THQ 2010 Annual Report Download - page 14

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Our marketing plans vary by target demographic but generally consist of a three-pronged media plan
encompassing TV, print and online advertising. Certain of our campaigns also include billboard advertising,
event sponsorship, in-theater advertising and radio placements. We also perform extensive consumer testing
of game packaging and TV creative prior to launch in order to determine the efficacy of the creative in
communicating the game’s positioning, tone, and attributes as well as measuring to what extent the creative
drives purchase interest. Retail or Channel Marketing efforts for our games include pre-sell give-aways,
displays and/or demonstrations at retailer- specific trade shows, and cooperative retail advertising campaigns.
We are taking a more aggressive approach in what we term the “connected marketing” space. This includes
how we build our brand in the online space via editorial opportunities; screen shot, trailer and other game
content releases online; advertising; official game websites; and community outreach and management.
Social media sites have grown in both their popularity and influence within our diverse target demographic.
This new consumer immersion in social media has allowed us to create new ways to drive brand awareness
and purchase intent via a medium that is both relevant and authentic to our target demographics’ acquisition
of information. Game trial has been a key driver of consumer demand for several of our Core Games, through
consumer demos released at retail or online, or game demos available at kiosks stationed at sports or other
entertainment events.
Publicity is another key driver of awareness for our game portfolio, as well as for THQ, as a publicly-held
company. We maintain strong relationships with a broad group of business, consumer, entertainment and
games enthusiast reporters across the globe, working closely to secure positive editorial coverage across
broadcast, print and online editorial outlets.
Dis tributing and Selling Our Product s
In North America, our products are primarily sold directly to mass merchandisers, consumer electronics stores,
discount warehouses and national retail chain stores. Our products are also sold to smaller, regional retailers,
as well as distributors who, in turn, sell our products to retailers that we do not service directly, such as
grocery and drug stores. Our North American sales activities are conducted by THQ sales representatives
throughout the United States, as well as by our representatives in Canada and Mexico.
Our international publishing activities are conducted via our offices throughout Europe and Asia Pacific. The
international offices market and distribute to direct-to-retail customers and through distributors in both their
home territories and, collectively, to approximately 60 additional territories.
We utilize electronic data interchange with most of our major customers in order to (i) efficiently receive,
process, and ship customer product orders, and (ii) accurately track and forecast sell-through of products to
consumers in order to determine whether to order additional products from the manufacturers. We believe
that the direct relationship model we use allows us to better manage inventory, merchandise and
communications. We ship all of our products to our North American customers from warehouses located in
Michigan and Minnesota, and we ship most of our products to our international customers from warehouses
located throughout Europe and Asia Pacific.
As discussed in Part II—Item 7, “Management’s Discussion and Analysis of Financial Condition and Results
of Operations,” we typically only allow returns for our PC products; however, we may decide to provide price
protection or allow returns for our video games after we analyze: (i) inventory remaining in the retail channel,
(ii) the rate of inventory sell-through in the retail channel, and (iii) our remaining inventory on hand. We
maintain a policy of giving credits for price protection and returns, but we do not give cash refunds.
We also globally market and distribute games and content digitally via the Internet and through high-end
wireless devices, such as the iPhone, iTouch, and iPad. The industry is delivering a growing amount of
games, downloadable content and product add-ons by direct digital download through the Internet and
gaming consoles. We believe that much of the growth in the industry will come via online distribution such as
massively multi-player games (both subscription and free-to-play), casual micro-transaction based games,
paid downloadable content and digital downloads of games. Accordingly, we plan to continue integrating a
digital strategy into all of our key franchises.