THQ falls in the less fortunate camp.
The publisher was at the top of its game two years ago.
The company's $US68 million profit and $US1 billion in revenue put it within striking distance of crosstown rival Activision.
THQ released an ambitious plan to expand its game line-up and began acquiring development studios across the country.
But now it's in retreat as it loses ground to publishers such as Nintendo and Activision, which strengthened through last year's merger with Vivendi's Blizzard Entertainment.
THQ, whose titles include World Wrestling Entertainment and SpongeBob SquarePants, is laying off 600 workers, a quarter of its development staff, cutting flailing games and closing studios.
"In the past, the rising tide of game sales lifted all boats," Colin Sebastian, an analyst with Lazard Capital Markets, said.
"Today, the market is still growing, but there are fewer winners."
The cost-saving moves come in response to a dramatic sales decline and big losses that have eaten into THQ's once-rich cash reserves.
Many of its big-budget games have sold poorly, despite garnering favourable reviews.
Its hold on kids' games, which are based on Nickelodeon TV shows and Pixar Animation movies, has slipped as children turn to the internet to play free online games.
THQ's situation appeared grave enough for Mike Hickey, a Janco Partners analyst, to say in an interview with the Los Angeles Business Journal that the company had a 50-50 chance of filing for bankruptcy protection this year.
Most analysts who cover THQ don't share that view.
Chief executive Brian Farrell dismissed the prediction as "idle gossip."
Although its reserves have dropped to $144 million from $458 million two years ago, he said the company was on track to generate a positive cash flow this year.
"This is a good business," Farrell said.
"It's just not as big as it used to be."
Farrell said THQ had embarked on a strategic plan to trim $220 million in annual costs by 2010 and invest in "fewer, better bets".
"Our strategy is to focus on bigger titles," he said.
"The formula is to make great games and market them effectively.
"High review scores lead to high sales and high profits.
"We think we have a plan in place to do that and return the company back to profitability."
Analysts say THQ faces formidable headwinds.
Although sales of game software grew 25% in 2008, the recession has led consumers to buy fewer titles.
In response, retailers are reluctant to stock games that don't immediately sell well or have solid track records.
Companies with Top-10 titles did well; those that didn't suffered.
Adding to the difficulty is the higher cost of making a video game.
Development budgets, which ranged between $US5 million and $US10 million per game five years ago, now routinely hit $US25 million, John Taylor, a managing director with Arcadia Investment, said.
"Budgets have skyrocketed, but the audience hasn't grown accordingly," Taylor said.
Farrell says the industry's economics are a lot tougher than when he joined the company as its chief financial officer in 1991 and became CEO in 1995.
Development costs then were measured in the hundreds of thousands of dollars.
"Budgets are bigger now, so we just can't make as many bets as we used to," he said.
"It's a matter of where you place those bets."
THQ's success depends largely on its ability to generate hits.
Topping its priority list is an upcoming game based on the Ultimate Fighting Championship franchise, a licence it secured two years ago.
With the licence up for renewal in 2011, it is under pressure to prove it can make a knockout game and hang on to the licence.
Analysts say THQ could become an acquisition target if its stock price continues to dwindle.
Its shares are down 86% in the past year.
Its market value is only $173 million.
"There are a number of companies, media companies as well as game publishing companies, that are in a position to make an offer for THQ," Sebastian said.
Farrell declined to comment on whether THQ was in discussions with potential buyers.
"We think we can create the most value by executing on our plan," he said.
Bob Aniello, THQ's former senior vice-president of marketing, urged patience, saying the two- to three-year development cycle for games means that improvements take time to bear fruit.
"THQ may be late, but being late has been part of its DNA, and it has always survived," Aniello said.
"It's too early to count them out." - Alex Pham
