THQ 2005 Annual Report Download - page 5

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thq inc. 2005 annual report 3
Building on this success with avid gamers, in fiscal 2006 we plan to launch a select number of new original titles with
franchise potential: Destroy All Humans!
™
, Juiced
™
, and S.T.A.L.K.E.R.: Shadow of Chernobyl. We also plan to launch two
new internally developed original properties for the new Xbox 360
™
: Saint’s Row
™
, from our Volition, Inc. studio and The
Outfit
™
from our Relic Entertainment studio. Each of these titles has received early critical praise from the video game press
and we are excited about the opportunity to create new franchises at or near the launch of the new hardware systems.
MARKET LEADERSHIP THROUGH THE TRANSITION
Our industry will be in transition over the next twelve to eighteen months, with new consoles expected from Microsoft in
2005, and from Sony and Nintendo in 2006. THQ is well positioned to continue our leadership through this transition
period. We plan to execute on a four-pronged strategy aimed at serving gamers on every platform. First, we plan to attack
the huge installed base of current generation hardware with some of the best mass-market brands in the industry:
Disney/Pixar, Nickelodeon and WWE, as well as games based on Scooby-Doo!
™
, Bratz
™
and the next installment in our
Tak
™
series. Second, we plan to launch products for the PC to help navigate the transition. Products targeted at the high-
end PC gamer include S.T.A.L.K.E.R.: Shadow of Chernobyl, Company of Heroes
™
and Titan Quest
™
and products for the
mass-market PC gamer include games based on The Incredibles and SpongeBob SquarePants
™
. Third, we plan to leverage
our handheld leadership. In fiscal 2006, we plan to launch more than ten titles in total on the Nintendo DS
™
and PSP
™
system, capitalizing on the significant installed base of these devices by holiday 2005. We also expect to benefit from the
new Nintendo Game Boy
®
Micro handheld device, planned for this holiday, which will augment the huge installed base of
Game Boy
®
Advance systems. Fourth, we expect our wireless business to continue to grow at a rapid pace, with THQ’s
revenue from wireless entertainment expected to more than double in fiscal 2006.
We believe we have the right strategy to navigate the transition and to position THQ for significant growth in fiscal 2007. We
expect to capitalize on the substantial installed base of current generation consoles and handheld devices with our industry-
leading mass-market portfolio. We also plan to establish new franchises early on the next generation of consoles, with six
products currently in development for the new platforms, including two planned this fiscal year: Saint’s Row and The Outfit.
STRATEGIES FOR LONG-TERM GROWTH
We are very proud of our 10 consecutive years of revenue growth and we are dedicated to increasing our operating
margin and profitability in the future. To achieve this, we intend to continue to execute against the following strategies:
1. Increase our sales and profits from current franchises, by continuing to build high-quality products, market them
aggressively and develop key brands in-house;
2. Build on our recent successes with new original intellectual properties, by continuing to pursue a limited number of
groundbreaking, new original titles with long-term franchise potential;
3. Build on our already strong international sales organization in both Europe and Asia Pacific; and
4. Aggressively attack the rapidly growing market for wireless entertainment.
We believe continued execution against these strategies will drive revenue, operating margin and net income growth for
THQ. In each of the last console cycles, THQ has more than doubled its revenue. We also grew market share seven-fold
over the past two cycles. With the investments we’ve made and the strategies we have in place, we expect to continue
to post significant growth through the next cycle.
In closing, I’d like to thank THQ’s more than 1,300 employees across our global organization for their dedicated efforts,
which drove our record results in fiscal 2005. We have built a solid base of powerful long-term franchises, with one of
the strongest mass-market portfolios in the industry. We believe our growing share of the core gamer market, our
expanding internal studio operations and our growing PC and wireless businesses all provide new opportunities for
THQ’s long-term growth.
I’d also like to thank our stockholders and directors for their ongoing support over the past fiscal year. We are extremely
proud of the records THQ set and the goals we achieved in fiscal 2005. Yet we are even more excited about the
foundation we have laid for our company’s continued growth for the long term.
Brian J. Farrell
President and Chief Executive Officer