10-K

Use these links to rapidly review the document
THQ INC. INDEX TO ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED MARCH 31, 2008 ITEMS IN FORM 10-K
PART IV

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2008
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to            
Commission file number 0-18813

THQ INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)	13-3541686 (I.R.S. Employer Identification No.)
29903 Agoura Road Agoura Hills, CA (Address of principal executive offices)	91301 (Zip Code)

Registrant's telephone number, including area code: (818) 871-5000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Name of each exchange on which registered:
Common Stock, $.01 par value	The NASDAQ Stock Market LLC
Preferred Stock Purchase Rights	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of the last business day of the registrant's most recently completed second fiscal quarter, September 28, 2007 was approximately $1.6 billion.

The number of shares outstanding of the registrant's common stock as of May 23, 2008 was approximately 66,654,620.

DOCUMENTS INCORPORATED BY REFERENCE

The 2008 Notice of Annual Meeting of Stockholders and Proxy Statement are incorporated by reference into Part III herein.

THQ INC.

INDEX TO ANNUAL REPORT ON FORM 10-K

FILED WITH THE SECURITIES AND EXCHANGE COMMISSION

FOR THE FISCAL YEAR ENDED MARCH 31, 2008

ITEMS IN FORM 10-K

		PAGE
	Part I
Item 1.	Business	1
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	15
Item 2.	Properties	16
Item 3.	Legal Proceedings	16
Item 4.	Submission of Matters to a Vote of Security Holders	18
	Part II
Item 5.	Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	19
Item 6.	Selected Consolidated Financial Data	23
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 8.	Consolidated Financial Statements and Supplementary Data	54
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	96
Item 9A.	Controls and Procedures	96
Item 9B.	Other Information	97
	Part III
Item 10.	Directors, Executive Officers and Corporate Governance	99
Item 11.	Executive Compensation	99
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	99
Item 13.	Certain Relationships and Related Transactions, and Director Independence	99
Item 14.	Principal Accounting Fees and Services	99
	Part IV
Item 15.	Exhibits and Consolidated Financial Statement Schedules	100
Signatures		105
Certifications

The statements contained in this Annual Report on Form 10-K that are not historical facts may be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to statements regarding industry prospects and future results of operations or financial position. We generally use words such as "anticipate," "believe," "could," "estimate," "expect," "forecast," "future" "intend," "may," "plan," "positioned," "potential," "project," "scheduled," "set to," "subject to," "upcoming" and other similar expressions to help identify forward-looking statements. These forward-looking statements are based on current expectations, estimates and projections about the business of THQ Inc. and its subsidiaries and are based upon management's current beliefs and certain assumptions made by management. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, business, competitive, economic, legal, political and technological factors affecting our industry, operations, markets, products or pricing. The forward-looking statements contained herein speak only as of the date on which they were made, and we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this Annual Report. Risks and uncertainties that may affect our future results include, but are not limited to, those discussed under the heading "Risk Factors," included in Item 1A herein.

All references to "we," "us," "our," "THQ," or the "Company" in the following discussion and analysis mean THQ Inc. and its subsidiaries. Most of the properties and titles referred to in this Annual Report are subject to trademark protection.

PART I

Item 1.    Business

Introduction

We are a leading worldwide developer and publisher of interactive entertainment software for all popular game systems, including:

•

Home video game consoles such as Microsoft Xbox 360, Microsoft Xbox, Nintendo Wii, Nintendo GameCube, Sony PlayStation 3 and Sony PlayStation 2;



•

Handheld platforms such as Nintendo DS, Nintendo Game Boy Advance, PSP (PlayStation Portable), wireless devices; and



•

Personal computers.

Our titles span a wide range of categories, including action, adventure, fighting, racing, role-playing, simulation, sports and strategy. We have created, licensed and acquired a group of highly recognizable brands, which we market to a variety of consumer demographics ranging from products targeted at children and the mass market to products targeted at core gamers. Our portfolio of licensed properties includes the Disney•Pixar properties Finding Nemo, The Incredibles, Cars, Ratatouille and WALL•E; World Wrestling Entertainment; Nickelodeon properties such as SpongeBob SquarePants, Avatar, and Nicktoons; Bratz; Warhammer 40,000; and the Ultimate Fighting Championship; as well as others. We also have licenses to create wireless products based on Disney•Pixar's Ratatouille and WALL•E as well as Star Wars and major sports leagues. In addition to licensed properties, we also develop games based upon our own intellectual properties, including Company of Heroes, DeBlob, Frontlines, MX vs. ATV, Red Faction and Saints Row.

We develop our products using both internal and external development resources. The internal resources consist of producers, game designers, software engineers, artists, animators and game testers located within our internal development studios and corporate headquarters. The external development resources consist of third-party software developers and other independent resources such as artists. We refer to this group of development resources as our Studio System.

1

Our global sales network includes offices throughout North America, Europe and Asia Pacific. In the U.S. and Canada, we market and distribute games directly to mass merchandisers, consumer electronic stores, discount warehouses and other national retail chain stores. Internationally, we market and distribute games on a direct-to-retail basis in the territories where we have a direct sales force and to a lesser extent, in the territories where we do not have a direct sales force, third parties distribute our games. We also globally market and distribute games and other content for wireless devices through major wireless carriers and distribute games digitally via the internet.

We were originally incorporated in New York in 1989 as Trinity Acquisition Corporation, which changed its name in 1991 to T.HQ, Inc. following a merger with THQ, Inc., a California corporation. We were reincorporated in Delaware as THQ Inc. in 1997. Our principal executive offices are located at 29903 Agoura Road, Agoura Hills, California 91301, and our telephone number is (818) 871-5000. Our internet address is http://www.thq.com.

Strategy

We offer consumers a broad portfolio of video game titles for all ages that are playable on all popular platforms. In order to remain a leading publisher of interactive entertainment software, our strategy is to use our portfolio to bring the right products to the right platforms at the right times. We believe this strategy will allow us to increase our revenues and expand our market share. We are also focused on increasing the profitability of our business. We pursue our strategy through four key areas as follows:

•

Increase sales and profits from our leading portfolio of mass-market franchises

We have grown and diversified our products targeted at the mass market by managing some of the biggest brands in entertainment in the video game category. We currently have key licenses to publish video games based on certain intellectual properties owned by The Walt Disney Company's Pixar Animation Studios ("Pixar"), World Wrestling Entertainment ("WWE") (through our joint venture with JAKKS Pacific, Inc.), Nickelodeon, DreamWorks Animation, MGA, Zuffa LLC's Ultimate Fighting Championship and Marvel.

We have increased sales in each of the last 13 fiscal years by leveraging these licensed brands both by introducing new products and through continued sale of our catalog of existing titles. In the fiscal year ended March 31, 2008 ("fiscal 2008"), we significantly grew revenue from games based on the WWE brand, shipping six million units of the new SmackDown vs. Raw! 2008 title. We shipped more than four million units of games based on Disney•Pixar's Ratatouille and more than one million units of Cars 2: Mater National in fiscal 2008. We also shipped three million units of new games based on the Nickelodeon brand in fiscal 2008.

In the fiscal year ending March 31, 2009 ("fiscal 2009"), we plan to continue to execute on this strategy by shipping new mass-market titles for leading console and handheld platforms, as well as PC. Key upcoming titles include games based on Disney•Pixar's WALL•E; WWE Smackdown vs. Raw! 2009 and WWE Legends of Wrestlemania; Nickelodeon titles including Tak, SpongeBob, and new music games based on Naked Brothers Band; Bratz: Girls Really Rock!; and others.

Additionally, in order to increase our profits, our goal is to shift more development to our internal development studios. In fiscal 2008, we continued to develop our key Disney•Pixar and Nickelodeon titles internally. We also hold a long-term agreement with Yuke's to continue to develop games based on the WWE brand. Yuke's has consistently delivered high-quality WWE games since we started working with them in 1999. As discussed further in "Note 8—Other Long-Term Assets" in the notes to the consolidated financial statements, we own less than a 20% interest in Yuke's.

2

•

Sequel and extend our growing portfolio of owned intellectual property by bringing high-quality products to market

In order to grow revenue and increase profitability, we believe it is important for us to create and acquire new intellectual property, expand our internal development capabilities and increase ownership of development tools and technology.

In fiscal 2008, we executed on this strategy with the shipment of more than 1.5 million units of MX vs. ATV Untamed, bringing the MX vs. ATV franchise lifetime shipments to more than 6.5 million units. We established a new original franchise, Frontlines: Fuel of War, developed internally by our Kaos Studio, as well as a new innovative original title for Nintendo DS, called Drawn to Life. We plan to extend our new intellectual properties in the future, including the Drawn to Life property, with the introduction of SpongeBob Drawn to Life in fiscal 2009.

In January 2008, we expanded our development capabilities to address the lucrative Role Playing Games ("RPG") genre with the acquisition of Big Huge Games development studio.

In our fiscal year ending March 31, 2009, we plan to increase revenue from owned intellectual properties. We plan to launch Saints Row 2 and Red Faction Guerrilla, sequels to two of our best-selling owned intellectual properties. We also plan to introduce a promising new intellectual property, Darksiders. Additionally, we have a strong line-up of owned games for Nintendo's fast growing Wii platform, including de Blob, Deadly Creatures and All Star Cheer Squad, which utilizes the popular Wii-fit balance board.

•

Pursue growing trends of digital content creation and distribution

As the interactive entertainment industry continues to evolve, new revenue streams are emerging from the growing trends of digital content creation and distribution. While still nascent, these revenue opportunities are expected to increase significantly in future years. We are currently focused on generating revenue from in-game advertising, downloadable content/micro-transactions, mobile content and massively multi-player online ("MMO") gaming. In July, 2007, we announced a co-development and publishing agreement to bring our critically-acclaimed PC game Company of Heroes to the Chinese market via an online version operated by Shanda Interactive Entertainment Limited. This marks THQ's first "free-to-play, pay for download" online game, which is scheduled to launch in mainland China in fiscal 2009. We are also developing an MMO title based on the popular Warhammer 40,000 universe in our Vigil Games studio.

•

Expand our international business

As the global gaming market continues to grow, we believe that international markets represent a significant growth opportunity for us. We are focused on expanding our international business by focusing on a global product portfolio and driving higher sales via direct distribution of our products. In fiscal 2008, THQ's international net sales grew 24%, and for the first time represented more than 50% of total net sales. International growth was fueled by the opening of direct sales offices in additional countries, as well as strong international sales of WWE SmackDown vs. Raw! 2008 and Ratatouille and changes in foreign currency rates. In fiscal 2009, we expect international net sales to represent approximately 50% of total net sales, as we continue to publish our portfolio of globally-appealing products through our global network of direct sales offices and continue our expansion efforts, especially in Asia.

Our Industry

The video game industry is the economic sector involved with the development, marketing and sale of video and computer games. It encompasses dozens of job disciplines and employs thousands of people worldwide. Video games have increasingly become a mainstream entertainment choice for both children and adults: 72% of the United States population between the ages of 6-44 plays video games, a significant increase from the 64% who played video games only a year ago, according to a recent study conducted by NPD, an independent provider of consumer and retail market research for video games and other

3

industries. According to the International Development Group, Inc. ("IDG"), an independent consulting and advisory services company that analyzes the consumer electronics and interactive entertainment industries, sales of console, handheld and PC games (excluding wireless) reached $10.0 billion in North America, and $9.9 billion in Europe in calendar 2007.

The first modern video game platform was introduced by Nintendo in 1985. Advances in technology over the past 23 years have resulted in continuous increases in the processing power of the chips that power both the consoles and PC. Today's video game consoles—the Sony PlayStation 3, Microsoft Xbox 360 and Nintendo Wii—are not simply gaming platforms, but also function as multimedia hubs that can deliver high-quality digital movies and television programs. Video games are also played on personal computers that contain powerful graphics cards, and on advanced handheld devices such as PSP (PlayStation Portable), Nintendo DS and Nintendo GameBoy Advance. Additionally, both online gaming and wireless gaming have become popular platforms for video game players over the last several years.

Our Products

We develop, market and sell video games and other interactive software and content for play on console platforms, handheld platforms, mobile devices, PCs and online. The following games generated a significant portion of our sales during the fiscal years ended March 31, 2008, 2007 and 2006:

•

in fiscal 2008, WWE SmackDown vs. Raw 2008, Disney•Pixar's Ratatouille, and MX vs. ATV Untamed;



•

in fiscal 2007, Disney•Pixar's Cars, WWE SmackDown vs. Raw 2007, Saints Row, Nickelodeon titles Avatar: The Last Airbender and SpongeBob SquarePants: Creature from the Krusty Krab, and Bratz: Forever Diamondz; and



•

in fiscal 2006, WWE SmackDown vs. Raw 2006, Juiced, Destroy All Humans!, SpongeBob SquarePants: Lights, Camera, PANTS! and The Incredibles: Rise of the Underminer.

Our games are based on intellectual property that is either wholly-owned by us or licensed from third parties. We develop our games using both internal development resources and external development resources working for us pursuant to contractual agreements. Whether a game is developed internally or externally, upon completion of development we extensively play-test each game, and if required, send the game to the manufacturer for its review and approval. Other than games we release for PCs or wireless devices, the console manufacturers or their authorized vendors manufacture our products for us. We then market and distribute our games for sale throughout the world.

Creating and Acquiring Our Intellectual Property

Our business process begins with an idea. Inspiration for our interactive entertainment software comes from many sources—from our internal studios, from our external studio partners, or from existing intellectual properties that we either license or acquire. Traditionally, most of our titles were based upon licensed properties that have attained a high level of consumer recognition or acceptance. We have relationships with many well-known licensors and have created games based on their properties, including Disney•Pixar, Nickelodeon, World Wrestling Entertainment, Warner Bros. and MGA Entertainment. These intellectual property licenses usually grant us the exclusive use of the property for specified titles, on specified platforms, within a defined territory and for a specified license term. The licenses are of varying duration, and we pay royalties to our property licensors generally based on our net sales of the title that includes the licensor's intellectual property. We typically advance payments against minimum guaranteed royalties over the license term. Royalty rates are generally higher for properties with proven popularity and less perceived risk of commercial failure.

A cornerstone of our strategy is to create or acquire new intellectual properties that we own. Our owned intellectual property is generally created either by one of our development studios or by a third-party

4

developer with whom we contract. We have also acquired intellectual properties from other publishers or developers. The titles we create based on intellectual properties we own may contain certain licensed content, such as music or rights to use of a name or object (such as a brand-name vehicle). In this case, we enter into a license agreement with the content owner and pay either a fixed fee or royalty for the use of such content.

Developing Our Products

We develop our products using both internal and external development resources. The internal resources consist of producers, game designers, software engineers, artists, animators and game testers located within our internal studios located throughout the United States, in the United Kingdom and in Australia, and in our corporate headquarters. The external development resources consist of third-party software developers and other independent resources such as artists. We refer to this collective group of development resources as our Studio System.

We make the decision as to which development resources to use based upon the creative and technical challenges of the product, including whether the intellectual property being developed into a game is licensed, an original concept that we created, or an original concept created by a third-party developer. Once we determine where a product will be developed, our product development team oversees the internal or external resources in its design, technical assessment and construction of each game.

The development cycle for a new game depends on the platform and the complexity and scope of the game. Additionally, when developing an intellectual property into a game which is simultaneously being made into a motion picture, our development schedule is designed to ensure that our games are commercially available by the motion picture's theatrical release. The development cycle for console and PC games ranges from 18-36 months and the development cycle for handheld games ranges from 12-24 months.

These development cycles require that we assess whether there will be adequate retailer and consumer demand for a game well in advance of its release. The investments in such development, prior to reaching technological feasibility, are recorded as product development expenses in our consolidated statement of operations. We had product development expenses of $128.9 million in fiscal 2008, $97.1 million in fiscal 2007 and $94.6 million in fiscal 2006.

Upon completion of development, each game is extensively play-tested by us to ensure compatibility with the appropriate hardware systems and configurations, and to minimize the number of bugs and other defects found in the products. If required, we also send the game to the manufacturer for its review and approval. To support our products after release, we provide online access to our customers on a 24 hour basis as well as operator help lines during regular business hours. The customer support group tracks customer inquiries, and we use this data to help improve the development and production processes.

Manufacturing Our Products

Other than games we release for sale on PCs, digital download, or wireless devices, our video games are manufactured for us by the platform manufacturers or their authorized vendors. We contract with various DVD replicators for the manufacturing of our PC products.

The platform game manufacturing process begins with our placing a purchase order with a manufacturer. We then send the approved software code to the manufacturer (together with related artwork, user instructions, warranty information, brochures and packaging designs) for manufacturing.

We are required by our platform licenses to provide a standard defective product warranty on all of the products sold. Generally, we are responsible for resolving, at our own expense, any warranty or repair claims. We have not experienced any material warranty claims, but there is no guarantee that we will not experience such claims in the future.

5

Distributing Our Products—Marketing and Sales

The manner in which we drive consumer demand for our brands across the globe has evolved significantly in recent years as we have expanded our owned and licensed franchise portfolio. At the global brand management level, we take a disciplined approach to defining and refining positioning for our key game releases. We implement extensive consumer and retail research including concept and play testing in conjunction with our development studios.

Our marketing plans vary by target demographic but generally consist of a three-pronged media plan encompassing TV, print and online advertising. Certain of our campaigns also include billboard advertising, event sponsorship, in-theater advertising and radio placements. Retail or Channel Marketing efforts for our games include pre-sell give-aways, displays and/ or demonstrations at retailer-specific trade shows, and cooperative retail advertising campaigns.

We are taking a more aggressive approach in what we term the "connected marketing" space. This includes how we build our brand in the online space via editorial opportunities; screen shot, trailer and other game content releases online; advertising; official game websites; and community outreach and management. Game trial has been a key driver of consumer demand for several of our core games, through consumer demos released at retail or online, or game demos available at kiosks stationed at sports or other entertainment events.

Publicity is another key driver of awareness for our game portfolio, as well as for THQ, as a publicly-held company. We maintain strong relationships with a broad group of business, consumer, entertainment and games enthusiast reporters across the globe, working closely to secure positive editorial coverage across broadcast, print and online editorial outlets.

Product Sales.    In North America, our products are primarily sold directly to mass merchandisers, consumer electronics stores, discount warehouses and national retail chain stores. Our products are also sold to smaller, regional retailers, as well as distributors who, in turn, sell our products to retailers that we do not service directly, such as grocery and drug stores. Our domestic sales activities are led by our national sales team, which has representatives in most major markets in the United States.

Our international publishing activities are managed by our office in Switzerland and operated via our offices in the United Kingdom, Australia, France, Germany, Korea, Japan, Spain, Austria, Denmark, the Netherlands and Italy. International offices market and distribute to direct-to-retail customers and through distributors in both their home territories and to approximately 60 additional territories.

We utilize electronic data interchange with most of our major customers in order to (i) efficiently receive, process, and ship customer product orders, and (ii) accurately track and forecast sell-through of products to consumers in order to determine whether to order additional products from the manufacturers. We believe that the direct relationship model we use allows us to better manage inventory, merchandise and communications. We ship all of our products to our North American customers from warehouses located in Michigan and Minnesota, and we ship most of our products to our international customers from warehouses located throughout Europe and Asia Pacific.

As discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations," we typically only allow returns for our personal computer products; however, we may decide to provide price protection or allow returns for our video games after we analyze: (i) inventory remaining in the retail channel, (ii) the rate of inventory sell-through in the retail channel, and (iii) our remaining inventory on hand. We maintain a policy of giving credits for price protection and returns, but do not give cash refunds.

6

Platform License Agreements

Before we can develop, market, or sell video games on a console or handheld platform, we must enter into a license agreement with the manufacturer of such platform. The current "platform manufacturers" are Microsoft, Nintendo and Sony. Each of these platform license agreements allows us a non-exclusive right to use, for a fixed term, technology that is owned by the platform manufacturer. As each platform license expires, if we intend to continue publishing games on such platform, we must enter into a new agreement or an amendment with the licensor to extend the term of the agreement. Certain agreements, such as the licenses with Sony and Microsoft for PlayStation 3 and Xbox 360, respectively, automatically renew each year unless either party gives notice by the applicable date that it intends to terminate the agreement. Additionally, each agreement designates a territory in which we can publish and distribute titles. We are currently licensed to develop and publish titles on all platforms that are currently sold in North America. Our key platform licenses also allow us to develop and publish titles in Europe, Australia, New Zealand and Japan. We are also licensed to develop and publish titles for PlayStation 2, Xbox and Xbox 360 in various additional territories, including parts of Asia and Central and South America. We expect to enter into additional platform licenses and extend current licenses as new platforms are launched or our current agreements expire.

Our platform licenses require that each title be approved by the manufacturer. The manufacturers have the right to review, evaluate and approve a prototype of each title and the title's packaging and marketing materials. Once a title is developed and has been approved by the manufacturer, the title is manufactured solely by such manufacturer or a designated vendor of the manufacturer. The licenses establish the payment terms for the manufacture of each cartridge or disc made, which generally provide for a charge for every cartridge or disc manufactured. The amounts charged by the manufacturers for both console discs and handheld cartridges include a manufacturing, printing and packaging fee as well as a royalty for the use of the manufacturer's name, proprietary information and technology, and are subject to adjustment by the manufacturers at their discretion.

The platform license agreements also require us to indemnify the manufacturers with respect to all loss, liability and expense resulting from any claim against the manufacturer involving the development, marketing, sale, or use of our games, including any claims for copyright or trademark infringement brought against the manufacturer. Each platform license may be terminated by the manufacturer if a breach or default by us is not cured after we receive written notice from the manufacturer, or if we become insolvent. Upon termination of a platform license for any reason other than our breach or default, we have a limited period of time to sell any existing product inventory remaining as of the date of termination. The length of this sell-off period varies between 90 and 180 days, depending upon the platform agreement. We must destroy any such inventory remaining after the end of the sell-off period. Upon termination as a result of our breach or default, we must destroy any remaining inventory within a minimum number of days as specified by the manufacturer.

Seasonality

The interactive entertainment software market is highly seasonal, with sales typically significantly higher during the third quarter of our fiscal year, due primarily to the increased demand for interactive games during the year-end holiday buying season.

Major Customers

Our largest customers worldwide include Best Buy, GameStop, Target, Toys "R" Us and Wal-Mart. We also sell our products to other national and regional retailers, discount store chains and specialty retailers. Wal-mart and GameStop each accounted for more than 10% of our gross sales in fiscal 2008, 2007 and 2006. A substantial reduction, termination of purchases, or business failure by any of our largest customers could have a material adverse effect on us.

7

Competition

As a publisher of interactive entertainment software, we consider ourselves to be part of the entertainment industry. At the most fundamental level, our products compete with other forms of entertainment, such as motion pictures, television and music, for the leisure time and discretionary spending of consumers. Our primary competition for sales of video games comes from Sony, Microsoft and Nintendo, each of which is a large developer and marketer of software for its own platforms, as well as other publishers and developers of interactive entertainment software, such as Activision, Atari, Electronic Arts, LucasArts, Namco, Sega, Take-Two Interactive Software, Ubisoft, and Vivendi Games.

In addition to competing for video game revenue, we compete with our competitors over licenses and brand-name recognition, access to distribution channels, and effectiveness of marketing and price. We also face intense competition from our competitors for the services of talented video game producers, artists, engineers and other employees.

In addition to our traditional competitors in the video game industry, some of our competitors are very large, diversified corporations that have begun to develop games based upon their own highly recognizable brands, and, as a result, stand to become more direct competitors. Disney Interactive Studios recently expanded its internal software game publishing efforts and Viacom has expanded its efforts in interactive entertainment software publishing.

Employees

As of March 31, 2008, we employed approximately 2,400 people, of whom over 800 were outside the United States. We believe that our ability to attract and retain qualified employees is a critical factor in the successful development of our products and that our future success will depend, in large measure, on our ability to continue to attract and retain qualified employees. None of our employees are represented by a labor union or covered by a collective bargaining agreement and we consider our relations with employees to be favorable.

Financial Information About Geographic Areas

See Item 7 "Management Discussion and Analysis of Financial Condition and Results of Operations" and Note 18 of notes to consolidated financial statements included in Item 8.

Available Information

We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission ("SEC"). Our SEC filings, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act are available to the public free of charge over the internet at our website at http://www.thq.com or at the SEC's web site at http://www.sec.gov. Our SEC filings will be available on our website as soon as reasonably practicable after we have electronically filed or furnished them to the SEC. Information contained on our website is not incorporated by reference into this annual report on Form 10-K. You may also read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Room 1580, Washington D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330 or on the internet at http://www.sec.gov/info/edgar/prrrules.htm. You can view our Code of Business Conduct and Ethics, our Code of Ethics for Executive Officers and Other Senior Financial Officers and the charters for each of our committees of the Board of Directors free of charge on the corporate governance section of our website.

8

Item 1A.    Risk Factors

Our business is subject to many risks and uncertainties that may affect our future financial performance. Some of those important risks and uncertainties that may cause our operating results to vary or may materially and adversely affect our operating results are as follows:

We must continue to develop and sell new titles in order to generate revenue and remain profitable.

We derive almost all of our revenue from sales of interactive software games designed for play on video game consoles, handheld devices and personal computers. Even the most successful video games remain popular for only limited periods of time, often less than six months, and thus the success of our business is dependent upon our ability to continually develop and sell successful new games.

Our business is "hit" driven. If we do not deliver "hit" games, our revenue and profitability can suffer.

While many new products are regularly introduced, only a relatively small number of "hit" titles account for a significant portion of video game sales. If we fail to develop "hit" titles, or if "hit" products published by our competitors take a larger share of consumer spending than we anticipate, our product sales could fall below our expectations.

Risk factors related to video game platforms:

Our business is dependent upon the success and availability of the video game platforms on which consumers play our games.    We derive most of our revenue from the sale of products for play on video game platforms manufactured by third parties, such as Sony's PlayStation 2, PlayStation 3 and PSP, Microsoft's Xbox 360, and Nintendo's Wii and DS. The following factors related to such platforms can adversely affect sales of our video games and our profitability:

Popularity of platforms.    In the previous console platform cycle, the PlayStation 2 was the best-selling platform and games for the PlayStation 2 dominated software sales. In the current platform cycle, the Wii is the best-selling platform to date; however, the Xbox 360 is currently the most popular console in terms of software game sales. Since the development cycle for a game is from 12 to 36 months, we must make decisions about which games to develop on which platforms before knowing what the consumer preference for the platforms will be when the game is finished. Choosing the wrong games for the wrong platforms could negatively impact our revenues and profitability.

Platform shortages.    In the past few years, many of the platforms on which our games are played have experienced shortages and some, including the Nintendo Wii, are still difficult for consumers to purchase. Platform shortages generally negatively affect the sales of video games since consumers do not have consoles on which to play the games.

Platform pricing.    The current generation of console platforms are priced higher than their respective predecessor platforms. The Xbox 360 can cost as much as $449.99, the Wii is priced at $249.99 and the PS3 is priced at $399.99. The cost of the hardware could adversely affect their sales, which could negatively affect sales of our products for these platforms since consumers need a platform in order to play our games.

Our inability to enter into agreements with the manufacturers to develop, publish and distribute titles on their platforms could seriously impact our operations.    We are dependent on the platform manufacturers (Microsoft, Nintendo and Sony) and our non-exclusive licenses with them, both for the right to publish titles for their platforms and for the manufacture of our products for their platforms. Our existing platform licenses require that we obtain approval for the publication of new games on a title-by-title basis. As a result, the number of titles we are able to publish for these platforms, and our sales from titles for these platforms, may be limited. Should any manufacturer choose not to renew or extend our license agreement

9

at the end of its current term, or if any license were terminated, we would be unable to publish additional titles for that manufacturer's platform, which could negatively affect our operating results.

Additionally, since each of the manufacturers publishes games for its own platform, and also manufactures products for all of its other licensees, a manufacturer may give priority to its own products or those of other publishers in the event of insufficient manufacturing capacity. Unanticipated delays in the delivery of products due to delayed manufacturing could also negatively affect our operating results.

Risk factors related to creating and acquiring our intellectual property:

The loss of our key licenses, or renewals of such licenses on less advantageous terms, could cause our revenue to decline.    Games we develop based upon a small number of licensed brands make up a substantial portion of our sales each year. In fiscal 2008 and fiscal 2007, sales of titles for our three top-selling brands, Disney•Pixar, Nickelodeon and World Wrestling Entertainment ("WWE") comprised 54% of our net sales; and in fiscal 2006, 47% of our net sales were based on titles from such brands. A limited number of licensed brands may continue to produce a disproportionately large amount of our sales. Due to this dependence on a limited number of brands, the loss of a brand license or the renewal of a brand license on less advantageous terms may significantly harm our business and financial results.

We are currently involved in litigation with the WWE with respect to our video game license. Since WWE titles make up a significant portion of our sales, our inability to retain the license could harm us. See, Item 3 "Legal Proceedings" for a more detailed discussion of this litigation.

A decrease in the popularity of our licensed brands can materially affect our revenue.    A significant portion of our net sales are derived from products based on popular licensed properties. A decrease in the popularity of the underlying property of our licenses could negatively impact our ability to sell games based on such licenses.

Our inability to acquire or create new intellectual property that has a high level of consumer recognition or acceptance could harm us.    We generate a portion of our revenue from wholly-owned intellectual property. The success of our internal brands depends on our ability to create original ideas that appeal to the avid gamer. Titles based on wholly-owned intellectual property can be expensive to develop and market since they do not have a built-in consumer base or licensor support. Our inability to create new products that find consumer acceptance could negatively impact our profitability.

Risk factors related to the development of our products:

Increasing development costs can decrease our profitability.    Video games are becoming increasingly expensive to develop. Because the current generation console platforms and computers have greater complexity and capabilities than the earlier platforms and computers, costs are higher to develop games for the current generation platforms and computers. Greater costs can lead to lower operating margins, negatively affecting our profitability.

Video game product development schedules are difficult to predict and can be subject to delays. Postponements in shipments can substantially impact our profitability in any given quarter.    Our ability to meet product development schedules is affected by a number of factors, including the creative processes involved, the coordination of large and sometimes geographically-dispersed development teams required by the increasing complexity of our products, the need to refine and tune our products prior to their release, and the time required to manufacture a game once it is submitted to the manufacturer. We have in the past experienced development and manufacturing delays for several of our products. Failure to meet anticipated production schedules may cause a shortfall in our expected sales and profitability and cause our operating results in any given quarter to be materially different from expectations. Delays that prevent release of our products during peak selling seasons or in conjunction with specific events, such as the

10

release of a related movie, could significantly affect the sales of such products and thus our financial performance.

Video games that are not high quality may not sell according to our forecast, which could materially impact our profitability in any given quarter.    Consumers that buy games targeted at the mass market and core gamers prefer high-quality games. If our games are not high quality, consumers may not purchase as many games as we expected, which could materially impact our revenue and profitability in any given quarter.

We have experienced development challenges on the PlayStation 3. Our inability to overcome our development challenges for games developed for the PlayStation 3 could negatively impact our revenue and profitability.    We have experienced unexpected challenges in developing games for the PlayStation 3, which has caused us to miss ship dates or cancel games that were being developed for the platform. If we fail to successfully develop games for the PlayStation 3 in the future, our revenues and profitability could be materially affected.

Defects in our game software could harm our reputation or decrease the market acceptance of our products.    Our game software may contain defects. In addition, because we do not manufacture our games for console platforms, we may not discover defects until after our products are in use by retail customers. Any defects in our software could damage our reputation, cause our customers to terminate relationships with us or to initiate product liability suits against us, divert our engineering resources, delay market acceptance of our products, increase our costs or cause our revenue to decline.

We rely on external developers for the development of some of our titles.    Some of our titles are developed by third-party developers. We have no direct control over the business, finances and operational practices of these external developers. A delay or failure to complete the work performed by external developers may result in delays in, or cancellations of, product releases. Additionally, the future success of externally-developed titles will depend on our continued ability to maintain relationships and secure agreements on favorable terms with skilled external developers. Our competitors may acquire the businesses of key developers or sign them to exclusive development arrangements. In either case, we would not be able to continue to engage such developers' services for our products, except for those that they are contractually obligated to complete for us. We cannot guarantee that we will be able to establish or maintain such relationships with external developers and failure to do so could result in a material adverse effect on our business and financial results.

Risk factors related to distribution of our products:

Software pricing.    Software prices for the current generation console games are higher than prices for games for the predecessor platforms. There is no assurance that consumers will continue to pay the higher prices of these games. Additionally, although we still publish games for the PlayStation 2, as consumers purchase games for current generation consoles rather than for the PS2 and demand for games on the PS2 declines, the prices of our games for the PS2 may also decline. Reduced pricing of our PS2 products may result in lower revenues, which could materially affect our profitability.

We rely on a small number of customers that account for a significant amount of our sales.    Our largest single customer, Wal-Mart, accounted for more than 10% of our gross sales in the last three fiscal years. In fiscal 2008, our five largest customers, including Wal-Mart, accounted for 41% of our gross sales. A substantial reduction, termination of purchases, or business failure by any of our largest customers could have a material adverse effect on us.

We compete aggressively with other video game publishers for retail shelf space. Our inability to get our games placed on retailers' shelves could materially impact our revenues and profitability.    As video game publishers strive to release more blockbuster titles and as retailers merge, competition for retail shelf space may become more intense. Our inability to get our products on retailers' shelves may force us to increase our

11

marketing expenditures to maintain sales of our titles. Increased expenses without corresponding increased sales could reduce our profit margins and thus have a negative effect on our business and financial results.

Lack of retailer support for categories in which we publish games could negatively affect the sales of our products.    In fiscal 2008, retailers strongly supported games that were music or peripheral-based and we did not publish any games in this category. Future lack of retailer support for our key games could cause lower sales of such games, negatively affecting our revenue and profitability.

Increased sales of used video game products could lower our sales.    Increased sales of used video games, which are generally priced lower than new video games, by one of our key customers could negatively affect our sales of new titles and thus our revenues.

Risk factors related to competition:

Competitive launches may negatively affect the sales of our games.    We compete for consumer dollars with several other video game publishers and consumers must make choices among available games. If we make our games available for sale at the same time as many other new games become available, consumers may choose to spend their money on products published by our competitors rather than our products and retailers may choose to give more shelf space to our competitors' products, leaving less space to sell our products. Since the life cycle of a game is short, strong sales of our competitors' games could negatively affect the sales of our games.

Competition in the interactive software entertainment industry may lead to reduced sales of our products and reduced market share.    Our industry is intensely competitive. We compete for both the sale of games and licenses to properties with the platform manufacturers and other publishers. Such competition could negatively affect sales of our games as follows:

Development of software by hardware manufacturers.    Microsoft, Nintendo and Sony have each increased development efforts of software for their own hardware platforms. As a result of their commanding positions in the industry, the manufacturers may have better bargaining positions with respect to retail pricing, shelf space and retailer accommodations than do any of their licensees, including us. Additionally, the manufacturers can bundle their software with their hardware, creating less demand for individual sales of our products.

Development of software and online games by intellectual property owners.    As discussed above, a significant portion of our revenue is due to sales of games based upon licensed properties. In recent years, some of our key licensors, including Disney and Warner Bros., have increased their development of video games, which could lead to such licensors not renewing our licenses to publish games based upon their properties or not grant future licenses to develop games based upon such properties. If we do not publish such games, our revenue could be significantly affected.

Competition for licenses.    Some of our competitors have greater name recognition among consumers and licensors of properties, a broader product line, or greater financial, marketing and other resources than we do. Accordingly, these competitors may be able to market their products more effectively or make larger offers or guarantees in connection with the acquisition of licensed properties. As competition for popular properties increases, our cost of acquiring licenses for such properties may increase, resulting in reduced margins.

Competition with emerging forms of home-based entertainment may reduce sales of our products.    We also compete with other forms of entertainment and leisure activities. For example, we believe the overall growth in the use of the internet and online services by consumers may pose a competitive threat if customers and potential customers spend less of their available time using interactive entertainment software and more using the internet and online services.

12

Competition for qualified personnel is intense in the interactive software entertainment industry and failure to hire and retain qualified personnel could seriously harm our business.    We rely to a substantial extent on the management, marketing, sales, technical and software development skills of a limited number of employees to formulate and implement our business plan. Our success depends to a significant extent upon our ability to attract and retain key personnel. Competition for employees can be intense and the process of locating key personnel with the right combination of skills is often lengthy. The loss of services of key personnel could have a material adverse effect on our business.

Consolidation in the interactive software entertainment industry presents challenges with respect to resources and integration of acquired businesses.

Consistent with our strategy to expand our internal development capabilities and distribution channels, we intend to continue to pursue acquisitions of companies, intellectual property rights and other assets that can be acquired on acceptable terms and which we believe can be operated or exploited profitably. As our industry continues to consolidate, we face additional competitive pressures that can negatively affect our business.

Further, as we acquire companies, we are faced with additional challenges. The integration of newly-acquired companies' operations with our existing operations requires management time and effort. Additionally, there is a risk of loss of key employees, customers and vendors of the recently-acquired companies.

Emerging video game platforms, such as MMO games or games for wireless devices, require investments and present many risks.

Globally, MMO games have rapidly become a popular way to play video games. Additionally, wireless network and mobile phone technologies are continually undergoing rapid innovation. New mobile phones with more advanced processors and supporting advanced programming languages continue to be introduced in the market. We have no control over the demand for, or success of, these products. However, if we fail to anticipate and adapt to these and other technological changes, our market share and our operating results may suffer. Our future success in providing online games, wireless games and other content will depend on our ability to adapt to rapidly changing technologies, develop applications to accommodate evolving industry standards and improve the performance and reliability of our applications.

A significant portion of our revenue is derived from our international operations, which may subject us to economic, political, regulatory and other risks.

In fiscal 2008 we derived 51% of our net sales outside of North America, up from 42% in fiscal 2007. We intend to continue expanding our international operations, which may subject us to many risks, including: different consumer preferences, challenges caused by distance, language and cultural differences in doing business with foreign entities, unexpected changes in regulatory requirements, tariffs and other barriers, difficulties in staffing and managing foreign operations, and possible difficulties collecting foreign accounts receivable. These factors or others could have an adverse effect on our future foreign sales or the profits generated from these sales.

There are additional risks inherent in doing business in certain international markets, such as China. For example, foreign exchange controls may prevent us from expatriating cash earned in China and standard business practices in China may increase our risk of violating U.S. laws such as the Foreign Corrupt Practices Act.

Additionally, sales generated by our international offices will generally be denominated in the currency of the country in which the sales are made. To the extent our foreign sales are not denominated in U.S. dollars, our sales and profits could be materially and adversely affected by foreign currency fluctuations.

13

We may not be able to protect our intellectual property rights against piracy, infringement of our patents by third parties, or declining legal protection for intellectual property.

We defend our intellectual property rights and combat unlicensed copying and use of software and intellectual property rights through a variety of techniques. Preventing unauthorized use or infringement of our rights is difficult. Unauthorized production occurs in the computer software industry generally, and if a significant amount of unauthorized production of our products were to occur, it could materially and adversely affect our results of operations. We hold copyrights on the products, manuals, advertising and other materials owned by us and we maintain certain trademark rights. We regard our titles, including the underlying software, as proprietary and rely on a combination of trademark, copyright and trade secret laws as well as employee and third-party nondisclosure and confidentiality agreements, among other methods, to protect our rights. We include with our products a "shrink-wrap" or "click-wrap" license agreement which imposes limitations on use of the software. It is uncertain to what extent these agreements and limitations are enforceable, especially in foreign countries. Policing unauthorized use of our products is difficult, and software piracy is a persistent problem, especially in some international markets. Further, the laws of some countries where our products are or may be distributed either do not protect our products and intellectual property rights to the same extent as the laws of the United States, or are poorly enforced. Legal protection of our rights may be ineffective in such countries. We cannot be certain that existing intellectual property laws will provide adequate protection for our products.

Third parties may claim we infringe their intellectual property rights.

Although we believe that we make reasonable efforts to ensure that our products do not violate the intellectual property rights of others, from time to time we receive notices from others claiming we have infringed their intellectual property rights. The number of these claims may grow. Responding to these claims may require us to enter into royalty and licensing agreements on unfavorable terms, require us to stop selling or to redesign affected products, or pay damages or satisfy indemnification commitments including contractual provisions under various license arrangements. If we are required to enter into such agreements or take such actions, our operating margins may decline as a result.

We cannot be certain of the future effectiveness of our internal controls over financial reporting or the impact of the same on our operations or the market price for our common stock.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to include in our Annual Report on Form 10-K our assessment of the effectiveness of our internal controls over financial reporting. Furthermore, our independent registered public accounting firm is required to report on whether it believes we maintain, in all material respects, effective internal controls over financial reporting. Although we believe that we currently have adequate internal controls procedures in place, we cannot be certain that future material changes to our internal controls over financial reporting will be effective. If we cannot adequately maintain the effectiveness of our internal controls over financial reporting, we might be subject to sanctions or investigation by regulatory authorities, such as the Securities and Exchange Commission. Any such action could adversely affect our financial results and the market price of our common stock.

Fluctuations in our quarterly operating results due to seasonality in the interactive software entertainment industry and other factors related to our business operations could result in substantial losses to investors.

We have experienced, and may continue to experience, significant quarterly fluctuations in sales and operating results. The interactive software entertainment market is highly seasonal, with sales typically significantly higher during the year-end holiday buying season. Other factors that cause fluctuations in our sales and operating results include:

•

the timing of our release of new titles as well as the release of our competitors' products;

14

•

the popularity of both new titles and titles released in prior periods;



•

the profit margins for titles we sell;



•

the competition in the industry for retail shelf space;



•

fluctuations in the size and rate of growth of consumer demand for titles for different platforms; and



•

the timing of the introduction of new platforms and the accuracy of retailers' forecasts of consumer demand.

We believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance. We may not be able to maintain consistent profitability on a quarterly or annual basis. It is likely that in some future quarter, our operating results may be below the expectations of public market analysts and investors as a result of the factors described above and others described throughout this "Risk Factors" section, and the price of our common stock may fall or significantly fluctuate.

Rating systems and future legislation may make it difficult to successfully market and sell our products.

Currently, the interactive software entertainment industry is self-regulated and rated by the Entertainment Software Rating Board ("ESRB"). Our retail customers take the ESRB rating into consideration when deciding which of our products they will purchase. If the ESRB or a manufacturer determines that a product should have a rating directed to an older or more mature consumer, we may be less successful in our marketing and sales of a particular product.

