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THQ INC. 20 06 ANNUAL REPORT 3
We expect to round out our mass-market line-up with a sequel to our MGA Bratz brand, which shipped more than one million units in fiscal
2006, and new games based on the movies Monster House™ and Barnyard. We also plan to bring The Sopranos® universe to interactive gaming
for the first time and to sequel our successful Destroy All Humans! franchise on current-generation consoles.
Games for the Avid Player
Our Xbox 360 line-up includes our innovative and critically acclaimed internally developed open-world action title Saints Row. We believe Saints Row
has a competitive advantage, as one of the first games to appear on the Xbox 360 in the open-world genre. We also plan to release racing titles
Moto GP 2006 and GTR on Xbox 360 as well as Juiced™: Eliminator on the PSP system.
THQ’s fiscal 2007 line-up includes four Windows PC titles targeted to the avid gamer – Company of Heroes, Supreme Commander, Titan Quest™
and S.T.A.L.K.E.R.: Shadow of Chernobyl. These critically acclaimed games target the most active segments of the Windows PC market:
Real-Time-Strategy, Role-Playing-Games and First-Person-Shooter.
Positioned for Long-Term Growth
THQ is poised to outperform the market in fiscal 2007. Our main focus, however, is to position the company to capitalize on industry growth,
and to make further market share gains over the next cycle. Our goal is to continue to grow our top line at or above market rates and to drive
our operating margins higher.
We plan to continue executing on our strategies to accomplish this goal by:
1) Continuing to grow our mass-market franchises
2) Growing share against the core gamer
3) Continuing global market penetration
4) Extending handheld leadership, including the wireless platform
5) Increasing owned intellectual properties
6) Developing more product internally
7) Pursuing new revenue opportunities such as downloadable content and in-game advertising
THQ has already scheduled a substantial line-up of games to take advantage of the anticipated accelerating market growth in fiscal 2008. We
have a solid pipeline of next-generation and handheld titles from both our internal studios and from leading external studios.
In fiscal 2008, we plan to continue growing our mass-market franchises with the release of new games based on the next Disney/Pixar film plus
a sequel to Cars, and our World Wrestling Entertainment and Nickelodeon franchises.
With respect to original properties targeted to the core gamer, we’ve announced action title Frontlines: Fuel of War from our Kaos studio on
PS3 and Xbox 360. In addition, we plan to release original titles from our Concrete Games, Juice Games, Rainbow and Volition, Inc. studios,
all exclusively on next-generation platforms.
We expect owned intellectual properties to approach 40% of net sales in fiscal 2008. We are also targeting more than 50% of fiscal 2008 net
sales to come from products developed by our internal studios. We expect approximately 40% of fiscal 2008 net sales to come from interna-
tional markets.
We plan to extend our handheld leadership by releasing a growing number of games for the Nintendo DS platform and PSP system. We also
remain confident in the growth opportunity in the wireless market, and our ability to leverage THQ’s content onto this platform. We expect
THQ Wireless growth to accelerate starting in fiscal 2008.
We are just beginning to exploit the emerging revenue opportunities from downloadable content and in-game advertising. We expect to start
realizing meaningful contributions from these areas over the next three to five years.
In summary, THQ executed very well in a tough environment last fiscal year. We have a solid line-up of both current and next-generation titles
to give us confidence in the short term, and we have positioned THQ very well for growth in the long term.
I’d like to thank our 1,600 employees located on four continents for their tremendous efforts that drove THQ’s growth in fiscal 2006 and posi-
tioned our company for future success. I’d also like to thank our stockholders and directors for their continued support. We look forward to
executing on our strategies for growth and profitability in the years to come.
Brian J. Farrell
President and Chief Executive Officer