THQ 2005 Annual Report Download - page 27

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4
leverage our mass-market franchises, core gamer titles, wireless sports licenses and other exclusive wireless
licenses, such as Star Wars, to become a leading provider of games and other content for wireless devices.
Industry Overview
As a publisher of interactive entertainment software, we consider ourselves to be part of the entertainment
industry. At the most fundamental level, our products compete with other forms of entertainment, such as
motion pictures, television and music, for the leisure time and discretionary spending of consumers. We
believe that video games have increasingly become a mainstream entertainment choice for both children
and a maturing, technologically sophisticated audience. According to the International Development
Group, Inc. (“IDG”), an independent consulting and advisory services company which analyzes the
consumer electronics and interactive entertainment industries, sales of PC, console and handheld games
(excluding wireless games) reached $7.7 billion in North America, and $6.4 billion in Europe in 2004. As
we approach the next generation of console systems, we look toward an expanding market for interactive
entertainment software. We believe that improved graphics, deeper onlinefunctionality and expanded
artificial intelligence capabilities of the new platforms will help grow our industry significantly. In addition,
the number of worldwide handsets that are enabled for wireless games is projected to grow from
200 million in2004 to almost 700 million in2008 according to the Arc Group, an independent advisory
services company which analyzes the wireless telecommunications industry. Also, the U.S. wireless gaming
market is projected to grow from $345 million in 2004 to almost $1.5billion in 2008 according to IDC, an
independent advisory services company which analyzes the telecommunications industry.
Historically, there have been multiple gaming platforms and vigorous competition between console
manufacturers. The first modern platform was introduced by Nintendo in 1985. Advances in technology
over the past 20 years have resulted in continuous increases in the processing power of the chips that
power both the consoles and PC. For the past several years, Sonyhas been the clear leader in the console
market (with its PlayStation and PlayStation 2 consoles), Microsoft and Nintendo are large and viable
competitors, and PCs also continue to be a viable interactive game platform. Also, over the past two years,
wireless devices, such as mobile phones, have become a viable gamingplatform. Nintendo has been the
dominant manufacturer of handheld platforms, most recently with its Game Boy Advance. Infiscal 2005,
Nintendo released a new handheld platform, the Nintendo DS, and Sony entered the handheld platform
market with its PSP system.
We currently develop and publish products for all major platforms, and this diversification continues to be
a cornerstone of our strategy. In fiscal 2005, our product releases were for the SonyPlayStation 2,
Microsoft Xbox, Nintendo GameCube, PC, Game Boy Advance, Nintendo Dual Screen and wireless
devices. In fiscal 2006, we plan to release products on all of these platforms as well as the PSP system and
the Xbox 360, the next-generation Xbox videogame system, which Microsoft is expected to launch in the
2005 holiday season. Sony is expected to launch its next-generation platform, the PlayStation 3,in 2006 and
Nintendo has recently announced that itwill release its next-generation console, Revolution, in 2006. We
expect to release games on each new console platform at or near the launch of the platforms.
Products
We develop, market and sell video games and other interactive software and content for home console
platforms, handheld platforms and personal computers. In fiscal 2005, we published six titles that shipped
more than one million units. The following list identifies games that generated a significant portion of our
sales during the fiscal years ended March 31, 2005 and 2004 and the twelve monthsended March 31, 2003:
•In fiscal 2005, Disney/Pixar’s The Incredibles, The SpongeBob SquarePants Movie, and WWE™
SmackDown! Vs. Raw™;