Video Game Firm THQ to Exit Kids' Licensed Entertainment Business

our editor recommends

E3: THQ Executive on Hollywood's Growing Acceptance of Video Games, Working With Guillermo del Toro on 'inSANE' (Q&A)

THQ Prevails Over Rival Ubisoft in Quebec Appeals Court Decision

NEW YORK - Video game maker THQ Inc. unveiled a new business strategy on Wednesday, saying that it will exit the kids’ licensed entertainment business.

As part of the new focus, THQ is already in the process of ending its relationships with kids’ licensed entertainment companies, such as Viacom's Nickelodeon and DreamWorks Animation, but said it would continue to sell certain previously released titles.

In the future, THQ wants to focus on its "core video game franchises and digital initiatives." It said it particularly wants to "accelerate digital revenues by extending and supporting key console launches and to create dedicated digital properties for emerging platforms."

THQ president and CEO Brian Farrell cited the success of action game Saints Row: The Third as an example for how the firm's revised strategy can work. The game has shipped 3.8 million units globally and is expected to ship between five and six million units over its lifetime, according to the company.

THQ also cited other key franchises for a more mature audience, including the upcoming UFC Undisputed 3, Darksiders II, Company of Heroes, inSANE, Saints Row and Warhammer 40,000.

“THQ will be a more streamlined organization focused only on our strongest franchises,” he said about the new strategy.

"The company loses money, has lost money four of the last five years," said Wedbush Securities analyst Michael Pachter. "Kids is one of the businesses that loses money...It’s clear that THQ hasn’t done a good job lately with kids’ licensed content, as they have been more focused on mature content - WWE and UFC - and their own IP."

THQ's kids fare has included Puss in Boots, SpongeBob and Kung Fu Panda games, among others.

Pachter estimated that THQ may pay around $15 million to DreamWorks Animation a year for kids entertainment licenses and "probably under $10 million" to Nickelodeon for SpongeBob.

"It is more of a commentary on why entertainment companies will have difficulty finding licensing partners for games," said Pachter. "Disney and Warner have largely taken this in-house."