titles, which gives higher potential but also higher risk due to a greater cost in the form of skilled game developers. The IP portfolio includes strong brands like Dead Island, Saints Row and Metro. The segment has experienced some tough years following earlier successes, and in 2017 this became particularly evident when sales flopped for Agents of Mayhem, a sequel to the Saints Row game series. This was probably the reason why THQ was able to acquire Koch Media at an attractive multiple. Currently there are four AAA titles under development, with Metro Exodus and Dead Island 2 announced. THQ, with its broad and stable IP portfolio, and Koch Media, with its more cutting-edge AAA game development, should fit very well together. Games accounted for 26 percent of sales in 2017.
Representing 8 percent of sales in 2017, the third business area, Film, operates as an independent distributor and co-producer of films. Sales are made through both physical and digital channels, with the majority of revenue generated digitally. Two niches where it has been successful are cult classics in Germany and horror films in Italy. Historically, approximately 10 international productions have been released per year.