THQ Snags Multi-Year DreamWorks Licensing Deal

Despite its efforts to become the "new THQ," licensed video games have long been the bread and butter of the company. It doesn't look like that's about to stop either. With THQ's Pixar license agreement set to expire next year, the publisher strategically formed a multi-year deal today with DreamWorks. 

DreamWorks Animation SKG has granted THQ the exclusive worldwide rights to develop and publish video games based on upcoming animated feature films, Kung Fu Panda: The Kaboom of Doom and Puss In Boots, as well as the animated television show, The Penguins of Madagascar. The agreement enables THQ to make games based on these properties for all console and handheld systems, including Xbox Live Arcade, PlayStation Network and Nintendo Wii Virtual Console, and wireless devices.

“The three properties announced today, in addition to MegaMind, underscore our commitment to reinvigorating our portfolio of licensed games for kids and families with top global entertainment brands,” said Doug Clemmer, THQ Executive Vice President, Kids, Family and Casual Games.

“We are pleased to expand our relationship with THQ and continue to be impressed by their focus on the kids and family videogame business,” said Kerry Phelan, Head of Worldwide Consumer Products for DreamWorks Animation. “We look forward to extending the reach of our feature films and The Penguins of Madagascar TV series into a broad line of games and believe THQ will do a great job of maximizing our properties for family audiences.”

The goal is to publish the games in conjunction with the movies. Kung Fu Panda: The Kaboom of Doom (the sequel to Kung Fu Panda) is scheduled to be released on June 3, 2011; Puss In Boots (based on the cat from the Shrek universe) is scheduled to be released on November 4, 2011; and THQ intends to publish games based on MegaMind starting November of next year. Additionally, the animated television show The Penguins of Madagascar has been running on Nickelodeon since March 2009. Nickelodeon recently extended the show to add more episodes, so now THQ expects to publish the first video games based on the IP during its fiscal year beginning April 1, 2010.

Colin Sebastian of Lazard Capital Markets said in an investor note, "Family licenses a good fit for THQ – if development costs are under control. We believe that these new titles are a good fit with THQ’s strength in developing family and kids games based on popular entertainment franchises. While these titles tend to have a lower unit and margin profile vs. wholly owned franchises, historically, THQ has successfully executed on a number of key licenses. In addition, the move helps to diversify THQ’s product slate and pipeline, particularly given some uncertainty regarding the future of the Nickelodeon licenses."

Regarding Activision, which published the last Shrek game, Sebastian added, "Activision [is] not as focused on entertainment licenses. While Activision’s current contract with DreamWorks expires in summer 2010, we note that the company is now more focused on its portfolio of wholly owned and internally developed franchises (Call of Duty, World of Warcraft), and may not have aggressively pursue these other licensing opportunities. In addition, Activision is still publishing titles based on the Shrek and Spider-Man entertainment licenses, among several others."