Todd,
Obviously, as I haven't read the WCW license agreement, this is speculation. But I don't think you can determine much about the 2nd quarter (or 1st for that matter) WCW revenues from the year-end inventory level.
As you point out, any items "in production" seem to be allowed under the agreement. Assumedly this includes all finished goods and WIP. I also think that it probably includes items simply ordered to be pressed at a factory or Nintendo. The term "in production" could easily be defined as creative production, and not manufactured product. Therefore if THQ was essentially done with Nitro 64, and had simply placed the order to Nintendo to manufacture it, that may be sufficient to stay within the agreement, even though their inventory number would contain $0 of this product.
I believe this is probably the case as it seems to be in the WCW's best interest to allow THQ to keep selling games up to the deadline. As long as they don't anger ERTS and breach that agreement, why wouldn't they want to keep receiving license fees from THQ as long as possible? And I don't think ERTS would push the issue that much, for fear of angering a major new license.
Could be wrong, but I think THQ will find it pretty easy to sell as much WCW as possible up through June 1999. I still don't even know if there is a mandatory recall of the product at that date. Seems a bit strange to me that Wal-Mart would be required to go pull product off the shelf on that date.
In any event, I assume that there will still be a fair amount of WCW revenue in Q2, unless THQ loads up the distributors at the end of Q1.
Kory |
