THQ 2006 Annual Report Download - page 44

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36
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.
Product development expense increased by $11.3 million infiscal 2006 as compared to the prior fiscal year.
This increase was primarily due to the expansion of our internal studios with the acquisitions of Juice
Games Limited and Vigil Games, LLC and with the formation of two new studios, Kaos Studios and
Incinerator Games. Product development expense also increased due to spending on development of
games for next-generation platforms.
Selling and Marketing (in thousands)
Year Ended
March 31,2006% of net sales
Year Ended
March 31,2005% of net sales % change
$123,552 15.3% $ 1 10,514 14.6% 11.8%
Selling and marketing expense consists of personnel-related costs, advertising and promotional expenses.
For fiscal 2006, selling and marketing expenses increased as a percentage of net sales as compared to the
prior fiscal year. Selling and marketing expenses increased in absolute dollars by $13.0 million for fiscal
2006 compared to the prior fiscal year. This increase was primarily due to promotional efforts to support
the launch of two new owned and original titles: Juiced and Destroy All Humans!.
Payment to Venture Partner (in thousands)
Year Ended
March 31,2006% of net sales
Year Ended
March 31,2005% of net sales % change
$12,572 1.6 % $9,7741.3% 28.6%
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 by $2.8 million dollars in fiscal 2006 as
compared to the prior fiscal year due to increases in net sales of games based upon the WWE license. In
fiscal 2006 we released WWE SmackDown vs. Raw 2006 on PlayStation 2 and PlayStation Portable and in
the prior fiscal year we released WWE SmackDown vs. Raw on PlayStation 2.
General and Administrative (in thousands)
Year Ended
March 31,2006% of net sales
Year Ended
March 31,2005% of net sales % change
$67,615 8.4% $54,831 7.2% 23.3%
General and administrative expenses consist of personnel and related expenses of executive and
administrative staff, fees for professional services such as legal and accounting, depreciation and
amortization, allowances for bad debts, foreign exchange transaction gains and losses, and facilities.
General and administrative expenses increased by $12.8 million for fiscal 2006 as compared to the prior
fiscal year. The increase in fiscal 2006 is primarily due to foreign exchange transactions in the prior fiscal
year, as well as growth in European operations, higher depreciation expense and higher amortization
expense related to prior-year acquisitions.