Here at WKR we have been following THQ's financial trouble for some time.

THQ is currently responsible for making the first UFC game for the next-gen consoles. While UFC Undisputed 2009 will come out later this May it doesn't mean that the company producing it will survive.

"THQ needs a hit title to break back into profitability," said Colin Sebastian, a San Francisco-based analyst with Lazard Capital Markets LLC, who has a "hold" rating on the stock and doesn't own it. The UFC game is "definitely being looked at by investors as an important milestone."    

Things look hopeful for the publisher when you consider that UFC Undisputed 2009 is marketed towards a core demographic of gamers. Combine that with the strong niche following that the UFC holds, as well as the cross platform launch (both Xbox360 and PS3) and it appears that THQ could sell 2 million copies easily. 

But that doesn't change the fact that THQ is in some serious trouble. The company's stock has plummeted from a high of $20 a share to $3 a share today. THQ is simply hemorrhagin money. The publisher began selling off developer studios not long ago. 

As of our last report THQ had already lost $334 million. Recent earning posted include another $36.4 million lost not including the $44.7 million the studio spent in restructuring (they also laid off 600 employees). Basically THQ needs capital and quickly and they are betting on their UFC IP to generate it. 

According to the Bloomberg report THQ has already spent $20 million on designing the game and plans on matching that amount with marketing dollars. Even if the company hits the 2 million mark of units sold a full third of revenue would be eaten up just in development cost. That doesn't include the money THQ would owe to Zuffa. 

Ultimately the videogame industry is facing an upheaval. The current business model, which is molded after Hollywood, is too large an expensive in order to generate stable revenue's. Van Zelfden of Slate has an excellent piece detailing the issues facing the industry and what is needed to revitalize a unhealthy industry.