THQ 2005 Annual Report Download - page 80

57
THQ INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
Business. THQ Inc., a Delaware corporation, is a leading worldwide developer and publisher of
interactive entertainment software for the major hardware platforms in the video game market. We
currently develop and/or publish titles primarily for Sony PlayStation 2, Microsoft Xbox, Nintendo
GameCube, Nintendo Game Boy Advance, Nintendo Dual Screen, Sony PlayStation Portable, personal
computers and wireless devices. Sony, Microsoft and Nintendo recently announced that they would be
releasing new consoles: theSony PlayStation 3, Microsoft Xbox 360 and Nintendo Revolution. We are
developing games for the PlayStation 3 and Xbox 360, and we intend to develop games for the Revolution,
and plan to release games at or near the launch of each platform. Our titles span a wide range of
categories, including action, adventure, fighting, racing, role playing, simulation, sports and strategy. Our
customers include Wal-Mart, Toys “R” Us, Target, Best Buy, Game Stop, Electronics Boutique, Game
Stores Group Ltd. and other national and regional retailers, discount store chains and specialty retailers.
All references to “we,” “us,” “our,” “THQ,” or the “Company” in the following notes mean THQ Inc. and
its subsidiaries.
Fiscal Year. Effective January 1, 2003, we changed our fiscal year end from December 31 to March 31.
Accordingly, the transitional period ended March 31, 2003 (Transition 2003) represents three months of
operations.
Platform Licenses.
In addition to obtaining licenses to develop intellectual property, our business is dependent upon entering
into license agreements with the platform manufacturers which allow us the right to develop, publish and
distribute titles for use on such manufacturer’s platform. Our key platform licenses currently include:
•licenses with Nintendo to develop games for the GameCube, Game Boy Advance and Dual Screen;
•licenses with Sony to develop games for the PlayStation 2 and PlayStation Portable; and
•licenses with Microsoft to develop games for the Xbox.
Each license is for a fixed term, and as each license expires, we generally enter into a new agreement or an
amendment with the licensor to extend the term of the agreement. Certain agreements, such as the
licenses withSony for the PlayStation 2, automatically renew each year unless either party gives notice by
the applicable date that it intends to terminate the agreement. Additionally, each agreement designates a
territory in which we can publish and distribute titles. We currently are licensed to publish and distribute
titles on all platforms which are currently sold in the United States and Canada. We are licensed to publish
and distribute titles for GameCube, PlayStation 2, Xbox and Game Boy Advance in various additional
territories, including Europe, Australia and New Zealand, parts of Asia and Central and South America.
We expect to enter into additional platform licensesor extend current licenses as new platforms are
launched or our current agreements expire.
The platform licenses are not exclusive and require that each title be approved by the manufacturer prior
to development of the software, and once developed, manufactured solely by such manufacturer or a
designated vendor of the manufacturer. The licenses establish the fees that we must pay to the
manufacturer for each cartridge or disc made. Nintendo charges us a fixed amount for each Game Boy
Advance cartridge manufactured. This amountvaries based, in part, on the memory capacity of the
cartridge. Our Nintendo, Sony and Microsoft console agreements include a charge for every disc
manufactured. The amounts charged by the manufacturers for both console discs and handheld cartridges