THQ 2012 Annual Report Download - page 4

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shipped more than 2.2 million units as of the end
of the fiscal year. This newest installment drove
lifetime units sold by us of the WWE franchise
since 2000 to more than 52 million.
The coming few years in the video game business
will have numerous inflection points for change
for which we believe THQ is well-positioned. We
expect the next few years will create significant
opportunities to reinvent THQ as we exploit new
business models, launch new IP, and re-launch
well-loved brands like Company of Heroes.
Business Realignment to
Position THQ for the Future
Responding to the challenges we faced, we
made the following significant changes to our
business in order to position THQ for success
for the future:
•Based on our assessment of the market
for the Kids/Family/Casual business, we
wound down and exited this segment
of the market. As part of that effort, we
completed negotiations with our four major
kids’ and movie-based entertainment
licensors, which helped reduce our future
license obligations by about $32 million.
We also ended the development of uDraw
hardware and software, and expect uDraw
to have no further impact to profitability.
• Wedeterminedthatthescopeandcostof
our planned massively multiplayer online
game (MMO) had an unacceptable risk
profile based on the launch of similar new
MMOs in the marketplace. As a result, we
made the decision to refocus the creative
and technical resources of Vigil Games
into lower risk, higher reward categories
instead of seeking to launch an MMO in a
flat-to-declining market for those games.
• We discontinued a number of titles in
our product pipeline that did not fit our
strategic objectives, and we sold games
and product lines that did not meet
internal profitability thresholds or were no
longer central to our go-forward strategy
of bringing high quality, connected core
games to market. As part of this trimming
of our portfolio, in June we transferred our
license to develop future games based on
the Ultimate Fighting Championship.
• Wereducedcostsandheadcountin
our corporate and global publishing
organizations, and reduced our portfolio
of studios from eleven to four. As a
result, we reduced our annualized product
development spend, selling and marketing
expense, and general and administrative
expenses by $180 million dollars. This step
has made us a leaner and more focused
company, with a far lower breakeven
level, and significantly improved operating
leverage.
In short, we have made considerable progress
in focusing our resources on only those
opportunities that are best positioned for critical
and commercial success.
Strategy to Focus on Core
and Digital Offerings
With our business realignment now in large part
complete, THQ is dramatically different from
what it was just a few months ago. Our strategy
is focused on creating and marketing high-
demand core games with a significant digital
component. These connected experiences,
in particular, are key to increasing customer
engagement, retention, and monetization.
Saints Row: The Third was a great example