From time to time, legislation has been introduced at the local, state and federal levels for the establishment of a government mandated rating and governing system in the United States and in foreign countries for our industry. Various foreign countries already allow government censorship of interactive entertainment products. We believe that if our industry were to become subject to a government rating system or other regulation, our ability to successfully market and sell our products could be adversely affected.

Any significant downturn in general economic conditions that results in a reduction in discretionary spending could reduce demand for our products and harm our business.

Our product sales are affected by the retail customer's ability and desire to spend disposable income on the purchase of our games. Any significant downturn in general economic conditions that results in a reduction in discretionary spending could result in a reduction in demand for our products and could harm our business. Such industry downturns have been, and may continue to be, characterized by diminished product demand and subsequent erosion of average selling prices.

Because of these and other factors affecting our operating results and financial condition, past financial performance should not be considered a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.

Item 1B.    Unresolved Staff Comments

None.

15

Item 2.    Properties

Our principal corporate and administrative office is located in approximately 100,000 square feet of leased space in a building located at 29903 Agoura Road, Agoura Hills, California. Including this office, the following is a summary of the principal leased offices we maintained as of May 23, 2008:

Purpose		North America	Europe	Asia Pacific	Total
Sales and administrative		123,900	69,900	21,300	215,100
Product development		385,500	6,100	23,700	415,300
	Total leased square footage	509,400	76,000	45,000	630,400

We also own 10,820 square feet of space in Phoenix, Arizona, which serves as our data center and motion capture studio.

Item 3.    Legal Proceedings

WWE related Lawsuits

On October 19, 2004, World Wrestling Entertainment, Inc. ("WWE") filed a lawsuit in the United States District Court for the Southern District of New York (the "Court") against JAKKS Pacific, Inc. ("JAKKS"), us, THQ/JAKKS Pacific LLC (the "LLC"), and others, alleging, among other claims, improper conduct by JAKKS, certain executives of JAKKS, an employee of the WWE and an agent of the WWE in granting the WWE videogame license to the LLC. The complaint seeks various forms of relief, including monetary damages and a judicial determination that, among other things, the WWE videogame license is void. On March 30, 2005, WWE filed an amended complaint, adding both new claims and our president and chief executive officer, Brian Farrell, as a defendant. In August 2005, the Court directed the parties to file briefs on the three federal law claims alleged by the Plaintiffs (i.e., Robinson-Patman, and Sherman Act, and a threshold issue concerning the Plaintiff's RICO claim). The motions to dismiss the amended complaint based on these issues were fully briefed and argued and, on March 31, 2006, the Court granted the defendants' motion to dismiss the Robinson-Patman Act and Sherman Act claims and denied the defendants' motion seeking to dismiss the RICO claims on the basis of the threshold "enterprise" issue that was briefed.

The Court then set a second round of briefing on the motions to dismiss on all other federal issues, including other defenses under RICO. After extensive briefing concluded in August 2006 and a hearing held in September 2006, on December 21, 2007, the Court granted our motions to dismiss the federal claims, and denied a motion by WWE to reconsider the Court's prior March 2006 order dismissing the antitrust claims. Among the Court's grounds for its decision were its findings that WWE had failed to allege a pattern of racketeering activity, RICO injury or antitrust injury, and that its RICO claims were barred by the statutes of limitations. The Court also dismissed WWE's state law claims, without prejudice to refiling them in state court, for lack of federal jurisdiction. WWE has now asserted its state law claims in Connecticut, as described below. WWE has appealed the Court's rulings, and the appeal is pending in the Second Circuit Court of Appeals. The appeal is currently in abeyance, and there is currently no briefing schedule or timetable for resolution of the appeal.

On October 12, 2006, WWE filed a separate lawsuit against us and the LLC in the Superior Court of the State of Connecticut, alleging that our agreements with Yuke's Co., Ltd. ("Yuke's"), a developer and distributor in Japan, violated a provision of the WWE videogame license prohibiting sublicenses without WWE's written consent. The lawsuit seeks, among other things, a declaration that the WWE is entitled to terminate the video game license and seek monetary damages. On February 8, 2007, we and the LLC jointly moved to strike one of the claims, for violation of the Connecticut Unfair Trading Practices Act; on March 28, 2007, the Court denied that motion, without prejudice to our ability to raise the same issue at a later date. At a hearing on May 8, 2007, the Court granted WWE's request to amend its pleadings to add

16

allegations and claims substantially similar to those already pending in WWE's lawsuit in the Southern District of New York and to "cite in" the other defendants from that action, including our CEO, Brian Farrell. Following the dismissal without prejudice of WWE's lawsuit in the Southern District of New York, WWE sought leave to refile its state law claims in this action, which was granted. The claims now pending in this action are a combination of the earlier claims relating to the Yuke's agreements and the Connecticut equivalents of the state law claims that had previously been pending in the Southern District of New York. We have moved to dismiss many of the claims in this action. Moreover, JAKKS has filed a summary judgment motion based on the collateral estoppel effects of the dismissal of WWE's lawsuit in the Southern District of New York, and we intend to join in that motion. JAKKS's motion was scheduled for hearing on May 19, 2008, and there is not yet a hearing scheduled on the THQ defendants' motion. Discovery in this action is scheduled to be completed by June 2009, and the case is to be ready for trial by May 1, 2010.

We intend to vigorously defend ourselves against the claims raised in this action, including those raised in the amended complaint. However, in light of the early status of this litigation, we cannot estimate a possible loss, if any. Games we develop based upon our WWE videogame license have contributed to approximately 25% of our net sales in fiscal 2008, up from approximately 15% of our net sales in fiscal 2007 and 2006. The loss of the WWE license would have a negative impact on our future financial results.

Operating agreement with JAKKS Pacific, Inc.

In June 1999 we entered into an operating agreement with JAKKS that governs our relationship with respect to the WWE videogame license. Pursuant to the terms of this agreement, JAKKS is entitled to a preferred payment from revenues derived from exploitation of the WWE videogame license. The amount of the preferred payment to JAKKS for the period beginning July 1, 2006 and ending December 31, 2009 (the "First Subsequent Distribution Period") is to be determined by agreement or, failing that, by arbitration.

The parties have not reached agreement on the preferred payment for the First Subsequent Distribution Period. Accordingly, as provided in the operating agreement, the parties are in the process of selecting an arbitrator to resolve this dispute. Although we believe continuation of the previous preferred payment would represent significantly excessive compensation to JAKKS for the First Subsequent Distribution Period, we are not able to predict the outcome of the arbitration or otherwise estimate the amount of the preferred payment for the First Subsequent Distribution Period. Accordingly, we are currently accruing for a preferred payment to JAKKS at the previous rate. However, we have advised JAKKS that we do not intend to make any payment until the amount of the preferred payment payable to JAKKS for the First Subsequent Distribution Period is agreed or otherwise determined as provided in the operating agreement. On April 30, 2007, we filed a petition to compel arbitration and appoint an arbitrator in the Superior Court of the State of California for the County of Los Angeles, West District. At a hearing on June 19, 2007 (with a subsequent order entered on June 25, 2007), the Court established a process for selecting an arbitrator and denied a request by JAKKS for provisional relief requesting that, pending conclusion of the arbitration, THQ either be enjoined from distributing to itself any proceeds from the joint venture since June 2006 or be compelled to resume payments to JAKKS at the same rate that was in effect prior to June 2006. Pursuant to the process, the judge named a "shortlist" of five arbitrator candidates drawn from lists submitted by the parties, and afforded the parties five days to agree upon an arbitrator candidate, failing which the judge would appoint an arbitrator from the "shortlist." On July 18, 2007, JAKKS filed a notice of disqualification, purporting to disqualify all of the arbitrator candidates on the "shortlist" other than the one individual who had been among the candidates submitted by JAKKS. We objected to this notice. On July 31, 2007, the Court struck JAKKS's notice and selected an arbitrator from the "shortlist." On or about August 22, 2007 JAKKS filed in the Court of Appeal of the State of California a petition for writ of mandate/prohibition or other appropriate relief, seeking an order directing the judge to disqualify all of the arbitrator candidates other than the one individual who had been submitted by JAKKS. In its filing,

17

JAKKS argued that this individual was the only "shortlist" candidate to file certain disclosures within a time period JAKKS maintains is required by statute. The Court of Appeal granted a temporary stay of the arbitration on August 30, 2007. On the same day that the Court of Appeal issued its temporary stay, JAKKS filed a notice with the Superior Court that it was exercising its one-time peremptory challenge pursuant to the California Code of Civil Procedure to disqualify "without cause" the arbitrator chosen by the judge. Following a hearing, the Court of Appeal denied JAKKS's petition in an opinion and order filed February 28, 2008. The case has now been returned to the trial court for further proceedings. At this time, we cannot anticipate when the arbitration will commence.

We do not expect the resolution of this dispute to have a material adverse impact on our results of operations, financial position or cash flows.

Lawsuits related to our historical stock option granting practices

Kukor and Ramsey v. Haller, et. Al.    On August 25, 2006, following our announcement of the informal inquiry by the SEC, a purported shareholder derivative action captioned Ramsey v. Haller et. Al. was filed against certain of our current and former officers and directors in the California Superior Court, Los Angeles County. The complaint alleges, among other things, purported improprieties in our issuance of stock options, breach of fiduciary duty and unjust enrichment. Another lawsuit was subsequently filed by the same law firm on behalf of another purported shareholder, David Kukor, and the parties stipulated to consolidate the two actions. On or about April 19, 2007, a Consolidated Shareholder Derivative Complaint (the "Consolidated Complaint") was filed, alleging the same types of claims and quoting from various public statements by us since the filing of the original complaint. We are also named as a nominal defendant. On May 29, 2007, we filed a demurrer to the Consolidated Complaint as a whole. The demurrer was overruled by the Court on October 11, 2007, and a status conference before the Court is currently scheduled for May 28, 2008. No discovery has been conducted, nor can it be conducted absent further court order.

Although litigation is subject to inherent uncertainties, we do not believe the results of the remaining shareholder action will have a material adverse impact on our consolidated financial position or results of operations.

Other

We are also involved in additional routine litigation arising in the ordinary course of our business. In the opinion of our management, none of such pending litigation is expected to have a material adverse effect on our consolidated financial condition or results of operations.

Terminated Proccedings

SEC Informal Inquiry.    On August 4, 2006, we received an informal inquiry from the Securities and Exchange Commission ("SEC") requesting certain documents and information relating to our stock option grant practices from January 1, 1996 to the present. We fully cooperated with the SEC's inquiry and on February 27, 2008 received a notice from the SEC that its investigation of our stock option grant practices has been completed and that the SEC does not intend to recommend any action against THQ.

Item 4.    Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this Annual Report.

18

PART II

Item 5.    Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

THQ's common stock is quoted on the NASDAQ Global Select Market under the symbol "THQI." The following table sets forth, for the periods indicated, the high and low closing sales prices of our common stock as reported by the NASDAQ Global Select Market:

		Closing Sales Prices
		High		Low
Fiscal Year Ended March 31, 2008
	Fourth Quarter ended March 31, 2008	$	28.19	$	17.94
	Third Quarter ended December 31, 2007		29.63		23.39
	Second Quarter ended September 30, 2007		31.32		24.98
	First Quarter ended June 30, 2007		36.39		30.52
Fiscal Year Ended March 31, 2007
	Fourth Quarter ended March 31, 2007	$	34.33	$	29.64
	Third Quarter ended December 31, 2006		34.00		28.69
	Second Quarter ended September 30, 2006		30.87		19.74
	First Quarter ended June 30, 2006		27.76		19.65

The last reported price of our common stock on May 23, 2008, as reported by NASDAQ Global Select Market, was $20.50 per share.

Holders

As of May 23, 2008 there were approximately 303 holders of record of our common stock.

Dividend Policy

We have never paid cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the growth and development of our business and, therefore, we do not anticipate paying any cash dividends in the future.

19

Securities Authorized for Issuance Under Equity Compensation Plans

Information for our equity compensation plans in effect as of March 31, 2008 is as follows (amounts in thousands, except per share amounts):

	(a)		(b)		(c)
Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted-average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
Equity compensation plans approved by security holders	8,713,875		$	20.74	3,297,755
Equity compensation plans not approved by security holders	551,717	(1)	$	12.05	—
Total	9,265,592		$	20.22	3,297,755

(1)

Represents the aggregate number of shares of THQ common stock to be issued upon exercise of individual compensation arrangements with employee and non-employee option and warrant holders. The outstanding options were primarily granted under the Company's Third Amended and Restated Non-executive Employee Stock Option Plan (the "NEEP Plan"). For a description of the material features of the NEEP Plan, see "Note 14—Stock-based Compensation" in the notes to the consolidated financial statements. As of July 20, 2006, the Company does not grant equity awards from the NEEP or from any other non-security holder approved equity compensation plan.

Stock Price Performance Graph

The following information shall not be deemed to be "filed" with the Securities and Exchange Commission nor shall this information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate it by reference into a filing.

The following graph shows a five-year comparison of cumulative total stockholder returns for the period from March 31, 2003 through March 31, 2008, for the Company's common stock, NASDAQ Global Select Market Composite Index and the RDG Technology Index. The comparison assumes an initial investment of $100 in each on March 31, 2003. We have not paid any cash dividends and, therefore, the cumulative total return calculation is based solely upon stock price appreciation and not upon reinvestment of cash dividends.

The comparisons in the graph below are based on historical data and are not intended to forecast the possible future performance of THQ's common stock.

20

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among THQ Inc., The NASDAQ Composite Index
And The RDG Technology Composite Index

*

$100 invested on 3/31/03 in stock or index-including reinvestment of dividends. Fiscal year ending March 31.

	3/31/2003		3/31/2004		3/31/2005		3/31/2006		3/31/2007		3/31/2008
THQ Inc.	$	100.00	$	154.91	$	215.48	$	297.38	$	392.72	$	250.40
NASDAQ Composite	$	100.00	$	151.01	$	152.38	$	181.06	$	189.63	$	177.49
RDG Technology Composite	$	100.00	$	149.02	$	144.21	$	170.59	$	175.88	$	168.47

Recent Sales of Unregistered Securities

On January 18, 2008, in connection with our acquisition of Big Huge Games, Inc. ("BHG"), we issued an aggregate of 199,631 shares of our common stock to stockholders of BHG as partial consideration for the purchase of their shares of BHG. The shares are restricted from transfer and held in escrow by THQ until certain criteria are met, as set forth in the BHG stock purchase agreement. We issued and sold these shares in a transaction exempt from registration under Section 4(2) of the Securities Act of 1933 (the "Act") and/or Regulation D promulgated thereunder. The recipients of the shares were not acting as underwriters within the meaning of Section 2(a)(11) of the Act, written disclosure was made to each recipient that the shares have not been registered under the Act and, therefore, cannot be resold unless they are registered under the Act or unless an exemption from registration is available, and appropriate legends were affixed to the share certificates issued to each recipient. The issuance of these shares was made without general solicitation or advertising.

21

Purchases of Equity Securities by the Issuer and Affiliated Purchases

The following table presents the Company's repurchases of our common stock during the three months ended March 31, 2008.

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans
January 1 - January 31	—	$	—	—	$	—
February 1 - February 29	685,000		19.14	685,000		28,590,269
March 1 - March 31	—		—	—		—
Total	685,000	$	19.14	685,000	$	28,590,269

(1)

As of March 31, 2007 we had $8.5 million authorized and available for common stock repurchases. On May 15, 2007 our Board authorized the repurchase of up to $25.0 million of our common stock from time to time on the open market or in private transactions. On July 31, 2007 our Board authorized the repurchase of up to $25.0 million of our common stock from time to time on the open market or in private transactions. On October 30, 2007 our Board authorized the repurchase of up to $25.0 million of our common stock from time to time on the open market or in private transactions. During the year ended March 31, 2008, we repurchased 2,193,400 shares of our common stock for approximately $54.9 million, leaving approximately $28.6 million available for future repurchases. There is no expiration date for the authorized repurchases.

22

Item 6.    Selected Consolidated Financial Data

The following table summarizes certain selected consolidated financial data, which should be read in conjunction with our consolidated financial statements and Notes thereto and with Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere herein. The selected consolidated financial data presented below as of and for each of the fiscal years in the five-year period ended March 31, 2008 are derived from our audited consolidated financial statements. The consolidated balance sheets as of March 31, 2008, and 2007, and the consolidated statements of operations for the fiscal years ended March 31, 2008, 2007 and 2006, and the report thereon are included elsewhere in this Form 10-K.

STATEMENT OF OPERATIONS DATA
(In thousands, except per share data)

			Fiscal Year Ended March 31,
			2008			2007		2006			2005(a)			2004(b)
Net sales			$	1,030,467		$	1,026,856	$	806,560		$	756,731		$	640,846
Costs and expenses:
	Cost of sales—product costs			389,097			351,449		287,946			255,187			234,574
	Cost of sales—software amortization and royalties			231,800			165,462		116,371			93,622			105,632
	Cost of sales—license amortization and royalties			99,524			99,533		80,508			85,926			71,132
	Cost of sales—venture partner expense			24,056			16,730		12,572			9,774			9,675
	Product development			128,869			97,105		94,575			80,090			42,292
	Selling and marketing			175,288			139,958		124,809			111,444			88,295
	General and administrative			69,901			78,413		57,944			50,278			43,831
		Total costs and expenses		1,118,535			948,650		774,725			686,321			595,431
Income (loss) from continuing operations				(88,068	)		78,206		31,835			70,410			45,415
Interest and other income, net				15,433			12,822		7,955			6,483			7,720
Income (loss) from continuing operations before income taxes and minority interest				(72,635	)		91,028		39,790			76,893			53,135
		Income taxes		(35,785	)		26,206		7,621			15,235			19,063
Income (loss) from continuing operations before minority interest				(36,850	)		64,822		32,169			61,658			34,072
		Minority interest		—			136		(63	)		(261	)		—
Income (loss) from continuing operations				(36,850	)		64,958		32,106			61,397			34,072
Gain on sale of discontinued operations, net of tax				1,513			3,080		—			—			—
Net income (loss)			$	(35,337	)	$	68,038	$	32,106		$	61,397		$	34,072
Earnings (loss) per share—basic:
	Continuing operations		$	(0.55	)	$	1.00	$	0.51		$	1.05		$	0.59
	Discontinued operations			0.02			0.05		—			—			—
	Earnings (loss) per share—basic		$	(0.53	)	$	1.05	$	0.51		$	1.05		$	0.59
Earnings (loss) per share—diluted:
	Continuing operations		$	(0.55	)	$	0.96	$	0.49		$	1.02		$	0.58
	Discontinued operations			0.02			0.05		—			—			—
	Earnings (loss) per share—diluted		$	(0.53	)	$	1.01	$	0.49		$	1.02		$	0.58
Shares used in per share calculation—basic				66,475			65,039		62,615			58,545			57,279
Shares used in per share calculation—diluted				66,475			67,593		65,520			60,367			58,605

23

BALANCE SHEET DATA
(In thousands)

	As of March 31,
	2008		2007		2006		2005		2004
Working capital	$	396,505	$	562,316	$	459,558	$	400,063	$	309,633
Total assets	$	1,084,320	$	1,013,541	$	848,468	$	746,606	$	527,901
Stockholders' equity	$	740,569	$	768,957	$	627,751	$	547,758	$	437,879

Notes:

(a)

Net income includes a $7.8 million benefit for research and development income tax credits claimed for prior years.

(b)

Net income includes a $4.0 million benefit for a settlement of a dispute with directors' and officers' insurance carrier, net of tax.

24

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

The following is a discussion of our operating results and the primary trends that affect our business. Certain of these trends and other statements made herein may be "forward-looking" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are included herein because we believe that an understanding of these trends is important to understand our results for fiscal 2008, as well as our future prospects. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this Form 10-K, including in the remainder of "Management's Discussion and Analysis of Financial Condition and Results of Operations" or the consolidated financial statements and related notes. The discussion and analysis herein may be understood more fully by reference to the consolidated financial statements and notes to the consolidated financial statements. Additionally, readers should refer to our cautionary statement on page 1 herein as well as "Risk Factors" set forth in Item 1A. All references to "we," "us," "our," "THQ," or the "Company" in the following discussion and analysis mean THQ Inc. and its subsidiaries.

Overview of Fiscal 2008 Results

Net sales in fiscal 2008 were $1,030.5 million, up from $1,026.9 million. Year-over-year growth in the WWE franchise was due to strong sales of WWE SmackDown vs. Raw 2008, which shipped six million units in fiscal 2008, and the strong performance of our owned intellectual properties, MX vs. ATV Untamed, Frontlines: Fuel of War and Drawn to Life, was largely offset by weakness in our kids games and under-performance of the Juiced 2: Hot Import Nights, Stuntman: Ignition and Conan titles relative to our expectations. Despite higher sales in fiscal 2008, our operating margin was (9)% as compared to 8% in fiscal 2007. The decline in operating margin was primarily due to higher sales returns and allowances, accelerated amortization of software development, write-offs related to the cancellation of projects in development, higher product development expenses and higher selling and marketing expenses as a percentage of net sales in fiscal 2008 as compared to fiscal 2007.

Our net loss from continuing operations for fiscal 2008 was $36.8 million, or $0.55 per diluted share, compared to net income from continuing operations of $65.0 million, or $0.96 per diluted share, for fiscal 2007. Our net loss for fiscal 2008 was $35.3 million, or $0.53 per diluted share, and included a $1.5 million gain on sale of discontinued operations.

Cash used in operations was $9.7 million during fiscal 2008, as compared to cash provided by operations of $64.0 million in fiscal 2007. The increase in cash used was primarily a result of our fiscal 2008 net loss as compared to fiscal 2007 net income and an increase in accounts receivable due to higher net sales and the timing of product releases in the three months ended March 31, 2008 as compared to the same period last fiscal year, partially offset by higher non-cash amortization of licenses and software development in fiscal 2008 as compared to fiscal 2007.

Trends Affecting Our Business

We operate in one business segment: video game development, publishing and distribution. We derive revenue principally from sales of packaged interactive software games designed for play on video game consoles, handheld devices and personal computers. The significant trends that affect our business include the following:

Products.    In order to increase revenues while facing higher development costs, we believe it is increasingly important in our industry to have a robust and diversified product portfolio. The success of our product portfolio relative to our competition is a principle driver of our continued success. In recent years, we have focused our efforts on growing both our owned intellectual properties and our licensed brands. As a result of these efforts, we believe we can continue to grow our revenues at or above the video game software market growth rate.

25

Development Costs.    The current generation consoles have increased functionality (e.g. realistic environments and artificial intelligence) over their legacy counterparts. The increased functionality delivers a more exciting gaming experience but adds complexity to the development of video games for these new consoles. This complexity increases the overall cost to develop these games and accordingly, during fiscal 2009, we expect our average software development costs to increase as we develop more games for these new consoles.

Online Gaming.    Online gaming is growing rapidly in popularity. According to the NPD report, "Online Gaming 2007: The Virtual Landscape," 62% of gamers report playing games online. With technology advances over the past few years, gamers can play online via PC, console and handheld systems. In fiscal 2008, we launched Frontlines: Fuel of War, which had online capability. MMO gaming has become popular, especially in Asia. In fiscal 2009, we plan to launch Company of Heroes Online in the Chinese market, which marks our first entry into the free-to-play, pay for download model of video games.

Platform Market Segmentation.    In fiscal 2008, our industry continued to transition from the legacy consoles to the current generation consoles, Microsoft Xbox 360, Sony PlayStation 3 ("PS3") and Nintendo Wii. Additionally, the Nintendo DS and Sony PSP handhelds continued to grow. With the current generation of console systems and current handheld platforms, we believe segmenting our market will be extremely important. We have designed our publishing strategy to take advantage of the unique feature sets of the new consoles, handhelds and PC. Our strategy to reach core gamers focuses on the Xbox 360, PS3 and PC platforms. Our mass-market brands are targeted primarily for the Nintendo Wii, PS2 and DS platforms. We plan to publish some of our licensed brands, such as WWE and Disney•Pixar across all viable platforms.

International growth.    Over the past few years, sales of video games outside of the United States have grown significantly. In fiscal 2008, international net sales increased 24% to $527.3 million, from $426.7 million in fiscal 2007. The international installed base of video game platforms continues to increase, and we are focused on expanding our international presence by identifying territories where we see opportunity and establishing a direct sales presence to seize such opportunities. In addition to our sales force presence, we are focused on releasing and aggressively marketing titles with international appeal. We continue to evaluate new business opportunities in the Asia Pacific region.

Critical Accounting Estimates

The Management's Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The estimates discussed below are considered by management to be critical because they are both important to the portrayal of our financial condition and results of operations and because their application places the most significant demands on management's judgment, with financial reporting results relying on estimates about the effect of matters that are inherently uncertain. Specific risks for these critical accounting estimates are described in the following paragraphs. For all of these estimates, we caution that actual results may differ materially from these estimates under different assumptions or conditions.

Accounts receivable allowances.    We derive revenue from sales of packaged software for video game systems and personal computers and sales of content and services for wireless devices. Product revenue is recognized net of allowances for price protection and returns and various customer discounts. We typically only allow returns for our personal computer products; however, we may decide to provide price protection or allow returns for our video games after we analyze the following:

•

inventory remaining in the retail channel,

26

•

the rate of inventory sell-through in the retail channel, and



•

our remaining inventory on hand.

We maintain a policy of giving credits for price protection and returns, but do not give cash refunds. Included in our accounts receivable allowances is our allowance for co-operative advertising that we engage in with our retail channel partners. Our co-operative advertising allowance is based upon specific contractual commitments and does not involve estimates made by management.

We establish sales allowances based on estimates of future price protection and returns with respect to current period product revenue. We analyze historical price protection granted, historical returns, current sell-through of retailer and distributor inventory of our products, current trends in the video game market and the overall economy, changes in customer demand and acceptance of our products, and other related factors when evaluating the adequacy of the price protection and returns allowance. In addition, we monitor the volume of our sales to retailers and distributors and their inventories, because slow-moving inventory in the distribution channel can result in the requirement for price protection or returns in subsequent periods. Actual price protection and returns in any future period are uncertain. While we believe we can make reliable estimates for these matters, if we changed our assumptions and estimates, our price protection and returns reserves would change, which would impact the net revenue we report. In addition, if actual price protection and returns were significantly greater than the reserves we have established, the actual results of our reported net sales would decrease. Conversely, if actual price protection and returns were significantly less than our reserves, our reported net sales would increase.

Similarly, we must use significant judgment and make estimates in connection with establishing allowances for doubtful accounts in any accounting period. We analyze customer concentrations, customer credit-worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. Material differences may result in the amount and timing of our bad debt expense for any period if we made different judgments or utilized different estimates. If our customers experience financial difficulties and are not able to meet their ongoing financial obligations to us, our results of operations may be adversely impacted.

Licenses.    Minimum guaranteed royalty payments for intellectual property licenses are initially recorded on our balance sheet as an asset (licenses) and as a liability (accrued royalties) at the contractual amount upon execution of the contract if no significant performance obligation remains with the licensor. When a significant performance obligation remains with the licensor, we record royalty payments as an asset (licenses) and as a liability (accrued royalties) when payable rather than upon execution of the contract. Royalty payments for intellectual property licenses are classified as current assets and current liabilities to the extent such royalty payments relate to anticipated product sales during the subsequent year and long-term assets and long-term liabilities if such royalty payments relate to anticipated product sales after one year.

We evaluate the future recoverability of our capitalized licenses on a quarterly basis. The recoverability of capitalized license costs is evaluated based on the expected performance of the specific products in which the licensed trademark or copyright is to be used. As many of our licenses extend for multiple products over multiple years, we also assess the recoverability of capitalized license costs based on certain qualitative factors such as the success of other products and/or entertainment vehicles utilizing the intellectual property, whether there are any future planned theatrical releases or television series based on the intellectual property and the rights holder's continued promotion and exploitation of the intellectual property. Prior to the related product's release, we expense, as part of cost of sales—license amortization and royalties, capitalized license costs when we estimate such amounts are not recoverable.

Licenses are expensed to cost of sales—license amortization and royalties at the higher of (i) the contractual royalty rate based on actual net product sales related to such license, or (ii) an effective rate based upon total projected revenue related to such license. When, in management's estimate, future cash flows will not be sufficient to recover previously capitalized costs, we expense these capitalized costs to cost

27

of sales—license amortization and royalties. If actual revenues or revised forecasted revenues fall below the initial forecasted revenue for a particular license, the charge to cost of sales—license amortization and royalties expense may be larger than anticipated in any given quarter. As of March 31, 2008, the net carrying value of our licenses was $86.8 million. If we were required to write off licenses, due to changes in market conditions or product acceptance, our results of operations could be materially adversely affected.

Software Development.    We utilize both internal development teams and third-party software developers to develop our software. We account for software development costs in accordance with Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standard ("SFAS") No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed" ("FAS 86"). We capitalize software development costs once technological feasibility is established and we determine that such costs are recoverable against future revenues. For products where proven game engine technology exists, this may occur early in the development cycle. We capitalize the milestone payments made to third-party software developers and the direct payroll and overhead costs for our internal development teams. We evaluate technological feasibility on a product-by-product basis. Amounts related to software development for which technological feasibility is not yet met are charged as incurred to product development expense in our consolidated statements of operations.

On a quarterly basis, we compare our unamortized software development costs to net realizable value, on a product-by-product basis. The amount by which any unamortized software development costs exceed their net realizable value is charged to cost of sales—software amortization and royalties. The net realizable value is the estimated future net revenues from the product, reduced by the estimated future direct costs associated with the product such as completion costs, cost of sales and advertising.

Commencing upon product release, capitalized software development costs are amortized to cost of sales—software amortization and royalties based on the ratio of current gross revenues to total projected gross revenues. If actual gross revenues, or revised projected gross revenues, fall below the initial projections, the charge to cost of sales—software amortization and royalties may be larger than anticipated in any given quarter. In fiscal 2008, we recorded approximately $35.4 million of accelerated amortization due to the underperformance of certain previously released games and approximately $23.9 million of additional amortization expense related to the cancellation of certain games. As of March 31, 2008, the net carrying value of our software development was $181.2 million.

The milestone payments made to our third-party developers during their development of our games are typically considered non-refundable advances against the total compensation they can earn based upon the sales performance of the products. Any additional compensation earned beyond the milestone payments is expensed to cost of sales—software amortization and royalties as earned.

Goodwill and Other Intangible Assets.    We perform our annual review for goodwill impairment on the first day of our fourth fiscal quarter, or more frequently if indicators of potential impairment exist. We performed an annual review of goodwill impairment in each of the fiscal years ended March 31, 2008, 2007 and 2006 and found no impairment. Our impairment review process is based on a discounted future cash flow approach that uses our estimates of revenue for our reporting unit, driven by anticipated success of our products and product release schedules, and estimated costs as well as appropriate discount rates. These estimates are consistent with the plans and estimates that we use to manage the underlying business. All identifiable intangible assets with finite lives will continue to be amortized over their estimated useful lives and assessed for impairment under SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."

Based on these judgments and assumptions, we determine whether we need to take an impairment charge to reduce the value of the goodwill and indefinite-lived intangible assets stated on our balance sheets to reflect their estimated fair values. Judgments and assumptions about future values are complex and often subjective. They can be affected by a variety of factors, including, but not limited to, significant negative industry or economic trends, significant changes in the manner or use of the acquired assets or the strategy

28

of our overall business and significant underperformance relative to expected historical or projected future operating results. Although we believe the judgments and assumptions we have made in the past have been reasonable and appropriate, there is nonetheless a high degree of uncertainty and judgment involved.

We continue to encounter the risks and difficulties faced with launching or acquiring a new business. When the business is a development studio, we look for ways to maximize the talent and intellectual property within the studio. We make judgments and assumptions as to the commercial success and quantity of games developed by a particular studio. Different judgments and assumptions could materially impact our reported financial results. For example, if we do not develop games with the same commercial success or the same number of games as we have estimated, we may need to take an impairment charge against goodwill in the future. More conservative assumptions of the anticipated future benefits from these businesses would result in lower fair values which could result in impairment charges, which would decrease net income and result in lower asset values on our balance sheets. Conversely, less conservative assumptions would result in higher fair values which could result in lower impairment charges and higher net income.

Revenue Recognition.    Our revenue recognition policies are in compliance with American Institute of Certified Public Accountants Statement of Position ("SOP") 97-2, "Software Revenue Recognition," as amended by SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions," which provide guidance on generally accepted accounting principles ("GAAP") for recognizing revenue on software transactions, and Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition in Financial Statements," which outlines the basic criteria that must be met to recognize revenue and provides guidance for presentation of revenue and for disclosure related to revenue recognition policies in financial statements filed with the Securities and Exchange Commission ("SEC").

Some of our packaged software products are developed with the ability to be connected to, and played via, the internet. In order for consumers to participate in online communities and play against one another via the internet, we (either directly or through outsourced arrangements with third parties) maintain servers that support an online service we provide to consumers for activities such as matchmaking, roster updates, tournaments and player rankings. Generally, we consider the online service to be incidental to the overall product offering and an inconsequential deliverable. Accordingly, we do not defer any revenue related to products containing the limited online service.

In instances where the online service is considered a substantive deliverable in addition to the software product, we account for the sale as a "bundled" sale, or multiple element arrangement, in which we sell both the packaged software product and the online service for one combined price. Vendor specific objective evidence for the fair value of the online service does not exist as we do not separately offer or charge for the online service. Therefore, when the online service is determined to be a substantive deliverable, we recognize the revenue from sales of such software products ratably over the estimated online service period of six months, beginning the month after shipment of the software product. Costs of sales related to such products are also deferred and recognized with the related revenues and include product costs, software amortization and royalties, and license amortization and royalties.

Determining whether the online service for a particular game constitutes a substantive deliverable is subjective and requires management's judgment. Determining the estimated service period over which to recognize the related revenue and costs of sales is also subjective and involves management's judgment.

During fiscal 2008, we determined the online service for one of our titles, Frontlines: Fuel of War (on PC and Xbox 360), is a substantive deliverable in addition to the packaged software, primarily because of its significance to game play. We will recognize all of the revenue and related costs of sales from the sale of this game ratably over the service period, which we have estimated to be six months beginning the month after shipment. At March 31, 2008 the deferred revenue related to this game was $30.9 million and is included within Accrued and Other Current Liabilities in our Consolidated Balance Sheet.

29

Stock-based compensation.    We adopted SFAS No. 123(R) "Share-Based Payment" ("FAS 123R") in our first quarter of fiscal 2007 and accordingly, we now record stock-based compensation expense for all of our stock-based awards. The adoption of this accounting pronouncement had a material impact on our consolidated statement of operations and our cash flows from operating and financing activities for fiscal 2007. See "Note 14—Stock-based Compensation" in the notes to the consolidated financial statements.

Under FAS 123R, we estimate the fair value of stock options granted using the Black-Scholes option pricing model. The fair value for awards that are expected to vest is then amortized on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. The amount of expense recognized represents the expense associated with the stock options we expect to ultimately vest based upon an estimated rate of forfeitures; this rate of forfeitures is updated as necessary and any adjustments needed to recognize the fair value of options that actually vest or are forfeited are recorded. The Black-Scholes option pricing model, used to estimate the fair value of an award, requires the input of subjective assumptions, including the expected volatility of our common stock and an option's expected life. As a result, the financial statements include amounts that are based upon our best estimates and judgments relating to the expenses recognized for stock-based compensation. We adopted FAS 123R under the modified prospective transition method wherein no prior period financial statement information was affected. All prior period financial statements include stock-based compensation accounted for under Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and the disclosure only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," as amended ("FAS 123"). The financial statements for fiscal 2008 and 2007, include stock-based compensation accounted for under FAS 123R. There were no material differences in valuation methodologies or assumptions compared to those that were used in estimating the fair value of stock options under the disclosure only provisions of FAS 123.

The following table sets forth the amount of stock-based compensation expense recognized in fiscal 2008, 2007 and 2006 (in thousands):

		Year Ended March 31,
		2008		2007		2006
Cost of sales—software amortization and royalties		$	6,800	$	2,087	$	—
Product development			4,773		3,364		926
Selling and marketing			2,654		2,817		981
General and administrative			8,444		10,704		1,515
	Total stock-based compensation expense	$	22,671	$	18,972	$	3,422

Income taxes.    As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves: (i) estimating our current tax exposure in each jurisdiction including the impact, if any, of changes or interpretations to applicable tax laws and regulations, (ii) estimating additional taxes resulting from tax examinations and (iii) making judgments regarding the recoverability of deferred tax assets. To the extent recovery of deferred tax assets is not likely based on our estimates of future taxable income in each jurisdiction, a valuation allowance is established.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due. Our estimate for the potential outcome for any uncertain tax issue, including our claims for research and development income tax credits, requires judgment. We believe we have adequately provided for any reasonably foreseeable outcome related to these matters. However, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period in which they are resolved or when statutes of limitation on potential assessments expire.

30

As of April 1, 2007, we adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109" ("FIN 48"). Previously, we had accounted for income tax contingencies in accordance with SFAS No. 5, "Accounting for Contingencies." As required by FIN 48, we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For income tax positions meeting the "more likely than not" threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date, we applied FIN 48 to all income tax positions for which the statute of limitations remained open. Our adoption of FIN 48 on April 1, 2007 had no impact on our April 1, 2007 beginning retained earnings balance. The amount of unrecognized tax benefits as of April 1, 2007 and March 31, 2008 was $18.6 million and $11.6 million, respectively. The contingent tax liability relates to tax positions taken in previously filed tax returns and similar positions expected to be taken in our current year income tax returns. A portion of the contingent tax liability relates to fiscal years under examination. On May 24, 2007 we received notification from the IRS that the Joint Committee on Taxation had completed its review of our file and took no exception to the conclusions reached by the IRS. We have evaluated the impact of the conclusions reached in the IRS examination in the FIN 48 measurement and recognition process. We are currently under routine examination by the IRS for our income tax returns for fiscal years 2004 through 2007 and by various state jurisdictions for fiscal years subsequent to 2003. We do not expect these examinations to be concluded and settled in the next 12 months, therefore, we are currently unable to estimate the potential impact to the liability for unrecognized tax benefits or the timing of such changes. We do not anticipate any significant changes in the unrecognized tax benefits in fiscal 2009 related to the expiration of the statutes of limitations.

Recently Issued Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurement" ("FAS 157"). FAS 157 provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities. In February 2008, the FASB issued FSP FAS 157-2, "Effective Date of FASB Statement No. 157" which defers the implementation for certain non-recurring, nonfinancial assets and liabilities from fiscal years beginning after November 15, 2007 to fiscal years beginning after November 15, 2008, which will be our fiscal year 2010. The statement provisions effective as of April 1, 2008, do not have a material effect on our results of operations, financial position, or cash flows. We are evaluating the impact, if any, the adoption of the remaining provisions will have on our results of operations, financial position or cash flows.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115" ("FAS 159"). FAS 159 permits an entity to choose to measure many financial instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. We adopted this statement on April 1, 2008 and did not make this election. As such, the adoption of this statement did not have any impact on our results of operations, financial position or cash flows.

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("FAS 162"). FAS 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with GAAP for nongovernmental entities. FAS 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles." We do not expect the adoption of this statement to have a material impact on our results of operations, financial position or cash flows.

31

In December 2007, the FASB issued SFAS No. 141R, "Business Combinations" ("FAS 141R"). FAS 141R retains the fundamental requirements in FAS 141 that the acquisition method of accounting (which FAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. FAS 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. FAS 141R is effective for business combination transactions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, which will be our fiscal year 2010. We are evaluating the impact, if any, the adoption of this statement will have on our results of operations, financial position or cash flows.

In April 2008, the FASB issued FSP FAS 142-3, "Determination of the Useful Life of Intangible Assets" ("FSP 142-3"). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, "Goodwill and Other Intangible Assets" ("FAS 142"). This change is intended to improve the consistency between the useful life of a recognized intangible asset under FAS 142 and the period of expected cash flows used to measure the fair value of the asset under FAS 141R and other GAAP. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, which will be our fiscal year 2010. The requirement for determining useful lives must be applied prospectively to intangible assets acquired after the effective date and the disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. We do not expect the adoption of this statement to have a material impact on our results of operations, financial position or cash flows.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements" ("FAS 160"). This Statement amends ARB 51 to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. FAS 160 is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008, which will be our fiscal year 2010. We are evaluating the impact, if any, the adoption of this statement will have on our results of operations, financial position or cash flows.

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133" ("FAS 161"). This Statement changes the disclosure requirements for derivative instruments and hedging activities. Under FAS 161, entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. FAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, which will be our fiscal year 2010. We are evaluating the impact, if any, the adoption of this statement will have on our results of operations, financial position or cash flows.

In December 2007, the FASB ratified the Emerging Issues Task Force's ("EITF") consensus on EITF Issue No 07-1, "Accounting for Collaborative Arrangements" that discusses how parties to a collaborative arrangement (which does not establish a legal entity within such arrangement) should account for various activities. The consensus indicates that costs incurred and revenues generated from transactions with third parties (i.e. parties outside of the collaborative arrangement) should be reported by the collaborators on the respective line items in their income statements pursuant to EITF Issue No. 99-19, "Reporting Revenue Gross as a Principal Versus Net as an Agent". Additionally, the consensus provides that income statement characterization of payments between the participation in a collaborative arrangement should be based upon existing authoritative pronouncements; analogy to such pronouncements if not within their scope; or a reasonable, rational, and consistently applied accounting policy election. EITF Issue No. 07-1 is

32

effective for interim or annual reporting periods in fiscal years beginning after December 15, 2008, which is our fiscal 2010 and is to be applied retrospectively to all periods presented for collaborative arrangements existing as of the date of adoption. We are currently evaluating the impact, if any, the adoption of this standard will have on our results of operations, financial position or cash flows.

In June 2007, the FASB ratified the EITF consensus conclusion on EITF 07-3, "Accounting for Advance Payments for Goods or Services to be Used in Future Research and Development". EITF 07-3 addresses the diversity which exists with respect to the accounting for the non-refundable portion of a payment made by a research and development entity for future research and development activities. Under this conclusion, an entity is required to defer and capitalize non-refundable advance payments made for research and development activities until the related goods are delivered or the related services are performed. EITF 07-3 is effective for interim or annual reporting periods in fiscal years beginning after December 15, 2007, which is our fiscal 2009, and requires prospective application for new contracts entered into after the effective date. We do not expect the adoption of EITF 07-3 to have a material impact on our results of operations, financial position or cash flows.

Results of Operations

Comparison of Fiscal 2008 to Fiscal 2007

Our net loss from continuing operations for fiscal 2008 was $36.8 million, or $0.55 per diluted share, compared to net income from continuing operations of $65.0 million, or $0.96 per diluted share, for fiscal 2007. Our net loss for fiscal 2008 was $35.3 million, or $0.53 per diluted share, and included a $1.5 million gain on sale of discontinued operations.

Net Sales

We derive revenue principally from sales of packaged interactive software games designed for play on video game consoles, handheld devices and personal computers. We also derive revenue through downloads by mobile phone users of our wireless content.

In fiscal 2008, we deferred revenue for one of our titles, Frontlines: Fuel of War, on both PC and Xbox 360. We will recognize revenue from the sale of this title over an estimated service period of six months, beginning the month after shipment. At March 31, 2008 the deferred revenue related to this game was $30.9 million and is included within accrued and other current liabilities in our consolidated balance sheet. At March 31, 2008 the deferred costs related to this game were $20.7 million and are included within software development and prepaid expenses and other current assets in our consolidated balance sheet.

The following table details our net sales by territory for fiscal 2008 and fiscal 2007 (in thousands):

	Fiscal Year Ended March 31,
									Increase/ (Decrease)			% Change
	2008				2007
North America	$	503,134	48.8	%	$	600,159	58.4	%	$	(97,025	)	(16.2	)%
Europe		454,880	44.2			365,406	35.6			89,474		24.5	%
Asia Pacific		72,453	7.0			61,291	6.0			11,162		18.2	%
International		527,333	51.2			426,697	41.6			100,636		23.6	%
Consolidated net sales	$	1,030,467	100.0	%	$	1,026,856	100.0	%	$	3,611		0.4	%

Net sales increased by $3.6 million in fiscal 2008 as compared to fiscal 2007, from $1,026.9 million to $1,030.5 million. Worldwide net sales in fiscal 2008 were primarily driven by sales of WWE SmackDown vs. Raw! 2008, Ratatouille and sales of our catalog titles.

33

North America net sales decreased by $97.0 million in fiscal 2008 as compared to fiscal 2007. The decrease in North America net sales was primarily due to the following:

•

sales of Ratatouille in fiscal 2008 were outperformed by sales of Cars in fiscal 2007, and



•

a decline in sales of games based on our Nickelodeon license in fiscal 2008, including Avatar: The Burning Earth as compared to sales of games based on our Nickelodeon license in fiscal 2007, including Avatar: The Last Airbender, partially offset by



•

an increase in sales of WWE SmackDown vs. Raw! 2008 in fiscal 2008 as compared to WWE SmackDown vs. Raw! 2007 in fiscal 2007, and



•

an increase in sales of our owned intellectual properties, including MX vs. ATV Untamed in fiscal 2008.

International net sales increased by $100.6 million in fiscal 2008 as compared to fiscal 2007. The increase in international net sales was primarily due to the following:

•

an increase in sales of WWE SmackDown vs. Raw! 2008 in fiscal 2008 as compared to WWE SmackDown vs. Raw! 2007 in fiscal 2007,



•

an increase in sales of our owned intellectual properties, including Juiced 2: Hot Import Nights, Stuntman: Ignition and MX vs. ATV Untamed in fiscal 2008, and



•

sales of Cars 2: Mater National in fiscal 2008, with no comparable title in fiscal 2007.

Changes in foreign currency rates increased reported international net sales by $44.6 million or 10% in fiscal 2008, as compared to fiscal 2007. Excluding the impacts of foreign exchange rates, international net sales increased by 13% in fiscal 2008 as compared to fiscal 2007.

Net Sales by Platform

Our worldwide net sales by platform for fiscal 2008 and fiscal 2007 are as follows (in thousands):

		Fiscal Year Ended March 31,
Platform										Increase/ (Decrease)			% Change
		2008				2007
Consoles
	Microsoft Xbox 360	$	129,483	12.6	%	$	134,908	13.1	%	$	(5,425	)	(4.0	)%
	Microsoft Xbox		2,278	0.2			27,476	2.7			(25,198	)	(91.7	)%
	Nintendo Wii		91,431	8.9			30,025	2.9			61,406		204.5	%
	Nintendo GameCube		7,090	0.7			52,338	5.1			(45,248	)	(86.5	)%
	Sony PlayStation 3		85,533	8.3			—	—			85,533		—	%
	Sony PlayStation 2		252,642	24.5			304,916	29.7			(52,274	)	(17.1	)%
			568,457	55.2			549,663	53.5			18,794		3.4	%
Handheld
	Nintendo Dual Screen		226,912	22.0			114,143	11.1			112,769		98.8	%
	Nintendo Game Boy Advance		36,655	3.6			119,869	11.7			(83,214	)	(69.4	)%
	Sony PlayStation Portable		84,030	8.2			65,402	6.4			18,628		28.5	%
	Wireless		19,751	1.9			26,467	2.6			(6,716	)	(25.4	)%
			367,348	35.7			325,881	31.8			41,467		12.7	%
PC			94,264	9.1			149,546	14.6			(55,282	)	(37.0	)%
Other			398	0.0			1,766	0.1			(1,368	)	(77.5	)%
Net Sales		$	1,030,467	100.0	%	$	1,026,856	100.0	%	$	3,611		0.4	%

34

Console Platforms

Net sales for console platforms increased by 3% in fiscal 2008 to $568.5 million from $549.7 million in fiscal 2007. In fiscal 2008, sales of games for the Sony PlayStation 2 ("PS2") constituted 44% of our sales for console platforms, down from 55% of total console sales in fiscal 2007, while sales of games on the Sony PlayStation 3 ("PS3") and Nintendo Wii ("Wii") climbed from approximately zero and 5%, respectively of total console sales in fiscal 2007 to 15% and 16%, respectively in fiscal 2008. We released 40 and 31 new titles for console platforms in fiscal 2008 and fiscal 2007, respectively.

Microsoft Xbox 360 Net Sales (in thousands)

Year Ended March 31, 2008	% of net sales	Year Ended March 31, 2007	% of net sales	% change
$129,483	12.6%	$134,908	13.1%	(4.0)%

In fiscal 2008, net sales of video games for Xbox 360 were primarily driven by sales of WWE SmackDown vs. Raw! 2008, and sales of games based on our owned intellectual properties, including MX vs. ATV Untamed, Stuntman: Ignition and Juiced 2: Hot Import Nights. We released 10 and five new titles in fiscal 2008 and fiscal 2007, respectively. Although we released five more titles in fiscal 2008 as compared to fiscal 2007, net sales decreased by $5.4 million primarily due to the following:

•

the deferral of revenue from sales of Frontlines: Fuel of War (see Critical Accounting Estimates for information regarding our revenue recognition policies),



•

fiscal 2008 net sales included Stuntman: Ignition and Juiced 2: Hot Import Nights, both of which had a high rate of sales returns and allowances and underperformed relative to our expectations, and



•

fiscal 2007 included the launch of our owned intellectual property Saints Row, which had premium pricing and sold well over a million units.

Microsoft Xbox Net Sales (in thousands)

Year Ended March 31, 2008	% of net sales	Year Ended March 31, 2007	% of net sales	% change
$2,278	0.2%	$27,476	2.7%	(91.7)%

In fiscal 2008, net sales of video games for Microsoft Xbox ("Xbox") were primarily driven by sales of our catalog titles. We released one and three new titles in fiscal 2008 and fiscal 2007, respectively. Net sales decreased by $25.2 million in fiscal 2008 as compared to fiscal 2007 primarily due to consumer demand shifting to games for Microsoft's current generation console, Xbox 360.

Nintendo Wii Net Sales (in thousands)

Year Ended March 31, 2008	% of net sales	Year Ended March 31, 2007	% of net sales	% change
$91,431	8.9%	$30,025	2.9%	204.5%

In fiscal 2008, net sales of video games for Wii were primarily driven by sales of WWE SmackDown vs. Raw! 2008, as well as sales of Ratatouille and Cars 2: Mater-National. We released 10 and four new titles in fiscal 2008 and fiscal 2007, respectively. Net sales increased by $61.4 million in fiscal 2008 as compared to fiscal 2007 primarily due to the following:

•

the release of WWE SmackDown vs. Raw! 2008 in fiscal 2008 with no WWE title released on Wii in fiscal 2007,

35

•

the release of six additional titles in fiscal 2008 as compared to fiscal 2007, and



•

an increase in sales of our catalog titles in fiscal 2008 as compared to fiscal 2007.

Nintendo GameCube Net Sales (in thousands)

Year Ended March 31, 2008	% of net sales	Year Ended March 31, 2007	% of net sales	% change
$7,090	0.7%	$52,338	5.1%	(86.5)%

In fiscal 2008, net sales of video games for Nintendo GameCube ("GameCube") were driven by sales of Ratatouille and our catalog titles. Net sales decreased by $45.2 million in fiscal 2008 as compared to fiscal 2007 primarily due to only one new release, Ratatouille, in fiscal 2008, as compared to eight new releases, including Cars, in fiscal 2007. The decrease is also due to consumer demand shifting to games for Nintendo's current generation console, Wii.

Sony PlayStation 3 Net Sales (in thousands)

Year Ended March 31, 2008	% of net sales	Year Ended March 31, 2007	% of net sales	% change
$85,533	8.3%	$—	—%	—%

Sony released its current generation console, PS3 in November 2006. In fiscal 2008, net sales of video games for PS3 were primarily driven by WWE SmackDown vs. Raw! 2008 and sales of our owned intellectual properties MX vs. ATV Untamed, Juiced 2: Hot Import Nights and Stuntman: Ignition. We released seven new titles in fiscal 2008 and plan to release additional titles for PS3 as the installed base continues to grow.

Sony PlayStation 2 Net Sales (in thousands)

Year Ended March 31, 2008	% of net sales	Year Ended March 31, 2007	% of net sales	% change
$252,642	24.5%	$304,916	29.7%	(17.1)%

In fiscal 2008, net sales of video games for PS2 were primarily driven by sales of WWE SmackDown vs. Raw! 2008 and sales of our catalog titles. We released 11 new titles in both fiscal 2008 and fiscal 2007. Net sales decreased by $52.3 million in fiscal 2008 as compared to fiscal 2007 primarily due to a decrease in sales of new releases in the North America markets, including:

•

sales of Ratatouille in fiscal 2008 as compared to stronger performance of Cars in fiscal 2007,



•

stronger sales of games based on our Nickelodeon license in fiscal 2007, and



•

sales of WWE SmackDown vs. Raw! 2008 in fiscal 2008 as compared to stronger performance of WWE SmackDown vs. Raw! 2007 in fiscal 2007.

Sony released its current generation console, PS3, in November 2006 and some of the sales decline in fiscal 2008 is attributable to consumer demand shifting to PS3. We expect sales of games for PS2 to continue to decline over time as the installed base for PS3 continues to grow and consumer demand continues to shift to PS3.

Handheld Platforms

Net sales for handheld platforms increased by 13% in fiscal 2008 to $367.3 million from $325.9 million in fiscal 2007. Consistent with our expectations, net sales of games for Nintendo's Dual Screen ("DS") and

36

Sony's PlayStation Portable ("PSP") continued to increase in fiscal 2008 with the growth of the installed base, while net sales of games for Game Boy Advance ("GBA") declined from 37% of game sales for handheld platforms in fiscal 2007 to 10% in fiscal 2008. We released 30 and 27 new handheld titles in fiscal 2008 and fiscal 2007, respectively.

Nintendo Dual Screen Net Sales (in thousands)

Year Ended March 31, 2008	% of net sales	Year Ended March 31, 2007	% of net sales	% change
$226,912	22.0%	$114,143	11.1%	98.8%

In fiscal 2008, net sales of video games for DS were primarily driven by sales of Ratatouille, our owned intellectual property, Drawn to Life, and sales of our catalog titles. We released 18 and nine new titles in fiscal 2008 and fiscal 2007, respectively. Net sales increased by $112.8 million in fiscal 2008 as compared to fiscal 2007 primarily due to the following:

•

the release of nine additional titles in fiscal 2008 as compared to fiscal 2007, including Drawn to Life and WWE SmackDown vs. Raw! 2008, and



•

an increase in sales of our catalog titles in fiscal 2008 as compared to fiscal 2007.

The installed base of DS hardware is expected to continue growing, and we plan to continue our strong lineup of mass-market titles for this platform.

Nintendo Game Boy Advance Net Sales (in thousands)

Year Ended March 31, 2008	% of net sales	Year Ended March 31, 2007	% of net sales	% change
$36,655	3.6%	$119,869	11.7%	(69.4)%

In fiscal 2008, net sales of video games for GBA were primarily driven by Ratatouille and sales of our catalog titles. We released six and 13 new titles in fiscal 2008 and fiscal 2007, respectively. Net sales decreased by $83.2 million in fiscal 2008 as compared to fiscal 2007 primarily due to consumer demand shifting to DS. We expect sales of games for GBA to continue to decline over time as a result of consumer demand shifting to DS.

PlayStation Portable Net Sales (in thousands)

Year Ended March 31, 2008	% of net sales	Year Ended March 31, 2007	% of net sales	% change
$84,030	8.2%	$65,402	6.4%	28.5%

In fiscal 2008, net sales of video games for PSP were primarily driven by sales of WWE SmackDown vs. Raw! 2008, Ratatouille, and sales of our catalog titles. We released six and five new titles in fiscal 2008 and fiscal 2007, respectively. Net sales increased by $18.6 million in fiscal 2008 as compared to fiscal 2007 primarily due to the following:

•

an increase in sales of WWE SmackDown vs. Raw! 2008 in fiscal 2008 as compared to sales of WWE SmackDown vs. Raw! 2007 in fiscal 2007,



•

sales of our owned intellectual property MX vs. ATV Untamed in fiscal 2008, and



•

an increase in sales of our catalog titles in fiscal 2008 as compared to fiscal 2007, partially offset by



•

sales of Ratatouille in fiscal 2008 as compared to stronger performance of Cars in fiscal 2007.

37

As the installed base of PSP hardware continues to grow, we expect to continue to bring more titles to the platform.

Wireless Net Sales (in thousands)

Year Ended March 31, 2008	% of net sales	Year Ended March 31, 2007	% of net sales	% change
$19,751	1.9%	$26,467	2.6%	(25.4)%

Wireless net sales consist of sales of wireless games and other content such as wireless wallpapers and ringtones. Prior to December 1, 2006 we also derived wireless revenue by providing infrastructure services for the delivery of wireless content and entertainment through our controlling interest in Minick Holding AG ("Minick").

In fiscal 2008, wireless net sales were primarily driven by games and other content based on Worms, Star Wars and major sports leagues. Wireless net sales decreased by $6.7 million in fiscal 2008 as compared to fiscal 2007 primarily due to fiscal 2007 including revenue from our controlling interest in Minick, which was sold in December 2006.

We expect wireless net sales to increase in fiscal 2009, as compared to fiscal 2008.

PC Net Sales (in thousands)

Year Ended March 31, 2008	% of net sales	Year Ended March 31, 2007	% of net sales	% change
$94,264	9.1%	$149,546	14.6%	(37.0)%

In fiscal 2008, net sales of video games for PC products were primarily driven by sales of our owned intellectual property, Company of Heroes: Opposing Fronts, sales of the Real-Time Strategy game Warhammer 40,000: Dawn of War—Soulstorm, and sales of our catalog titles. We released eight and nine new titles in fiscal 2008 and fiscal 2007, respectively. Net sales decreased by $55.3 million in fiscal 2008 as compared to fiscal 2007 primarily due to the following:

•

lower sales from two of our standalone expansion packs, Company of Heroes: Opposing Fronts and Supreme Commander: Forged Alliance, in fiscal 2008, as compared to sales of the original titles in fiscal 2007, Company of Heroes and Supreme Commander, respectively, both with premium PC pricing,



•

the deferral of revenue from sales of Frontlines: Fuel of War (see Critical Accounting Estimates for information regarding our revenue recognition policies), and



•

the release of one fewer title in fiscal 2008 as compared to fiscal 2007, partially offset by an increase in sales of our catalog titles in fiscal 2008 as compared to fiscal 2007.

38

Costs and Expenses, Interest and Other Income, Income Taxes and Minority Interest

Costs and expenses increased by $169.9 million, or 17.9%, in fiscal 2008 as compared to fiscal 2007, to $1,118.5 million, from $948.7 million. This increase, on a dollar basis, was primarily due to:

•

higher software amortization and royalties primarily as a result of accelerated amortization taken on current year releases that underperformed relative to our expectations and our decision to discontinue development of certain games in connection with our continued product quality initiatives,



•

higher product costs primarily due to i) higher fiscal 2008 sales mix of new-generation products as compared to a higher mix of PC products in fiscal 2007, and ii) changes in foreign currency exchange rates,



•

higher selling and marketing expenses due to promotional efforts to support our owned intellectual properties, including Stuntman: Ignition, Juiced 2: Hot Import Nights and Frontlines: Fuel of War as well as an increase in selling and marketing spend to support WWE SmackDown vs. Raw! 2008 in fiscal 2008 as compared to WWE SmackDown vs. Raw! 2007 in fiscal 2007, and



•

higher product development expenses primarily due to increased product development efforts to support future growth.

Cost of Sales—Product Costs (in thousands)

Year Ended March 31, 2008	% of net sales	Year Ended March 31, 2007	% of net sales	% change
$389,097	37.8%	$351,449	34.2%	10.7%

Product costs primarily consist of direct manufacturing costs (including platform manufacturer license fees), net of manufacturer volume rebates and discounts. Product costs as a percentage of net sales increased by 3.6 points in fiscal 2008 as compared to fiscal 2007. This increase was primarily due to:

•

higher rate of sales returns and allowances on various titles, including Stuntman: Ignition and Juiced 2: Hot Import Nights, in fiscal 2008 as compared to fiscal 2007, and



•

lower fiscal 2008 sales mix of high-margin PC products as compared to fiscal 2007.

Cost of Sales—Software Amortization and Royalties (in thousands)

Year Ended March 31, 2008	% of net sales	Year Ended March 31, 2007	% of net sales	% change
$231,800	22.5%	$165,462	16.1%	40.1%

Software amortization and royalties primarily consists of amortization of capitalized payments made to third-party software developers and amortization of capitalized internal studio development costs. Commencing upon product release, capitalized software development costs are amortized to software amortization and royalties based on the ratio of current revenues to total projected revenues. In fiscal 2008 software amortization and royalties increased by 6.4 points as a percentage of net sales over fiscal 2007. This increase was primarily due to:

•

approximately $35.4 million of accelerated amortization expense in fiscal 2008 due to underperformance of certain games released in fiscal 2008, including Destroy All Humans! Path of the Furon, Stuntman: Ignition, Ratatouille and Conan, and



•

approximately $23.9 million of additional amortization expense in fiscal 2008 related to the cancellation of Destroy All Humans! Big Willy Unleashed on PS2 and PSP, Frontlines: Fuel of War on

39

PS3, a sequel in the Stuntman franchise which we no longer intend to pursue, and a previously unannounced title for Xbox 360 that had been scheduled for release in fiscal 2010.

Cost of Sales—License Amortization and Royalties (in thousands)

Year Ended March 31, 2008	% of net sales	Year Ended March 31, 2007	% of net sales	% change
$99,524	9.7%	$99,533	9.7%	0.0%

License amortization and royalties expense consists of royalty payments due to licensors, which are expensed at the higher of (1) the contractual royalty rate based on actual net product sales for such license, or (2) an effective rate based upon total projected revenue for such license. License amortization and royalties as a percentage of net sales remained flat at 9.7% in both fiscal 2008 and fiscal 2007. In fiscal 2008, we recognized approximately $4.6 million of additional license amortization and royalties expense arising from our decision to no longer pursue our Juiced and Stuntman intellectual properties in the future. Excluding these charges, license amortization and royalties, as a percentage of net sales, would have been lower by half a point in fiscal 2008 due to the increased mix of net sales from games based on our owned intellectual properties, including MX vs. ATV Untamed, Juiced 2: Hot Import Nights, Stuntman: Ignition and Drawn to Life.

Cost of Sales—Venture Partner Expense (in thousands)

Year Ended March 31, 2008	% of net sales	Year Ended March 31, 2007	% of net sales	% change
$24,056	2.3%	$16,730	1.6%	43.8%

Venture partner expense is related to the license agreement that the THQ/JAKKS Pacific joint venture, comprised of THQ and JAKKS Pacific, Inc. ("JAKKS"), has with the WWE, under which our role is to develop, manufacture, distribute, market and sell WWE video games. Venture partner expense increased by $7.3 million in fiscal 2008 as compared to fiscal 2007. This increase is due to an overall increase in net sales of games based upon the WWE license, primarily due to the release of WWE SmackDown vs. Raw 2008 in fiscal 2008 on three additional platforms as compared to WWE SmackDown vs. Raw 2007 in fiscal 2007. We have not paid these amounts to JAKKS; see "Item 3—Legal Proceedings" for information regarding our venture partner agreement.

Product Development (in thousands)

Year Ended March 31, 2008	% of net sales	Year Ended March 31, 2007	% of net sales	% change
$128,869	12.5%	$97,105	9.5%	32.7%

Product development expense primarily consists of expenses incurred by internal development studios and payments made to external development studios prior to products reaching technological feasibility. Product development expense increased by $31.8 million in fiscal 2008 as compared to fiscal 2007. This increase is primarily due to overall increased product development efforts to support future growth, including increased quality assurance efforts and increased wireless game development due in part to our acquisition of Universomo, a mobile game developer based in Finland that we acquired in May 2007. Also contributing to the increases in product development expense is approximately $4.7 million recognized in the three months ended December 31, 2007 due to a change in our estimate of an unannounced title having reached technological feasibility.

40

Selling and Marketing (in thousands)

Year Ended March 31, 2008	% of net sales	Year Ended March 31, 2007	% of net sales	% change
$175,288	17.0%	$139,958	13.6%	25.2%

Selling and marketing expenses consist of advertising, promotional expenses, and personnel-related costs. In fiscal 2008, selling and marketing expenses increased on a dollar basis by $35.3 million as compared to fiscal 2007. This increase was primarily due to the following:

•

promotional efforts to support our owned intellectual properties Stuntman: Ignition and Juiced 2: Hot Import Nights in fiscal 2008 as compared to Saints Row in fiscal 2007,



•

promotional efforts to support the launch of Frontlines: Fuel of War, released on PC and Xbox 360 in the fourth quarter of fiscal 2008, and to establish this new title as a core franchise going forward, and



•

an increase in selling and marketing spend to support WWE SmackDown vs Raw 2008 in fiscal 2008 as compared to WWE SmackDown vs Raw 2007 in fiscal 2007.

In fiscal 2008, selling and marketing expenses increased by 3.4 points as a percentage of net sales as compared to fiscal 2007. This increase is primarily due to the following:

•

promotional efforts to support the launch of Frontlines: Fuel of War, released on PC and Xbox 360 in the fourth quarter of fiscal 2008, and to establish this new title as a core franchise going forward,



•

promotional efforts to support our owned intellectual properties Stuntman: Ignition and Juiced 2: Hot Import Nights relative to their sales performance in fiscal 2008 as compared to Saints Row relative to its sales performance in fiscal 2007, and



•

promotional efforts to support Ratatouille relative to its sales performance in fiscal 2008 as compared to Cars relative to its sales performance in fiscal 2007.

General and Administrative (in thousands)

Year Ended March 31, 2008	% of net sales	Year Ended March 31, 2007	% of net sales	% change
$69,901	6.8%	$78,413	7.6%	(10.9)%

General and administrative expenses consist of personnel and related expenses of executive and administrative staff, as well as fees for professional services such as legal and accounting. General and administrative expenses decreased by $8.5 million in fiscal 2008 as compared to fiscal 2007. The decrease was primarily due to:

•

lower professional fees in fiscal 2008 as compared to fiscal 2007, which included incremental professional fees related to an informal SEC inquiry into our stock option grant practices, and



•

lower stock-based compensation charges in fiscal 2008 related to the departure of certain executives.

Interest and Other Income, net

Interest and other income, net consists of interest earned on our investments as well as gains and losses resulting from exchange rate changes for transactions denominated in currencies other than the functional currency. Interest and other income, net increased by $2.6 million in fiscal 2008 as compared to fiscal 2007. The increase in fiscal 2008 was primarily due to higher average yields on higher average investment balances.

41

Income Taxes

We recorded an income tax benefit of $35.8 million for fiscal 2008 as compared to income tax expense of $26.2 million for fiscal 2007. The income tax benefit in fiscal 2008 reflects an effective tax rate of 49%, which is higher than our statutory rate of 35%. The significant items that generated the variance between our effective tax rate and the statutory tax rate for fiscal 2008 were (i) the partial release of the reserve on previous years' research and development tax credits, (ii) fiscal 2008 research and development tax credits, and (iii) tax free interest income.

The income tax expense for fiscal 2007 reflects an effective income tax rate of 29%, which is lower than our statutory rate of 35%. The significant items that generated the variance between our effective tax rate and the statutory tax rate for fiscal 2007 were research and development tax credits and tax free interest income.

Minority Interest and Discontinued Operations

Minority interest reflects the income allocable to equity interests in Minick that are not owned by THQ. Prior to December 1, 2006, we owned 50% of Minick's outstanding common stock and controlled its board of directors. On December 1, 2006, we sold our interest in Minick. As of March 31, 2008 we have received approximately $18.6 million in cash due to the sale of Minick. We recognized gains of $1.5 million and $3.1 million in fiscal 2008 and fiscal 2007, respectively, related to the sale of Minick. These gains are presented as "Gain on sale of discontinued operations, net of tax" in our consolidated statements of operations. Pursuant to the Minick sale agreement, we may receive additional consideration of approximately $1.2 million during the three months ended June 30, 2008. If such amounts are received, the additional gain recognized will be reported in discontinued operations in the period the proceeds are collected. The results of Minick's operations were not material to any of the periods presented and have therefore not been reclassified as discontinued operations.

Comparison of Fiscal 2007 to Fiscal 2006

Net income from continuing operations for fiscal 2007 was $65.0 million, or $0.96 per diluted share, compared to net income from continuing operations of $32.1 million, or $0.49 per diluted share, for fiscal 2006. Net income for fiscal 2007 was $68.0 million, or $1.01 per diluted share, and included a $3.1 million gain on sale of discontinued operations.

Net Sales

We derive revenue principally from sales of packaged interactive software games designed for play on video game consoles, handheld devices and personal computers. We also derive revenue through downloads by mobile phone users of our wireless content.

The following table details our net sales by territory for fiscal 2007 and 2006 (in thousands):

	Fiscal Year Ended March 31,
									Increase/ (Decrease)
	2007				2006						% Change
North America	$	600,159	58.4	%	$	489,945	60.7	%	$	110,214	22.5	%
Europe		365,406	35.6			269,928	33.5			95,478	35.4	%
Asia Pacific		61,291	6.0			46,687	5.8			14,604	31.3	%
International		426,697	41.6			316,615	39.3			110,082	34.8	%
Consolidated net sales	$	1,026,856	100.0	%	$	806,560	100.0	%	$	220,296	27.3	%

42

North America and international net sales in fiscal 2007 were primarily driven by the release of Cars, from the Disney•Pixar franchise, WWE SmackDown vs. Raw 2007, and the successful launch of Saints Row, a new internally developed and owned intellectual property.

Net sales in fiscal 2007 increased 27% over fiscal 2006, from $806.6 million to $1,026.9 million. The increase in net sales was primarily due to the following:

•

growth in sales from games from our Disney•Pixar license, led by the release of Cars, which shipped nearly eight million units in the fiscal 2007. Sales of Cars outperformed sales of The Incredibles: Rise of the Underminer, which was released in fiscal 2006 and was a sequel to The Incredibles, which was released in fiscal 2005;



•

sales of WWE SmackDown vs. Raw 2007, which shipped four million units in fiscal 2007, outperforming sales of WWE SmackDown vs. Raw 2006 in fiscal 2006;



•

growth in sales of games from our Nickelodeon license, which increased by approximately 22% over sales from this license in fiscal 2006; and



•

sales of Saints Row, a new internally developed and owned intellectual property.

In fiscal 2007, our North American sales increased by 22.5% over fiscal 2006. Our international sales increased by $110.1 million, or 35% in fiscal 2007 due to marketing and sales expansion in the international markets as well as the release of games with increased international appeal.

Changes in foreign currency rates increased reported international net sales by $25.2 million or 6% in fiscal 2007, as compared to fiscal 2006. Excluding the impacts of foreign exchange rates, international net sales increased by 22% in fiscal 2007.

Net Sales by Platform

Our worldwide net sales by platform for fiscal 2007 and fiscal 2006 are as follows (in thousands):

		Fiscal Year Ended March 31,
Platform										Increase/ (Decrease)
		2007				2006							% Change
Consoles
	Microsoft Xbox 360	$	134,908	13.1	%	$	14,479	1.8	%	$	120,429		831.7	%
	Microsoft Xbox		27,476	2.7			88,181	10.9			(60,705	)	(68.8	)%
	Nintendo Wii		30,025	2.9			—	—			30,025		—	%
	Nintendo GameCube		52,338	5.1			59,255	7.3			(6,917	)	(11.7	)%
	Sony PlayStation 2		304,916	29.7			296,294	36.7			8,622		2.9	%
			549,663	53.5			458,209	56.7			91,454		20.0	%
Handheld
	Nintendo Dual Screen		114,143	11.1			32,855	4.1			81,288		247.4	%
	Nintendo Game Boy Advance		119,869	11.7			171,477	21.3			(51,608	)	(30.1	)%
	Sony PlayStation Portable		65,402	6.4			29,406	3.6			35,996		122.4	%
	Wireless		26,467	2.6			36,112	4.5			(9,645	)	(26.7	)%
			325,881	31.8			269,850	33.5			56,031		20.8	%
PC			149,546	14.6			77,615	9.6			71,931		92.7	%
Other			1,766	0.1			886	0.2			880		99.3	%
Net Sales		$	1,026,856	100.0	%	$	806,560	100.0	%	$	220,296		27.3	%

43

Console Platforms

Net sales for console platforms increased by 20% in fiscal 2007 to $549.7 million from $458.2 million in fiscal 2006. In fiscal 2007, sales of games for the Sony PlayStation 2 constituted 55% of our sales for console platforms, down from 65% of total console sales in fiscal 2006, while sales of games on the Microsoft Xbox 360 climbed from approximately 3% of total console sales in fiscal 2006 to almost 25% in fiscal 2007. We released 31 new titles for console platforms in fiscal 2007 and 2006.

Microsoft Xbox 360 Net Sales (in thousands)

Year Ended March 31, 2007	% of net sales	Year Ended March 31, 2006	% of net sales	% change
$134,908	13.1%	$14,479	1.8%	831.7%

In fiscal 2007, net sales of video games for Xbox 360 were primarily driven by the release of our owned and internally developed property Saints Row and by WWE SmackDown vs. Raw 2007. In fiscal 2006, The Outfit was the only game released for the Xbox 360, while we released five new titles in fiscal 2007. The $120.4 million increase in net sales in fiscal 2007 is due to our release of four more titles as compared to fiscal 2006. As the installed base of Xbox 360 hardware has grown since its launch in November 2005, we have brought more titles to the platform, including Disney•Pixar's Cars. We expect to continue to bring new titles to this platform as the installed base of Xbox 360 continues to grow.

Microsoft Xbox Net Sales (in thousands)

Year Ended March 31, 2007	% of net sales	Year Ended March 31, 2006	% of net sales	% change
$27,476	2.7%	$88,181	10.9%	(68.8)%

In fiscal 2007, net sales of video games for Xbox were primarily driven by the release of Disney•Pixar's Cars, Destroy All Humans! 2 and sales of our catalog titles. We released three and 11 new titles in fiscal 2007 and 2006, respectively. Net sales decreased by $60.7 million in fiscal 2007 as compared to fiscal 2006 primarily due to fewer units sold of video games for Xbox as consumer demand shifted to games for Microsoft's current generation console, Xbox 360.

Nintendo Wii Net Sales (in thousands)

Year Ended March 31, 2007	% of net sales	Year Ended March 31, 2006	% of net sales	% change
$30,025	2.9%	$—	—%	—%

Nintendo launched its current generation console, Nintendo Wii ("Wii") in November 2006. In fiscal 2007, we released four new titles, which accounted for all sales on Wii in fiscal 2007. The games released were Disney•Pixar's Cars and three Nickelodeon titles: SpongeBob SquarePants: Creature from the Krusty Krab, Avatar: The Last Airbender and Barnyard.

Nintendo GameCube Net Sales (in thousands)

Year Ended March 31, 2007	% of net sales	Year Ended March 31, 2006	% of net sales	% change
$52,338	5.1%	$59,255	7.3%	(11.7)%

In fiscal 2007, net sales of video games for Nintendo GameCube ("GameCube") were primarily driven by sales of Disney•Pixar's Cars and our Nickelodeon titles, as well as sales of our catalog titles. We released

44

eight and seven new titles in fiscal 2007 and 2006, respectively. Net sales decreased by $6.9 million in fiscal 2007 as compared to fiscal 2006 primarily due to decreased sales of catalog titles in fiscal 2007 as consumers shifted to the current generation consoles. We expect net sales for GameCube to continue to decline in the future as consumer demand shifts to video games made for Wii.

Sony PlayStation 2 Net Sales (in thousands)

Year Ended March 31, 2007	% of net sales	Year Ended March 31, 2006	% of net sales	% change
$304,916	29.7%	$296,294	36.7%	2.9%

In fiscal 2007, net sales of video games for PlayStation 2 ("PS2") were primarily driven by WWE SmackDown vs. Raw 2007, Disney•Pixar's Cars and sales of our Nickelodeon and catalog titles. We released 11 and 12 new titles in fiscal 2007 and 2006, respectively. Net sales increased $8.6 million in fiscal 2007 as compared to fiscal 2006 primarily due to sales of Disney•Pixar's Cars as compared to sales of The Incredibles: Rise of the Underminer in fiscal 2006, partially offset by lower sales of catalog titles, which were higher in fiscal 2006. Sony released its current generation console, PS3, in November 2006. We expect net sales of games for PS2 to decline in the future as the installed base of PS3 grows.

Handheld Platforms

Net sales for handheld platforms increased by 21% in fiscal 2007 to $325.9 million from $269.9 million in fiscal 2006. We released 27 and 22 new handheld titles in fiscal 2007 and 2006, respectively. Consistent with our expectations, net sales of games for Nintendo's Dual Screen ("DS") and Sony's PlayStation Portable ("PSP") continued to increase in fiscal 2007 with the growth of the installed base, while net sales of games for Game Boy Advance ("GBA") declined from 64% of game sales for handheld platforms in fiscal 2006 to 37% in fiscal 2007.

Nintendo Dual Screen Net Sales (in thousands)

Year Ended March 31, 2007	% of net sales	Year Ended March 31, 2006	% of net sales	% change
$114,143	11.1%	$32,855	4.1%	247.4%

In fiscal 2007, sales of Cars, Bratz: Forever Diamondz and sales of our Nickelodeon and catalog titles drove our sales and contributed to an $81.3 million increase in net sales over fiscal 2006. We released nine and eight new titles in fiscal 2007 and 2006, respectively. As the installed base of DS hardware continues to grow, we expect to continue to bring more titles to the platform.

Nintendo Game Boy Advance Net Sales (in thousands)

Year Ended March 31, 2007	% of net sales	Year Ended March 31, 2006	% of net sales	% change
$119,869	11.7%	$171,477	21.3%	(30.1)%

In fiscal 2007, net sales of video games for GBA were primarily driven by Cars and sales of our catalog titles. We released 13 and 10 new titles in fiscal 2007 and 2006, respectively. Net sales decreased by $51.6 million in fiscal 2007 as compared to fiscal 2006 as consumer demand shifted to DS. We expect net sales from GBA products to continue to decline as a result of continued growth of DS and PSP into the handheld video game market.

45

PlayStation Portable Net Sales (in thousands)

Year Ended March 31, 2007	% of net sales	Year Ended March 31, 2006	% of net sales	% change
$65,402	6.4%	$29,406	3.6%	122.4%

In fiscal 2007, net sales of video games for PSP were driven by Cars and WWE SmackDown vs. Raw 2007. We released five and four new titles in fiscal 2007 and 2006, respectively. Net sales increased by $36.0 million in fiscal 2007 as compared to fiscal 2006 primarily due to sales of Cars and increased sales of catalog titles. As the installed base of PSP hardware continues to grow, we expect to continue to bring more titles to the platform.

Wireless Net Sales (in thousands)

Year Ended March 31, 2007	% of net sales	Year Ended March 31, 2006	% of net sales	% change
$26,467	2.6%	$36,112	4.5%	(26.7)%

Wireless net sales consist of wireless games and other content such as wireless wallpapers and ringtones. Prior to December 2006 we also derived wireless revenue by providing infrastructure services for the delivery of wireless content and entertainment through our controlling interest in Minick Holding AG ("Minick").

In fiscal 2007, wireless net sales consisted of games and other content based on Star Wars and Worms; licensed properties such as SpongeBob SquarePants and WWE; and owned intellectual properties such as Saints Row and Juiced. Wireless net sales decreased by $9.6 million during fiscal 2007 as compared to fiscal 2006. The decrease is due to the sale of our interest in Minick in December 2006 and fewer new titles released as we re-align our wireless product portfolio to emphasize more casual game content to position ourselves for wireless platform share gains in the future.

PC Net Sales (in thousands)

Year Ended March 31, 2007	% of net sales	Year Ended March 31, 2006	% of net sales	% change
$149,546	14.6%	$77,615	9.6%	92.7%

In fiscal 2007, net sales of video games for PC products were primarily driven by the release of our new owned and internally developed property, Company of Heroes, as well as S.T.A.L.K.E.R.: Shadow of Chernobyl, Supreme Commander and Titan Quest. We released nine and 11 new titles in fiscal 2007 and 2006, respectively. Net sales increased by $71.9 million in fiscal 2007, as compared to fiscal 2006 primarily due to these core-gamer titles with premium PC pricing.

Costs and Expenses, Interest and Other Income, Income Taxes and Minority Interest

Costs and expenses increased by $174.0 million, or 22%, in fiscal 2007 compared to fiscal 2006, to $948.7 million, from $774.7 million. This increase was primarily due to:

•

higher product costs related to our increase in net sales,



•

an increase in software amortization and royalties due to greater sales and the higher cost of developing games for current generation consoles, and



•

$19.0 million of stock-based compensation expense primarily due to our adoption of FAS 123R in our first quarter of fiscal 2007, $15.6 million higher than in fiscal 2006; $5.0 million of legal and

46

accounting fees incurred in connection with the investigation of our historical stock option grant practices in fiscal 2007 and $2.9 million from the payroll tax effects of our historical stock option grant practices investigation in fiscal 2007.

Costs and expenses as a percentage of net sales decreased by 4 points to 92% in fiscal 2007 from 96% in fiscal 2006. This decrease was primarily due to product mix of higher priced titles and leverage of our selling and marketing and general and administrative expenses.

Cost of Sales—Product Costs (in thousands)

Year Ended March 31, 2007	% of net sales	Year Ended March 31, 2006	% of net sales	% change
$351,449	34.2%	$287,946	35.7%	22.1%

Product costs primarily consist of direct manufacturing costs (including platform manufacturer license fees), net of manufacturer volume rebates and discounts. Product costs as a percentage of net sales decreased by 1.5 points in fiscal 2007 as compared to fiscal 2006. This decrease was primarily due to an increase in sales from our premium priced PC games including Company of Heroes, S.T.A.L.K.E.R.: Shadow of Chernobyl, Supreme Commander and Titan Quest. These PC games have lower product costs as compared to most of our other platforms due to the lack of a platform manufacturer license fee.

Cost of Sales—Software Amortization and Royalties (in thousands)

Year Ended March 31, 2007	% of net sales	Year Ended March 31, 2006	% of net sales	% change
$165,462	16.1%	$116,371	14.4%	42.2%

Software amortization and royalties primarily consists of amortization of capitalized payments made to third-party software developers and amortization of capitalized internal studio development costs. Commencing upon product release, capitalized software development costs are amortized to software amortization and royalties based on the ratio of current revenues to total projected revenues. In fiscal 2007 software amortization and royalties as a percentage of net sales increased by 1.7 points over fiscal 2006. This increase was primarily due to a greater mix of current generation titles with higher development costs.

Cost of Sales—License Amortization and Royalties (in thousands)

Year Ended March 31, 2007	% of net sales	Year Ended March 31, 2006	% of net sales	% change
$99,533	9.7%	$80,508	10.0%	23.6%

License amortization and royalties expense consists of royalty payments due to licensors, which are expensed at the higher of (1) the contractual royalty rate based on actual net product sales for such license or (2) an effective rate based upon total projected revenue for such license. In fiscal 2007 license amortization and royalties as a percentage of net sales decreased slightly versus fiscal 2006. The top selling titles in fiscal 2007 were Cars and WWE® SmackDown vs. Raw 2007, both licensed properties. However, the increased mix of net sales from games based on our owned intellectual properties including Saints Row, Destroy All Humans! 2, Company of Heroes and Titan Quest lowered the overall rate as compared to fiscal 2006.

47

Cost of Sales—Venture Partner Expense (in thousands)

Year Ended March 31, 2007	% of net sales	Year Ended March 31, 2006	% of net sales	% change
$16,730	1.6%	$12,572	1.6%	33.1%

Venture partner expense is related to the joint license agreement that THQ and JAKKS Pacific, Inc. ("JAKKS") have with the WWE under which our role is to develop, manufacture, distribute, market and sell WWE video games. Venture partner expense increased by $4.2 million in fiscal 2007 as compared to fiscal 2006. This increase is due to an overall increase in net sales of games based upon the WWE license, which is primarily due to the release of WWE® SmackDown vs. Raw 2007 in fiscal 2007 and the introduction of this game to the current generation console Xbox360. See "Item 3—Legal Proceedings" for information regarding our venture partner agreement.

Product Development (in thousands)

Year Ended March 31, 2007	% of net sales	Year Ended March 31, 2006	% of net sales	% change
$97,105	9.5%	$94,575	11.7%	2.7%

Product development expense primarily consists of expenses incurred by internal development studios and payments made to external development studios prior to products reaching technological feasibility. Product development expense increased by $2.5 million in fiscal 2007 as compared to fiscal 2006. This increase is primarily due to $3.4 million of stock-based compensation expense due to our adoption of FAS 123R in our first quarter of fiscal 2007, $2.4 million higher than in fiscal 2006, and $1.5 million from the payroll tax effects of our historical stock option grant practices investigation in fiscal 2007. This increase was partially offset by more products under development that reached technological feasibility earlier in the development process in fiscal 2007 as compared to fiscal 2006.

Selling and Marketing (in thousands)

Year Ended March 31, 2007	% of net sales	Year Ended March 31, 2006	% of net sales	% change
$139,958	13.6%	$124,809	15.5%	12.1%

Selling and marketing expenses consist of advertising, promotional expenses, and personnel-related costs. In fiscal 2007, selling and marketing expenses increased on a dollar basis by $15.1 million over fiscal 2006. This increase was primarily due to the promotional efforts supporting Cars and WWE SmackDown vs. Raw 2007 which exceeded the promotional costs for Incredibles: Rise of the Underminer and WWE SmackDown vs. Raw 2006 in fiscal 2006 as well as the launch of Saints Row in fiscal 2007. The increase is also due to $2.8 million of stock-based compensation expense due to our adoption of FAS 123R in our first quarter of fiscal 2007, $1.8 million higher than in fiscal 2006, and $0.7 million from the payroll tax effects of our historical stock option grant practices investigation in fiscal 2007.

In fiscal 2007, selling and marketing expenses decreased by 1.9 points as a percentage of net sales as compared to fiscal 2006. This decrease is due to our effective marketing spend that drove a 27% increase in net sales as compared to fiscal 2006.

48

General and Administrative (in thousands)

Year Ended March 31, 2007	% of net sales	Year Ended March 31, 2006	% of net sales	% change
$78,413	7.6%	$57,944	7.2%	35.3%

General and administrative expenses consist of personnel and related expenses of executive and administrative staff, as well as fees for professional services such as legal and accounting. General and administrative expenses increased by $20.5 million in fiscal 2007 as compared to fiscal 2006. The increase was primarily due to $10.7 million of stock-based compensation expense due to our adoption of FAS 123R in our first quarter of fiscal 2007, which was $9.2 million higher than in fiscal 2006. The increase is also attributable to $5.0 million in legal and accounting fees incurred in connection with the investigation of our historical stock option grant practices and $0.8 million for the related payroll tax effects.

Interest and Other Income, net

Interest and other income consists of interest earned on our short-term investments as well as gains and losses resulting from exchange rate changes for transactions denominated in currencies other than the functional currency. Interest and other income increased by $4.9 million in fiscal 2007 as compared to fiscal 2006. The increase was primarily due to higher average yields on our short-term investment balances.

Income Taxes

The effective income tax rate was 29% for fiscal 2007 and 19% for fiscal 2006. The fiscal 2006 effective income tax rate benefited from the following factors: (1) a higher ratio of research and development tax credits to pre-tax income and (2) a higher ratio of tax exempt interest income to overall pre-tax income. If fiscal 2006 pretax income were the same as in fiscal 2005 the effective tax rate would have been approximately 28%. The tax rate for fiscal 2007 is higher because of non-deductible stock-based compensation expense recognized under FAS 123R.

Minority Interest and Discontinued Operations

Minority interest reflects the income allocable to equity interests in Minick that are not owned by THQ. Prior to December 1, 2006, we owned 50% of Minick's outstanding common stock and controlled its board of directors. On December 1, 2006, we sold our interest in Minick. As of March 31, 2007 we received approximately $17.1 million in cash and recognized a gain of approximately $3.1 million in discontinued operations due to the sale. The results of Minick's operations were not material to any of the periods presented and have therefore not been reclassified as discontinued operations.

Liquidity and Capital Resources

(In thousands)		March 31, 2008			March 31, 2007			Change
Cash and cash equivalents		$	247,820		$	174,748		$	73,072
Short-term investments			69,684			283,210			(213,526	)
	Cash, cash equivalents and short-term investments	$	317,504		$	457,958		$	(140,454	)
Percentage of total assets			29	%		45	%

49

		Year Ended March 31,
(In thousands)
		2008			2007			Change
Cash (used in) provided by operating activities		$	(9,714	)	$	63,997		$	(73,711	)
Cash provided by (used in) investing activities			105,820			(28,135	)		133,955
Cash (used in) provided by financing activities			(26,513	)		40,939			(67,452	)
Effect of exchange rate changes on cash			3,479			6,430			(2,951	)
	Net increase (decrease) in cash and cash equivalents	$	73,072		$	83,231		$	(10,159	)

Cash Flow from Operating Activities.    Our principal source of cash is from sales of interactive software games designed for play on video game consoles, handheld devices and personal computers. Our principal uses of cash are for product purchases of discs and cartridges along with associated manufacturer's royalties, payments to external developers and licensors, the costs of internal software development and selling and marketing expenses.

Cash used in operating activities increased by approximately $73.7 million in fiscal 2008 as compared to fiscal 2007. The increase in cash used was primarily a result of our fiscal 2008 net loss as compared to fiscal 2007 net income and an increase in accounts receivable due to higher net sales and the timing of product releases in the three months ended March 31, 2008 as compared to the same period last fiscal year, partially offset by higher non-cash amortization of licenses and software development in fiscal 2008 as compared to fiscal 2007. We expect to generate positive operating cash flow for the full fiscal year 2009.

Cash Flow from Investing Activities.    Cash provided by investing activities in fiscal 2008 increased by approximately $134.0 million, primarily due to lower purchases of available-for-sale investments, partially offset by our acquisitions of Big Huge Games, Universomo and Elephant Entertainment during fiscal 2008.

Cash Flow from Financing Activities.    Cash used in financing activities increased by approximately $67.5 million in fiscal 2008 as compared to fiscal 2007, primarily due to an increase in common stock repurchases in fiscal 2008 as compared to fiscal 2007, as well as lower proceeds from issuance of common stock to employees in fiscal 2008 as compared to fiscal 2007.

In fiscal 2009, we expect to generate more cash than we did in fiscal 2008. The increase in the generation of cash is expected to be primarily attributable to higher net income.

Key Balance Sheet Accounts

Accounts Receivable.    Accounts receivable increased $45.2 million in fiscal 2008, from $67.6 million at March 31, 2007 to $112.8 million at March 31, 2008. The increase in net accounts receivable is primarily due to higher net sales and the timing of product releases in the three months ended March 31, 2008 as compared to the three months ended March 31, 2007. The increase in accounts receivable also reflects units shipped of Frontlines: Fuel of War, although the recognition of revenue from this title was deferred to future periods (see Critical Accounting Estimates for information regarding our revenue recognition policies). Accounts receivable allowances were $113.0 million as of March 31, 2008, a $32.5 million increase from March 31, 2007. Allowances for price protection and returns as a percentage of trailing nine month net sales were 10% and 8% as of March 31, 2008 and 2007, respectively. We believe our current reserves are adequate based on historical experience, inventory remaining in the retail channel and the rate of inventory sell-through in the retail channel.

Inventory.    Inventory increased $10.8 million in fiscal 2008, from $27.4 million at March 31, 2007 to $38.2 million at March 31, 2008. The increase in inventory coincides with the higher net sales in the three months ended March 31, 2008 as compared to March 31, 2007. Inventory turns on a rolling twelve month basis were 11 and 10 at March 31, 2008 and 2007, respectively.

50

Licenses.    Licenses decreased $4.3 million in fiscal 2008, from $91.1 million at March 31, 2007 to $86.8 million at March 31, 2008. The decrease in licenses is due to amortization of our existing licenses, partially offset by advance payments made to key licensors.

Software Development.    Software development increased $16.9 million in fiscal 2008, from $164.3 million at March 31, 2007 to $181.2 million at March 31, 2008. The increase in software development is primarily the result of our investment in current generation cross-platform titles scheduled to be released in fiscal 2009 and beyond, partially offset by software amortization and royalties of titles released in fiscal 2008, as well as cancellations of certain unreleased titles. Approximately 67% of the software development asset balance at March 31, 2008 is for games that have fiscal 2009 release dates.

Accounts Payable.    Accounts payable increased by $33.5 million from $28.2 million at March 31, 2007 to $61.7 million at March 31, 2008. The increase in accounts payable is primarily due to an increase in product purchases.

Accrued and Other Current Liabilities.    Accrued and other current liabilities increased $58.7 million in fiscal 2008, from $143.4 million at March 31, 2007 to $202.1 million at March 31, 2008. The increase in accrued and other current liabilities is primarily due to the deferral of revenue from sales of Frontlines: Fuel of War, as well as the withholding of payments due our venture partner, which will remain unpaid until a new payment rate has been established as the old payment rate has expired. See "Item 3—Legal Proceedings."

Inflation

We currently believe that inflation has not had a material impact on continuing operations.

Financial Condition

We believe the existing cash, cash equivalents, short-term investments, and cash generated from operations will be sufficient to meet our operating requirements for at least the next twelve months, including working capital requirements, capital expenditures and potential future acquisitions or strategic investments. We may choose at any time to raise additional capital to strengthen our cash position, facilitate expansion, pursue strategic investments or to take advantage of business opportunities as they arise. While the Company has investments in auction rate securities which recently experienced an illiquid market, we do not believe that any illiquidity in our long-term investments will impact our future cash needs. See "Note 2—Investment Securities" in the notes to the consolidated financial statements for further information related to our investments.

Our ability to maintain sufficient liquidity could be affected by various risks and uncertainties described in Item 1A "Risk Factors" in this Annual Report on Form 10-K.

51

Guarantees and Commitments

A summary of annual minimum contractual obligations and commercial commitments as of March 31, 2008 is as follows (in thousands):

	Contractual Obligations and Commercial Commitments(6)
Fiscal Years Ending March 31,	License / Software Development Commitments(1)		Advertising(2)		Leases(3)		Letters of Credit(4)		Other(5)		Total
2009	$	110,316	$	13,009	$	17,011	$	30,914	$	5,347	$	176,597
2010		46,630		15,543		16,062		—		1,388		79,623
2011		14,038		8,532		14,766		—		—		37,336
2012		2,850		1,547		12,497		—		—		16,894
2013		600		1,547		9,170		—		—		11,317
Thereafter		500		1,160		17,998		—		—		19,658
	$	174,934	$	41,338	$	87,504	$	30,914	$	6,735	$	341,425

(1)

Licenses and Software Development.    We enter into contractual arrangements with third parties for the rights to intellectual property and for the development of products. Under these agreements, we commit to provide specified payments to an intellectual property holder or developer. Assuming all contractual provisions are met, the total future minimum contract commitments for contracts in place as of March 31, 2008 are approximately $174.9 million. License/software development commitments in the table above include $55.4 million of commitments to licensors that are included in our consolidated balance sheet as of March 31, 2008 because the licensors do not have any significant performance obligations to us. These commitments were included in both current and long-term licenses and accrued royalties.

(2)

Advertising.    We have certain minimum advertising commitments under most of our major license agreements. These minimum commitments generally range from 2% to 12% of net sales related to the respective license. We estimate that our minimum commitment for advertising in fiscal 2009 will be $13.0 million.

(3)

Leases.    We are committed under operating leases with lease termination dates through 2015. Most of our leases contain rent escalations. Rent expense was $16.1 million, $14.0 million and $10.6 million for the fiscal years ended March 31, 2008, 2007 and 2006, respectively.

(4)

Letters of Credit.    As of March 31, 2008, we had outstanding letters of credit of approximately $30.9 million. On October 3, 2006, we entered into an agreement with a bank primarily to provide stand-by letters of credit to a platform manufacturer from whom we purchase products. We pledged cash equivalents and investments to the bank as collateral in an amount equal to 110% of the amount of the outstanding stand-by letters of credit.

(5)

Other.    As of March 31, 2008, we had purchase commitments of approximately $2.8 million, included in the table above, pertaining to various international distribution agreements signed in fiscal 2008 for products that are expected to ship on various dates during fiscal 2009. These agreements have two year terms and are contractually denominated as 1.8 million Euros.

Pursuant to the terms of our acquisitions of Universomo, Big Huge Games and Elephant Entertainment combined, there is additional consideration of $3.9 million included in accrued and other current liabilities in our March 31, 2008 consolidated balance sheet and included in the table above. In addition, we may have to pay additional consideration of $1.9 million in cash (contractually denominated as 1.2 million Euros) and $4.7 million in stock in future years if such sellers attain certain agreed upon targets, as set forth in the relevant purchase agreement.

52

(6)

We have omitted unrecognized tax benefits from this table due to the inherent uncertainty regarding the timing and amount of certain payments related to these unrecognized tax benefits. The underlying positions have not been fully developed under audit to quantify at this time. As of March 31, 2008 we had $11.6 million of unrecognized tax benefits. See "Note 12—Income Taxes" in the notes to the consolidated financial statements.

Other potential future expenditures relate to the following:

Manufacturer Indemnification.    We must indemnify the platform manufacturers (Microsoft, Nintendo, Sony) of our games with respect to all loss, liability and expenses resulting from any claim against such manufacturer involving the development, marketing, sale or use of our games, including any claims for copyright or trademark infringement brought against such manufacturer. As a result, we bear a risk that the properties upon which the titles of our games are based, or that the information and technology licensed from others and incorporated into the products, may infringe the rights of third parties. Our agreements with our third-party software developers and property licensors typically provide indemnification rights for us with respect to certain matters. However, if a manufacturer brings a claim against us for indemnification, the developers or licensors may not have sufficient resources to, in turn, indemnify us.

Indemnity Agreements.    We have entered into indemnification agreements with the members of our Board of Directors, our Chief Executive Officer and our Chief Financial Officer, to provide a contractual right of indemnification to such persons to the extent permitted by law against any and all liabilities, costs, expenses, amounts paid in settlement and damages incurred by the any such person as a result of any lawsuit, or any judicial, administrative or investigative proceeding in which such person is sued as a result of their service as members of our Board of Directors, Chief Executive Officer or as Chief Financial Officer. The indemnification agreements provide specific procedures and time frames with respect to requests for indemnification and clarify the benefits and remedies available to the indemnitees in the event of an indemnification request.

Litigation.    For information related to legal proceedings that may result in future expenditures to the Company, see "Item 3—Legal Proceedings."

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

Market Risk

We are exposed to certain market risks arising from transactions in the normal course of business, principally risks associated with interest rate and foreign currency fluctuations. Market risk is the potential loss arising from changes in market rates and market prices. We employ established policies and practices to manage these risks. We use foreign exchange option and forward contracts to hedge anticipated exposures or mitigate some existing exposures subject to foreign currency exchange rate risk as discussed below.

Interest Rate Risk

We have interest rate risk primarily related to our investment portfolio. A substantial portion of our portfolio is in short-term investments made up of primarily municipal securities and long-term investments made up of auction rate securities ("ARS"). The value of these investments may fluctuate with changes in interest rates. However, we believe our interest rate risk is immaterial due to the short-term nature of the municipal securities and the fact that the interest rates on our ARS are either reset to short-term interest rates in the auction process or, in the event of a failed auction, are reset to the failure rates as specified in the underlying agreements which are typically equal to or greater than short-term interest rates at the time of reset. Although there has been recent uncertainty in the credit markets, all of the securities are investment grade securities, and we have no reason to believe that any of the underlying issuers of our ARS are presently at risk or that the underlying credit quality of the assets backing our ARS has been

53

impacted by the reduced liquidity of these investments. We have continued to receive interest payments on the ARS according to their terms. See "Note 2—Investment Securities" in the notes to the consolidated financial statements for further information related to our investments.

As of March 31, 2008, we had outstanding letters of credit of approximately $30.9 million.

Foreign Currency Exchange Rate Risk

We transact business in many different foreign currencies and are exposed to financial market risk resulting from fluctuations in foreign currency exchange rates, particularly the GBP and the Euro, which may result in a gain or loss of earnings to us. Our international business is subject to risks typical of an international business, including, but not limited to, foreign currency exchange rate volatility. Accordingly, our future results could be materially and adversely affected by changes in foreign currency exchange rates. Throughout the year, we frequently monitor the volatility of the GBP and the Euro (and all other applicable currencies).

Cash Flow Hedging Activities.    From time to time, we hedge a portion of our foreign currency risk related to forecasted foreign currency denominated sales and expense transactions by entering into option contracts that generally have maturities less than 90 days. Our hedging programs reduce, but do not entirely eliminate, the impact of currency exchange rate movements in revenue and operating expenses. During the year ended March 31, 2008, we purchased foreign currency option contracts to sell approximately $88.0 million in foreign currencies. These foreign currency options contracts were settled during the year ended March 31, 2008 and resulted in $1.0 million of expense, which is included in interest and other income, net in our condensed consolidated statements of operations for the period then ended.

Balance Sheet Hedging Activities.    We utilize foreign exchange forward contracts to mitigate foreign currency risk associated with foreign currency-denominated assets and liabilities, primarily certain inter-company receivables and payables. Our foreign exchange forward contracts are not designated as hedging instruments under SFAS No. 133 and are accounted for as derivatives whereby the fair value of the contracts are reported as other current assets or other current liabilities in our consolidated balance sheets, and the associated gains and losses from changes in fair value are reported in interest and other income, net in the consolidated statements of operations. The forward contracts generally have a contractual term of one month or less and are transacted near month-end. Therefore, the fair value of the forward contracts generally is not significant at each month-end.

Foreign exchange forward contracts are designed to offset gains and losses on the underlying foreign currency denominated assets and liabilities. Any movement in foreign currency exchange rates resulting in a gain or loss on our foreign exchange forward contracts would be offset by an opposing gain or loss in the underlying foreign currency denominated assets and liabilities that were hedged and would not have a material impact on our financial position. As of March 31, 2008, we had foreign exchange forward contracts in the notional amount of $97.0 million, all with maturities of one month, consisting primarily of the Euro, GBP, and AUD.

The counterparties to these forward contracts are creditworthy multinational commercial and investment banks. The risks of counterparty non-performance associated with these contracts are not considered to be material. Notwithstanding our efforts to manage foreign exchange risks, there can be no assurances that our mitigating or hedging activities will adequately protect us against the risks associated with foreign currency fluctuations.

We do not hedge foreign currency translation risk. A hypothetical 10% adverse change in exchange rates would result in a reduction of reported net sales of approximately $50.4 million and a reduction of reported income before taxes of approximately $2.4 million. This estimate assumes an adverse shift in all foreign currency exchange rates, which do not always move in the same direction; actual results may differ materially.

Item 8.    Consolidated Financial Statements and Supplementary Data

The report of Independent Registered Public Accounting Firm, consolidated financial statements and notes to consolidated financial statements follow below.

54

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of THQ Inc.,
Agoura Hills, California

We have audited the accompanying consolidated balance sheets of THQ Inc. and subsidiaries (the "Company") as of March 29, 2008 and March 31, 2007, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended March 29, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 29, 2008 and March 31, 2007, and the results of its operations and its cash flows for each of the years in the three-year period ended March 29, 2008, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of March 29, 2008, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated May 28, 2008 expressed an unqualified opinion on the Company's internal control over financial reporting.

As discussed in Note 1, "Description of Business and Summary of Significant Accounting Policies" to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment," effective April 1, 2006, and adopted Financial Accounting Standards Board Interpretation No. 48, "Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109" effective April 1, 2007.

DELOITTE & TOUCHE LLP

Los Angeles, California
May 28, 2008

55

THQ INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

			March 31, 2008		March 31, 2007
ASSETS
Current assets:
	Cash and cash equivalents		$	247,820	$	174,748
	Short-term investments			69,684		283,210
		Cash, cash equivalents and short-term investments		317,504		457,958
	Accounts receivable, net of allowances			112,843		67,586
	Inventory			38,240		27,381
	Licenses			47,182		41,406
	Software development			155,821		130,512
	Income taxes receivable			—		18,525
	Prepaid expenses and other current assets			24,487		16,238
		Total current assets		696,077		759,606
Property and equipment, net				50,465		45,095
Licenses, net of current portion				39,597		49,661
Software development, net of current portion				25,369		33,766
Income taxes receivable, net of current portion				16,116		2,163
Deferred income taxes				61,710		15,812
Goodwill				122,385		88,688
Long-term investments				52,599		—
Other long-term assets, net				20,002		18,750
		TOTAL ASSETS	$	1,084,320	$	1,013,541
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$	61,700	$	28,225
	Accrued and other current liabilities			202,102		143,418
	Income taxes payable			6,504		—
	Deferred income taxes			29,266		25,647
		Total current liabilities		299,572		197,290
Other long-term liabilities				44,179		47,294
Commitments and contingencies				—		—
Stockholders' equity:
	Preferred stock, par value $0.01, 1,000,000 shares authorized			—		—
	Common stock, par value $0.01, 225,000,000 shares authorized as of March 31, 2008; 66,352,994 and 66,677,721 shares issued and outstanding as of March 31, 2008 and 2007, respectively			664		667
	Additional paid-in capital			468,693		471,332
	Accumulated other comprehensive income			27,194		17,603
	Retained earnings			244,018		279,355
		Total stockholders' equity		740,569		768,957
		TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,084,320	$	1,013,541

See notes to consolidated financial statements.

56

THQ INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

		Fiscal Year Ended March 31,
		2008			2007		2006
Net sales		$	1,030,467		$	1,026,856	$	806,560
Costs and expenses:
	Cost of sales—product costs		389,097			351,449		287,946
	Cost of sales—software amortization and royalties		231,800			165,462		116,371
	Cost of sales—license amortization and royalties		99,524			99,533		80,508
	Cost of sales—venture partner expense		24,056			16,730		12,572
	Product development		128,869			97,105		94,575
	Selling and marketing		175,288			139,958		124,809
	General and administrative		69,901			78,413		57,944
	Total costs and expenses		1,118,535			948,650		774,725
Income (loss) from continuing operations			(88,068	)		78,206		31,835
	Interest and other income, net		15,433			12,822		7,955
Income (loss) from continuing operations before income taxes and minority interest			(72,635	)		91,028		39,790
	Income taxes		(35,785	)		26,206		7,621
Income (loss) from continuing operations before minority interest			(36,850	)		64,822		32,169
	Minority interest		—			136		(63	)
Income (loss) from continuing operations			(36,850	)		64,958		32,106
Gain on sale of discontinued operations, net of tax			1,513			3,080		—
Net income (loss)		$	(35,337	)	$	68,038	$	32,106
Earnings (loss) per share—basic:
	Continuing operations	$	(0.55	)	$	1.00	$	0.51
	Discontinued operations		0.02			0.05		—
	Earnings (loss) per share—basic	$	(0.53	)	$	1.05	$	0.51
Earnings (loss) per share—diluted:
	Continuing operations	$	(0.55	)	$	0.96	$	0.49
	Discontinued operations		0.02			0.05		—
	Earnings (loss) per share—diluted	$	(0.53	)	$	1.01	$	0.49
Shares used in per share calculation—basic			66,475			65,039		62,615
Shares used in per share calculation—diluted			66,475			67,593		65,520

See notes to consolidated financial statements.

57

THQ INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except share data)

Fiscal Years Ended March 31, 2006, 2007 and 2008

			Common Stock								Accumulated Other Comprehensive Income (Loss)
								Additional Paid-In Capital						Retained Earnings
			Shares		Amount												Total
Balance at March 31, 2005			60,689,622		$	607		$	355,089		$	12,851		$	179,211		$	547,758
Exercise of options			3,187,569			32			37,755			—			—			37,787
Issuance of restricted stock			263,786			3			855			—			—			858
Stock-based compensation			—			—			2,564			—			—			2,564
Tax benefit related to the exercise of employee stock options			—			—			9,162			—			—			9,162
Comprehensive income:
	Net income		—			—			—			—			32,106			32,106
	Other comprehensive income (loss)
		Foreign currency translation loss	—			—			—			(3,085	)		—			(3,085	)
		Unrealized gain on investments, net of $0.4 million tax expense	—			—			—			601			—			601
Comprehensive income																		29,622
Balance at March 31, 2006			64,140,977		$	642		$	405,425		$	10,367		$	211,317		$	627,751
Exercise of options			3,193,844			31			50,532			—			—			50,563
Conversion of stock unit awards			8,100			—			—			—			—			—
Cancellation of restricted stock			(49,700	)		—			—			—			—			—
Repurchase of common stock			(615,500	)		(6	)		(13,581	)		—			—			(13,587	)
Stock-based compensation			—			—			20,090			—			—			20,090
Tax benefit related to the exercise of employee stock options			—			—			8,866			—			—			8,866
Comprehensive income:
	Net income		—			—			—			—			68,038			68,038
	Other comprehensive income (loss)
		Foreign currency translation gain	—			—			—			9,463			—			9,463
		Unrealized loss on investments, net of $1.3 million tax benefit	—			—			—			(2,227	)		—			(2,227	)
Comprehensive income																		75,274
Balance at March 31, 2007			66,677,721		$	667		$	471,332		$	17,603		$	279,355		$	768,957
Exercise of options			1,421,907			14			21,122			—			—			21,136
Issuance of restricted stock, net			194,600			2			(559	)		—			—			(557	)
Issuance of ESPP shares			304,881			3			5,945			—			—			5,948
Conversion of stock unit awards			8,100			—			—			—			—			—
Cancellation of restricted stock			(60,815	)		—			—			—			—			—
Repurchase of common stock			(2,193,400	)		(22	)		(54,888	)		—			—			(54,910	)
Stock-based compensation			—			—			21,820			—			—			21,820
Tax benefit related to the exercise of employee stock options			—			—			3,921			—			—			3,921
Comprehensive income:
	Net income (loss)		—			—			—			—			(35,337	)		(35,337	)
	Other comprehensive income (loss)
		Foreign currency translation gain	—			—			—			9,372			—			9,372
		Unrealized gain on investments, net of $0.1 million tax expense	—			—			—			219			—			219
Comprehensive income																		(25,746	)
Balance at March 31, 2008			66,352,994		$	664		$	468,693		$	27,194		$	244,018		$	740,569

See notes to consolidated financial statements.

58

THQ INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

		Fiscal Year Ended March 31,
		2008			2007			2006
OPERATING ACTIVITIES:
Net income (loss)		$	(35,337	)	$	68,038		$	32,106
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Minority interest and other		—			54			63
	Depreciation and amortization		18,722			15,651			14,162
	Amortization of licenses and software development		257,051			179,684			112,916
	Gain on sale of discontinued operations		(1,513	)		(3,080	)		—
	Loss on disposal of property and equipment		270			1,395			538
	Amortization of interest and gain/(loss) on investments		812			—			—
	Stock-based compensation		22,860			16,253			3,422
	Tax benefit related to stock-based awards		3,921			8,866			9,162
	Excess tax benefit related to stock-based awards		(2,157	)		(3,963	)		—
	Deferred income taxes		(42,537	)		(948	)		2,082
Changes in operating assets and liabilities:
	Accounts receivable, net of allowances		(38,232	)		7,053			(5,902	)
	Inventory		(9,622	)		2,277			(5,501	)
	Licenses		(38,423	)		(37,809	)		(13,392	)
	Software development		(225,433	)		(203,089	)		(134,943	)
	Prepaid expenses and other current assets		(7,031	)		(3,275	)		1,970
	Accounts payable		30,635			(5,584	)		(397	)
	Accrued and other liabilities		40,826			28,380			22,925
	Income taxes		15,474			(5,906	)		3,578
Net cash (used in) provided by operating activities			(9,714	)		63,997			42,789
INVESTING ACTIVITIES:
	Proceeds from sales and maturities of available-for-sale investments		617,754			672,645			510,555
	Purchase of available-for-sale investments		(458,561	)		(675,735	)		(557,677	)
	Other long-term assets		(986	)		(2,933	)		(3,366	)
	Acquisitions, net of cash acquired		(32,636	)		(7,797	)		(12,282	)
	Net proceeds from sale of discontinued operations		1,513			7,181			—
	Purchases of property and equipment		(21,264	)		(21,496	)		(23,112	)
Net cash provided by (used in) investing activities			105,820			(28,135	)		(85,882	)
FINANCING ACTIVITIES:
	Stock repurchase		(54,910	)		(13,587	)		—
	Proceeds from issuance of common stock to employees		26,240			50,563			37,787
	Excess tax benefit related to stock-based awards		2,157			3,963			—
Net cash (used in) provided by financing activities			(26,513	)		40,939			37,787
Effect of exchange rate changes on cash			3,479			6,430			(1,352	)
Net increase (decrease) in cash and cash equivalents			73,072			83,231			(6,658	)
Cash and cash equivalents—beginning of period			174,748			91,517			98,175
Cash and cash equivalents—end of period		$	247,820		$	174,748		$	91,517
Supplemental cash flow information:
	Cash paid during the period for income taxes	$	14,076		$	28,476		$	6,037
	Cash paid during the period for interest	$	190		$	79		$	155

See notes to consolidated financial statements.

59

THQ INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     Description of Business and Summary of Significant Accounting Policies

We are a leading worldwide developer and publisher of interactive entertainment software for all popular game systems, including:

•

Home video game consoles such as Microsoft Xbox 360, Microsoft Xbox, Nintendo Wii, Nintendo GameCube, Sony PlayStation 3 and Sony PlayStation 2;



•

Handheld platforms such as Nintendo Dual Screen, Nintendo Game Boy Advance, PSP portable entertainment system ("PSP system"), wireless devices; and



•

Personal computers.

Our titles span a wide range of categories, including action, adventure, fighting, racing, role-playing, simulation, sports and strategy. We have created, licensed and acquired a group of highly recognizable brands, which we market to a variety of consumer demographics ranging from products targeted at children and the mass market to products targeted at core gamers. Our portfolio of licensed properties includes the Disney•Pixar properties Finding Nemo, The Incredibles, Cars, Ratatouille and WALL•E; World Wrestling Entertainment; Nickelodeon properties such as SpongeBob SquarePants, Avatar, and Nicktoons; Bratz; Warhammer 40,000; and the Ultimate Fighting Championship; as well as others. We also have licenses to create wireless products based on Disney•Pixar's Ratatouille and WALL•E as well as Star Wars and major sports leagues. In addition to licensed properties, we also develop games based upon our own intellectual properties, including Company of Heroes, DeBlob, Frontlines, MX vs. ATV, Red Faction and Saints Row.

Principles of Consolidation.    The consolidated financial statements include the accounts of THQ Inc. and our wholly owned and majority owned subsidiaries as well as the venture we have with JAKKS Pacific, Inc. See "Note 16—Agreement with JAKKS Pacific, Inc." The results of operations for acquisitions of companies have been included in the consolidated statements of operations beginning on the closing date of acquisition. See "Note 5—Business Combinations." All material intercompany balances and transactions have been eliminated in consolidation.

Fiscal Year.    Effective April 1, 2006, we began reporting our fiscal year on a 52/53-week period. Beginning with the fiscal year ending March 31, 2007, our fiscal year ended on the Saturday nearest March 31. The results of operations for the fiscal year ended March 31, 2008, 2007 and 2006 contain the following number of weeks:

Fiscal Period	Number of Weeks	Fiscal Period End Date
Year ended March 31, 2008	52 weeks	March 29, 2008
Year ended March 31, 2007	52 weeks	March 31, 2007
Year ended March 31, 2006	52 weeks	March 31, 2006

For simplicity, all fiscal periods in our consolidated financial statements and accompanying notes are presented as ending on a calendar month end.

Pervasiveness of Estimates.    The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates relate to licenses, software development, accounts receivable allowances, income taxes, stock-based compensation expense and deferred revenue.

Foreign Currency Translation.    Assets and liabilities of foreign operations are translated at current rates of exchange while results of operations are translated at average rates in effect for the period. Translation gains or losses are shown as a separate component of accumulated other comprehensive income (loss).

60

Foreign currency transaction gains and losses result from exchange rate changes for transactions denominated in currencies other than the functional currency and are included in interest and other income in our consolidated statements of operations. For the fiscal years ended March 31, 2008 and 2007, foreign currency transaction gains were $0.5 million and $0.1 million, respectively. For the fiscal year ended March 31, 2006, foreign currency transaction losses were $0.3 million.

Cash, Cash Equivalents and Investment Securities.    We consider all money market funds and highly liquid investments with maturities of three months or less when purchased to be cash equivalents.

Investments designated as available-for-sale securities under Statements of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Investment in Certain Debt and Equity Securities," are carried at fair value based on quoted market prices or estimated based on quoted market prices for financial instruments with similar characteristics. Unrealized gains and losses of the Company's available-for-sale securities are excluded from earnings and reported as a component of other comprehensive income (loss). Additionally, the Company assesses whether an other-than-temporary impairment loss on its available-for-sale securities has occurred due to declines in fair value or other market conditions. Declines in fair value that are considered other-than-temporary are recorded as an impairment of investments in the consolidated statements of operations.

In general, investments with original maturities of greater than 90 days and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year may also be classified as short-term based on their highly liquid nature and because such investments represent the investment of cash that is available for current operations.

The Company's investments include auction rate securities ("ARS"). These ARS are variable rate bonds tied to short-term interest rates with long-term maturities. ARS have interest rate resets through a modified Dutch auction at predetermined short-term intervals, typically every 7, 28, or 35 days. Interest on ARS is generally paid at the end of each auction process or semi-annually and is based upon the interest rate determined during the prior auction. The majority of our ARS are AAA/Aaa rated, and are typically collateralized by student loans guaranteed by the U.S. government under the Federal Family Education Loan Program or backed by monoline bond insurance companies. See "Note 2—Investment Securities" for further details.

Financial Instruments.    The carrying value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and accrued royalties, approximate fair value based on their short-term nature. Investments classified as available for sale are stated at fair value.

We account for our derivative and hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. The assets or liabilities associated with our derivative instruments and hedging activities are recorded at fair value in other current assets or liabilities, respectively, on our consolidated balance sheets. As discussed below, gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting.

We utilize forward contracts in order to reduce financial market risks. These instruments are used to hedge foreign currency exposures of underlying assets, liabilities, or certain forecasted foreign currency denominated transactions. Our accounting policies for these instruments are based on whether they meet the criteria for designation as hedging transactions. Changes in fair value of derivatives that are designated as cash flow hedges, are highly effective, and qualify as hedging instruments, are recorded in other comprehensive income until the underlying hedged item is recognized in earnings within the financial statement line item consistent with the hedged item. Any ineffective portion of a derivative change in fair value is immediately recognized in earnings. During the periods presented we did not have any derivatives that qualify for hedge accounting. Changes in the fair value of derivatives that do not qualify for hedge accounting treatment are recorded in earnings. The fair value of foreign currency contracts is estimated based on the forward rate of the various hedged currencies as of the end of the period. As of March 31, 2008, 2007 and 2006, we had foreign exchange forward contracts in the notional amount of $97.0 million,

61

$47.0 million and $60.3 million, respectively. The net losses recognized from foreign currency contracts in fiscal 2008 and fiscal 2007 were $5.9 million and $0.9 million, respectively, and the net gain recognized from foreign currency contracts in fiscal 2006 was $0.5 million, and are included in interest and other income in our consolidated statements of operations.

Accounts Receivable Allowances.    We derive revenues from sales of packaged software for video game systems and personal computers and sales of content and services for wireless devices. Product revenue is recognized net of allowances for price protection and returns and various customer discounts. We typically only allow returns for our personal computer products; however, we may decide to provide price protection or allow returns for our video games after we analyze: (i) inventory remaining in the retail channel, (ii) the rate of inventory sell-through in the retail channel, and (iii) our remaining inventory on hand. We maintain a policy of giving credits for price protection and returns, but do not give cash refunds. We use significant judgment and make estimates in connection with establishing allowances for price protection, returns, and doubtful accounts in any accounting period. Included in our accounts receivable allowances is our allowance for co-operative advertising that we engage in with our retail channel partners. Our co-operative advertising allowance is based upon specific contractual commitments and does not involve estimates made by management.

Concentrations of Credit Risk.    Financial instruments which potentially subject us to concentration of credit risk consist principally of cash and cash equivalents, short-term investments, accounts receivable and long-term investments. We place cash and cash equivalents and short-term investments with high credit-quality financial institutions and limit the amount of credit exposure to any one financial institution. We believe the risk related to cash and cash equivalents and accounts receivable is not material due to the short-term nature of such assets. Our investments include significant holdings of ARS. Although there has been recent uncertainty in the credit markets, all of the securities are investment grade securities, and we have no reason to believe that any of the underlying issuers of our ARS are presently at risk or that the underlying credit quality of the assets backing our ARS has been impacted by the reduced liquidity of these investments. See "Note 2—Investment Securities" in the notes to the consolidated financial statements for further information related to our investments.

Most of our sales are made directly to mass merchandisers and national retailers. Due to the increased volume of sales to these channels, we have experienced an increased concentration of credit risk, and as a result, may maintain individually significant receivable balances with such mass merchandisers and national retailers. We perform ongoing credit evaluations of our customers, maintain an allowance for potential credit losses, and most of our foreign receivables are covered by credit insurance. As of March 31, 2008 and 2007, approximately 15% and 22%, respectively, of our gross accounts receivable outstanding was with one major customer. Our largest single customer accounted for 14% of our gross sales in fiscal 2008, 18% of our gross sales in fiscal 2007 and 19% of our gross sales in fiscal 2006. Our second largest customer accounted for 12% of our gross sales in fiscal 2008, 11% of our gross sales in fiscal 2007 and 10% of our gross sales in fiscal 2006.

Inventory.    Inventory, which consists principally of finished products, is stated at the lower of cost (moving weighted average) or market. We estimate the net realizable value of slow-moving inventory on a title by title basis, and charge the excess of cost over net realizable value to cost of sales—product costs.

Property and Equipment.    Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of their useful lives or the remaining lease term.

Licenses.    Minimum guaranteed royalty payments for intellectual property licenses are initially recorded on our balance sheet as an asset (licenses) and as a liability (accrued royalties) at the contractual amount upon execution of the contract if no significant performance obligation remains with the licensor. When a significant performance obligation remains with the licensor, we record royalty payments as an asset (licenses) and as a liability (accrued royalties) when payable rather than upon execution of the contract. Royalty payments for intellectual property licenses are classified as current assets and current liabilities to the extent such royalty payments relate to anticipated product sales during the subsequent year and

62

long-term assets and long-term liabilities if such royalty payments relate to anticipated product sales after one year.

We evaluate the future recoverability of our capitalized licenses on a quarterly basis. The recoverability of capitalized license costs is evaluated based on the expected performance of the specific products in which the licensed trademark or copyright is to be used. As many of our licenses extend for multiple products over multiple years, we also assess the recoverability of capitalized license costs based on certain qualitative factors such as the success of other products and/or entertainment vehicles utilizing the intellectual property, whether there are any future planned theatrical releases or television series based on the intellectual property and the rights holder's continued promotion and exploitation of the intellectual property. Prior to the related product's release, we expense, as part of cost of sales—license amortization and royalties, capitalized license costs when we estimate such amounts are not recoverable.

Licenses are expensed to cost of sales—license amortization and royalties at the higher of (1) the contractual royalty rate based on actual net product sales related to such license or (2) an effective rate based upon total projected revenue related to such license. When, in management's estimate, future cash flows will not be sufficient to recover previously capitalized costs, we expense these capitalized costs to cost of sales—license amortization and royalties. If actual revenues or revised forecasted revenues fall below the initial forecasted revenue for a particular license, the charge to cost of sales—license amortization and royalties expense may be larger than anticipated in any given quarter. As of March 31, 2008, the net carrying value of our licenses was $86.8 million. If we were required to write off licenses, due to changes in market conditions or product acceptance, our results of operations could be materially adversely affected.

Software Development.    We utilize both internal development teams and third-party software developers to develop our software. We account for software development costs in accordance with Financial Accounting Standards Board ("FASB") SFAS No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed" ("FAS 86"). We capitalize software development costs once technological feasibility is established and we determine that such costs are recoverable against future revenues. For products where proven game engine technology exists, this may occur early in the development cycle. We capitalize the milestone payments made to third-party software developers and the direct payroll and overhead costs for our internal development teams. We evaluate technological feasibility on a product-by-product basis. Amounts related to software development for which technological feasibility is not yet met are charged as incurred to product development expense in our consolidated statements of operations.

On a quarterly basis, we compare our unamortized software development costs to net realizable value, on a product-by-product basis. The amount by which any unamortized software development costs exceed their net realizable value is charged to cost of sales—software amortization and royalties. The net realizable value is the estimated future net revenues from the product, reduced by the estimated future direct costs associated with the product such as completion costs, cost of sales and advertising.

Commencing upon product release, capitalized software development costs are amortized to cost of sales—software amortization and royalties based on the ratio of current gross revenues to total projected gross revenues. If actual gross revenues, or revised projected gross revenues, fall below the initial projections, the charge to cost of sales—software amortization and royalties may be larger than anticipated in any given quarter. In fiscal 2008, we recorded approximately $35.4 million of accelerated amortization due to the underperformance of certain previously released games and approximately $23.9 million of additional amortization expense related to the cancellation of certain games. As of March 31, 2008, the net carrying value of our software development was $181.2 million.

The milestone payments made to our third-party developers during their development of our games are typically considered non-refundable advances against the total compensation they can earn based upon the sales performance of the products. Any additional compensation earned beyond the milestone payments is expensed to cost of sales—software amortization and royalties as earned.

Goodwill and Other Intangible Assets.    We perform our annual review for goodwill impairment on the first day of our fourth fiscal quarter, or more frequently if indicators of potential impairment exist. We

63

performed an annual review of goodwill impairment in each of the fiscal years ended March 31, 2008, 2007 and 2006 and found no impairment. Our impairment review process is based on a discounted future cash flow approach that uses our estimates of revenue for our reporting unit, driven by anticipated success of our products and product release schedules, and estimated costs as well as appropriate discount rates. These estimates are consistent with the plans and estimates that we use to manage the underlying business. All identifiable intangible assets with finite lives will continue to be amortized over their estimated useful lives and assessed for impairment under SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."

Revenue Recognition.    Our revenue recognition policies are in compliance with American Institute of Certified Public Accountants Statement of Position ("SOP") 97-2, "Software Revenue Recognition," as amended by SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions," which provide guidance on generally accepted accounting principles ("GAAP") for recognizing revenue on software transactions, and Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition in Financial Statements," which outlines the basic criteria that must be met to recognize revenue and provides guidance for presentation of revenue and for disclosure related to revenue recognition policies in financial statements filed with the Securities and Exchange Commission ("SEC").

Product Sales:    We recognize revenue for packaged software when title and risk of loss transfers to the customer, provided that no significant vendor support obligations remain outstanding and that collection of the resulting receivable is deemed probable by management.

Some of our packaged software products are developed with the ability to be connected to, and played via, the internet. In order for consumers to participate in online communities and play against one another via the internet, we (either directly or through outsourced arrangements with third parties) maintain servers which support an online service that we provide to consumers for activities such as matchmaking, roster updates, tournaments and player rankings. Generally, we consider the online service to be incidental to the overall product offering and an inconsequential deliverable. Accordingly, we do not defer any revenue related to products containing the limited online service.

In instances where the online service is considered a substantive deliverable in addition to the software product, we account for the sale as a "bundled" sale, or multiple element arrangement, in which we sell both the packaged software product and the online service for one combined price. Vendor specific objective evidence for the fair value of the online service does not exist as we do not separately offer or charge for the online service. Therefore, when the online service is determined to be a substantive deliverable, we recognize the revenue from sales of such software products ratably over the estimated online service period of six months, beginning the month after shipment of the software product. Costs of sales related to such products are also deferred and recognized with the related revenues and include product costs, software amortization and royalties, and license amortization and royalties.

Although we generally sell our products on a no-return basis, in certain circumstances we may allow price protection, returns or other allowances on a negotiated basis. We estimate such price protection, returns or other allowances based upon management's evaluation of our historical experience, retailer inventories, the nature of the titles and other factors. Such estimates are deducted from gross sales. See "Note 3—Accounts Receivable Allowances." Software is sold under a limited 90-day warranty against defects in material and workmanship. To date, we have not experienced material warranty claims.

Software Licenses:    For those agreements that provide the customers the right to multiple copies in exchange for guaranteed minimum royalty amounts, revenue is recognized at delivery of the product master or the first copy. Per copy royalties on sales that exceed the guarantee are recognized as earned. Revenue from the licensing of software for the fiscal years ended March 31, 2008, 2007 and 2006 was $7.8 million, $8.6 million and $6.3 million, respectively.

Wireless Revenue:    We recognize wireless revenues principally from the sale or subscription of our applications to wireless subscribers under distribution agreements with wireless carriers in the period in which the applications are purchased by the subscribers, assuming that: fees are fixed and determinable; we have no significant obligations remaining and collection of the related receivable is reasonably assured. In

64

accordance with the distribution agreements, the wireless carriers are responsible for billing, collecting and remitting our fees to us. The wireless carriers generally report the final sales data to us within 10 to 45 days following the end of each month. When final sales data is not available in a timely manner for reporting purposes, we estimate our revenues based on available sales data and historical trends. We will record differences between estimated revenues and actual revenues in the next reporting period once the actual amounts are determined.

Also, in accordance with EITF No. 99-19, "Reporting Revenue Gross as a Principal Versus Net as an Agent," we recognize as revenues the net amount the wireless carrier pays to us upon the sale of our applications, net of any service or other fees earned and deducted by the wireless carrier.

Advertising.    Advertising and sales promotion costs are generally expensed as incurred, except for television airtime and print media costs associated with media campaigns, which are deferred and charged to expense in the period the airtime or advertising space is used for the first time. We engage in co-operative advertising with some of our retail channel partners. We accrue the associated costs when revenue is recognized and such amounts are included in selling and marketing expense if there is a separate identifiable benefit for which we can reasonably estimate the fair value of the benefit identified; otherwise, they are recognized as a reduction of net sales. Advertising costs for the fiscal years ended March 31, 2008, 2007 and 2006 were $85.7 million, $61.2 million and $61.0 million, respectively.

Stock-based compensation.    We adopted SFAS No. 123(R) "Share-Based Payment" ("FAS 123R") in our first quarter of fiscal 2007 and accordingly, we now record stock-based compensation expense for all of our stock-based awards. The adoption of this accounting pronouncement had a material impact on our consolidated statement of operations and our cash flows from operating and financing activities for fiscal 2007. See "Note 14—Stock-based Compensation."

Under FAS 123R, we estimate the fair value of stock options granted using the Black-Scholes option pricing model. The fair value for awards that are expected to vest is then amortized on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. The amount of expense recognized represents the expense associated with the stock options we expect to ultimately vest based upon an estimated rate of forfeitures; this rate of forfeitures is updated as necessary and any adjustments needed to recognize the fair value of options that actually vest or are forfeited are recorded. The Black-Scholes option pricing model, used to estimate the fair value of an award, requires the input of subjective assumptions, including the expected volatility of our common stock and an option's expected life. As a result, the financial statements include amounts that are based upon our best estimates and judgments relating to the expenses recognized for stock-based compensation. We adopted FAS 123R under the modified prospective transition method wherein no prior period financial statement information was affected. All prior period financial statements include stock-based compensation accounted for under Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and the disclosure only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," as amended ("FAS 123"). The financial statements for fiscal 2007 and 2008, include stock-based compensation accounted for under FAS 123R. There were no material differences in valuation methodologies or assumptions compared to those that were used in estimating the fair value of stock options under the disclosure only provisions of FAS 123.

Income Taxes.    We account for income taxes in accordance with SFAS No. 109 "Accounting for Income Taxes" ("FAS 109"). The provision for income taxes is computed using the asset and liability method, under which deferred income tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards in each jurisdiction in which we operate. Deferred income tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. We record a valuation allowance to reduce deferred income tax assets to the amount that is believed "more likely than not" to be realized.

65

As of April 1, 2007, we adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109" ("FIN 48"). Previously, we had accounted for income tax contingencies in accordance with SFAS No. 5, "Accounting for Contingencies." As required by FIN 48, we recognize the financial statement benefit of an income tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the "more likely than not" threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date, we applied FIN 48 to all income tax positions for which the statute of limitations remained open.

Basic and Diluted Earnings Per Share.    Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the period, increased by common stock equivalents. Common stock equivalents are calculated using the treasury stock method and represent incremental shares issuable upon exercise of our outstanding options, warrants, the employee stock purchase plan, other stock unit awards and, if applicable in the period, conversion of our convertible debt. However, potential common shares are not included in the denominator of the diluted earnings per share calculation when inclusion of such shares would be anti-dilutive, such as in a period in which a net loss is recorded.

Recently Issued Accounting Pronouncements.    In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurement" ("FAS 157"). FAS 157 provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities. In February 2008, the FASB issued FSP FAS 157-2, "Effective Date of FASB Statement No. 157" which defers the implementation for certain non-recurring, nonfinancial assets and liabilities from fiscal years beginning after November 15, 2007 to fiscal years beginning after November 15, 2008, which will be our fiscal year 2010. The statement provisions effective as of April 1, 2008, do not have a material effect on our results of operations, financial position, or cash flows. We are evaluating the impact, if any, the adoption of the remaining provisions will have on our results of operations, financial position or cash flows.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115" ("FAS 159"). FAS 159 permits an entity to choose to measure many financial instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. We adopted this statement on April 1, 2008 and did not make this election. As such, the adoption of this statement did not have any impact on our results of operations, financial position or cash flows.

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("FAS 162"). FAS 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with GAAP for nongovernmental entities. FAS 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles." We do not expect the adoption of this statement to have a material impact on our results of operations, financial position or cash flows.

In December 2007, the FASB issued SFAS No. 141R, "Business Combinations" ("FAS 141R"). FAS 141R retains the fundamental requirements in FAS 141 that the acquisition method of accounting (which FAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. FAS 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that

66

the acquirer achieves control. FAS 141R is effective for business combination transactions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, which will be our fiscal year 2010. We are evaluating the impact, if any, the adoption of this statement will have on our results of operations, financial position or cash flows.

In April 2008, the FASB issued FSP FAS 142-3, "Determination of the Useful Life of Intangible Assets" ("FSP 142-3"). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, "Goodwill and Other Intangible Assets" ("FAS 142"). This change is intended to improve the consistency between the useful life of a recognized intangible asset under FAS 142 and the period of expected cash flows used to measure the fair value of the asset under FAS 141R and other GAAP. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, which will be our fiscal year 2010. The requirement for determining useful lives must be applied prospectively to intangible assets acquired after the effective date and the disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. We do not expect the adoption of this statement to have a material impact on our results of operations, financial position or cash flows.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements" ("FAS 160"). This Statement amends ARB 51 to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. FAS 160 is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008, which will be our fiscal year 2010. We are evaluating the impact, if any, the adoption of this statement will have on our results of operations, financial position or cash flows.

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133" ("FAS 161"). This Statement changes the disclosure requirements for derivative instruments and hedging activities. Under FAS 161, entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. FAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, which will be our fiscal year 2010. We are evaluating the impact, if any, the adoption of this statement will have on our results of operations, financial position or cash flows.

In December 2007, the FASB ratified the Emerging Issues Task Force's ("EITF") consensus on EITF Issue No 07-1, "Accounting for Collaborative Arrangements" that discusses how parties to a collaborative arrangement (which does not establish a legal entity within such arrangement) should account for various activities. The consensus indicates that costs incurred and revenues generated from transactions with third parties (i.e. parties outside of the collaborative arrangement) should be reported by the collaborators on the respective line items in their income statements pursuant to EITF Issue No. 99-19, "Reporting Revenue Gross as a Principal Versus Net as an Agent". Additionally, the consensus provides that income statement characterization of payments between the participation in a collaborative arrangement should be based upon existing authoritative pronouncements; analogy to such pronouncements if not within their scope; or a reasonable, rational, and consistently applied accounting policy election. EITF Issue No. 07-1 is effective for interim or annual reporting periods in fiscal years beginning after December 15, 2008, which is our fiscal 2010 and is to be applied retrospectively to all periods presented for collaborative arrangements existing as of the date of adoption. We are currently evaluating the impact, if any, the adoption of this standard will have on our results of operations, financial position or cash flows.

67

In June 2007, the FASB ratified the EITF consensus conclusion on EITF 07-3, "Accounting for Advance Payments for Goods or Services to be Used in Future Research and Development". EITF 07-3 addresses the diversity which exists with respect to the accounting for the non-refundable portion of a payment made by a research and development entity for future research and development activities. Under this conclusion, an entity is required to defer and capitalize non-refundable advance payments made for research and development activities until the related goods are delivered or the related services are performed. EITF 07-3 is effective for interim or annual reporting periods in fiscal years beginning after December 15, 2007, which is our fiscal 2009, and requires prospective application for new contracts entered into after the effective date. We do not expect the adoption of EITF 07-3 to have a material impact on our results of operations, financial position or cash flows.

2.     Investment Securities

The following table summarizes our investment securities and their related inception-to-date gross unrealized gains and (losses), as of March 31, 2008 (in thousands). All of our investment securities are classified as available-for-sale.

			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Short-term investments:
	U.S. agency securities		$	3,501	$	—	$	—		$	3,501
	Municipal securities			58,381		527		—			58,908
	Corporate notes			7,493		—		(218	)		7,275
		Total short-term investments		69,375		527		(218	)		69,684
Long-term investments:
	U.S. agency securities			—		—		—			—
	Municipal securities(1)			47,185		—		(1,176	)		46,009
	Corporate securities(1)			6,800		—		(210	)		6,590
		Total long-term investments		53,985		—		(1,386	)		52,599
Total investment securities			$	123,360	$	527	$	(1,604	)	$	122,283

(1)

The municipal securities and corporate securities included in the table above and classified as long-term are all auction rate securities with most collateralized by student loans guaranteed by the U.S. government under the Federal Family Education Loan Program and the majority of the remaining securities backed by monoline bond insurance companies.

As of March 31, 2008 we had approximately $52.6 million of ARS classified as long-term available-for-sale securities. These ARS are variable rate bonds tied to short-term interest rates with long-term maturities. ARS have interest rate resets through a modified Dutch auction at predetermined short-term intervals, typically every 7, 28, or 35 days. Interest on ARS is generally paid at the end of each auction process or semi-annually and is based upon the interest rate determined during the prior auction.

As of March 31, 2008, the majority of the ARS we held were AAA/Aaa rated, with most collateralized by student loans guaranteed by the U.S. government under the Federal Family Education Loan Program and the majority of the remaining securities backed by monoline bond insurance companies. We historically invested in these securities for short periods of time as part of our cash management program. However, the recent uncertainty in the credit markets have prevented us and other investors from selling our securities. As such, we have classified these investments as long-term as of March 31, 2008 to reflect the current lack of liquidity of these securities. We currently have the ability and intent to hold these ARS until the auction process recovers. All of the securities are investment grade securities, and we have no reason to

68

believe that any of the underlying issuers of our ARS are presently at risk or that the underlying credit quality of the assets backing our ARS has been impacted by the reduced liquidity of these investments. We have continued to receive interest payments on the ARS according to their terms.

As of March 31, 2008, there was insufficient observable ARS market information available to determine the fair value of our investments. Therefore, we estimated the fair value of these investments by incorporating assumptions that market participants would use in their estimates of fair value. Some of these assumptions included i) credit quality, ii) estimates on the probability of the issue being called prior to final maturity, and iii) broker quotes. Based on this analysis, as of March 31, 2008 we recorded a temporary impairment of approximately $1.4 million related to our ARS in accumulated other comprehensive income in our consolidated statement of stockholders' equity. The contractual terms of these securities do not permit the issuer to call, prepay or otherwise settle the securities at prices less than the stated par value of the security. Accordingly, we do not consider these investments to be other-than-temporarily impaired as of March 31, 2008. We believe this temporary impairment is primarily attributable to the limited liquidity of these investments.

The following table summarizes the gross unrealized losses and fair value of our investment securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2008 (in thousands):

			Unrealized Losses Less Than 12 Months					Unrealized Losses 12 Months or Greater				Total
			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Short-term investments:
	U.S. agency securities		$	3,501	$	—		$	—	$	—	$	3,501	$	—
	Municipal securities			58,908		—			—		—		58,908		—
	Corporate notes			7,275		(218	)		—		—		7,275		(218	)
		Total short-term investments		69,684		(218	)		—		—		69,684		(218	)
Long-term investments:
	U.S. agency securities			—		—			—		—		—		—
	Municipal securities(1)			46,009		(1,176	)		—		—		46,009		(1,176	)
	Corporate securities(1)			6,590		(210	)		—		—		6,590		(210	)
		Total long-term investments		52,599		(1,386	)		—		—		52,599		(1,386	)
Total investment securities			$	122,283	$	(1,604	)	$	—	$	—	$	122,283	$	(1,604	)

(1)

The municipal securities and corporate securities included in the table above and classified as long-term are all auction rate securities with most collateralized by student loans guaranteed by the U.S. government under the Federal Family Education Loan Program and the majority of the remaining securities backed by monoline bond insurance companies.

The gross unrealized losses on our short-term investments in the above tables were primarily caused by a decrease in the fair value of the investments as a result of an increase in interest rates.

During the year ended March 31, 2008 there were $0.1 million of realized gains and no realized losses from sales of available-for-sale securities. During the year ended March 31, 2007 there were no realized gains or (losses) from sales of available-for-sale securities. In addition to the net unrealized loss of approximately $1.0 million during the year ended March 31, 2008 from our investment securities, we had a pre-tax unrealized holding gain on our investment in Yuke's Co., Ltd. ("Yuke's") which is classified as available-for-sale and is included in other long-term assets (see "Note 8—Other Long-Term Assets").

69

The following table summarizes the amortized cost and fair value of our investment securities, classified by stated maturity as of March 31, 2008 (in thousands):

			Amortized Cost		Fair Value
Short-term investments:
	Due in one year or less		$	47,964	$	48,200
	Due after one year through two years			21,411		21,484
		Total short-term investments		69,375		69,684
Long-term investments:
	Due after one year through five years			500		500
	Due after five years through ten years			1,000		1,000
	Due after ten years			52,485		51,099
		Total long-term investments		53,985		52,599
Total investment securities			$	123,360	$	122,283

The following table summarizes our investment securities and their related inception-to-date gross unrealized gains and (losses), as of March 31, 2007 (in thousands). All of our investment securities are classified as available-for-sale.

			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Short-term investments:
	U.S. agency securities		$	12,495	$	3	$	(2	)	$	12,496
	Municipal securities			245,761		—		(45	)		245,716
	Corporate notes			25,000		—		(2	)		24,998
		Total short-term investments	$	283,256	$	3	$	(49	)	$	283,210

The following table summarizes the gross unrealized losses and fair value of our short-term investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2007 (in thousands):

		Unrealized Losses Less Than 12 Months					Unrealized Losses 12 Months or Greater				Total
		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. agency securities		$	12,496	$	(2	)	$	—	$	—	$	12,496	$	(2	)
Municipal securities			245,716		(45	)		—		—		245,716		(45	)
Corporate notes			24,998		(2	)		—		—		24,998		(2	)
	Total short-term investments	$	283,210	$	(49	)	$	—	$	—	$	283,210	$	(49	)

The gross unrealized losses in each of the securities in the above tables were primarily caused by a decrease in the fair value of the investments as a result of an increase in interest rates. The contractual terms of these securities do not permit the issuer to call, prepay or otherwise settle the securities at prices less than the stated par value of the security. Accordingly, we did not consider these investments to be other-than-temporarily impaired as of March 31, 2007.

During the year ended March 31, 2007 there were no realized gains or (losses) from sales of available-for-sale securities. In addition to the net unrealized loss of approximately $46,000 from our

70

short-term investments, we had an unrealized loss on our investment in Yuke's Co., Ltd. ("Yuke's") which is classified as available-for-sale and is included in other long-term assets. See "Note 8—Other Long-Term Assets."

3.     Accounts Receivable Allowances

Accounts receivable allowances at March 31, 2008, 2007 and 2006 consist of the following (in thousands):

	Balance at Beginning of Period		Provisions		Deductions			Balance at End of Period
Year ended March 31, 2008
Allowance for price protection and returns	$	66,071	$	185,921	$	(159,204	)	$	92,788
Allowance for co-op advertising		13,612		48,008		(41,713	)		19,907
Allowance for doubtful accounts and other		866		67		(587	)		346
Total	$	80,549	$	233,996	$	(201,504	)	$	113,041
Year ended March 31, 2007
Allowance for price protection and returns	$	48,223	$	128,454	$	(110,606	)	$	66,071
Allowance for co-op advertising		8,440		40,726		(35,554	)		13,612
Allowance for doubtful accounts and other		1,157		975		(1,266	)		866
Total	$	57,820	$	170,155	$	(147,426	)	$	80,549
Year ended March 31, 2006
Allowance for price protection and returns	$	46,909	$	133,756	$	(132,442	)	$	48,223
Allowance for co-op advertising		10,324		33,272		(35,156	)		8,440
Allowance for doubtful accounts and other		887		2,452		(2,182	)		1,157
Total	$	58,120	$	169,480	$	(169,780	)	$	57,820

4.     Balance Sheet Details

Inventory.    Inventory at March 31, 2008 and 2007 consists of the following (in thousands):

		March 31, 2008		March 31, 2007
Components		$	1,849	$	1,693
Finished goods			36,391		25,688
	Inventory	$	38,240	$	27,381

71

Property and Equipment, net.    Property and equipment, net at March 31, 2008 and 2007 consists of the following (in thousands):

		Useful Lives	March 31, 2008			March 31, 2007
Building		30 yrs	$	730		$	719
Land		—		401			401
Computer equipment and software		3-10 yrs		63,646			50,777
Furniture, fixtures and equipment		5 yrs		9,476			8,262
Leasehold improvements		3-6 yrs		15,715			12,694
Automobiles		2-5 yrs		105			92
				90,073			72,945
Less: accumulated depreciation				(39,608	)		(27,850	)
	Property and equipment, net		$	50,465		$	45,095

Depreciation expense associated with property and equipment amounted to $17.4 million, $13.7 million and $11.7 million for the fiscal years ended March 31, 2008, 2007 and 2006, respectively.

Accrued and Other Current Liabilities.    Accrued and other current liabilities at March 31, 2008 and 2007 consist of the following (in thousands):

		March 31, 2008		March 31, 2007
Accrued liabilities		$	39,876	$	31,125
Accrued compensation			39,939		36,591
Accrued venture partner expense			37,809		15,273
Deferred revenue, net—packaged software product			30,864		—
Accrued third-party software developer milestones			10,594		9,387
Accrued royalties			43,020		51,042
	Accrued and other current liabilities	$	202,102	$	143,418

Deferred revenues, net—packaged software product, consists of net sales from packaged software products bundled with online services considered to be more-than-inconsequential to the software product. Such amounts are recognized ratably over the estimated service period of six months beginning the month after initial sale. At March 31, 2008 the deferred costs related to this deferred revenue were $20.7 million and are included within software development and prepaid expenses and other current assets in our consolidated balance sheet. See "Note 1—Description of Business and Summary of Significant Accounting Policies" for further information regarding our revenue recognition policies.

Other Long-Term Liabilities.    Other long-term liabilities at March 31, 2008 and 2007 consist of the following (in thousands):

		March 31, 2008		March 31, 2007
Accrued royalties		$	35,004	$	43,966
Unrecognized tax benefits and related interest			5,461		—
Accrued liabilities			3,714		3,328
	Other long-term liabilities	$	44,179	$	47,294

5.     Business Combinations

In fiscal 2008, we acquired certain of the assets and/or all of the outstanding equity interests in the following three entities for a total cost of $35.3 million, of which $31.1 million was paid in cash, $0.3 million

72

in shares issued, and the remaining $3.9 million may be paid in future years depending on whether certain pre-tax income targets are met pursuant to the purchase agreements:

•

Big Huge Games, Inc., located in Timonium, Maryland, a leading development studio focused on the Role-Playing-Game genre;



•

Universomo Ltd., located in Tampere, Finland, a developer of interactive entertainment software for all major mobile platforms;



•

Elephant Entertainment, LLC, located in Minneapolis, Minnesota, a publisher and distributor of casual PC games.

Pursuant to the terms of our acquisitions of Big Huge Games and Universomo, there is a potential additional consideration, up to $6.6 million, related to their meeting certain post-acquisition performance targets that can be earned in future years. Of the $6.6 million, $1.9 million is payable in cash (contractually denominated as 1.2 million Euros) and will be recognized as additional purchase price if paid, and $4.7 million is payable in stock and will be recognized as post-acquisition expenses, if earned.

Goodwill and other intangible assets recognized in the above transactions amounted to $30.3 million and $6.1 million, respectively, $34.9 million of which is not expected to be deductible for income tax purposes. The acquisitions were accounted for using the purchase method in accordance with FAS 141 "Business Combinations." Accordingly, the net assets were recorded at their estimated fair values, and operating results were included in our financial statements from the date of acquisition. The preliminary purchase price allocation, including the allocation of goodwill, will be updated as additional information becomes available. We did not present pro forma information as these acquisitions were immaterial to our financial position and results of operations.

In each of fiscal 2008 and fiscal 2007, we paid the former shareholders of ValuSoft additional consideration of $1.8 million for reaching certain pre-tax income targets pursuant to the purchase agreement. In 2002, we acquired the assets of ValuSoft, Inc. for a total cost of $14.2 million, which was paid primarily in cash. Since then, we have paid the former shareholders of ValuSoft total additional consideration in the amount of $11.0 million because ValuSoft reached certain pre-tax income targets in the five years subsequent to the acquisition. No amounts of additional consideration are outstanding as of March 31, 2008. Goodwill recognized in the original transaction and in the payments of the additional consideration has amounted to $23.0 million and is expected to be deductible for income tax purposes.

6.     Goodwill

The changes in the carrying amount of goodwill for the fiscal years ended March 31, 2008 and 2007 were as follows (in thousands):

Balance at March 31, 2006		$	90,872
	Sale of 50% interest in Minick Holdings AG ("Minick")		(9,598	)
	Goodwill acquired		3,753
	Additional consideration paid for ValuSoft		1,800
	Effect of foreign currency exchange rates and other		1,861
Balance at March 31, 2007		$	88,688
	Goodwill acquired		30,329
	Additional consideration paid for ValuSoft		1,800
	Effect of foreign currency exchange rates and other		1,568
Balance at March 31, 2008		$	122,385

We performed an annual review of goodwill impairment in each of the fiscal years ended March 31, 2008, 2007 and 2006 and found no impairment.

73

7.     Other Intangible Assets

Intangible assets include licenses, software development and other intangible assets. Intangible assets are included in other long-term assets, net, except licenses and software development, which are reported separately in the consolidated balance sheets. Other intangible assets are as follows (in thousands):

		March 31, 2008							March 31, 2007
	Useful Lives	Gross Carrying Amount		Accumulated Amortization			Net Amount		Gross Carrying Amount		Accumulated Amortization			Net Amount
Software technology	2-4 years	$	3,504	$	(562	)	$	2,942	$	953	$	(715	)	$	238
Trade secrets	5 years		—		—			—		1,800		(1,800	)		—
Trade names	3-10 years		2,844		(673	)		2,171		2,100		(922	)		1,178
Non-compete / Employment contracts	1.5-6.5 years		2,383		(1,127	)		1,256		1,048		(828	)		220
Total		$	8,731	$	(2,362	)	$	6,369	$	5,901	$	(4,265	)	$	1,636

Amortization of other intangible assets for the fiscal years ended March 31, 2008, 2007 and 2006 was $1.3 million, $1.9 million and $2.6 million, respectively. Finite-lived other intangible assets are amortized using the straight-line method over the lesser of their estimated useful lives or the agreement terms, typically from one and one-half to ten years and are assessed for impairment under SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."

The following table summarizes the estimated amortization expense for each of the next five fiscal years and thereafter (in thousands):

Fiscal Years Ending March 31,
2009	$	1,493
2010		1,524
2011		1,274
2012		921
2013		430
Thereafter		727
	$	6,369

8.     Other Long-Term Assets

In addition to other intangible assets, other long-term assets include our investment in Yuke's, a Japanese video game developer. We own less than a 20% interest in Yuke's, which is publicly traded on the Nippon New Market in Japan. Accordingly, we account for this investment under SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities" as available-for-sale. Unrealized holding gains and losses are excluded from earnings and are included as a component of other comprehensive income until realized. In fiscal 2008 the pre-tax unrealized holding gain related to our investment in Yuke's was approximately $1.4 million, and in fiscal 2007 the pre-tax unrealized holding loss was approximately $3.5 million. Due to the long-term nature of this relationship, this investment is included in other long-term assets in the consolidated balance sheets.

74

Other long-term assets as of March 31, 2008 and 2007 are as follows (in thousands):

		March 31, 2008		March 31, 2007
Investment in Yuke's		$	7,080	$	5,726
Other intangible assets (see Note 7)			6,369		1,636
Other			6,553		11,388
	Total other long-term assets	$	20,002	$	18,750

9.     Capital Stock Transactions

As of March 31, 2007 we had $8.5 million authorized and available for common stock repurchases. During fiscal 2008, our Board authorized the repurchase of up to $75.0 million of our common stock from time to time on the open market or in private transactions. During the year ended March 31, 2008, we repurchased 2,193,400 shares of our common stock for approximately $54.9 million, leaving approximately $28.6 million available for future repurchases. There is no expiration date for the authorized repurchases.

On January 18, 2008, in connection with our acquisition of Big Huge Games, Inc. ("BHG"), we issued an aggregate of 199,631 shares of our common stock to stockholders of BHG as partial consideration for the purchase of their shares of BHG. The shares are restricted from transfer and held in escrow by THQ until certain criteria are met, as set forth in the BHG stock purchase agreement.

On July 30, 2007 we amended our certificate of incorporation to increase our authorized number of shares of common stock to 225,000,000, from 75,000,000.

10.   Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income were as follows (in thousands):

	Foreign Currency Translation Gains (Losses)			Net Unrealized Gains (Losses) on Securities			Net Accumulated Other Comprehensive Income (Loss)
Balance at March 31, 2005	$	9,729		$	3,122		$	12,851
Other comprehensive income (loss)		(3,085	)		601			(2,484	)
Balance at March 31, 2006		6,644			3,723			10,367
Other comprehensive income (loss)		9,463			(2,227	)		7,236
Balance at March 31, 2007		16,107			1,496			17,603
Other comprehensive income (loss)		9,372			219			9,591
Balance at March 31, 2008	$	25,479		$	1,715		$	27,194

11.   Earnings (Loss) Per Share

Basic earnings (loss) per share is computed as net income (loss) divided by the weighted average number of shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur from common shares issuable through stock-based compensation plans including stock options, stock-based awards and purchase opportunities under our ESPP. Effective April 1, 2006, we adopted FAS 123R using the modified prospective transition method (see "Note 14—Stock-based Compensation" for further disclosure of our stock-based compensation plans and our adoption of FAS 123R). In applying the treasury stock method in determining our dilutive potential common shares, assumed proceeds from dilutive weighted average outstanding options as of March 31, 2008 and 2007 include the windfall tax benefits, net of shortfalls, calculated under the "as-if" method as prescribed by

75

FAS 123R. The following table is a reconciliation of the weighted-average shares used in the computation of basic and diluted earnings (loss) per share for the periods presented (in thousands):

	Fiscal Year Ended March 31,
	2008			2007		2006
Net income (loss) used to compute basic and diluted earnings (loss) per share	$	(35,337	)	$	68,038	$	32,106
Weighted average number of shares outstanding—basic		66,475			65,039		62,615
Dilutive effect of potential common shares		—			2,554		2,905
Number of shares used to compute earnings (loss) per share—diluted		66,475			67,593		65,520

The following weighted average potential common shares were excluded from the computation of diluted earnings (loss) per share above as such effect would have been antidilutive for the periods presented (in thousands):

	Fiscal Year Ended March 31,
	2008	2007	2006
Potential common shares	9,352	2,086	738

12.   Income Taxes

United States and foreign income before taxes and details of the provision for income tax are as follows (in thousands):

			Fiscal Year Ended March 31,
			2008			2007			2006
Income from continuing operations before income taxes and minority interest:
	United States		$	(99,868	)	$	60,955		$	29,753
	Foreign			27,233			30,073			10,037
			$	(72,635	)	$	91,028		$	39,790
Provision for income tax (benefit) expense:
	Current
		Federal	$	(8,049	)	$	(518	)	$	(9,877	)
		State		(355	)		(12	)		1,151
		Foreign		13,430			11,211			5,325
		Total current		5,026			10,681			(3,401	)
	Deferred
		Federal		(33,833	)		6,905			8,967
		State		(6,310	)		(1,036	)		(5,057	)
		Foreign		(4,485	)		(519	)		(1,679	)
		Total deferred		(44,628	)		5,350			2,231
Add back benefit (expense) recorded to stockholders' equity:
	Tax benefit related to stock option exercises			3,921			8,866			9,162
	Tax benefit (expense) related to unrealized (gain) loss on investments			(104	)		1,309			(371	)
Provision for income tax			$	(35,785	)	$	26,206		$	7,621

76

The differences between the U.S. federal statutory tax rate and our effective tax rate, expressed as a percentage of income before income taxes and minority interest, were as follows:

		Fiscal Year Ended March 31,
		2008		2007		2006
U.S. federal statutory tax rate		(35.0	)%	35.0	%	35.0	%
Impact of changes in unrecognized tax benefits		(6.4	)	—		—
State taxes, net of federal impact		(5.7	)	0.2		(2.5	)
Tax exempt interest income		(3.3	)	(2.9	)	(5.1	)
Research and development credits		(3.2	)	(4.3	)	(5.4	)
Non-deductible stock-based compensation		2.8		2.0		—
Rate differences in foreign taxes and other		1.5		(1.2	)	(2.9	)
	Effective tax rate	(49.3	)%	28.8	%	19.1	%

Deferred income taxes reflect the net tax effects of temporary differences between the amounts of assets and liabilities for accounting purposes and the amounts used for income tax purposes. The components of the net deferred income tax asset and liability are as follows (in thousands):

			March 31,
			2008			2007
Deferred income tax assets:
	Accruals, reserves and other expenses		$	39,527		$	29,080
	Tax credit carryforwards			21,581			22,371
	Net operating loss carryforwards			28,777			5,513
	Other			17,129			2,859
		Total deferred income tax assets		107,014			59,823
	Valuation allowance			(8,357	)		(7,126	)
		Deferred tax asset, net of valuation allowance		98,657			52,697
Deferred income tax liabilities:
	Software development costs			(62,000	)		(60,207	)
	Depreciation and amortization			(3,163	)		(2,065	)
	Unrealized gain on investments			(1,050	)		(260	)
		Total deferred income tax liabilities		(66,213	)		(62,532	)
		Net deferred tax asset (liability)	$	32,444		$	(9,835	)

As of March 31, 2008, current net deferred tax liabilities were $29.3 million and long term net deferred tax assets were $61.7 million. As of March 31, 2007, current net deferred tax liabilities were $25.6 million and long-term net deferred tax assets were $15.8 million.

The tax credit carryforwards as of March 31, 2008 includes research and development tax credit carryforwards of $11.1 million and $11.6 million for federal and state purposes, respectively. The federal tax credit carryforward expires in 2028, while the majority of the state credits are from California and can be carried forward indefinitely. In addition, we have foreign tax credit carryforwards of $3.0 million. These credits expire in 2018.

As of March 31, 2008, we have federal and various state net operating loss carryforwards totaling $69.6 and $70.9 million, respectively, that expire between 2008 and 2028 and foreign net operating loss carryforwards totaling $22.3 million that can be carried forward indefinitely. At March 31, 2008, our deferred income tax asset for net operating loss carryforwards was reduced by a valuation allowance of $8.4 million as

77

compared to $7.1 million in the prior fiscal year. Realization of the deferred tax assets is dependent upon the continued generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. Although realization is not assured, we believe it is "more likely than not" that the net carrying value of the deferred tax asset will be realized.

The tax benefits associated with certain net operating loss carryforwards relate to employee stock options. Pursuant to SFAS No. 109, "Accounting for Income Taxes" ("FAS 109"), current year net operating losses have been reduced by $5.1 million relating to these items which will be credited to additional paid-in capital when we can reduce our income taxes payable.

At March 31, 2008 we had accumulated foreign earnings of $66.5 million. We do not plan to repatriate these earnings, therefore, no U.S. income tax has been provided on the foreign earnings. Additionally, we have not tax effected the cumulative translation adjustment as we have no intention of repatriating foreign earnings.

We adopted the provisions of FASB Interpretation 48, "Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109," ("FIN 48") on April 1, 2007. Previously, we had accounted for tax contingencies in accordance with SFAS No. 5, Accounting for Contingencies. As required by FIN 48, we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would "more likely than not" sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date, we applied FIN 48 to all tax positions for which the statute of limitations remained open. Our adoption of FIN 48 on April 1, 2007 had no impact on our April 1, 2007 beginning retained earnings balance. The amount of unrecognized tax benefits as of April 1, 2007 was $18.6 million.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Balance at April 1, 2007	$	18,604
Additions based on tax positions related to the current year		2,266
Additions for tax positions of prior years		—
Reductions for tax positions of prior years		(1,755	)
Reductions as result of lapse of applicable statute of limitations		(229	)
Settlements		(7,250	)
Balance at March 31, 2008	$	11,636

The total unrecognized tax benefit of $11.6 million is reflected in our consolidated balance sheet as $1.5 million in net current deferred tax liabilities, $5.3 million in net long-term deferred tax assets, and $4.8 million in other long-term liabilities. The amount of unrecognized tax benefits at March 31, 2008 includes $5.0 million of unrecognized tax benefits which, if ultimately recognized, will reduce our annual effective tax rate.

We are subject to income taxes in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for fiscal years before 2004.

Our uncertain tax positions relate to tax years that remain subject to examination by the relevant tax authorities. On May 24, 2007 we received notification from the IRS that the Joint Committee on Taxation had completed its review of our file and took no exception to the conclusions reached by the IRS. We have evaluated the impact of the conclusions reached in the IRS examination in the FIN 48 measurement and recognition process. We are currently under routine examination by the IRS for our income tax returns for fiscal years 2004 through 2007 and by various state jurisdictions for fiscal years subsequent to 2003. We do

78

not expect these examinations to be concluded and settled in the next 12 months, therefore, we are currently unable to estimate the potential impact to the liability for unrecognized tax benefits or the timing of such changes. We do not anticipate any significant impact to its unrecognized tax benefit balance in fiscal 2009 related to the expiration of the statutes of limitations.

Our policy is to recognize interest and penalty expense, if any, related to uncertain tax positions as a component of income tax expense. For the fiscal years ended March 31, 2008 and 2007, we recognized $0.1 million of interest income and $0.4 million in interest expense, respectively, related to uncertain tax positions. As of March 31, 2008 and April 1, 2007, we had an accrued liability of $0.6 million and $0.7 million, respectively, for interest related to uncertain tax positions. These amounts are included in other long-term liabilities in the consolidated balance sheets.

13.   Employee Defined Contribution Plan

For our United States employees we sponsor a defined contribution plan under Section 401(k) of the Internal Revenue Code. The plan allows employees the ability to defer up to 60% of their annual compensation (up to the 2008 IRS annual maximum of $15,500). The plan also provides that we will match the employees' contribution equal to the employee's deferral, up to 4% of eligible compensation with a maximum of $9,200 based on the 2008 IRS maximum compensation limit. We may also contribute funds to the plan in the form of a discretionary profit-sharing contribution. Employer contributions under the plan were $6.1 million, $4.9 million and $3.5 million in the fiscal years ended March 31, 2008, 2007 and 2006, respectively.

14.   Stock-based Compensation

Prior to July 20, 2006, we utilized two stock option plans: the THQ Inc. Amended and Restated 1997 Stock Option Plan (the "1997 Plan") and the THQ Inc. Third Amended and Restated Nonexecutive Employee Stock Option Plan (the "NEEP Plan"). The 1997 Plan provided for the issuance of up to 14,357,500 shares available for employees, consultants and non-employee directors, and the NEEP plan provided for the issuance of up to 2,142,000 shares available for nonexecutive employees of THQ of which no more than 20% was available for awards to our nonexecutive officers and no more than 15% was available for awards to the nonexecutive officers or general managers of our subsidiaries or divisions. The 1997 Plan and the NEEP Plan were cancelled on July 20, 2006, the same day THQ's stockholders approved the THQ Inc. 2006 Long-Term Incentive Plan ("LTIP").

Under the 1997 Plan, we granted incentive stock options, non-qualified stock options, performance accelerated restricted stock ("PARS") and performance accelerated restricted stock units ("PARSUs"). The NEEP Plan provided for the grant of only non-qualified stock options to non-executive officers of the Company. The LTIP provides for the grant of stock options (including incentive stock options), stock appreciation rights (SARs), restricted stock awards, restricted stock units ("RSUs"), and other performance awards (in the form of performance shares or performance units) to eligible directors and employees of, and consultants or advisors to, the Company. Subject to certain adjustments, the total number of shares of THQ common stock that may be issued under the LTIP shall not exceed 6,000,000 shares. Shares subject to awards of stock options or SARs will count as one share for every one share granted against the share limit, and all other awards will count as 1.6 shares for every one granted against the share limit. As of March 31, 2008, we had 3,102,634 shares under the LTIP available for grant.

The purchase price per share of common stock purchasable upon exercise of each option granted under the 1997 Plan, the NEEP Plan and the LTIP may not be less than the fair market value of such share of common stock on the date that such option is granted. Generally, options granted under our plans become

79

exercisable over three years and expire on the fifth anniversary of the grant date. Other vesting terms are as follows:

•

PARS and PARSUs that have been granted to our officers under the 1997 Plan and the LTIP vest with respect to 100% of the shares subject to the award on the fifth anniversary of the grant date subject to continued employment of the grantee; provided, however, 20% of the shares subject to each award will vest on each of the first through fourth anniversaries of the grant date if certain performance targets for the Company are attained each fiscal year. In the fiscal year ended March 31, 2008, it was determined that certain performance targets had been met with respect to our fiscal year ended March 31, 2007 and as such certain of our officers vested in 20% of outstanding awards.



•

PARSUs granted to our non-employee directors under the 1997 Plan are currently fully vested.



•

Deferred Stock Units ("DSUs") granted to our non-employee directors under the LTIP vest immediately, however, may not be paid to a director until thirteen (13) months after the date of grant.



•

RSUs granted to our employees are performance-based awards that do not carry any acceleration conditions. Each award will vest with respect to 100% of the shares on the third anniversary of the grant date, subject to continued employment of the grantee.

The fair value of our nonvested restricted stock and restricted stock units is determined based on the closing trading price of our common stock on the grant date. The fair value of PARS, PARSUs, DSUs and RSUs granted is amortized over the vesting period.

In March 2008, under the LTIP, we granted 312,375 RSUs to our employees. Total compensation expense recognized on RSUs for fiscal year ended March 31, 2008 was $42,000.

Beginning in March 2007, we offered our non-executive employees the ability to participate in an employee stock purchase plan ("ESPP"). Under the ESPP, up to 500,000 shares of our common stock may be purchased by eligible employees during six-month offering periods that commence each March 1 and September 1 (each, an "Offering Period"). The first business day of each Offering Period is referred to as the "Offering Date." The last business day of each Offering Period is referred to as the "Purchase Date". Pursuant to our ESPP, eligible employees may authorize payroll deductions of up to 15 percent of their base salary, subject to certain limitations, to purchase shares at 85 percent of the lower of the fair market value of our common stock on the Offering Date or Purchase Date. The fair value of the ESPP options granted is amortized over the offering period. During the year ended March 31, 2008, employees purchased 124,650 and 180,229 shares at a price of $24.47 and $15.90 per share, respectively, on the Purchase Dates. No purchase of ESPP shares occurred during the year ended March 31, 2007. As of March 31, 2008, we had 195,121 shares available for issuance under the ESPP.

Any references we make to unspecified "stock-based compensation" and "stock-based awards" are intended to represent the collective group of all our awards and purchase opportunities: stock options, PARS, PARSUs, DSUs, RSUs and ESPP options. Any references we make to "nonvested shares" and "vested shares" are intended to represent our PARS, PARSU, DSU and RSU awards.

Prior to April 1, 2006, we accounted for our stock-based compensation using the intrinsic value method in accordance with APB 25 and the disclosure-only provisions of FAS 123. Effective April 1, 2006, we adopted the fair value recognition provisions of FAS 123R using the modified prospective transition method. Under that transition method, results for prior periods have not been restated as a result of adopting FAS 123R.

80

For the fiscal years ended March 31, 2008, 2007 and 2006, stock-based compensation expense recognized in the consolidated statements of operations was as follows (in thousands):

		Year Ended March 31,
		2008			2007			2006
Cost of sales—software amortization and royalties		$	6,800		$	2,087		$	—
Product development			4,773			3,364			926
Selling and marketing			2,654			2,817			981
General and administrative			8,444			10,704			1,515
	Stock-based compensation expense before income taxes		22,671			18,972			3,422
Income tax benefit			(6,132	)		(5,060	)		(867	)
	Total stock-based compensation expense after income taxes	$	16,539		$	13,912		$	2,555

Additionally, stock-based compensation expense is capitalized in accordance with FAS 86, as discussed in "Note 1—Description of Business and Summary of Significant Accounting Policies." The following table summarizes stock-based compensation expense included in our consolidated balance sheets as a component of software development (in thousands):

Balance at April 1, 2006	$	—
Stock-based compensation expense capitalized during the period		5,924
Amortization of capitalized stock-based compensation expense		(2,087	)
Balance at March 31, 2007	$	3,837
Stock-based compensation expense capitalized during the period		5,765
Amortization of capitalized stock-based compensation expense		(6,800	)
Balance at March 31, 2008	$	2,802

FAS 123R requires that stock-based compensation expense be based on awards that are ultimately expected to vest and accordingly, stock-based compensation expense recognized in fiscal years ended March 31, 2008 and 2007 has been reduced by estimated forfeitures. Our estimate of forfeitures is based on historical forfeiture behavior as well as any expected trends in future forfeiture behavior.

The fair value of stock options granted during the years ended March 31, 2008 and 2007 were estimated on the date of grant using the Black-Scholes option pricing model with the weighted-average assumptions noted in the table below. Anticipated volatility is based on implied volatilities from traded options on our stock and on our stock's historical volatility. The expected term of our stock options granted is based on historical exercise data and represents the period of time that stock options granted are expected to be outstanding. Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The risk-free rate for periods within the expected lives of options and ESPP are based on the US Treasury yield in effect at the time of grant.

The fair value of our ESPP options for the six month offering periods that began on March 1, 2007, September 4, 2007, and March 3, 2008 was estimated using the Black-Scholes option pricing model with

81

the weighted-average assumptions noted in the table below and the per share fair value for those offering periods was $8.39, $7.63, and $5.52, respectively.

	Stock Option Grants		Employee Stock Purchase Plan		Stock Option Grants		Employee Stock Purchase Plan
	Year Ended March 31, 2008		Year Ended March 31, 2008		Year Ended March 31, 2007		Year Ended March 31, 2007
Dividend yield	—	%	—	%	—	%	—	%
Anticipated volatility	36	%	38.8	%	37	%	37	%
Weighted-average risk-free interest rate	3.9	%	4.4	%	4.9	%	5.1	%
Expected lives	3.2 years		0.5 year		3.2 years		0.5 year

A summary of our stock option activity for each of the three years ended March 31, 2008, 2007 and 2006 is as follows (in thousands, except per share amounts):

		Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at March 31, 2005		9,880		$	13.10
	Granted	3,276		$	20.48
	Exercised	(3,187	)	$	12.03
	Forfeited/expired/cancelled	(894	)	$	14.44
Outstanding at March 31, 2006		9,075		$	16.00
	Granted	2,638		$	24.60
	Exercised	(3,217	)	$	15.66
	Forfeited/expired/cancelled	(932	)	$	18.61
Outstanding at March 31, 2007		7,564		$	19.15
	Granted	2,982		$	27.44
	Exercised	(1,422	)	$	14.89
	Forfeited/expired/cancelled	(1,007	)	$	25.86
Outstanding at March 31, 2008		8,117		$	22.10	2.9	$	19,090
	Vested and expected to vest	7,312		$	21.76	2.9	$	18,685
Exercisable at March 31, 2008		3,642		$	17.96	1.8	$	16,541

The aggregate intrinsic value is calculated as the difference between the exercise price of a stock option and the quoted price of our common stock at March 31, 2008. It excludes stock options that have exercise prices in excess of the quoted price of our common stock at March 31, 2008. The aggregate intrinsic value of stock options exercised during fiscal years ended March 31, 2008, 2007 and 2006 was $19.5 million, $42.9 million and $32.9 million, respectively.

The weighted-average grant-date fair value per share of options granted during fiscal years ended March 31, 2008, 2007 and 2006 was $8.28, $7.81 and $9.15, respectively.

82

A summary of the status of our nonvested shares as of March 31, 2008 and 2007 and changes during the years then ended, is as follows (in thousands, except per share amounts):

	Shares		Weighted- Average Grant-date Fair Value Per Share
Nonvested shares at April 1, 2006	284		$	19.54
Granted	155		$	26.21
Vested	(42	)	$	25.66
Forfeited/cancelled	(58	)	$	19.63
Nonvested shares at March 31, 2007	339		$	21.81
Granted	494		$	29.74
Vested	(92	)	$	23.60
Forfeited/cancelled	(129	)	$	25.34
Nonvested shares at March 31, 2008	612		$	22.16

The weighted-average grant-date fair value of nonvested shares granted in the fiscal year ended March 31, 2006 was $19.34.

The unrecognized compensation cost, that we expect to recognize, related to our nonvested stock-based awards at March 31, 2008, and the weighted-average period over which we expect to recognize that compensation, is as follows (in thousands):

	Unrecognized Compensation Cost at March 31, 2008		Weighted- Average Period (in years)
Stock options	$	21,939	1.4
Nonvested shares		8,342	3.3
ESPP		929	0.4
	$	31,210

Cash received from exercises of stock options for the fiscal years ended March 31, 2008, 2007 and 2006 was $21.1 million, $50.6 million and $37.8 million, respectively. The actual tax benefit realized for the tax deductions from exercises of all stock-based awards totaled $5.5 million, $8.9 million and $9.2 million for the fiscal years ended March 31, 2008, 2007 and 2006, respectively.

The fair value of all our stock-based awards that vested during the years ended March 31, 2008, 2007 and 2006 was $23.5 million, $19.9 million and $14.8 million, respectively.

Non-Employee Stock Warrants.    In prior years, we have granted stock warrants to third parties in connection with the acquisition of licensing rights for certain key intellectual property. The warrants generally vest upon grant and are exercisable over the term of the warrant. The exercise price of third-party stock warrants is equal to the fair market value of our common stock at the date of grant. No third-party stock warrants were granted or exercised during the fiscal years ended March 31, 2008, 2007 and 2006.

At March 31, 2008, 2007 and 2006, we had 390,000 stock warrants outstanding with a weighted average exercise price per share of $12.32. In fiscal 2006, 112,500 warrants expired unexercised.

In accordance with EITF No. 96-18, "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Connection with Selling Goods or Services," we measure the fair value of

83

these warrants on the measurement date. The fair value of each stock warrant is capitalized and amortized to expense when the related product is released and the related revenue is recognized. Additionally, as more fully described in Note 1, the recoverability of intellectual property licenses is evaluated on a quarterly basis with amounts determined as not recoverable being charged to expense. In connection with the evaluation of capitalized intellectual property licenses, any capitalized amounts for related third-party stock warrants are additionally reviewed for recoverability with amounts determined as not recoverable being amortized to expense. For the years ended March 31, 2008, 2007 and 2006, $0.5 million, $0.7 million and $1.3 million, respectively, was amortized and included in cost of sales—license amortization and royalties expense.

As a result of the stock option grant practices inquiry, as discussed more fully in our March 31, 2006 Amendment No. 2 on Form 10-K/A, certain of our stock options were found to have been granted with an exercise price below the fair market value of our common stock on the date determined to be the correct measurement date. Those that vested subsequent to December 2004 result in nonqualified deferred compensation for purposes of Section 409A of the Internal Revenue Code, and holders are subject to an excise tax on the value of the options in the year in which the options vest. We have determined that options to purchase approximately 1.1 million shares of our common stock held by current and former employees may be subject to adverse tax consequences under Section 409A. All of the affected shares pertained to grants made to non-executive employees.

In order to mitigate the unfavorable personal tax consequences under Section 409A, in December 2006 the Compensation Committee of our Board of Directors, pursuant to the terms and conditions of our compensatory stock plans under which our stock options had been granted, unilaterally corrected the exercise price of affected options that remained outstanding to increase the exercise price to the fair market value of our common stock on the revised measurement date. In January 2007, the Compensation Committee determined to give each affected option holder, subject to certain conditions, a cash payment equal to the aggregate difference between the initial exercise price and the increased exercise price of each holder's affected options ("Cash Payment"). As of March 31, 2007, $2.3 million was paid out to affected employees, and there were no additional amounts paid in fiscal 2008. We accounted for the impact of the corrected options as a stock option modification under FAS 123R. As a result of this partial cash settlement of these options and the application of the modification accounting, we recognized $0.7 million in additional compensation cost due to the increase in the fair value of these options and $0.6 million in accelerated compensation cost in fiscal year ended March 31, 2007.

We also compensated individuals who had exercised affected options prior to December 2006 for excise tax liability and certain other adverse consequences under Section 409A. We incurred additional compensation expense of $0.9 million in the three months ended December 31, 2006 based upon our best estimate of this liability at that point in time. In the three months ended March 31, 2007 we increased our estimate of this liability by $1.2 million based upon our review of the IRS Compliance Resolution Program (the "Program"), announced in February 2007 (IRS Announcement 2007-18). At March 31, 2007, it was our intent to participate in this Program, and we estimated our total liability under this Program would be approximately $2.1 million. This amount was included in accrued and other current liabilities in our consolidated balance sheet at March 31, 2007. In fiscal 2008, we completed the program and the entire $2.1 million of excise tax liability was paid out to the respective individuals.

The adoption of FAS 123R, using the fair value method, had the following effect on our income from continuing operations before income taxes and minority interest, income from continuing operations, gain on sale of discontinued operations, net income, and basic and diluted net income per share as compared to

84

what would have been reported under APB 25 using the intrinsic value method, which was the method used prior to our adoption (in thousands, except per share data):

		Year Ended March 31, 2007
		Fair Value Method		Intrinsic Value Method		Impact of Change
Income from continuing operations before income taxes and minority interest		$	91,028	$	105,613	$	14,585
Income from continuing operations			64,958		75,963		11,005
Gain on sale of discontinued operations, net of tax			3,080		3,080		—
Net income		$	68,038	$	79,043	$	11,005
Earnings per share—basic:
	Continuing operations	$	1.00	$	1.17	$	0.17
	Discontinued operations		0.05		0.05		—
	Earnings per share—basic	$	1.05	$	1.22	$	0.17
Earnings per share—diluted:
	Continued operations	$	0.96	$	1.12	$	0.16
	Discontinued operations		0.05		0.05		—
	Earnings per share—diluted	$	1.01	$	1.17	$	0.16

Prior to the adoption of FAS 123R, we presented all tax benefits of deductions resulting from our stock-based awards as operating cash flows in the statement of cash flows. FAS 123R requires the cash flows resulting from the tax benefits arising out of tax deductions in excess of the compensation recognized for the stock-based awards ("excess tax benefits") to be classified as financing cash flows. Prior to our adoption of FAS 123R on April 1, 2006, the $4.0 million excess tax benefit classified as a financing cash inflow in the year ended March 31, 2007 would have been classified as an operating cash inflow.

Proforma information for periods prior to the adoption of FAS 123R

Prior to the adoption of FAS 123R, we accounted for our stock-based compensation to employees using the intrinsic value method in accordance with APB 25 and the disclosure-only provisions of FAS 123. Employee stock-based compensation expense recognized under FAS 123R was not reflected in our results of operations for the fiscal years ended March 31, 2006. Forfeitures of our stock-based awards were reflected in our disclosures as they occurred. Previously reported amounts have not been restated relative to our adoption of FAS 123R.

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model. The following weighted-average assumptions were used for option grants made under our stock option plans during the fiscal year ended March 31, 2006:

	Fiscal year ended March 31, 2006
Dividend yield	0	%
Anticipated volatility	51	%
Weighted average risk-free interest rate	4.11	%
Expected lives	3 years

The following table shows what our net income and income per share would have been for the fiscal year ended March 31, 2006, had compensation cost for our stock-based compensation been measured based on

85

the estimated fair value at the grant dates in accordance with the provisions of FAS 123 (in thousands, except per share amounts):

			Fiscal year ended March 31, 2006
Net income—as reported			$	32,106
	Add: Stock-based employee compensation expense included in reported net income, net of related tax benefit			2,396
	Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax benefit			(13,131	)
Net income—pro forma			$	21,371
	Earnings per share:
		Basic—as reported	$	0.51
		Basic—pro forma	$	0.34
		Diluted—as reported	$	0.49
		Diluted—pro forma	$	0.33

15.   Stockholders Rights Plan

THQ's stockholders hold their stock subject to an Amended and Restated Rights Agreement dated August 22, 2001, as amended by the First Amendment to the Amended and Restated Rights Agreement, dated as of April 9, 2002 (collectively, the "Rights Agreement"). Pursuant to the Rights Agreement, and as adjusted pursuant to Section 11(p) of the Rights Agreement as a result of the stock splits which occurred on April 9, 2002 and on September 1, 2005, each share of THQ common stock is accompanied by four-ninths (4/9) of a preferred stock purchase right ("Right") which entitles the registered holder to purchase four nine-thousandths (4/9000) of a share of Series A Junior Participating Preferred Stock at an exercise price of $44.44. The Rights become exercisable 10 days after any person or group acquires, or 10 business days after any person or group has announced its intention to commence a tender offer for, 15% or more of the outstanding common stock of THQ. In the event that any person or group acquires 15% or more of our outstanding common stock, each holder of a Right (other than such person or group) will be entitled to purchase, at the exercise price, the number of shares of common stock having a current market value equal to two times the exercise price of the Right. If we are acquired in a merger or other business combination, each registered holder of a Right will be entitled to purchase, at the exercise price, a number of shares of common stock of the acquirer having a current market value equal to two times the exercise price of the Right.

The Board may redeem the Rights at a redemption price of $0.001 per Right, subject to adjustment, at any time until 10 days after the acquisition of 15% or more of the common stock of THQ. At any time after a person or group has acquired 15% or more but less than 50% of the common stock, the Board may exchange all or part of the Rights for shares of common stock at an exchange ratio of 4/9 shares of common stock for each Right or four nine-thousandths (4/9000) of a share of Series A Junior Participating Preferred Stock ("Preferred Stock") per Right. The Rights expire on June 21, 2010.

Pursuant to the Certificate of Designation, as amended (the "Certificate of Designation"), establishing the Preferred Stock, effective as September 1, 2005: (i) each share of Preferred Stock is entitled to quarterly dividends equal to 2,250 times the aggregate per share amount of all dividends declared on the common stock, (ii) each share of Preferred Stock will be entitled to 2,250 votes on all matters submitted to a vote of THQ's stockholders, (iii) the "adjustment number" (as defined in the Certificate of Designation) used in Section 6 of the Certificate of Designation for calculating the liquidation amount for Preferred Stock is 2,250 and (iv) in the event of a consolidation, merger, combination or similar transaction, each share of Preferred Stock will be exchanged or changed into an amount per share equal to 2,250 times the amount of

86

capital stock, securities, cash or other property for which each share of common stock is exchanged or changed. The description of the Rights contained herein does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement and the Certificate of Designation.

16.   Agreement with JAKKS Pacific, Inc.

In June 1999 we entered into an operating agreement with JAKKS Pacific, Inc. ("JAKKS") that governs our relationship with respect to the World Wrestling Entertainment, Inc. ("WWE") license. This agreement was amended in January 2002. Our relationship with JAKKS was established to enable THQ to develop, manufacture, distribute, market and sell video games pursuant to the license from WWE. The principal terms of this operating agreement are as follows:

•

We are responsible for funding all operations of the venture, including all payments owed to WWE;



•

For the period commencing November 16, 1999 and ending June 30, 2006, JAKKS was entitled to receive a preferred payment equal to the greater of a fixed guarantee, payable quarterly, or specified percentages of the net sales from WWE-licensed games (as defined) in amounts that vary based on the platform. We were entitled to the profits and cash distributions remaining after the payment of these amounts;



•

For periods after June 30, 2006, the amount of the preferred payment is subject to renegotiation between the parties. The parties have not yet reached agreement as to the amount of the preferred payment. We have not paid JAKKS since June 30, 2006, but are accruing at the payment rate that expired June 30, 2006. This preferred payment is included in our consolidated statements of operations in the caption "Cost of sales—venture partner expense." An arbitration procedure is specified in the event the parties do not reach agreement; and



•

We are responsible for the day-to-day operations of the venture. We are responsible for development, sales and distribution of WWE-licensed games, and JAKKS is responsible for the approval process and other relationship matters with WWE.

For financial reporting purposes, we are deemed to control the venture; therefore, all venture operating results are consolidated with our results.

In November 2001, through the venture with JAKKS, we entered into an amendment to expand the WWE license to include exclusive rights to other wrestling content produced by the WWE through December 2014. In exchange for these rights we paid a minimum guarantee to WWE that has already been recouped.

We are currently involved in litigation with WWE and JAKKS with respect to the license and the preferred payment. See "Note 17—Commitments and Contingencies—Litigation."

87

17.   Commitments and Contingencies

A summary of annual minimum contractual obligations and commercial commitments as of March 31, 2008 is as follows (in thousands):

	Contractual Obligations and Commercial Commitments(6)
Fiscal Years Ending March 31,	License / Software Development Commitments(1)		Advertising(2)		Leases(3)		Letters of Credit(4)		Other(5)		Total
2009	$	110,316	$	13,009	$	17,011	$	30,914	$	5,347	$	176,597
2010		46,630		15,543		16,062		—		1,388		79,623
2011		14,038		8,532		14,766		—		—		37,336
2012		2,850		1,547		12,497		—		—		16,894
2013		600		1,547		9,170		—		—		11,317
Thereafter		500		1,160		17,998		—		—		19,658
	$	174,934	$	41,338	$	87,504	$	30,914	$	6,735	$	341,425

(1)

Licenses and Software Development.    We enter into contractual arrangements with third parties for the rights to intellectual property and for the development of products. Under these agreements, we commit to provide specified payments to an intellectual property holder or developer. Assuming all contractual provisions are met, the total future minimum contract commitments for contracts in place as of March 31, 2008 are approximately $174.9 million. License/software development commitments in the table above include $55.4 million of commitments to licensors that are included in our consolidated balance sheet as of March 31, 2008 because the licensors do not have any significant performance obligations to us. These commitments were included in both current and long-term licenses and accrued royalties.

(2)

Advertising.    We have certain minimum advertising commitments under most of our major license agreements. These minimum commitments generally range from 2% to 12% of net sales related to the respective license. We estimate that our minimum commitment for advertising in fiscal 2009 will be $13.0 million.

(3)

Leases.    We are committed under operating leases with lease termination dates through 2015. Most of our leases contain rent escalations. Rent expense was $16.1 million, $14.0 million and $10.6 million for the fiscal years ended March 31, 2008, 2007 and 2006, respectively.

(4)

Letters of Credit.    As of March 31, 2008, we had outstanding letters of credit of approximately $30.9 million. On October 3, 2006, we entered into an agreement with a bank primarily to provide stand-by letters of credit to a platform manufacturer from whom we purchase products. We pledged cash equivalents and investments to the bank as collateral in an amount equal to 110% of the amount of the outstanding stand-by letters of credit.

(5)

Other.    As of March 31, 2008, we had purchase commitments of approximately $2.8 million pertaining to various international distribution agreements signed in fiscal 2008 for products that are expected to ship on various dates during fiscal 2009. These agreements have two year terms and are contractually denominated as 1.8 million Euros.

Pursuant to the terms of our acquisitions of Universomo, Big Huge Games and Elephant Entertainment combined, there is additional consideration of $3.9 million included in accrued and other current liabilities in our March 31, 2008 consolidated balance sheet and included in the table above. In addition, we may have to pay additional consideration of $1.9 million in cash (contractually denominated as 1.2 million Euros) and $4.7 million in stock in future years if such sellers attain certain agreed upon targets, as set forth in the relevant purchase agreement.

88

(6)

We have omitted unrecognized tax benefits from this table due to the inherent uncertainty regarding the timing and amount of certain payments related to these unrecognized tax benefits. The underlying positions have not been fully developed under audit to quantify at this time. As of March 31, 2008 we had $11.6 million of unrecognized tax benefits. See "Note 12—Income Taxes" for further information regarding the unrecognized tax benefits.

Other potential future expenditures relate to the following:

Manufacturer Indemnification.    We must indemnify the platform manufacturers (Microsoft, Nintendo, Sony) of our games with respect to all loss, liability and expenses resulting from any claim against such manufacturer involving the development, marketing, sale or use of our games, including any claims for copyright or trademark infringement brought against such manufacturer. As a result, we bear a risk that the properties upon which the titles of our games are based, or that the information and technology licensed from others and incorporated into the products, may infringe the rights of third parties. Our agreements with our third-party software developers and property licensors typically provide indemnification rights for us with respect to certain matters. However, if a manufacturer brings a claim against us for indemnification, the developers or licensors may not have sufficient resources to, in turn, indemnify us.

Indemnity Agreements.    We have entered into indemnification agreements with the members of our Board of Directors, our Chief Executive Officer and our Chief Financial Officer, to provide a contractual right of indemnification to such persons to the extent permitted by law against any and all liabilities, costs, expenses, amounts paid in settlement and damages incurred by the any such person as a result of any lawsuit, or any judicial, administrative or investigative proceeding in which such person is sued as a result of their service as members of our Board of Directors, Chief Executive Officer or as Chief Financial Officer. The indemnification agreements provide specific procedures and time frames with respect to requests for indemnification and clarify the benefits and remedies available to the indemnitees in the event of an indemnification request.

Litigation.

WWE related Lawsuits

On October 19, 2004, World Wrestling Entertainment, Inc. ("WWE") filed a lawsuit in the United States District Court for the Southern District of New York (the "Court") against JAKKS Pacific, Inc. ("JAKKS"), us, THQ/JAKKS Pacific LLC (the "LLC"), and others, alleging, among other claims, improper conduct by JAKKS, certain executives of JAKKS, an employee of the WWE and an agent of the WWE in granting the WWE videogame license to the LLC. The complaint seeks various forms of relief, including monetary damages and a judicial determination that, among other things, the WWE videogame license is void. On March 30, 2005, WWE filed an amended complaint, adding both new claims and our president and chief executive officer, Brian Farrell, as a defendant. In August 2005, the Court directed the parties to file briefs on the three federal law claims alleged by the Plaintiffs (i.e., Robinson-Patman, and Sherman Act, and a threshold issue concerning the Plaintiff's RICO claim). The motions to dismiss the amended complaint based on these issues were fully briefed and argued and, on March 31, 2006, the Court granted the defendants' motion to dismiss the Robinson-Patman Act and Sherman Act claims and denied the defendants' motion seeking to dismiss the RICO claims on the basis of the threshold "enterprise" issue that was briefed.

The Court then set a second round of briefing on the motions to dismiss on all other federal issues, including other defenses under RICO. After extensive briefing concluded in August 2006 and a hearing held in September 2006, on December 21, 2007, the Court granted our motions to dismiss the federal claims, and denied a motion by WWE to reconsider the Court's prior March 2006 order dismissing the antitrust claims. Among the Court's grounds for its decision were its findings that WWE had failed to allege a pattern of racketeering activity, RICO injury or antitrust injury, and that its RICO claims were

89

barred by the statutes of limitations. The Court also dismissed WWE's state law claims, without prejudice to refiling them in state court, for lack of federal jurisdiction. WWE has now asserted its state law claims in Connecticut, as described below. WWE has appealed the Court's rulings, and the appeal is pending in the Second Circuit Court of Appeals. The appeal is currently in abeyance, and there is currently no briefing schedule or timetable for resolution of the appeal.

On October 12, 2006, WWE filed a separate lawsuit against us and the LLC in the Superior Court of the State of Connecticut, alleging that the Company's agreements with Yuke's Co., Ltd. ("Yuke's"), a developer and distributor in Japan, violated a provision of the WWE videogame license prohibiting sublicenses without WWE's written consent. The lawsuit seeks, among other things, a declaration that the WWE is entitled to terminate the video game license and seek monetary damages. On February 8, 2007, we and the LLC jointly moved to strike one of the claims, for violation of the Connecticut Unfair Trading Practices Act; on March 28, 2007, the Court denied that motion, without prejudice to our ability to raise the same issue at a later date. At a hearing on May 8, 2007, the Court granted WWE's request to amend its pleadings to add allegations and claims substantially similar to those already pending in WWE's lawsuit in the Southern District of New York and to "cite in" the other defendants from that action, including our CEO, Brian Farrell. Following the dismissal without prejudice of WWE's lawsuit in the Southern District of New York, WWE sought leave to refile its state law claims in this action, which was granted. The claims now pending in this action are a combination of the earlier claims relating to the Yuke's agreements and the Connecticut equivalents of the state law claims that had previously been pending in the Southern District of New York. We have moved to dismiss many of the claims in this action. Moreover, JAKKS has filed a summary judgment motion based on the collateral estoppel effects of the dismissal of WWE's lawsuit in the Southern District of New York, and we intend to join in that motion. JAKKS's motion was scheduled for hearing on May 19, 2008, and there is not yet a hearing scheduled on the THQ defendants' motion. Discovery in this action is scheduled to be completed by June 2009, and the case is to be ready for trial by May 1, 2010.

We intend to vigorously defend ourselves against the claims raised in this action, including those raised in the amended complaint. However, in light of the early status of this litigation, we cannot estimate a possible loss, if any. Games we develop based upon our WWE videogame license have contributed to approximately 25% of our net sales in fiscal 2008, up from approximately 15% of our net sales in fiscal 2007 and 2006. The loss of the WWE license would have a negative impact on our future financial results.

Operating agreement with JAKKS Pacific, Inc.

In June 1999 we entered into an operating agreement with JAKKS that governs our relationship with respect to the WWE videogame license. Pursuant to the terms of this agreement, JAKKS is entitled to a preferred payment from revenues derived from exploitation of the WWE videogame license. The amount of the preferred payment to JAKKS for the period beginning July 1, 2006 and ending December 31, 2009 (the "First Subsequent Distribution Period") is to be determined by agreement or, failing that, by arbitration.

The parties have not reached agreement on the preferred payment for the First Subsequent Distribution Period. Accordingly, as provided in the operating agreement, the parties are in the process of selecting an arbitrator to resolve this dispute. Although we believe continuation of the previous preferred payment would represent significantly excessive compensation to JAKKS for the First Subsequent Distribution Period, we are not able to predict the outcome of the arbitration or otherwise estimate the amount of the preferred payment for the First Subsequent Distribution Period. Accordingly, we are currently accruing for a preferred payment to JAKKS at the previous rate. However, we have advised JAKKS that we do not intend to make any payment until the amount of the preferred payment payable to JAKKS for the First Subsequent Distribution Period is agreed or otherwise determined as provided in the operating agreement. On April 30, 2007, we filed a petition to compel arbitration and appoint an arbitrator in the Superior Court of the State of California for the County of Los Angeles, West District. At a hearing on June 19, 2007 (with

90

a subsequent order entered on June 25, 2007), the Court established a process for selecting an arbitrator and denied a request by JAKKS for provisional relief requesting that, pending conclusion of the arbitration, we either be enjoined from distributing to ourselves any proceeds from the joint venture since June 2006 or be compelled to resume payments to JAKKS at the same rate that was in effect prior to June 2006. Pursuant to the process, the judge named a "shortlist" of five arbitrator candidates drawn from lists submitted by the parties, and afforded the parties five days to agree upon an arbitrator candidate, failing which the judge would appoint an arbitrator from the "shortlist." On July 18, 2007, JAKKS filed a notice of disqualification, purporting to disqualify all of the arbitrator candidates on the "shortlist" other than the one individual who had been among the candidates submitted by JAKKS. THQ objected to this notice. On July 31, 2007, the Court struck JAKKS's notice and selected an arbitrator from the "shortlist." On or about August 22, 2007 JAKKS filed in the Court of Appeal of the State of California a petition for writ of mandate/prohibition or other appropriate relief, seeking an order directing the judge to disqualify all of the arbitrator candidates other than the one individual who had been submitted by JAKKS. In its filing, JAKKS argued that this individual was the only "shortlist" candidate to file certain disclosures within a time period JAKKS maintains is required by statute. The Court of Appeal granted a temporary stay of the arbitration on August 30, 2007. On the same day that the Court of Appeal issued its temporary stay, JAKKS filed a notice with the Superior Court that it was exercising its one-time peremptory challenge pursuant to the California Code of Civil Procedure to disqualify "without cause" the arbitrator chosen by the judge. Following a hearing, the Court of Appeal denied JAKKS's petition in an opinion and order filed February 28, 2008. The case has now been returned to the trial court for further proceedings. At this time, we cannot anticipate when the arbitration will commence.

We do not expect the resolution of this dispute to have a material adverse impact on our results of operations, financial position or cash flows.

Lawsuits related to our historical stock option granting practices

Kukor and Ramsey v. Haller, et. Al.    On August 25, 2006, following our announcement of the informal inquiry by the SEC, a purported shareholder derivative action captioned Ramsey v. Haller et. Al. was filed against certain of our current and former officers and directors in the California Superior Court, Los Angeles County. The complaint alleges, among other things, purported improprieties in our issuance of stock options, breach of fiduciary duty and unjust enrichment. Another lawsuit was subsequently filed by the same law firm on behalf of another purported shareholder, David Kukor, and the parties stipulated to consolidate the two actions. On or about April 19, 2007, a Consolidated Shareholder Derivative Complaint (the "Consolidated Complaint") was filed, alleging the same types of claims and quoting from various public statements by THQ since the filing of the original complaint. We are also named as a nominal defendant. On May 29, 2007, we filed a demurrer to the Consolidated Complaint as a whole. The demurrer was overruled by the Court on October 11, 2007, and a status conference before the Court is currently scheduled for May 28, 2008. No discovery has been conducted, nor can it be conducted absent further court order.

Although litigation is subject to inherent uncertainties, we do not believe the results of the remaining shareholder action will have a material adverse impact on our consolidated financial position or results of operations.

Other

We are also involved in additional routine litigation arising in the ordinary course of our business. In the opinion of our management, none of such pending litigation is expected to have a material adverse effect on our consolidated financial condition or results of operations.

91

Terminated Proccedings

SEC Informal Inquiry.    On August 4, 2006, we received an informal inquiry from the Securities and Exchange Commission ("SEC") requesting certain documents and information relating to our stock option grant practices from January 1, 1996 to the present. We fully cooperated with the SEC's inquiry and on February 27, 2008 received a notice from the SEC that its investigation of our stock option grant practices has been completed and that the SEC does not intend to recommend any action against THQ.

Hawaii Laborers Pension Fund v. THQ, et. Al.    In October 2006, a purported shareholder derivative action captioned Hawaii Laborers Pension Fund v. THQ, et. Al., was filed against certain of our current and former officers and directors in federal district court, alleging claims under Section 14(a) of the Securities Exchange Act of 1934 as well as various state law claims arising out of alleged breaches of fiduciary duty related to stock option practices. On or about April 20, 2007, the plaintiff filed an Amended and Verified Shareholder Derivative Complaint (the "Amended Complaint") alleging that certain current and former officers and directors engaged in a conspiracy to manipulate grants dates associated with stock options and then concealed the alleged backdating option scheme and filed false and misleading statements with the SEC. We were also named as a nominal defendant. On August 20, 2007, following oral argument, the district court granted the defendants' motion to dismiss this action, with leave to amend. The judge subsequently issued an order on August 23, 2007. The plaintiffs filed an amended complaint on October 12, 2007. On November 28, 2007, the parties filed a stipulation by which the plaintiffs dismissed the action without prejudice. The Court entered the stipulation on December 13, 2007, and the action was dismissed without prejudice.

18.   Segment and Geographic Information

We operate in one reportable segment in which we are a developer, publisher and distributor of interactive entertainment software for home video game consoles, handheld platforms and personal computers. The following information sets forth geographic information on our net sales and total assets for the fiscal years ended March 31, 2008, 2007 and 2006 (in thousands):

	North America		Europe		Asia Pacific		Consolidated
Year ended March 31, 2008
Net sales to unaffiliated customers	$	503,134	$	454,880	$	72,453	$	1,030,467
Total assets		895,145		156,351		32,824		1,084,320
Year ended March 31, 2007
Net sales to unaffiliated customers	$	600,159	$	365,406	$	61,291	$	1,026,856
Total assets		900,579		89,950		23,012		1,013,541
Year ended March 31, 2006
Net sales to unaffiliated customers	$	489,945	$	269,928	$	46,687	$	806,560
Total assets		774,126		62,664		11,678		848,468

Our largest single customer accounted for 14% of our gross sales in fiscal 2008, 18% of our gross sales in fiscal 2007 and 19% of our gross sales in fiscal 2006. Our second largest customer accounted for 12% of our gross sales in fiscal 2008, 11% of our gross sales in fiscal 2007 and 10% of our gross sales in fiscal 2006.

92

Information about THQ's net sales by platform for fiscal 2008, 2007 and 2006 is presented below (in thousands):

		Fiscal Year Ended March 31,
Platform
		2008		2007		2006
Consoles
	Microsoft Xbox 360	$	129,483	$	134,908	$	14,479
	Microsoft Xbox		2,278		27,476		88,181
	Nintendo Wii		91,431		30,025		—
	Nintendo GameCube		7,090		52,338		59,255
	Sony PlayStation 3		85,533		—		—
	Sony PlayStation 2		252,642		304,916		296,294
			568,457		549,663		458,209
Handheld
	Nintendo Dual Screen		226,912		114,143		32,855
	Nintendo Game Boy Advance		36,655		119,869		171,477
	Sony PlayStation Portable		84,030		65,402		29,406
	Wireless		19,751		26,467		36,112
			367,348		325,881		269,850
PC			94,264		149,546		77,615
Other			398		1,766		886
Total Net Sales		$	1,030,467	$	1,026,856	$	806,560

93

19.   Quarterly Financial Data (Unaudited)

Twelve Months Ended March 31, 2008

		Quarter Ended
(Amounts in thousands, except per share data)		June 30, 2007			Sept. 30, 2007			Dec. 31, 2007		March 31, 2008			Fiscal Year Ended
Net sales		$	104,485		$	229,349		$	509,609	$	187,024		$	1,030,467
Expenses and other			130,063			239,879			490,391		242,769			1,103,102
Income (loss) from continuing operations before income taxes and minority interest			(25,578	)		(10,530	)		19,218		(55,745	)		(72,635	)
Income taxes			(16,304	)		(3,491	)		5,224		(21,214	)		(35,785	)
Income (loss) from continuing operations			(9,274	)		(7,039	)		13,994		(34,531	)		(36,850	)
Gain on sale of discontinued operations, net of tax			—			—			1,513		—			1,513
Net income (loss)		$	(9,274	)	$	(7,039	)	$	15,507	$	(34,531	)	$	(35,337	)
Earnings (loss) per share—basic:
	Continuing operations	$	(0.14	)	$	(0.11	)	$	0.21	$	(0.52	)	$	(0.55	)
	Discontinued operations		—			—			0.02		—			0.02
	Earnings (loss) per share—basic	$	(0.14	)	$	(0.11	)	$	0.23	$	(0.52	)	$	(0.53	)
Earnings (loss) per share—diluted:
	Continuing operations	$	(0.14	)	$	(0.11	)	$	0.21	$	(0.52	)	$	(0.55	)
	Discontinued operations		—			—			0.02		—			0.02
	Earnings (loss) per share—diluted	$	(0.14	)	$	(0.11	)	$	0.23	$	(0.52	)	$	(0.53	)

94

Twelve Months Ended March 31, 2007

		Quarter Ended
(Amounts in thousands, except per share data)		June 30, 2006			Sept. 30, 2006		Dec. 31, 2006			March 31, 2007		Fiscal Year Ended
Net sales		$	138,829		$	240,197	$	475,741		$	172,089	$	1,026,856
Expenses and other			157,037			222,796		391,419			164,576		935,828
Income (loss) from continuing operations before income taxes and minority interest			(18,208	)		17,401		84,322			7,513		91,028
Income taxes			(6,009	)		5,857		24,367			1,991		26,206
Income (loss) from continuing operations before minority interest			(12,199	)		11,544		59,955			5,522		64,822
Minority interest			98			45		(7	)		—		136
Income (loss) from continuing operations			(12,101	)		11,589		59,948			5,522		64,958
Gain on sale of discontinued operations, net of tax			—			—		2,107			973		3,080
Net income (loss)		$	(12,101	)	$	11,589	$	62,055		$	6,495	$	68,038
Earnings (loss) per share—basic:
	Continuing operations	$	(0.19	)	$	0.18	$	0.92		$	0.08	$	1.00
	Discontinued operations		—			—		0.03			0.02		0.05
	Earnings (loss) per share—basic	$	(0.19	)	$	0.18	$	0.95		$	0.10	$	1.05
Earnings (loss) per share—diluted:
	Continuing operations	$	(0.19	)	$	0.17	$	0.88		$	0.08	$	0.96
	Discontinued operations		—			—		0.03			0.01		0.05
	Earnings (loss) per share—diluted	$	(0.19	)	$	0.17	$	0.91		$	0.09	$	1.01

Due to rounding and reclassifications, some of the figures above may differ slightly from the 10-Q's previously filed.

20.   Discontinued Operations

In December 2006, we sold our 50% interest in Minick. As of March 31, 2008 we received approximately $18.6 million in cash from the sale of Minick and we recognized gains of $1.5 million and $3.1 million in fiscal 2008 and fiscal 2007, respectively. These gains are presented as "Gain on sale of discontinued operations, net of tax" in our consolidated statements of operations. Pursuant to the Minick sale agreement, we may receive additional consideration of approximately $1.2 million during the three months ended June 30, 2008. If such amounts are received, the additional gain recognized will be reported in discontinued operations in the period the proceeds are collected. The results of Minick's operations were not material to any of the periods presented and have therefore not been reclassified as discontinued operations.

95

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.    Controls and Procedures

(a)  Definition and limitations of disclosure controls.  Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluates these controls and procedures on an ongoing basis to determine if improvements or modifications are necessary.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. These limitations include the possibility of human error, the circumvention or overriding of the controls and procedures and reasonable resource constraints. In addition, because we have designed our system of controls based on certain assumptions, which we believe are reasonable, about the likelihood of future events, our system of controls may not achieve its desired purpose under all possible future conditions. Accordingly, our disclosure controls and procedures provide reasonable assurance, but not absolute assurance, of achieving their objectives.

(b)  Evaluation of disclosure controls and procedures.  Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures, believe that as of the end of the period covered by this report, our disclosure controls and procedures were effective in providing the requisite reasonable assurance that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(c)  Changes in internal control over financial reporting.  There were no material changes in our internal control over financial reporting in the fourth quarter of fiscal 2008.

96

Management Report on Internal Control Over Financial Reporting

We, as management of THQ Inc. and its subsidiaries (the "Company"), are responsible for establishing and maintaining adequate internal controls over financial reporting. Pursuant to the rules and regulations of the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of, the Company's principal executive and principal financial officers, or persons performing similar functions, and effected by the Company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

Management has conducted an assessment of the effectiveness of the Company's internal control over financial reporting as of March 29, 2008 based on the control criteria established in a report entitled Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such assessment, we have concluded that the Company's internal control over financial reporting is effective as of March 29, 2008.

/s/  BRIAN J. FARRELL	/s/  COLIN L. SLADE
Brian J. Farrell Chairman of the Board, President and Chief Executive Officer May 28, 2008	Colin L. Slade Executive Vice President, Chief Financial Officer and Chief Accounting Officer May 28, 2008

Item 9B.    Other Information

None.

97

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of THQ Inc.
Agoura Hills, California

We have audited the internal control over financial reporting of THQ Inc. and subsidiaries (the "Company") as of March 29, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 29, 2008, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of March 29, 2008 and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended of the Company and our report dated May 28, 2008 expressed an unqualified opinion on those financial statements and included an explanatory paragraph referring to a change in the accounting for income taxes.

DELOITTE & TOUCHE LLP
Los Angeles, California

May 28, 2008

98

PART III

Item 10.    Directors, Executive Officers and Corporate Governance

The following information required by Item 10 is incorporated herein by reference from our definitive Proxy Statement for the 2008 Annual Meeting of Stockholders, which will be filed within 120 days after the close of our fiscal year (the "Proxy Statement"):

•

Information regarding directors who are nominated for election is included under the caption "Proposal Number 1—Election of Directors;"



•

Information regarding executive officers is included under the caption "Executive Officers;"



•

Information related to involvement in certain legal proceedings is included under the caption "Involvement in Certain Proceedings;"



•

Information regarding the audit committee and its financial expert is included under the caption "Committees of the Board of Directors;" and



•

Information regarding Section 16 compliance is included under the caption "Section 16(a) Beneficial Ownership Reporting Compliance."

Information regarding our code of ethics applicable to our directors, principal executive officer, principal financial officer, principal accounting officer, and other senior financial officers appears under the caption "Charters, Code of Ethics, and Code of Business Conduct and Ethics."

Item 11.    Executive Compensation

The information required under this Item relating to executive compensation will be included in the Proxy Statement under the heading "Executive Compensation," and is incorporated herein by reference.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by Item 12 related to securities authorized for issuance under equity compensation plans is included in Item 5 herein. The information required by Item 12 related to security ownership of certain beneficial owners and management is incorporated herein by reference to the information in the Proxy Statement under the caption "Security Ownership of Certain Beneficial Owners and Management."

Item 13.    Certain Relationships and Related Transactions, and Director Independence

There were no reportable business relationships, transactions with management, or indebtedness of management during the fiscal year ended March 31, 2008.

Item 14.    Principal Accounting Fees and Services

The information regarding principal accounting fees and services and the Company's pre-approval policies and procedures for audit and non-audit services provided by the Company's independent accountant is incorporated by reference to the Proxy Statement under the caption "Proposal Number 4—Ratification of Independent Registered Public Accounting Firm."

99

PART IV

Item 15.    Exhibits and Consolidated Financial Statement Schedules

(a) Financial Statements and Financial Statement Schedules

The following financial statements of the Company are included in Part II Item 8:

		Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		55
CONSOLIDATED FINANCIAL STATEMENTS
	Consolidated balance sheets—March 31, 2008 and 2007	56
	Consolidated statements of operations for the fiscal years ended March 31, 2008, 2007 and 2006	57
	Consolidated statements of stockholders' equity for the fiscal years ended March 31, 2008, 2007 and 2006	58
	Consolidated statements of cash flows for the fiscal years ended March 31, 2008, 2007 and 2006	59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		60

(b) Exhibits.

The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the SEC. We will furnish copies of the exhibits for a reasonable fee (covering the expense of furnishing copies) upon request:

Exhibit Number	Title
3.1	Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Post-Effective Amendment No. 1 to the Registration Statement on Form S-3 filed on January 9, 1998 (File No. 333-32221) (the "S-3 Registration Statement")).
3.2	Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to Post-Effective Amendment No. 1 to the S-3 Registration Statement).
3.3	Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001).
3.4	Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.4 to the Registrant's Quarterly Report on Form 10-Q for the period ended September 30, 2007).
3.5	Amended and Restated Bylaws (incorporated by reference to Exhibit 3 to the Registrant's Current Report on Form 8-K filed on June 22, 2000).
3.6	Certificate of Designation of Series A Junior Participating Preferred Stock of THQ Inc. (incorporated by reference to Exhibit A of Exhibit 1 of Amendment No. 2 to the Registrant's Registration Statement on Form 8-A filed on August 28, 2001 (File No. 001-15959) (the "August 2001 8-A")).
3.7	Amendment to Certificate of Designation of Series A Junior Participating Preferred Stock of THQ Inc. (incorporated by reference to Exhibit 3.6 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001).

100

4.1	Amended and Restated Rights Agreement, dated as of August 22, 2001 between the Company and Computershare Investor Services, LLC, as Rights Agent (incorporated by reference to Exhibit 1 to Amendment No. 2 to the Registrant's August 2001 8-A).
4.2	First Amendment to Amended and Restated Rights Agreement, dated April 9, 2002 between the Company and Computershare Investor Services, LLC, as Rights Agent (incorporated by reference to Exhibit 2 to Amendment No. 3 to the Registrant's Registration Statement on Form 8-A filed on April 12, 2002 (file No. 000-18813)).
10.1#	Stock Option Agreement dated as of December 23, 1998, between the Company and James Whims (incorporated by reference to Exhibit 10.9 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999).
10.2#	Amended and Restated Employment Agreement, dated as of July 20, 2006 between the Company and Brian J. Farrell (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (the "September 2006 10-Q")).
10.3#*	Colin Slade Offer Letter dated January 22, 2008.
10.4#	Indemnification Agreements, dated as of November 30, 2004 between the Company and each director of the Company, being the following: Lawrence Burstein, Henry DeNero, Brian P. Dougherty, Brian J. Farrell, and James L. Whims (incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2004 (the "December 2004 10-Q")).
10.5#	Indemnification Agreement, dated as of March 28, 2006 between the Company and Jeffrey W. Griffiths (the form of which is incorporated by reference to Exhibit 10.4 to the Registrant's December 2004 10-Q).
10.6#	Indemnification Agreement, dated as of January 31, 2008 between the Company and Gary Rieschel (the form of which is incorporated by reference to Exhibit 10.4 to the Registrant's December 2004 10-Q).
10.7#	THQ Inc. 2006 Long Term Incentive Plan (incorporated by reference to Exhibit A to Company's Proxy Statement on Schedule 14A filed June 21, 2006).
10.8#	THQ Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit A to Company's Proxy Statement on Schedule 14A filed June 21, 2006).
10.9#	THQ Inc. Amended and Restated 1997 Stock Option Plan, as amended on August 18, 2005 (incorporated by reference to Exhibit 10.2 to the Registrant's September 2005 10-Q).
10.10#	Third Amended and Restated Non-executive Employee Stock Option Plan (incorporated by reference to Appendix C to Registrant's Proxy Statement on Schedule 14A filed July 3, 2003).
10.11#	THQ Inc. Stock Unit Deferred Compensation Plan, effective as of August 18, 2005 (incorporated by reference to Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2007 (the "March 2007 10-K)).
10.12#	Form of Severance Agreement with Executive Officers entered into June 15, 2006 (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 (the "June 2006 10-Q")).
10.13#	Form of Severance Agreement with Senior Officers entered into June 15, 2006 (incorporated by reference to Exhibit 10.2 to the Registrant's June 2006 10-Q).

101

10.14#	Form of Severance Agreement with Officers entered into June 15, 2006 (incorporated by reference to Exhibit 10.3 to the Registrant's June 2006 10-Q).
10.15#	Form of Change-in-Control Agreement with Executive and Senior Officers entered into on June 15, 2006 (incorporated by reference to Exhibit 10.4 to the Registrant's June 2006 10-Q).
10.16#	Form of Change-in-Control Agreement with Officers entered into on June 15, 2006 (incorporated by reference to Exhibit 10.5 to the Registrant's June 2006 10-Q).
10.17#	THQ Inc. Management Deferred Compensation Plan, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on December 23, 2004).
10.18+	PlayStation® 2 CD-Rom / DVD-Rom Licensed Publisher Agreement, dated as of April 1, 2000 between Sony Computer Entertainment America Inc. and the Company (incorporated by reference to Exhibit 10.10 to the Registrant's September 2002 10-Q).
10.19	PlayStation® 2 Licensed Publisher Agreement, dated as of May 21, 2003 between Sony Computer Entertainment Korea Inc. and THQ Korea Ltd. (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (the "June 2003 10-Q")).
10.20	PlayStation® 2 Licensed Publisher Agreement, dated as of July 28, 2003 between Sony Computer Entertainment Europe Limited and THQ International Limited (incorporated by reference to Exhibit 10.1 to the Registrant's September 2003 10-Q).
10.21+	PlayStation® Portable Licensed Publisher Agreement, dated as of November 17, 2004 between Sony Computer Entertainment America Inc. and the Company (incorporated by reference to Exhibit 10.2 to the Registrant's December 2004 10-Q).
10.22*+	Global PlayStation 3 Format Licensed Publisher Agreement and North American Territory Rider, effective as of March 5, 2007 by and between Sony Computer Entertainment America Inc. and the Company.
10.23+	Xbox 360 Publisher License Agreement, dated as of October 31, 2005 by and between Microsoft Licensing, GP and the Company (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 2005).
10.24	Amendment to the Xbox 360 Publisher License Agreement, effective as of October 1, 2006, by and between Microsoft Licensing, GP and the Company (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 2006).
10.25	Amendment to the Xbox 360 Publisher License Agreement, dated as of January 17, 2007, by and between Microsoft Licensing, GP and the Company (incorporated by reference to Exhibit 10.25 to the Registrant's Annual Report on the March 2007 10-K).
10.26+	Microsoft Corporation Xbox™ Publisher License Agreement, dated as of March 20, 2001 between Microsoft Corporation and the Company (incorporated by reference to Exhibit 10.8 to the Registrant's September 2002 10-Q).
10.27	Amendment to the Xbox™ Publisher Licensing Agreement (Tiered Royalty Rate Structure and Xbox Platinum Hits Program), dated as of January 31, 2003 between Microsoft Licensing, Inc. and the Company (incorporated by reference to Exhibit 10.2 to the Registrant's June 200310-Q).

102

10.28	Term Extension to Xbox™ Publisher License Agreement, dated October 13, 2004 between the Company and Microsoft Licensing, GP (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed on October 18, 2004).
10.29	Amendment to the Xbox™ Publisher Licensing Agreement (Platinum Hits Family Programs), dated as of March 15, 2004 (incorporated by reference to Exhibit 10.30 to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2004).
10.30+	Amendment to Xbox™ Publisher License Agreement, effective as of March 1, 2005 and dated March 9, 2005 by and between Microsoft Licensing, GP and the Company (incorporated by reference to Exhibit 10.27 to the Registrant's March 2005 10-K).
10.31+	Confidential License Agreement for Game Boy Advance (Western Hemisphere), dated as of July 18, 2001 between Nintendo of America, Inc. and the Company (incorporated by reference to Exhibit 10.6 to the Registrant's September 2002 10-Q).
10.32	First Amendment to the Confidential License Agreement for Game Boy Advance, dated as of July 18, 2004 between Nintendo of America, Inc. and the Company (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).
10.33+	Confidential License Agreement for Nintendo GameCube (Western Hemisphere), dated as of April 5, 2002 between Nintendo of America, Inc. and the Company (incorporated by reference to Exhibit 10.7 to the Registrant's September 2002 10-Q).
10.34+	First Amendment to Confidential License Agreement for Nintendo GameCube, dated as of April 5, 2005 between Nintendo of America, Inc. and the Company (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005).
10.35+	Confidential License Agreement for the Nintendo DS handheld platform, dated as of January 25, 2005 between Nintendo of America, Inc. and the Company (incorporated by reference to Exhibit 10.32 to the Registrant's March 2005 10-K).
10.36+	Confidential License Agreement for the Wii Console (Western Hemisphere), dated as of October 12, 2007 between Nintendo of America Inc. and the Company (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the period ended December 31, 2007).
10.37	Lease agreement dated December 22, 2004 between the Company, as Tenant, and FORCE-AGOURA ROAD, LLC and Dennis D. Jacobsen Family Holdings II, LLC, as Landlord (incorporated by reference to Exhibit 10.6 to the Registrant's December 2004 10-Q).
14	Code of Ethics for Executive Officers and Other Senior Financial Officers, as adopted May 27, 2004 (incorporated by reference from the Registrant's Form 10-K for the fiscal year ended March 31, 2006).
21*	Subsidiaries of the Registrant.

103

23.1*	Consent of Deloitte & Touche LLP
31.1*	Certification of Brian J. Farrell, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Colin Slade, Chief Financial Officer and Chief Accounting Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Brian J. Farrell, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Colin Slade, Chief Financial Officer and Chief Accounting Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*

Filed herewith

#

Management contract of compensatory plan or arrangement

+

Portions have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment in accordance with Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

104

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: May 28, 2008	THQ INC.
	By:	/s/ Brian J. Farrell Brian J. Farrell, Chairman of the Board, President and Chief Executive Officer
Dated: May 28, 2008	THQ INC.
	By:	/s/ Colin L. Slade Colin L. Slade, Executive Vice President, Chief Financial Officer and Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/  BRIAN J. FARRELL Brian J. Farrell	Director, Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)	May 28, 2008
/s/  COLIN L. SLADE Colin L. Slade	Executive Vice President, Chief Financial Officer and Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer)	May 28, 2008
/s/  LAWRENCE BURSTEIN Lawrence Burstein	Director	May 28, 2008
/s/  HENRY DENERO Henry DeNero	Director	May 28, 2008
/s/  BRIAN DOUGHERTY Brian Dougherty	Director	May 28, 2008
/s/  JEFFREY W. GRIFFITHS Jeffrey W. Griffiths	Director	May 28, 2008
/s/  GARY RIESCHEL Gary Rieschel	Director	May 28, 2008
/s/  JAMES L. WHIMS James L. Whims	Director	May 28, 2008

105

EX-10.3

Exhibit 10.3

January 30, 2008

Colin Slade

Dear Colin:

We are pleased to offer you the position of Chief Financial Officer and Executive Vice President, reporting to Brian Farrell, President and Chief Executive Officer.  Your start date will be February 29, 2008.  We look forward to a mutually beneficial and successful business relationship.  This letter sets out the terms and conditions of your employment with THQ.

The Compensation Plan and Benefits Package for your position is summarized on page two of this letter.  These terms may be modified at a later date; also, THQ may from time to time establish other policies and conditions regarding your employment.

In addition, this offer is made contingent upon your reading and signing the standard THQ New Hire Policies and upon THQ receiving positive confirmation on a background screening that is conducted for all newly hired employees.

If you accept this offer, please sign at the spaces provided on both pages of this letter, indicating your acceptance.  If you do not do so within seven days from the date of this letter, this offer will expire.

By signing this letter, you acknowledge that you understand and agree that your employment with THQ is at will.  Your employment with THQ is voluntarily entered into and we recognize you are free to resign at any time.  Similarly, it is recognized that THQ is free to conclude an employment relationship at any time we feel is appropriate.  While other terms of your employment may change with or without notice, this at will relationship can be changed only in a written agreement signed by you and an officer of THQ.

On your first day of work, we will need evidence of your U.S. citizenship, or proof of your legal right to live and work in the United States.

Welcome to the THQ team, Colin.

Sincerely,

William W. Goodmen

Executive Vice President

Human Resources and Administration

cc:  Brian Farrell

Acceptance:

Colin Slade Date Start date: 2/29/08

Colin Slade

Compensation Plan and Benefits Package
Title:	Chief Financial Officer and Executive Vice President
Base Salary:	$440,000 per year payable bi-weekly at the rate of $16,923.08.
	(26 pay periods/year)
Status:	Exempt
Health Insurance:	Blue Cross HMO, Blue Cross PPO, or Kaiser HMO. Eligibility begins on date of hire. In addition, you and your eligible dependents’ out-of-pocket healthcare expenses will be covered by Exec-U-Care at no cost to you.
Dental:	Coverage through Guardian. Eligibility begins on date of hire.
Vision:	Coverage through V.S.P. Eligibility begins on date of hire.
Life Insurance:	Three times base pay (capped at $1 million) — Eligibility effective on date of hire.
Short/Long Term Disability:	Eligibility effective on date of hire.
Vacation/Holidays:	Twenty (20) days per year vacation. Eight (8) paid holidays,plus two floating days per year.
401k Plan:	All regular employees are eligible to participate at the beginning of month following date of hire. 100% company match on first 4%. Six year vesting schedule for company match.
Bonus:	75% Target Bonus. Bonus will be based upon certain quantitative and qualitative performance measures and bonus will be determined annually by the Compensation Committee.
	For FY09, 50% of Target Bonus is guaranteed and will be paid out upon start date. This portion of the FY09 bonus will be considered a non-refundable draw from the final FY09 bonus.
Profit Sharing:	Contributions to 401K, based on profitability, are generally made once each year and are up to the discretion of management.
Stock Options:	You will be awarded 150,000 stock options, subject to approval by the Board of Directors and 15,000 PARSUs, to be awarded during the annual grant period (April or May, 2008), also subject to approval by the Board of Directors.
Deferred Compensation:	Eligible to participate in THQ’s Executive Deferred Compensation Plan.
Change in Control
Severance Agreement:	Eligible to participate in the Change of Control Severance Agreement.
Severance Agreement:	Eligible to participate in the Severance Agreement. In conjunction with the Severance Agreement and Section 2.2 ii, if employee is terminated within 12 months of employment, he will be eligible for his annual target bonus.

Relocation:	Eligible for relocation package. Relocation Agreement as discussed.
Acceptance:	/s/ Colin Slade
	Colin Slade	Date

EX-10.22

Exhibit 10.22

GLOBAL PLAYSTATION^®3 FORMAT

LICENSED PUBLISHER AGREEMENT

Sony Computer Entertainment America Inc.
GLPA	REDACTED	CONFIDENTIAL

TABLE OF CONTENTS

SECTION:		PAGE:
1.	DEFINITION OF TERMS	2
2.	LICENSE	5
3.	DEVELOPMENT AND DISTRIBUTION OF LICENSED PRODUCTS	5
4.	ONLINE GAMEPLAY	7
5.	LIMITATIONS ON LICENSES; RESERVATION OF RIGHTS	7
6.	QUALITY STANDARDS FOR LICENSED PRODUCTS	9
7.	MANUFACTURE OF DISC PRODUCTS	10
8.	MARKETING OF LICENSED PRODUCTS	12
9.	PAYMENTS	13
10.	REPRESENTATIONS AND WARRANTIES	14
11.	INDEMNITIES; LIMITED LIABILITY	16
12.	INFRINGEMENT OF SCE INTELLECTUAL PROPERTY RIGHTS BY THIRD PARTIES	18
13.	CONFIDENTIALITY	18
14.	TERM RENEWAL AND TERMINATION	22
15.	EFFECT OF EXPIRATION OR TERMINATION	24
16.	MISCELLANEOUS PROVISIONS	26

GLOBAL PLAYSTATION^® 3 FORMAT
LICENSED PUBLISHER AGREEMENT

This Global PlayStation®3 Format Licensed Publisher Agreement (the “Agreement”) is entered into on March 5, 2007 by and between SONY COMPUTER ENTERTAINMENT AMERICA INC., with offices at 919 East Hillsdale Boulevard, Foster City, California (“the SCE Company”) and THQ Inc., with offices at 29903 Agoura Road, Calabasas Hills, CA 91301 (“Publisher”).

The SCE Company’s parent company, Sony Computer Entertainment Inc. (“SCEI”), has designed and developed certain core technology of or concerning the System.

The SCE Company has the right to grant non-exclusive licenses to qualified entities regarding certain intellectual property rights with respect to the System.

Publisher desires to be granted a non-exclusive license to publish, develop, have manufactured, market, advertise, distribute and sell Licensed Products in accordance with the provisions of this Agreement and the provisions of the Regional Rider that is attached hereto and incorporated herein by reference, and the SCE Company is willing, in accordance with the terms and subject to the conditions of this Agreement and the Regional Rider, to grant Publisher such a license.

In consideration of the representations, warranties and covenants contained herein and in the Regional Rider, and other good and valuable consideration, Publisher and the SCE Company hereby agree as follows:

1.Definition of Terms.

1.1  “Advertising Materials” means any advertising, marketing, merchandising, promotional, contest-related, public relations (including press releases), display, point of sale or website materials regarding or relating to the Licensed Products or depicting any of the Licensed Trademarks. Advertising Materials include any advertisements in which the System is displayed, referred to, or used, including giving away any unit(s) of the System as prizes in contests or sweepstakes and the public display of the System in product placement opportunities.

1.2  “Affiliate” means, as applicable, either Sony Computer Entertainment America Inc. (“SCEA”), Sony Computer Entertainment Inc. (“SCEI”), Sony Computer Entertainment Europe Ltd. (“SCEE”), Sony Computer Entertainment Korea (“SCEK”), any subsidiary of the foregoing, or any other entity as may be established from time to time and becomes a part of the Sony Computer Entertainment Group.

1.3  “Attribution Line” means the legal attribution line used on Advertising Materials, which shall be substantially similar to the following: “Product copyright and trademarks are the property of the respective publisher or its licensors.”

1.4  “Designated Manufacturing Facility” means a manufacturing facility that is designated by the SCE Company, in its sole discretion, to manufacture Disc Products or any of their component parts.

1.5  “Development System Agreement” means an agreement entered into between the SCE Company and a Licensed Publisher or other licensee regarding the sale, lease, loan or license of Development Tools.

2

1.6  “Development Tools” means the PlayStation 3 development tools sold, leased, loaned or licensed solely for use in the development of Executable Software.

1.7  “Disc Products” means the Executable Software on PS3 Format Discs, Advertising Materials, Packaging, Printed Materials and Product Information relating to any individual title which shall consist of one application software product per Unit. Disc Products may, but need not, be designed to allow Online Gameplay.

1.8  “Effective Date” is the date specified in the preamble of this Agreement.

1.9  “Executable Software” means software in final object code form that is designed for use and operation exclusively on the System which consists of Publisher Software and any SCE Materials and constitutes a complete, standalone videogame.

1.10  “Guidelines” means any guidelines or specifications of the SCE Company with respect to the development, manufacture and publishing of Licensed Products, including any requirements regarding the development of Executable Software, the display of the Licensed Trademarks in any Licensed Products and related Advertising Materials, or the protection of any of the SCE Intellectual Property Rights, which may be set forth in the Technical Requirements Checklist, Corporate Identity Guidelines or in any other documentation provided to Publisher by the SCE Company. Guidelines shall be comparable to the guidelines and specifications applied by the SCE Company to its own software products for the System. All Guidelines may be modified, supplemented or amended by any Affiliate from time to time upon reasonable notice to Publisher. Guidelines are incorporated into and form a part of this Agreement.

1.11  “Licensed Developer” means an entity that has signed a Licensed Developer Agreement with any Affiliate.

1.12  “Licensed Developer Agreement” or “LDA” means a valid and current license agreement authorizing the development of software for the System, fully executed between a Licensed Developer and an Affiliate.

1.13  “Licensed Products” means Disc Products and Online Products, including any Publisher demonstration discs.

1.14  “Licensed Publisher” means an entity that has signed a Licensed Publisher Agreement with an Affiliate.

1.15  “Licensed Publisher Agreement” or “LPA” means a valid and current license agreement for the publishing, development, manufacture, marketing, advertising, distribution and sale of Licensed Products, fully executed between a Licensed Publisher and an Affiliate.

1.16  “Licensed Trademarks” means the trademarks, service marks, trade dress, logos, icons and other indicia designated in the Guidelines or otherwise for use on, in or otherwise in connection with Licensed Products. The Licensed Trademarks (or any part thereof) are subject to change during the term of this Agreement and may be modified, supplemented or amended by any Affiliate (as applicable) from time to time upon reasonable notice to Publisher.

1.17  “Master Disc” means a recordable Blu-Ray disc in the form requested by the SCE Company containing final pre-production Executable Software.

1.18  “Online Gameplay” means the capability to operate and interact with the Executable Software associated with a Licensed Product used on a System that is connected to the Internet or any other network and which may allow an end user to participate in a game or gameplay with another end user (or other end users) across the Internet or any other network.

1.19  “Online Products” means (i) enhancements, improvements, additions, patches, and updates, including characters, artifacts, scripts, levels, modifications, player statistics and gameplay data, used in conjunction

3

with a related Disc Product and distributed electronically to any end users after sale or distribution of a Unit of the related Disc Product; and (ii) Executable Software distributed electronically to end-users. Online Products may, but need not, be designed to allow Online Gameplay.

1.20  “Packaging” means, with respect to each Disc Product, the carton, containers, cases, edge labels, wrapping materials, security seals and other proprietary labels and trade dress elements and wrapping materials of or concerning the Disc Products (and all parts of any of the foregoing) but specifically excluding Printed Materials and PlayStation 3 Format Discs.

1.21  “PlayStation 3 Format Disc” means the disc media formatted for use with the System.

1.22  “Printed Materials” means all artwork and mechanicals for the disc label for each PlayStation 3 Format Disc and for the Packaging relating to any of the Disc Products, and all instructional manuals, liners, inserts, and any other materials and user information within or attached to the Packaging and distributed as part of the Disc Products.

1.23  “Product Information” means any information owned or licensed by Publisher relating to any of the Licensed Products, including demos, videos, hints and tips, artwork, depictions of Disc Product cover art and videotaped interviews.

1.24  “Product Proposal” means a written proposal prepared by a Licensed Publisher and submitted to the SCE Company under the Guidelines regarding the concept and design for a Licensed Product.

1.25  “Publisher Software” means any software including incorporated audio and visual material developed by Publisher under this Agreement or an LDA, and does not include any SCE Materials.

1.26  “Publisher Intellectual Property Rights” means those worldwide intellectual property rights, current or future, that are owned and controlled by Publisher, including rights in or related to patents, inventions, designs, copyrights, databases, trademarks, service marks, trade names, trade dress, mask work rights, utility model rights, trade secret rights, technical information, know-how, and the equivalents of the foregoing under the laws of any jurisdiction and any other intellectual property rights recognized in the Territory (including all registrations, applications to register and rights to apply for registration of same), that relate to the Publisher Software, Packaging, Product Information, Printed Materials, Advertising Materials or other materials.

1.27  “Purchase Order” means a written purchase order issued by Publisher pursuant to Section 7.8.1, regarding the purchase of Disc Products that conform to the Guidelines and other terms and conditions imposed by the SCE Company or any Designated Manufacturing Facility.

1.28  “Regional Rider” means the additional set of binding terms and which are appended to and form part of this Agreement, and which are applicable to the Territory.

1.29  “SCE Confidential Information” means the term as defined in Section 13.1.1.

1.30  “SCE Intellectual Property Rights” means those worldwide intellectual property rights, current or future, including rights in or related to patents, inventions, designs, copyrights, databases, trademarks (including the Licensed Trademarks), service marks, trade names, trade dress, mask work rights, utility model rights, trade secret rights, technical information, know-how, and the equivalents of the foregoing under the laws of any jurisdiction, and any other intellectual property rights recognized in the Territory (including all registrations, applications to register and rights to apply for registration of the same), for their full term including all renewals and extensions, that relate to the SCE Materials,

4

the System, the design and development of Licensed Products compatible with the System, and any SCE Confidential Information.

1.31  “SCE Materials” means any data, object code, source code, firmware, documentation (or any part(s) of any of the foregoing) or information relating to the System or the development of interactive entertainment products compatible with the System, selected in the sole judgment of the SCE Company, which are directly or indirectly provided or supplied by any Affiliate to Publisher. SCE Materials shall not include any hardware portions of the Development Tools, but shall include firmware in such hardware.

1.32  “System” means the PLAYSTATION®3 computer entertainment system.

1.33  “Term” means the period from the Effective Date until March 31, 2012.

1.34  “Territory” means the term as defined in the Regional Rider.

1.35  “Unit” means an individual copy of a specific Disc Product regardless of the number of PlayStation 3 Format Discs that are contained within and are part of such Disc Product.

2.    License.

2.1  License Grant.  The SCE Company grants to Publisher, for the Term and throughout the Territory, and in accordance with the other terms, limitations and conditions referenced herein, a non-exclusive, non-transferable license under the SCE Intellectual Property Rights, without the right to sublicense (except as specifically provided herein), to use SCE Materials as follows: (i) to develop and publish Licensed Products and to enter into agreements with Licensed Developers and other approved third parties, where the SCE Company requires such approval, subject to Section 3.2, to develop Licensed Products; (ii) to have Disc Products manufactured by Designated Manufacturing Facilities; (iii) to market, advertise, promote, sell and distribute Disc Products directly to end users or to third parties for distribution to end users; (iv) to market, advertise and promote, and, pursuant to a separate online distribution agreement(s) with the SCE Company or any Affiliate, to distribute Online Products to end users over the PlayStation®Network; (v) to use the Licensed Trademarks only in connection with the manufacturing, marketing, packaging, advertising, promotion, sale and distribution of the Licensed Products; and (vi) to sublicense end-user customers the right to use the Licensed Products for personal, noncommercial purposes in conjunction with the System only, and not with other devices or for public performance.

2.2  Separate PlayStation Agreements.  Unless specifically set forth in this Agreement, all terms used herein are specific to the System and the attendant SCE Company licensing program. Licenses relating to the original PlayStation, PS One, PlayStation 2 or PlayStation Portable game consoles are subject to separate agreements with the SCE Company (or any Affiliate, as applicable), and any license of rights to Publisher under such separate agreements shall not confer on Publisher any rights with respect to the System and vice versa.

3.    Development and Distribution of Licensed Products.

3.1  Right to Develop.  The SCE Company grants Publisher the right to purchase, lease or borrow, as applicable, certain hardware devices and license certain software tools and utilities that comprise the Development Tools, as is appropriate, from the SCE Company or its designee, pursuant to a separate Development System Agreement with the SCE Company or a separate rider to this Agreement, which hardware and software components may be used by Publisher only in connection with the development of Licensed Products pursuant to Section 2.1. In developing Executable Software (or portions thereof), Publisher and any third-party Licensed Developers with whom Publisher contracts shall fully comply in all respects with all Guidelines, including technical specifications. In the event that Publisher uses any third-party tools to develop Executable Software or any portion thereof, Publisher shall

5

be responsible at Publisher’s sole risk and expense for ensuring that it has obtained all necessary licenses for any such use.

3.2  Subcontractors.  Publisher may retain subcontractors who provide services which do not require access to SCE Materials or SCE Confidential Information without prior approval. Otherwise, Publisher may retain subcontractor(s) to assist with the development, publication and marketing of Licensed Products (or portions thereof) which have signed (i) an LPA or LDA with the SCE Company (the “PlayStation 3 Agreement”) in full force and effect throughout the term of such development, publishing and marketing services or (ii) if required by the SCE Company, an SCE Company-approved subcontractor agreement (“Subcontractor Agreement”), and the SCE Company has approved such subcontractor in writing (which approval shall be in the SCE Company’s sole discretion). Publisher shall not disclose to any subcontractor any of the SCE Confidential Information, including any SCE Materials, unless and until either a PlayStation 3 Agreement or any required Subcontractor Agreement has been executed and approved by the SCE Company. Publisher shall be solely responsible for verifying that all third parties that contribute to the development of any Licensed Product, or component thereof, satisfy the requirements of clause (i) or (ii) of this Section 3.2. Notwithstanding any consent which may be granted by the SCE Company for Publisher to employ any such permitted subcontractor(s), or any such separate agreement(s) that may be entered into by Publisher with any such permitted subcontractor, Publisher shall remain fully liable for its compliance with all of the provisions of this Agreement and for the compliance of any and all permitted subcontractors with the provisions of any agreements entered into by such subcontractors in accordance with this Section. Publisher shall use best efforts to cause all subcontractors that it retains in furtherance of this Agreement to comply in all respects with the terms and conditions of this Agreement, and hereby unconditionally guarantees all obligations of its subcontractors. The SCE Company may subcontract any of its rights or obligations hereunder.

3.3  Form of Distribution.  Executable Software distributed physically to end users and demonstration discs shall be in the form of PlayStation 3 Format Discs only. Publisher shall not, directly or indirectly, incorporate more than one Disc Product in a single Unit, or package or bundle Units of any Disc Product with any other goods or services, without the SCE Company’s prior written consent. Online Products, Online Gameplay and any services associated with Online Gameplay, including subscriptions, shall be distributed or made available electronically, including by wireless distribution, to end users over the PlayStation®Network only, unless the SCE Company gives express written consent to another manner of distribution on SCE Company standard terms or otherwise as agreed. Notwithstanding this limitation, Publisher may electronically transmit Executable Software from site to site, or from machine to machine over a computer network, for the sole purposes of facilitating development and for testing to be carried out under Section 6; provided that no right of retransmission shall attach to any such transmission, and provided further that Publisher shall use reasonable security measures customary within the high technology industry to reduce the risk of unauthorized interception or retransmission of such transmissions.

3.4  Distribution Channels for Disc Products.  Publisher may use such distribution channels to distribute Disc Products as Publisher deems appropriate, including the use of third-party distributors, resellers, dealers and sales representatives. In the event that the SCE Company permits Publisher to have any of its Disc Products published by another Licensed Publisher, Publisher must, in addition to complying with Section 3.2, provide the SCE Company with advance written notice of such arrangement, including the name of the Licensed Publisher and any additional information requested by the SCE Company regarding the nature of the distribution services that would be

6

provided by such third-party Licensed Publisher prior to manufacture of the Disc Product.

4.    Online Gameplay.

4.1  Access to and Maintenance of Online Gameplay.  Publisher shall maintain servers hosting Online Gameplay for the periods specified in the Guidelines. Publisher, or, at SCEE’s option, SCEE or its Affiliate shall provide notice to consumers in a clear and conspicuous manner via one of the methods listed in Section 4.3 any permanent shutdown to a server hosting or supporting Online Gameplay no later than three (3) months prior to any shutdown.

4.2  Publisher Online Designee.  Publisher shall appoint a dedicated contact person for its Licensed Products designed to allow Online Gameplay, who shall act as a liaison between the SCE Company and Publisher for all online matters relating to Licensed Products designed to allow Online Gameplay. Publisher’s designee shall also be responsible for ensuring that all terms and conditions relating to the online elements of the Licensed Products are complied with. Publisher shall give the SCE Company ten (10) days’ written notice prior to any change in designee.

4.3  Online Legal Compliance.  Licensed Products designed for Online Gameplay must include a legal disclosure enumerating end user, privacy and moderation policies and age rating (collectively, “Online Terms”) prior to allowing any end users to engage in Online Gameplay for the first time for a particular user or as otherwise required by law. The SCE Company reserves the right to review Publisher’s Online Terms, but shall have no liability for content of Publisher’s Online Terms. Online Terms shall either be coded into the applicable Licensed Product or available on the server hosting Online Gameplay in such a way that an end user must agree to it prior to accessing and engaging in Online Gameplay. Online Terms must comply with the Guidelines. Publisher must inform all end users engaging in or accessing Online Gameplay if any personally identifying information will be collected, how it will be collected, and how it will be used.

4.4  Publisher Liability for Online Gameplay.  Publisher shall bear exclusively all responsibility and liability for any features or capability of Licensed Products related to Online Gameplay, including Online Gameplay between territories using different television standards, whether PAL, NTSC or otherwise.

5.    Limitations on Licenses; Reservation of Rights.

5.1  Application of Council Directive 91/250/EEC. If Publisher has executed the Regional Rider in a Territory governed by Council Directive 91/250/EEC, the limitations set forth in Section 5 shall be subject to Council Directive 91/250/EEC.

5.2  Reverse Engineering Prohibited.  Publisher shall not directly or indirectly disassemble, decrypt, electronically scan, peel semiconductor components, decompile, or otherwise reverse engineer in any manner or attempt to reverse engineer or otherwise derive any source code from, all or any portion of the SCE Materials, or permit, assist or encourage any third party to do so.

5.3  Limitation on Creation of Derivative Works.  Publisher shall not use, modify, reproduce, sublicense, distribute, create derivative works from, or otherwise provide to third parties, the SCE Materials, in whole or in part, other than as expressly set forth herein without the SCE Company’s prior written consent.

5.4  Limitation on Examination and Study of Tools.  Publisher may study the performance, design and operation of the Development Tools solely for the limited purposes of developing and testing Publisher Software, or to develop tools to assist Publisher with the development and testing of Publisher Software. Any tools developed or derived by Publisher as a result of studying the performance, design or operation of the Development Tools shall be considered

7

derivative works of the SCE Materials and shall be owned by the SCE Company, but may be treated as trade secrets of Publisher. This section shall govern any conflict with a similar provision in any separate agreement.

5.5  Limitations Regarding Content of Licensed Products.  No rights are granted under this Agreement with respect to non-game products or products which contain significant elements of, or are a hybrid with, audio or video profile products. No rights are granted under this Agreement with respect to serving or providing in-game dynamic advertisements. Licensed Products may contain in-game static advertisements, subject to the Guidelines.

5.6  Reservation of SCE Company’s Rights.

5.6.1  Limitations on Use of SCE Materials and SCE Intellectual Property Rights.  This Agreement does not grant any right or license under, and Publisher shall not use, any SCE Confidential Information, the SCE Materials, or any of the SCE Intellectual Property Rights except as expressly authorized hereunder and in strict compliance with the terms and conditions of this Agreement. No other right or license is to be implied by or inferred from any provision of this Agreement or the conduct of the parties. In particular, Publisher shall not use the Executable Software, SCE Materials or SCE Confidential Information (or any portion of any of the foregoing) in connection with the development of any software for any emulator or other computer hardware or software system. In no event shall Publisher patent any tools, methods, or applications, created, developed or derived from SCE Materials. Publisher shall not make available to any third party any tools developed or derived from the study of the Development Tools without the SCE Company’s express written permission. Use of such tools shall be strictly limited to the creation or testing of Licensed Products and any other use, direct or indirect, of such tools is strictly prohibited. Moreover, Publisher shall bear all risks arising from incompatibility of its Licensed Product and the System resulting from use of Publisher-created tools. The burden of proof under this Section shall be on Publisher, and the SCE Company reserves the right to require Publisher to furnish evidence satisfactory to the SCE Company that Publisher has complied with this Section.

5.6.2  Ownership and Protection of SCE Materials and SCE Intellectual Property Rights.  All rights with respect to the SCE Materials and the System, including all of the SCE Intellectual Property Rights, are the exclusive property of the SCE Company or its Affiliates. Publisher shall not do or cause to be done any act or thing in any way impairing or tending to impair any of the SCE Company’s rights, title or interests in or to the SCE Materials or the SCE Intellectual Property Rights. Publisher shall take all steps as the SCE Company may reasonably require for the protection and maintenance of the SCE Intellectual Property Rights, including executing licenses or obtaining registrations. Publisher shall not register any trademark in its own name or in any other person’s name, or use, or obtain rights to use Internet domain names or addresses, which are identical or similar to, or are likely to be confused with any of the Licensed Trademarks or any other trademarks of the SCE Company. All goodwill associated with the Licensed Trademarks, including any goodwill generated or arising by or through Publisher’s or its sub-licensees’ activities under this Agreement, accrues to the benefit of and belongs exclusively to the SCE Company. Nothing contained in this Agreement shall be deemed to grant Publisher the right to use the trademark “SONY” in any manner or for any purpose.

5.6.3  Authentication.  The SCE Company reserves the right to require Publisher to utilize an authentication or authorization system to be provided, licensed or designated by the SCE Company to authenticate and verify all Licensed Products and units of the System. The SCE Company reserves the right to insert serial numbers on all PlayStation 3 Format Discs for security or authentication purposes.

8

5.7  Acknowledgment of Publisher’s Ownership Rights.  Separate and apart from the SCE Materials and other rights licensed to Publisher by the SCE Company hereunder, as between Publisher and the SCE Company, Publisher retains all rights, title and interest in and to the Publisher Software, the Product Proposals, and related Product Information, including Publisher Intellectual Property Rights therein, as well as Publisher’s rights in any source code and other underlying material such as artwork and music (but specifically excluding the SCE Materials and any software provided directly or indirectly by the SCE Company) and any names used as titles for Licensed Products and other trademarks used by Publisher. Nothing in this Agreement shall restrict the right of Publisher to develop, distribute or transmit products incorporating the Publisher Software and underlying material, which do not contain or were not developed through use of the SCE Materials or the SCE Intellectual Property Rights, for any hardware platform or service other than the System, or to use Printed Materials or Advertising Materials approved by the SCE Company (excepting Printed Materials or Advertising Materials that contain any Licensed Trademarks) as Publisher determines for such other platforms.

5.8  Guidelines Requirement.  The licenses granted to Publisher are expressly conditioned on Publisher’s compliance with all provisions of the SCE Company’s Guidelines, as and when published or within a commercially reasonable time following its receipt of a publication expressly referencing such provisions, and any and all such provisions are incorporated herein by this reference. To the extent that the Guidelines change with respect to any Licensed Product materials that Publisher submits to the SCE Company under Section 6.1, Publisher shall only be required to implement any such revised Guidelines in subsequent orders of corresponding Disc Product or subsequent publications of corresponding Online Product. Publisher shall not be required to recall or destroy previously manufactured Disc Products, unless such Disc Products do not comply with the original standards, requirements and conditions set forth in the Guidelines or unless explicitly required to do so in writing by the SCE Company.

6.    Quality Standards for Licensed Products.

6.1  Product Assessment, Format Quality Assurance and Printed and Advertising Materials.  Publisher shall comply with the process and requirements for assessment and format quality assurance of Licensed Products and Advertising Materials, on a product-by-product basis as specified in the Guidelines. The SCE Company will not approve Licensed Products that are outside the PlayStation®3 format specifications in the Guidelines.

6.2  Rating Requirements.  No Licensed Product may be published, sold, distributed, marketed, advertised or promoted unless each Licensed Product bears a consumer advisory age rating, consisting of a rating code and product descriptors, either as required by local law or as issued by, and following the rating display requirements of, a consumer advisory ratings system designated by the SCE Company. Any and all costs and expenses incurred in connection with obtaining such rating shall be borne solely by Publisher. No Licensed Product, Printed Materials or Advertising Materials may bear more than one consumer advisory rating code. Any Online Product that can be used with a Disc Product must bear a rating that is the same as or lower than the rating issued to the Disc Product, unless the SCE Company gives express written consent.

6.3  Compatibility of Licensed Products with Peripherals.  Publisher shall be solely responsible for functionality and operational compatibility of its Licensed Products with any third-party peripherals (e.g., controllers, memory storage devices, etc.). The SCE Company shall have no responsibility to test or otherwise evaluate the compatibility of Publisher’s Licensed Products with any third-party peripherals. The SCE Company shall not be held responsible for any actual, incidental or consequential damages that may result from any use or inability to use any third-party peripherals

9

with any Licensed Products or the System. If the SCE Company elects, at its sole discretion, to test or otherwise evaluate the compatibility of Publisher’s Licensed Products with any third-party peripheral device then, (i) any such testing or evaluation shall not obligate the SCE Company to test or evaluate any other third-party peripherals; (ii) any such testing or evaluation shall not shift to the SCE Company any responsibility to ensure or assess the functionality or compatibility of any third-party peripheral or require the SCE Company to report any third-party peripheral incompatibilities; and (iii) Publisher shall provide the SCE Company, upon request and at no additional cost or expense to the SCE Company, with a reasonable number of samples of any such third-party peripheral products for testing and review in a timely manner. In the event that any Licensed Product fails to perform to the SCE Company’s satisfaction with any third-party peripheral that it is intended to support, the SCE Company shall have the right to require that Publisher modify or remove such portions of the Executable Software as are intended to support the affected third-party peripheral.

6.4  Publisher’s Additional Quality Assurance Obligations.  If at any time or times subsequent to the approval of any part of a Licensed Product, the SCE Company identifies any material defects (such materiality to be determined by the SCE Company in its sole discretion) with respect to the Licensed Product, or in the event that the SCE Company identifies any improper use of its Licensed Trademarks or the SCE Materials, or any material defects or improper use are brought to the attention of the SCE Company, Publisher shall, at no cost to the SCE Company, promptly correct any such material defects, or improper use, to the SCE Company’s commercially reasonable satisfaction, which may include, in the SCE Company’s judgment, the recall and re-release of Units of the affected Disc Product or publication of an update, upgrade or technical fix to an Online Product. In the event any Licensed Products create any risk of loss or damage to any property or injury to any person, Publisher shall immediately take effective steps, at Publisher’s sole liability and expense, to recall and remove such Licensed Products from any affected channels of distribution; provided, however, that if Publisher is not acting as the distributor or seller for the Licensed Products, its obligation shall be to use its best efforts to arrange removal of all affected Licensed Products from the relevant distribution channels. Publisher shall provide all end-user support for Licensed Products. Publisher and the SCE Group Company may enter into a separate agreement to have Publisher provide all end-user support for Online Gameplay of Publisher’s Licensed Products that is provided through the PlayStation®Network. The SCE Company expressly disclaims any obligations or liability to provide end-user support with respect to Licensed Products.

