THQ 2005 Annual Report Download - page 56

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33
Product Development (in thousands)
Year Ended
March 31,2005% of net sales
Year Ended
March 31,2004% of net sales % change
$72,959 9.6 % $ 3 6,850 5.8% 3.8%
Product development expense primarily consists of expenses incurred by internal development studios and
payments made to external development studios prior to products reaching technological feasibility. For
fiscal 2005, product development expenses increased by $36.1 million from fiscal 2004. This increase was
primarily due to the following factors: (1) a significant increase in internal development headcount to
approximately 900 from 400compared to fiscal 2004 due in part to the acquisitions of Relic and Blue
Tongue and the formation of Concrete Games, (2) spending on development for games for next-
generation platforms, and (3) increased spending on product development for ourwireless content as we
continue to increase our wireless product offerings. We expect product development expense to increase in
fiscal 2006 as we continue to increase development of software for next-generation platforms and wireless
products.
Selling and Marketing (in thousands)
Year Ended
March 31,2005% of net sales
Year Ended
March 31,2004% of net sales % change
$115,646 15.3% $ 9 2,475 14.4%0.9%
Selling and marketing expense consists of personnel-related costs, advertising and promotional expenses.
For fiscal 2005, sellingand marketing expenses increased as a percentage of net sales as compared to fiscal
2004. Selling and marketing expenses increased in absolute dollars by $23.2 million for fiscal 2005
compared to fiscal 2004. This increase was primarily due to promotional efforts to support the new releases
of original titles The Punisher and Full Spectrum Warrior , as well as Disney/Pixar’s The Incredibles, The
SpongeBob SquarePants Movie, and WWE SmackDown! Vs. Raw, and other releases. We expect selling and
marketing expense to increase in fiscal 2006 as compared to fiscal 2005 as we support the launches of an
increased number of key titles based upon new original properties.
Payment to venture partner (in thousands)
Year Ended
March 31, 2005% of net sales
Year Ended
March 31, 2004% of net sales % change
$9,774 1.3 % $9,675 1.5%(0.2)%
The payment made to venture partner is related to the joint license agreement that THQ and JAKKS
Pacific, Inc. have with the WWE under which our role is to develop,manufacture, distribute, market and
sell WWE video games. Payment to venture partner increased slightly in absolute dollars for fiscal 2005
compared to fiscal 2004. The increase is in direct relation to the increases in sales of games based upon the
WWE license in fiscal 2005 as compared to fiscal 2004.
General and Administrative (in thousands)
Year Ended
March 31,2005% of net sales
Year Ended
March 31,2004% of net sales % change
$54,831 7.2 % $47,006 7.3% (0.1)%
General and administrativeexpenses consist ofpersonnel and related expenses of executive and
administrative staff, fees for professional services such as legal and accounting, depreciation and