THQ 2004 Annual Report Download - page 62

1. DESCRIPTION OF BUSINESS
Business. THQ Inc., a Delaware corporation, is a leading global developer and publisher of interactive entertainment software for the major hardware plat-
forms in the video game market. We currently develop and publish titles primarily for Sony PlayStation 2, Microsoft Xbox, Nintendo GameCube, Nintendo
Game Boy Advance, personal computers (“PCs”) and wireless devices. Our titles span most major interactive entertainment software genres, including action,
adventure, children’s, driving, fighting, puzzle, role playing, simulation, sports and strategy. Our customers include Wal-Mart,Toys “R” Us,Target, Best Buy, Game
Stop, Electronics Boutique, KB Toys, Game Stores Group Ltd and other national and regional retailers, discount store chains and specialty retailers.
Unless the context otherwise requires, references in this document to “THQ” or the “Company” include THQ Inc. and all of its wholly owned 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. The comparison for the three months ended March 31, 2003 and 2002 (unaudited) is
included in Note 16.
Platform License Agreements.
Sony. We have three license agreements with Sony pursuant to which we have the non-exclusive right to utilize the Sony name, related trademarks, and
its proprietary information and technology in order to develop and market software for use with the 128-bit Sony PlayStation 2. The license agreement
for the United States and Canada expires in March 2005 (subject to automatic annual renewal unless either party terminates the agreement by January 31
of the applicable year); the license agreement for Europe, Australia, New Zealand, certain countries in Africa and the Middle East expires in March 2005
(subject to automatic renewal unless either party terminates the agreement by February 28 of the applicable year); and the license agreement for Korea
expires in March 2006. We also have two license agreements with Sony pursuant to which we have the non-exclusive right to utilize the Sony name, relat-
ed trademarks, and its proprietary information and technology in order to develop and market software for use with the 32-bit Sony PlayStation. The
license agreement for the United States, Canada, Mexico and Latin America expires in August 2006; and the license agreement for Europe, Australia and
New Zealand expires in December 2005.
Nintendo. We have a license agreement with Nintendo pursuant to which we have the non-exclusive right to utilize the Nintendo name, related trade-
marks, and its proprietary information and technology in order to develop and market software for use with the Game Boy Advance handheld
game console in all countries in the Western Hemisphere which expires in July 2004 and a license agreement for Europe, Australia and New Zealand which
expires in April 2006. We have a license agreement with Nintendo pursuant to which we have the non-exclusive right to utilize the Nintendo name, related
trademarks, and its proprietary information and technology in order to develop and market software for use with the 128-bit Nintendo GameCube in all
countries in the Western Hemisphere which expires in April 2005 and a license agreement for Europe, Australia and New Zealand which expires in April
2006. We also have a license agreement with Nintendo pursuant to which we have the non-exclusive right to utilize the Nintendo name, related trade-
marks, and its proprietary information and technology in order to develop and market software for use with the Game Boy Color handheld game console
in all countries in the Western Hemisphere which expires in March 2006. We also have a license agreement with Nintendo pursuant to which we have
the non-exclusive right to utilize the Nintendo name, related trademarks, and its proprietary information and technology in order to develop and market
software for use with the Game Boy Color handheld game console in Europe,Australia and New Zealand which expires in October 2005.
Microsoft. We have a license agreement with Microsoft pursuant to which we have the non-exclusive right to utilize the Microsoft name, related trade-
marks, and its proprietary information and technology in order to develop and market software for use with the 128-bit Microsoft Xbox, which expires in
November 2004. The territory is determined on a title-by-title basis.
Our business is dependent on these license agreements with Sony, Nintendo and Microsoft. Substantially all of our products are manufactured by Sony,
Nintendo and Microsoft authorized vendors who charge us an amount for each disc-based product or cartridge manufactured. This charge includes a
manufacturing, printing and packaging fee as well as a royalty for the use of their respective names, proprietary information and technology.
In addition, we must indemnify Sony, Nintendo and Microsoft, as appropriate, with respect to all loss, liability and expense resulting from any claim against
Sony, Nintendo and Microsoft involving the development, marketing, sale or use of our titles, including any claims for copyright or trademark infringement
brought against Sony, Nintendo and Microsoft. As such, we bear the risk that the properties and information and technology licensed from Sony, Nintendo
and Microsoft and incorporated in the software may infringe the rights of third parties. Generally, we are entitled to indemnification from our software
developers and property licensors to cover our indemnification obligations to Sony, Nintendo and Microsoft but no assurance can be given that, if any claim
is brought against us, the developers and/or licensors will have sufficient resources to indemnify us.
THQ INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS