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

To: JGreg who wrote (8546)	11/13/1998 3:57:00 PM
From: JGreg	Respond to of 14266

Sorry, 10Q

To: JGreg who wrote (8546)	11/13/1998 4:08:00 PM
From: shotz	Read Replies (1) \| Respond to of 14266

JGreg, Thanks for answering this (& helping me with my homework). ALL: It is still not clear that precise meaning of "50% ownership in ?this? joint venture" translates to "THQ only gets 50% of WWF game revenue". How, then, will this work? -- Other than 50% of upfront licensing cost, what other $$$ (or other asset) does JAKKS bring to the table (to get 50% of THQ game earnings -- for 10 years)?? -- Is it a tit-for-tat arrangement, where THQ also gets a piece of the action figure revenue? In my simple mind, it still makes more sense that the "50% stake in the licensing joint venture", means that (a) they both bring a certain amount to table for license, and (b) both get to do their own business with the license. Then "co-managing the marketing of the games" could mean they will coordinate action figure and game releases ... I wonder if investor relations might clear this up? Good thing i'm a scientist, rather than a strategic business consultant ;-) regards, steve

To: JGreg who wrote (8546)	11/13/1998 4:13:00 PM
From: Kory	Read Replies (1) \| Respond to of 14266

As identified in the 10-Q, THQ has announced that it will account for the WWF joint venture under the equity method of accounting. This means that they will no longer report any revenue on their P&L for sales. What will happen is a single line entry on the P&L which states something to the effect of "50% share of Net Income/(Loss) of Joint Venture". This line will be used in the Net Income and EPS calculations. For example, assume THQ and JAKKS combine to sell $100 million in video game revenue. THQ's cost is $50 million and JAKKS is $30 million. The joint venture would thus generate a profit of $20 million, of which THQ will record their $10 million half on the ""50% share of Net Income of Joint Venture" line. I'm sure that some investors will be concerned with the loss of the revenue, even if the joint venture is profitable. Shorters, I'm sure, will think of it as another reason to sell as revenues are almost sure to fall if WWF remains a large portion of what THQ produces. As for the comparison to profitability to the WCW license, I would assume that the WWF will end up being less profitable than the WCW license. Why? The obvious 50%-50% sharing of profits is one reason, but the license cost was higher since wrestling is much more popular and proven now, than when THQ signed the WCW license. But then again, BF and company have a way of surprising me with creative ways to leverage licenses. Who knows - wrestling may get twice as popular and therefore a 1/2 share of profits is just as good. Or possible the Internet angles, Dreamcast, etc. may pan out. Either way, THQ will need new titles and new properties to sell. They have found a way to do so profitably for the past three years and I give them the benefit of the doubt now. Kory