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Technology Stocks : THQ,Inc. (THQI) -- Ignore unavailable to you. Want to Upgrade?

To: gofrank150 who wrote (7456)	8/6/1998 12:08:00 AM
From: Todd D. Wiener	Read Replies (1) \| Respond to of 14266

Chris- From what I've gathered from my conversations with THQ, I don't believe Nintendo cuts the cart costs for Players' Choice titles. Sony, on the other hand, does cut its CD royalty costs for the Greatest Hits promotion. So although Sony's way is best for THQ, Nintendo is offering to advertise the title, and beggars can't be choosers. An interesting, yet perhaps innaccurate, way to look at the Players' Choice situation is as follows: THQ may be losing $2 or so in gross profit for each unit sold, due to the lower wholesale price. This is about 6% of sales (2/33=.06) THQ's costs for sales & marketing have been running much higher than 6% of sales. It's true that a well known title doesn't need as much marketing as a new one, but THQ is not paying anything to market this product. It's a proven winner, so retailers will buy it. And the lower price point (more than 30% lower than the initial price) will prompt more buyers now than were willing to buy at the original price. By this I mean that the low price will bring gamers "out of the woodwork." Many have felt that the game wasn't worth spending $60-65. But $40 is much more reasonable, perhaps. My point is that, although THQ is losing on the gross profit line, THQ is compensating for this shortfall by saving money on advertising. So for the WCW vs. NWO title, gross margin will decline but operating margin should be similar to the originally released units. All in all, the effect should be minimal, as I've said. The only wildcard is how this release affects the release of Revenge 64 and Nitro 64 (both in Q4). I wonder if (and how) these 2 new titles will compete. I really think THQ should rename Nitro 64 as Thunder 64, because the game will be a sequel to Nitro, and it will be similar to Thunder (and Nitro PSX wasn't highly regarded, so gamers may be tempted to ignore Nitro 64 and instead buy Revenge 64). Hopefully, the October release of Revenge should allow enough time before the December release of Nitro. Todd And to answer a previous question about my selling, I sold my own shares (no one else I know who owns THQI shares sold today). And I sold around the open at $28, so I am not responsible for the dip today. :o)