7.    Manufacture of Disc Products.

7.1  Manufacture of Units.  Upon approval of Executable Software and associated Printed Materials pursuant to Section 6, and subject to Sections 7.4 – 7.7, the Designated Manufacturing Facility will, in accordance with the terms and conditions set forth in this Section 7, and at Publisher’s request and sole expense (a) manufacture PlayStation 3 Format Discs for Publisher; (b) manufacture Publisher’s Packaging and Printed Materials; and (c) assemble the PlayStation 3 Format Discs with the related Printed Materials and Packaging. Publisher shall comply with all Guidelines relating to the production of Units of Disc Products. The SCE Company reserves the right to insert or require Publisher to make arrangements for the insertion of certain Printed Materials relating to the System into each Unit.

7.2  Designated Manufacturing Facilities.  To insure compatibility of PlayStation 3 Format Discs with the System, consistent quality of the Disc Products and incorporation of anti-piracy security measures, the SCE Company shall designate and license a Designated Manufacturing Facility or Facilities to reproduce PlayStation 3 Format Discs. Publisher shall purchase[ * ] for PlayStation 3 Format Discs, including demonstration discs, from such Designated Manufacturing Facility. Any

*Confidential portion omitted and filed separately with the Securities and Exchange Commission.

10

Designated Manufacturing Facility shall be entitled to enforce the terms of this Agreement.

7.3  Creation of Master PlayStation 3  Format Disc.  Using one of the fully approved Master Discs provided by Publisher under the Guidelines, the SCE Company or the Designated Manufacturing Facility shall create an encrypted, reproducible master of the Executable Software (formatted as a PlayStation 3 Format Disc) from which all other copies of the Executable Software for the corresponding Disc Product are to be replicated. Publisher shall be responsible for the costs, as determined by the SCE Company or the Designated Manufacturing Facility, of producing the reproducible masters of any and all Executable Software.

7.4  Manufacture of Printed Materials by Designated Manufacturing Facility.  If Publisher elects to order Printed Materials from a Designated Manufacturing Facility, Publisher shall deliver all SCE Company-approved Printed Materials to that Designated Manufacturing Facility, at Publisher’s sole risk and expense, and the Designated Manufacturing Facility will manufacture such Printed Materials in accordance with this Section 7. In order to insure against loss or damage to the copies of the Printed Materials furnished to the SCE Company, Publisher shall retain duplicates of all Printed Materials, and neither the SCE Company nor any Designated Manufacturing Facility shall be liable for any loss of or damage to any Printed Materials.

7.5  Manufacture of Printed Materials by Alternate Source.  Subject to the Guidelines, Publisher may elect to be responsible for manufacturing its own Printed Materials (other than artwork which is to be reproduced or otherwise displayed on any PlayStation 3 Format Discs, which Publisher will supply to the Designated Manufacturing Facility for incorporation within the Disc Products), at Publisher’s sole risk and expense. The SCE Company shall have the right to disapprove any Printed Materials that do not comply with the applicable Guidelines. If Publisher elects to supply its own Printed Materials, neither the SCE Company nor any Designated Manufacturing Facility shall be responsible for any delays arising from use of Publisher’s own Printed Materials.

7.6  Manufacture of Packaging by Designated Manufacturing Facility.  To ensure consistent quality of the Disc Products, the SCE Company may designate and license a Designated Manufacturing Facility to reproduce all or part of the proprietary Packaging for the Disc Products. If so, then Publisher shall purchase [ * ] for such Packaging from a Designated Manufacturing Facility during the Term.

7.7  Assembly Services.  Publisher may either procure assembly services from a Designated Manufacturing Facility or, with the SCE Company’s prior written consent, from an alternate source. If Publisher elects to be responsible for assembling the Disc Products, then the Designated Manufacturing Facility shall ship the component parts of the Disc Product to a destination designated by Publisher, at Publisher’s sole risk and expense. The SCE Company shall have the right to inspect any assembly facilities that Publisher proposes to use in order to determine if the component parts of the Disc Products are being assembled in accordance with the SCE Company’s quality standards. The SCE Company may require Publisher to recall any Units of any Disc Products that fail to comply with the Guidelines. If Publisher elects to use alternate assembly facilities, neither the SCE Company nor any Designated Manufacturing Facility shall be responsible for any delays or other production issues, including missing component parts, arising from use of alternate assembly facilities. Publisher shall comply with all applicable labor laws and, in accordance with the provisions of Section 16.8, shall not employ child labor, slave labor or forced labor in connection with the assembly of the Licensed Products.

7.8  Orders and Delivery.

7.8.1  Orders.  Publisher shall issue Purchase Order(s) to a Designated Manufacturing Facility in the form set forth and

*Confidential portion omitted and filed separately with the Securities and Exchange Commission.

11

containing the information required in the Guidelines, with a copy to the SCE Company. No Purchase Orders will be processed for any Disc Product unless that Disc Product is fully compliant with the Guidelines. All Purchase Orders shall be subject to approval by the SCE Company not to be unreasonably withheld and to acceptance by the Designated Manufacturing Facility pursuant to the Guidelines. Purchase Orders issued by Publisher to a Designated Manufacturing Facility for each Licensed Product approved by the SCE Company shall be non-cancelable and are subject to the order requirements of the Designated Manufacturing Facility.

7.8.2  General Terms.  Neither the SCE Company nor any Designated Manufacturing Facility shall be responsible for shortage or breakage with respect to any order if component parts or assembly services are obtained from alternate sources.

7.9  Delivery of Disc Products.  The Designated Manufacturing Facility will deliver Disc Products to Publisher at Publisher’s sole expense, except where otherwise provided under this Agreement. Publisher shall have no right to have completed Units of Disc Products stored after manufacture.

7.10  Ownership of Original Master Discs.  Due to the proprietary and confidential nature of the mastering and encryption process, neither the SCE Company nor any Designated Manufacturing Facility shall under any circumstances release any original Master Discs, reproducible masters created under section 7.3 or other in-process materials to Publisher. All such materials shall be and remain the sole property of the SCE Company or the Designated Manufacturing Facility (as applicable). Notwithstanding the foregoing, the Publisher Intellectual Property Rights contained in the Publisher Software that is contained in any such in-process materials is, as between the SCE Company and Publisher, the sole and exclusive property of Publisher or its licensors.

8. Marketing of Licensed Products.

8.1  Marketing Generally.  At no expense to the SCE Company, Publisher shall, and shall direct its distributors to, diligently market, sell and distribute the Licensed Products, and shall use commercially reasonable efforts to stimulate demand for such Licensed Products throughout the Territory and to supply any resulting demand. Publisher shall use reasonable efforts to protect the Licensed Products from and against illegal reproduction or copying by end users or by any other persons.

8.2  Samples.  Publisher shall provide sample Units of each Disc Product to the SCE Company in the quantities and per the terms specified in the Guidelines. In the event that Publisher assembles any Disc Product using an alternate source, Publisher shall be responsible for shipping such sample Units to the SCE Company, at Publisher’s cost and expense, promptly following the commercial release of such Disc Product. Units shall not be shipped to the SCE Company prior to the commercial release of such Disc Product. The SCE Company assumes no liability for release of samples prior to commercial release. The SCE Company shall not directly or indirectly resell any such sample Units of the Disc Products without Publisher’s prior written consent. The SCE Company may distribute sample Units to its employees, provided that it uses its reasonable efforts to ensure that such Units are not sold into the retail market. In addition, subject to availability, Publisher shall sell to the SCE Company additional Units at cost.

8.3  Marketing Programs.  From time to time, the SCE Company may invite Publisher to participate in promotional or advertising opportunities that may feature one or more Licensed Products from one or more Licensed Publishers. Participation shall be voluntary and subject to terms to be determined at the time of the opportunity. In the event Publisher elects to participate, all materials submitted by Publisher to the SCE Company shall be submitted subject to the Guidelines and delivery of such materials to the SCE Company shall constitute acceptance by Publisher of the terms of the offer. Each Affiliate shall be entitled to display and otherwise use the Attribution Line on its

12

multi-product marketing materials, unless otherwise agreed in writing.

8.4  PlayStation Website.  Publisher shall provide the SCE Company with Product Information for a web page for each of its Licensed Products for display on the PlayStation promotional website, or other website(s) operated by the SCE Company from time to time in connection with the promotion of the PlayStation brand. Specifications for Product Information for such web pages shall be as provided in the Guidelines. Publisher shall provide the SCE Company with such Product Information for each Licensed Product upon submission of Printed Materials to the SCE Company for approval pursuant to the Guidelines. Publisher shall also provide updates for any such web page in a timely manner as may be required in the Guidelines.

8.5  Demonstration Disc Programs.  The SCE Company may, from time to time, provide opportunities for Publisher to contribute Licensed Product content for distribution as part of a demonstration disc published by any Affiliate, or permit Publisher to publish its own demonstration disc pursuant to a third party demonstration disc program. The specifications with respect to the approval, creation, manufacture, marketing, distribution and sale of any such demo disc programs shall be set forth in the Guidelines. The SCE Company reserves the right to choose from products submitted from other Licensed Publishers and first party products to determine the specific products that will be included in any SCE Company demonstration discs, and Publisher’s Licensed Products will not be guaranteed prominence or preferential treatment on any SCE demonstration disc. The SCE Company has no obligation to publish, advertise or promote any demonstration disc.

8.6  Contests and Sweepstakes of Publisher.  Publisher may conduct contests, sweepstakes, competitions and promotions, as permitted by law (collectively, “Contest” or “Contests”), to promote Licensed Products. The SCE Company shall permit Publisher to include Contest materials in Printed Materials and Advertising Materials, subject to compliance with the provisions of Sections 10.2 and 11.2, and subject to the Guidelines.

9.    Payments.

9.1  Payments for Licensed Products.  Publisher shall pay the SCE Company either directly or through its designee, for Licensed Products, including Licensed Products in any “Greatest Hits,” “Platinum” or any other program, and demonstration discs, at the rates and in the manner specified in the Regional Riders and the terms of this Section 9. Publisher shall be required in all cases to make payments to the SCE Company, in accordance with this Section 9 and the Regional Rider, with respect to any and all of Publisher’s products that are developed utilizing any SCE Materials or SCE Intellectual Property Rights or any derivative works based on or otherwise derived from the same. The burden of proof under this Section shall be on Publisher. The SCE Company reserves the right to require Publisher to furnish evidence satisfactory to the SCE Company that Publisher has complied with any or all of its obligations pursuant to this Section. Payment terms are subject to change in the SCE Company’s discretion upon reasonable notice to Publisher.

9.2  Payment for Units of Disc Products.  Payments shall be made to the SCE Company through its Designated Manufacturing Facility concurrent with the placement of any Purchase Order for Units of any Disc Product in accordance with the terms and conditions set forth in this Agreement unless otherwise agreed in writing with the SCE Company. Payment shall be made prior to manufacture unless the SCE Company has agreed in writing to extend credit terms to Publisher under Section 9.3.

9.3  Credit Terms.  The SCE Company is not required to extend any credit terms to Publisher, but may do so in the SCE Company’s sole discretion. Credit terms and limits shall be subject to revocation or extension at the SCE Company’s sole discretion. If credit terms are extended to Publisher, Purchase Orders will be invoiced upon shipment of Disc Products and

13

each invoice will be payable within 30 days of the date of the invoice. Publisher shall be additionally liable for all costs and expenses of collection, including without limitation, reasonable fees for lawyers and court costs.

9.4  Charges and Deductions.  The amounts that Publisher must pay under this Agreement are exclusive of all taxes, duties, charges or assessments which the SCE Company or the Designated Manufacturing Facility may have to collect or pay and for which Publisher is solely responsible. No costs incurred in the development, manufacture, marketing, sale or distribution of any Licensed Products shall be deducted from any amounts payable under this Agreement. Similarly, there shall be no deduction from any amounts owed hereunder as a result of any uncollectible accounts owed to Publisher, or for any credits, discounts, allowances or returns which Publisher may credit or otherwise grant to any third-party customer of any Licensed Products, or for any taxes, fees, assessments or expenses of any kind which may be incurred by Publisher in connection with its sale or distribution of any Licensed Products or arising with respect to the payment of royalties. Publisher may not assert any credit, set-off or counterclaim to justify withholding payment under this Agreement. Publisher shall be solely responsible for and bear any costs relating to any withholding taxes or other such assessments which may be imposed by any governmental authority with respect to the payments to the SCE Company. Publisher shall provide the SCE Company with official tax receipts or other such documentary evidence issued by the applicable tax authorities sufficient to substantiate that any such taxes or assessments have in fact been timely paid. Deductions may only be made after issuance of an approved credit memo from the SCE Company or a Designated Manufacturing Facility.

9.5  General Terms.  Each shipment to Publisher shall constitute a separate sale, whether said shipment constitutes the whole or partial fulfillment of any Purchase Order. Title to Units shall pass to Publisher only upon payment in full of the amounts due under this Agreement for those Units. The receipt and deposit by the SCE Company of any moneys payable under this Agreement shall be without prejudice to any rights or remedies the SCE Company has and shall not restrict or prevent the SCE Company from challenging the basis for calculation or payment accuracy. Nothing in this Agreement shall excuse or be construed as a waiver of Publisher’s obligation to timely provide any and all payments owed to the SCE Company or any Designated Manufacturing Facility.

10.  Representations and Warranties.

10.1  Representations and Warranties of SCE Company.  The SCE Company represents and warrants solely for the benefit of Publisher that the SCE Company has the right, power and authority to enter into this Agreement and to fully perform its obligations hereunder.

10.2  Representations and Warranties of Publisher.  Publisher represents and warrants that:

(i) There is no threatened or pending action, suit, claim or proceeding alleging that the use or possession by Publisher or its affiliates of all or any part of the Publisher Software, Product Proposals, Product Information, Printed Materials, Advertising Materials, Packaging not provided by the Designated Manufacturing Facility, or any underlying work or content embodied in any of the foregoing, including any name, designation or trademark used in conjunction with any of the Licensed Products, infringes or otherwise violates any intellectual property right or other right or interest of any kind whatsoever anywhere in the world of any third party, or otherwise contesting any right, title or interest of Publisher in or to the Publisher Software, Product Proposals, Product Information, Printed Materials, Advertising Materials, Packaging not provided by the Designated Manufacturing Facility, or any underlying work or content embodied in any of the foregoing, including any name, designation or trademark used in conjunction with any of the Licensed Products;

14

(ii)  The Publisher Software, Product Proposals, Product Information, Printed Materials, Advertising Materials, Packaging not provided by the Designated Manufacturing Facility, and their contemplated disclosure or use under this Agreement do not and shall not infringe any person’s rights including patents, copyrights (including rights in a joint work), trademarks, trade dress, trade secret, rights of publicity, privacy, performance, moral rights, literary rights or any other right or interest anywhere in the world of any third party. Publisher has obtained the consent of all holders of intellectual property rights necessary for the SCE Company’s or its Affiliates’ use of any Publisher Software, Product Proposals, Product Information, Printed Materials, Advertising Materials and Packaging not provided by the Designated Manufacturing Facility provided by Publisher, which may be reproduced, published, publicly displayed, publicly performed, marketed, sold and otherwise distributed by the SCE Company and any Affiliates in accordance with this Agreement. Publisher has made all payments required to any person having any legal rights arising from such disclosure or use so that the SCE Company will not incur any obligation to pay any royalty, residual, union, guild or other fees or expenses;

(iii)  Publisher has the right, power and authority to enter into this Agreement, to grant the SCE Company the rights granted hereunder and to fully perform its obligations hereunder;

(iv)  The making of this Agreement by Publisher does not violate any separate agreement, rights or obligations existing between Publisher and any other person, and, throughout the Term, Publisher shall not make any separate agreement with any third party that is inconsistent with any of the provisions of this Agreement;

(v)  Publisher has not previously taken any action that could be interpreted as having sold, assigned, leased, licensed or in any other way disposed of or encumbered any of the rights granted to Publisher hereunder. Publisher will not sell, assign, lease, license or in any other way dispose of or encumber any of such rights except as expressly consented to by the SCE Company in writing;

(vii)  Neither Publisher nor its affiliates shall make any representation or give any warranty to any person or entity expressly or on the SCE Company’s behalf, or to the effect that the Licensed Products are connected in any way with the SCE Company other than that the Executable Software and Licensed Products have been developed, marketed, sold and distributed under license from the SCE Company;

(viii)  In the event that any Executable Software is delivered by Publisher to any other Licensed Publishers or Licensed Developers in source code form, Publisher will take all precautions consistent with the protection of valuable trade secrets by companies in high technology industries to ensure that such third parties protect and maintain the confidentiality of such source code;

(ix)  The Executable Software, excepting any SCE Materials, and any Product Information shall be in a commercially acceptable form, free of significant bugs, defects, time bombs or viruses or unauthorized content that is inconsistent with the age rating applicable to the corresponding Licensed Product, which could disrupt, delay, or destroy the Executable Software or System, or render any of such items less than fully useful, or that could cause the SCE Company to suffer public disrepute, contempt, scandal or ridicule, or which insults or offends the community or any substantial organized group thereof or which could tend to adversely affect the SCE Company’s name, reputation or goodwill associated with the System, and shall be fully compatible with the System and all peripherals listed on the Printed Materials as compatible with the Licensed Product;

(x)  Each of the Licensed Products shall be developed, marketed, sold and distributed by or at the direction of Publisher in an ethical manner and in a responsible manner with respect to the protection of children in the online environment, and in full compliance with all applicable laws,

15

including federal, state, provincial, local and foreign laws, and any rules, regulations and standards promulgated thereunder, including lottery laws and labor laws, and will not contain content that violates applicable laws, including those relating to privacy or any obscene or defamatory matter;

(xi)  Publisher’s policies and practices with respect to the development, marketing, sale, and distribution of the Licensed Products shall in no manner reflect adversely upon the name, reputation or goodwill of the SCE Company or any Affiliate;

(xii)  To the extent Publisher wishes to utilize a Licensed Developer to assist in development of Licensed Products, Publisher has contracted, or will contract, with a Licensed Developer for the technical expertise and resources necessary to fulfill its obligations under this Agreement; and

(xiii)  Publisher shall make no false, misleading or inconsistent representations or claims with respect to the System, any Licensed Products, or the SCE Company or any Affiliate.

11. Indemnities; Limited Liability.

11.1  Indemnification by SCE Company.  The SCE Company shall indemnify and hold Publisher harmless from and against any and all third-party claims, demands, losses, liabilities, damages, expenses and costs, including reasonable fees for lawyers, expert witnesses and litigation costs, and costs incurred in the settlement or avoidance of any such claim, in connection with or which result from a breach of any of the SCE Company’s representations or warranties set forth in Section 10.1 (collectively, “SCE-Indemnified Claim(s)”); provided that: (i) Publisher shall give prompt written notice to the SCE Company of the assertion of any SCE-Indemnified Claim; (ii) the SCE Company shall have the right to select counsel and control the defense and settlement of any SCE-Indemnified Claim and Publisher shall not agree to the settlement of any SCE-Indemnified Claim without the SCE Company’s prior written consent; and (iii) Publisher shall provide the SCE Company reasonable assistance and cooperation concerning any SCE-Indemnified Claim, except that Publisher need not incur any out-of-pocket costs in rendering such assistance and cooperation. The SCE Company shall have the exclusive right, at its discretion, to commence and prosecute at its own expense any lawsuit or to take such other action with respect to SCE-Indemnified Claims as shall be deemed appropriate by the SCE Company.

11.2  Indemnification By Publisher.  Publisher shall indemnify and hold the SCE Company harmless from and against any and all claims, demands, losses, liabilities, damages, expenses and costs, including reasonable fees for lawyers, expert witnesses and litigation costs, and costs incurred in the settlement or avoidance of any such claim, in connection with or which result from (i) a breach of any of the provisions of this Agreement; (ii) any claim of infringement of a third party’s intellectual property rights or any consumer claim, with respect to Publisher’s Licensed Products, including claims related to Publisher’s support of unauthorized or unlicensed peripherals or software that are not part of the PlayStation 3 format specifications as set forth in the Guidelines; (iii) any claim related to any Licensed Product features or capability related to cross-regional Online Gameplay; (iv) any claims of or in connection with any personal or bodily injury (including death or disability) or property damage arising out of, in whole or in part, the development, marketing, advertising, sale, distribution or use of any of the Licensed Products (or portions thereof) unless due directly and solely to the breach of the SCE Company in performing any of the specific duties or providing any of the specific services required of it hereunder; or (v) any federal, state or foreign civil or criminal investigations or actions relating to the development, marketing, advertising, sale or distribution of Licensed  Products (all subsections collectively, “Publisher-Indemnified Claim(s)”), provided that (a) the SCE Company shall give prompt written notice to Publisher of the assertion of any Publisher-Indemnified Claim; (b) Publisher shall have the right to select counsel and control the defense and settlement of any

16

Publisher-Indemnified Claim, except that with respect to any Publisher-Indemnified Claims made by a third party against the SCE Company, the SCE Company shall have the right to select counsel for the SCE Company and reasonably control the defense and settlement of the Publisher-Indemnified Claim against the SCE Company; and (c) the SCE Company shall provide Publisher with reasonable assistance and cooperation concerning any Publisher-Indemnified Claim, except that the SCE Company need not incur any out-of-pocket costs in rendering such assistance and cooperation. Subject to the foregoing, Publisher shall have the exclusive right, at its discretion, to commence and prosecute at its own expense any lawsuit or to take such other action with respect to Publisher-Indemnified Claims as shall be deemed appropriate by Publisher.

11.3LIMITATIONS OF LIABILITY.

11.3.1  SCE Limitation of Liability for Financial Losses. In no event shall the SCE Company or any Affiliates, or the officers, directors, employees, agents, licensors or suppliers of any of such entities, be liable for loss of revenue, loss of actual or prospective profits, loss of contracts, loss of anticipated savings, loss of business opportunity, reputation or goodwill or loss of, damage to or corruption of data (whether such loss or damages are direct, indirect, special, incidental or consequential) arising out of, relating to, or in connection with this Agreement or any collateral contract (including the breach of this Agreement by the SCE Group Company), whether known, foreseen or foreseeable and whether in contract, tort (including negligence), product liability, under indemnity, or otherwise.

11.3.2  SCE Limitation of Liability for Other Consequential Losses. In no event shall the SCE Company, its Affiliates or the officers, directors, employees, agents, licensors or suppliers of any of such entities, be liable for any indirect, special, incidental or consequential loss or damage of any kind arising out of or in connection with this Agreement or any collateral contract (including the breach of this Agreement by the SCE Group Company), whether known, foreseen or foreseeable and whether in contract, tort (including negligence), product liability, under an indemnity or otherwise.

11.3.3  SCE Limitation of Liability for Representations. Publisher shall have no remedy with respect to any representation made to it upon which it relied in entering into this Agreement and the SCE Company and its Affiliates and the officers, directors, employees, agents, licensors or suppliers of any of such entities shall have no liability to Publisher other than under the express terms of this Agreement. In this Section 11.3.3, “representation” means any undertaking, promise, assurance, statement, representation, warranty or understanding, whether in writing or otherwise, of any person (whether a party to this Agreement or not), relating to the subject matter of this Agreement.

11.3.4  SCE Limitation of Liability for SCE Materials and Publisher’s Materials. Except as expressly set forth herein, neither the SCE Company, nor its Affiliates, nor the officers, directors, employees, agents, licensors or suppliers of any of such entities, shall bear any risk, or have any responsibility or liability of any kind to Publisher or to any third parties with respect to the quality, functionality, operation or performance of, or the use or inability to use, all or any part of the SCE Materials, the System, the Licensed Products or Units of Disc Products, or for any software errors or “bugs” in Product Information included on SCE Company demonstration discs.

11.3.5  SCE Limitation of Financial Liability.  In no event shall the SCE Company’s liability arising under, relating to, or in connection with this Agreement, or any collateral contract, exceed the total amount paid by Publisher under Section 9 within the 48 month period immediately prior to the date of the first occurrence of the event or circumstances giving rise to the claimed liability.

11.3.6  Publisher Limitation of Liability. In no event shall Publisher, its officers, directors, employees, agents, licensors or

17

suppliers be liable to the SCE Company for loss of revenue, loss of actual or prospective profits, loss of contracts, loss of anticipated savings, loss of business opportunity, reputation or goodwill or loss of, damage to or corruption of data (whether such loss or damage is direct, indirect, special, incidental or consequential), arising out of or in connection with this Agreement or any collateral contract (including the breach of this Agreement by Publisher) provided that such limitations shall not apply to damages resulting from Publisher’s breach of Sections 2, 3, 5, 11.2, or 13 of this Agreement, or to any amounts which Publisher may be required to pay pursuant to Sections 11.2 or 16.10.

11.3.7  Disclaimer of Warranty. Except as expressly provided in Section 10.1, neither the SCE Company, nor any of its officers, directors, employees, agents or suppliers, make, nor does Publisher receive, any warranties (express, implied or statutory) regarding all or part of the SCE Materials, the SCE Confidential Information, the SCE Intellectual Property Rights, the System, Units manufactured hereunder or Product Information included on demonstration discs. Without limiting the generality of the foregoing, the SCE Company disclaims any warranties, conditions or other terms implied by any law (including as to merchantability, satisfactory quality or fitness for a particular purpose and warranties against infringement, and the equivalents thereof under the laws of any jurisdiction) to the fullest extent permitted by applicable law.

11.3.8  Law Applicable to Liabilities. Nothing in this Agreement shall exclude or limit any liability of either party which may not be excluded or limited under applicable law.

12.  Infringement of SCE Intellectual Property Rights By Third Parties.

In the event that Publisher discovers or otherwise becomes aware that any of the SCE Intellectual Property Rights have been or are being infringed by any third party, Publisher shall promptly notify the SCE Company. The SCE Company shall have the sole right, in its discretion, to institute and prosecute lawsuits against third parties regarding infringement of SCE Intellectual Property Rights. Any lawsuit shall be prosecuted solely at the cost and expense of the SCE Company and all sums recovered in any such lawsuits, whether by judgment, settlement or otherwise, shall belong solely to the SCE Company. Upon the SCE Company’s request, Publisher shall execute all papers, testify on all matters and otherwise cooperate in every way necessary or desirable for the prosecution of any such lawsuit. The SCE Company shall reimburse Publisher for the reasonable expenses incurred as a result of such cooperation, but unless authorized by other provisions of this Agreement, not costs and expenses attributable to any cross-claim, counterclaim or third party action.

13.  Confidentiality.

13.1  SCE Confidential Information.

13.1.1  Definition of SCE Confidential Information.  “SCE Confidential Information” shall mean:

(i)the SCE Materials, the Development Tools, the Guidelines, the Regional Riders and this Agreement, including all exhibits and schedules attached to any of the foregoing and all information related to these items;

(ii)other information, documents and materials developed, owned, licensed or under the control of the SCE Company or any Affiliate, including all processes, data, hardware, software, inventions, trade secrets, ideas, creations, improvements, designs, discoveries, developments, research and know-how, including SCE Intellectual Property Rights relating to the SCE Materials and the Development Tools; and

(iii)information, documents and other materials regarding the SCE Company’s or any Affiliate’s finances, business and business methods, marketing and technical plans, and development and production plans; and

18

(iv)third-party information and documents licensed to or under the control of the SCE Company or any Affiliate.

The SCE Confidential Information consists of information in any medium, whether oral, printed, in machine-readable form or otherwise, provided to Publisher before or during the Term, including information subsequently reduced to tangible or written form. In addition, the existence of a relationship between Publisher and the SCE Company shall be deemed to be the SCE Confidential Information unless otherwise agreed to in writing by the parties or until publicly announced by the SCE Company or any Affiliate.

13.1.2  Term of Protection of the SCE Confidential Information.  The term for the protection of the SCE Confidential Information shall commence on the Effective Date and shall continue in full force and effect for as long as any of the SCE Confidential Information continues to be maintained as confidential and proprietary by the SCE Company or any Affiliate.

13.1.3  Preservation of SCE Confidential Information.  Publisher shall, with respect to the SCE Confidential Information:

(i)not disclose SCE Confidential Information to any person, other than those employees, directors or officers of the Publisher or subcontractors expressly approved under Section 3.2, whose duties justify a “need-to-know” and who have executed a confidentiality agreement in which such employees, directors, officers or subcontractors have agreed not to disclose and to protect and maintain the confidentiality of all confidential information and materials inclusive of those of third parties which may be disclosed to them or to which they may have access during the course of their duties. At the SCE Company’s request, Publisher shall provide the SCE Company with a copy of such confidentiality agreement between Publisher and its employees, directors, officers, or subcontractors and shall also provide the SCE Company with a list of employee, director, officer, and subcontractor signatories. Publisher shall not disclose any of the SCE Confidential Information to third parties, other than expressly approved subcontractors under section 3.2, including to consultants or agents without the SCE Company’s prior written consent. Any employees, directors, officers, subcontractors, authorized consultants and agents who obtain access to or copies of the SCE Confidential Information shall be advised by Publisher of the confidential or proprietary nature of the SCE Confidential Information, and Publisher shall be responsible for any breach of this Agreement by all such persons.

(ii)hold all of the SCE Confidential Information in confidence and take all measures necessary to preserve the confidentiality of the SCE Confidential Information in order to avoid disclosure, publication, or dissemination, using as high a degree of care and scrutiny, but at least reasonable care, as is consistent with the protection of valuable trade secrets by companies in high technology industries.

(iii)ensure that all written materials relating to or containing the SCE Confidential Information be maintained in a restricted access area and plainly marked to indicate the proprietary and confidential nature thereof.

(iv)at the SCE Company’s request, return promptly to the SCE Company any and all portions of the SCE Confidential Information, together with all copies thereof.

(v)not use, copy, reproduce, modify, create derivative works from, sublicense, distribute, or otherwise disseminate the SCE Confidential Information, or any portion thereof, except as expressly authorized, nor shall Publisher remove any proprietary legend set forth on or contained within any of the SCE Confidential Information.

13.1.4  Exceptions.  The foregoing restrictions shall not apply to any portion of the SCE Confidential Information which:

19

(i)  was previously known by Publisher without restriction on disclosure or use, as proven by written documentation of Publisher;

(ii)  is or legitimately becomes part of the public domain through no fault of Publisher or any of its employees, directors, officers, consultants or agents;

(iii)  is independently developed by Publisher’s employees or consultants who have not had access to or otherwise used the SCE Confidential Information (or any portion thereof), as proven by written documentation of Publisher;

(iv)  is required to be disclosed by court, administrative or governmental order; provided that Publisher must use all reasonable efforts prior to issuance of any such order to maintain the confidentiality of the SCE Confidential Information, including asserting in any action or investigation the restrictions set forth in this Agreement, and, immediately after receiving notice of any such action, investigation, or threatened action or investigation, Publisher must notify the SCE Company of such action, investigation, or threatened action or investigation, unless Publisher is ordered by a court not to so notify; or

(v)  is approved for release by written authorization of the SCE Company.

13.1.5  No Obligation to License.  Disclosure of the SCE Confidential Information to Publisher shall not (i) constitute any option, grant or license from the SCE Company to Publisher under any SCE Intellectual Property Rights now or after owned or controlled by the SCE Company; (ii) result in any obligation on the part of the SCE Company to approve any materials of Publisher; (iii) give Publisher any right to, directly or indirectly, develop, manufacture, sell or otherwise distribute any product derived from or which uses or was developed with the use of the SCE Confidential Information (or any portion thereof), other than as expressly set forth in this Agreement.

13.1.6  Publisher’s Obligations Upon Unauthorized Disclosure.  If at any time Publisher becomes aware of any unauthorized duplication, access, use, possession or knowledge of any of the SCE Confidential Information, it shall notify the SCE Company as soon as reasonably practicable, and shall promptly act to recover any such information and prevent further breach of the confidentiality obligations herein. Publisher shall provide any and all reasonable assistance to the SCE Company to protect the SCE Company’s proprietary rights in any of the SCE Confidential Information that Publisher or its employees, directors, officers, or permitted subcontractors, consultants, or agents may have directly or indirectly disclosed or made available, and that may be duplicated, accessed, used, possessed or known in any manner or for any purpose not expressly authorized by this Agreement, including enforcement of confidentiality agreements, commencement and prosecution in good faith (alone or with the SCE Company) of legal action, and reimbursement for all reasonable lawyers’ fees, costs and expenses incurred by the SCE Company to protect the SCE Company’s proprietary rights in the SCE Confidential Information. Publisher shall take all steps requested by the SCE Company to prevent the recurrence of any unauthorized duplication, access, use, possession or knowledge of the SCE Confidential Information.

13.2  Publisher’s Confidential Information.

13.2.1  Definition of Publisher’s Confidential Information.  “Publisher’s Confidential Information” shall mean:

(i)  any Publisher Software provided to the SCE Company pursuant to this Agreement and all documentation and information relating thereto, including Product Proposals, Printed Materials and Advertising Materials (other than documentation and information intended for release to and use by end users, the general public or the trade);

20

(ii)  other documents and materials developed, owned, licensed or under the control of Publisher, including all processes, data, hardware, software, inventions, trade secrets, ideas, creations, improvements, designs, discoveries, developments, research and know- how; and

(iii)  information and documents regarding Publisher’s finances, business, marketing and technical plans, business methods and production plans.

Publisher’s Confidential Information may consist of information in any medium, whether oral, printed, in machine-readable form or otherwise, provided to the SCE Company before or during the Term, including information subsequently reduced to tangible or written form.

13.2.2  Term of Protection of Publisher’s Confidential Information.  The term for the protection of Publisher’s Confidential Information shall commence on the Effective Date and shall continue in full force and effect for as long as any of Publisher’s Confidential Information continues to be maintained as confidential and proprietary by Publisher.

13.2.3  Preservation of Confidential Information of Publisher.  The SCE Company shall, with respect to Publisher’s Confidential Information:

(i)  hold all Publisher’s Confidential Information in confidence and take all reasonable steps to preserve the confidentiality of Publisher’s Confidential Information, and to prevent it from falling into the public domain or into the possession of persons other than those persons to whom disclosure is authorized hereunder.

(ii)  not disclose Publisher’s Confidential Information to any person other than the SCE Company’s or a Designated Manufacturing Facility’s employees, directors, agents, consultants and subcontractors who need to know or have access to Publisher’s Confidential Information for the purposes of this Agreement, and only to the extent necessary for such purposes.

(iii)  ensure that all written materials relating to or containing Publisher’s Confidential Information be maintained in a secure area and plainly marked to indicate the proprietary and confidential nature thereof.

(iv)  at Publisher’s request, return promptly to Publisher any and all portions of Publisher’s Confidential Information, together with all copies thereof.

(v)  not use Publisher’s Confidential Information, or any portion thereof, except as provided herein, nor shall the SCE Company remove any proprietary legend set forth on or contained within any of Publisher’s Confidential Information.

13.2.4  Exceptions.  The foregoing restrictions shall not apply to any portion of Publisher’s Confidential Information which:

(i)    was previously known by the SCE Company without restriction on disclosure or use, as proven by written documentation of the SCE Company;

(ii)   comes into the possession of the SCE Company from a third party which is not under any obligation to maintain the confidentiality of such information;

(iii)  is or legitimately becomes part of information in the public domain through no fault of the SCE Company, or any of its employees, directors, agents, consultants or subcontractors;

(iv)  is independently developed by the SCE Company’s employees, consultants or subcontractors who have not had access to or otherwise used Publisher’s Confidential Information (or any portion thereof), as proven by written documentation of the SCE Company;

21

(v)   is required to be disclosed by court, administrative, or governmental order; provided that the SCE Company attempts, prior to the issuance of any such order, to maintain the confidentiality of Publisher’s Confidential Information, including asserting in any action or investigation the restrictions set forth in this Agreement, and immediately after receiving notice of any such action, investigation, or threatened action or investigation, notifies Publisher of such action, investigation, or threatened action or investigation, unless the SCE Company is ordered by a court not to so notify; or

(vi)  is approved for release by written authorization of Publisher.

13.2.5  SCE Company’s Obligations Upon Unauthorized Disclosure.  If at any time the SCE Company becomes aware of any unauthorized duplication, access, use, possession or knowledge of Publisher’s Confidential Information, it shall notify Publisher as soon as is reasonably practicable. The SCE Company shall provide any and all reasonable assistance to Publisher to protect Publisher’s proprietary rights in any of Publisher’s Confidential Information that it or its employees or permitted subcontractors may have directly or indirectly disclosed or made available and that may be duplicated, accessed, used, possessed or known in a manner or for a purpose not expressly authorized by this Agreement, including enforcement of confidentiality agreements, commencement and prosecution in good faith (alone or with Publisher) of legal action, and reimbursement for all reasonable lawyers’ fees, costs and expenses incurred by Publisher to protect Publisher’s proprietary rights in Publisher’s Confidential Information. The SCE Company shall take all reasonable steps requested by Publisher to prevent the recurrence of any unauthorized duplication, access, use, possession or knowledge of Publisher’s Confidential Information.

13.3  Confidentiality of Agreement.  While the terms of this Agreement and the Regional Rider shall be treated as SCE Confidential Information, Publisher may disclose their terms and conditions:

(i)    to legal counsel;

(ii)   in confidence, to accountants, banks and financing sources and their advisors;

(iii)  in confidence, in connection with the enforcement of this Agreement or rights arising under or relating to this Agreement; and

(iv)  if required, in the opinion of its counsel, to file publicly or otherwise disclose the terms of this Agreement under applicable securities or other laws, Publisher shall promptly notify the SCE Company of such obligation so that the SCE Company has a reasonable opportunity to contest or limit the scope of such required disclosure, and Publisher shall request, and shall use best efforts to obtain, confidential treatment for such sections of this Agreement as the SCE Company may designate.

14.  Term Renewal and Termination.

14.1  Term Renewal.  The Term shall be automatically extended for additional one-year terms, unless either party provides the other with written notice of its election not to extend on or before January 31 of the year in which the Term would renew. Notwithstanding the foregoing, the term for the protection of SCE Confidential Information and Publisher’s Confidential Information shall be as set forth in Sections 13.1.2 and 13.2.2 respectively.

14.2  Termination by SCE Company.  The SCE Company shall have the right to terminate the Agreement immediately, on written notice to Publisher, upon the occurrence of any of the following:

(i)    If Publisher is in material breach of any of its obligations under the Agreement or under any other agreement entered into between the SCE Company or any Affiliate, on the one hand, and Publisher on the other hand;

(ii)   A statement of intent by Publisher to no longer exercise any of the rights granted by the

22

SCE Company to Publisher hereunder or Publisher failing to submit materials under section 6.1 or failing to issue any Purchase Orders during any period of twelve consecutive calendar months;

(iii)  If Publisher (a) is unable to pay its debts when due; (b) makes an assignment for the benefit of any of its creditors; (c) files or has filed against it a petition, or an order of bankruptcy or insolvency is made, under the bankruptcy or insolvency laws of any jurisdiction (and such petition is not discharged within 60 days) or becomes or is adjudicated bankrupt or insolvent; (d) is the subject of an order for, or applies for or notices its intent to apply for, the appointment of an administrator, receiver, administrative receiver, manager, liquidator, trustee or similar officer to be appointed over any of its business or property; (e) ceases to do business or enters into liquidation; or (f) takes or suffers any similar or analogous action in any jurisdiction as a consequence of debt;

(iv)  If a controlling interest in Publisher or in an entity which directly or indirectly has a controlling interest in Publisher is transferred to a party that (a) is in breach of any agreement with the SCE Company or any Affiliate; (b) directly or indirectly holds or acquires a controlling interest in a third party which designs, develops any of the core components for an interactive device or product which is directly or indirectly competitive with the System, or itself develops any product that is directly or indirectly competitive with the System; or (c) is in litigation or in an adversarial administrative proceeding with the SCE Company or any Affiliate concerning the SCE Confidential Information or any SCE Intellectual Property Rights, including challenging validity of any SCE Intellectual Property Rights;

(v)  If Publisher or any entity that directly or indirectly has a controlling interest in Publisher (a) enters into a business relationship with a third party related to the design or development of any core components for an interactive device or product which is directly or indirectly competitive with the System; or (b) acquires an interest in or otherwise forms a strategic business relationship with any third party which has developed or owns or acquires intellectual property rights in any such device or product;

(vi)  If Publisher or any of its affiliates initiates any legal or administrative action against the SCE Company or any Affiliate or challenges the validity of any SCE Intellectual Property Rights;

(vii)  If Publisher fails to pay any sums owed to the SCE Company on the date due and such default is not fully corrected or cured within ten (10) business days of the date on which such payment was originally due; or

(viii)  If Publisher or any of its officers or employees engage in “hacking” of any software for any PlayStation format or in activities which facilitate the same by any third party.

As used hereinabove, “controlling interest” means, with respect to any form of entity, sufficient power to control the decisions of such entity. Publisher shall immediately notify the SCE Company in writing in the event that any of the events or circumstances specified in this Section 14.2 occur. In the event of termination under 14.2(viii), the SCE Company shall have the right to terminate any other agreements entered into between the SCE Company and Publisher.

14.3  Product-by-Product Termination.  In addition to the events of termination described in Section 14.2, the SCE Company, at its option, shall be entitled to terminate, with respect to a particular Licensed Product, the licenses and related rights herein granted to Publisher immediately on written notice to Publisher, in the event that (a) Publisher fails to notify the SCE Company promptly in writing of any material change to any materials previously approved by the SCE Company in accordance with Sections 6 and the relevant Guidelines, and such breach is not corrected or cured within 30 days after receipt of written notice of such breach; (b) Publisher uses a third party that fails

23

to comply with the requirements of Section 3.2 in connection with the development of any Licensed Product; (c) any third party with whom Publisher has contracted for the development of Licensed Products breaches any of its material obligations to the SCE Company pursuant to such third party’s agreement with the SCE Company with respect to any such Licensed Product; (d) Publisher cancels a Licensed Product or fails to provide the SCE Company, in accordance with the provisions of Section 6 and the relevant Guidelines, with the final version of the Executable Software for any Licensed Product within three months of the scheduled release date (as referenced in the Product Proposal or as otherwise mutually agreed by the parties in writing), fails to provide work in progress to the SCE Company in strict compliance with the review process set forth in the Guidelines, fails to provide fully tested final Executable Software in strict conformance with the Guidelines; or (e) Publisher otherwise fails materially to conform to the Guidelines with respect to any particular Licensed Product.

14.4  Options in Lieu of Termination.  As alternatives to terminating the Agreement or all licensed rights with respect to a particular Licensed Product as set forth in Sections 14.2 and 14.3, the SCE Company may, at its option and upon written notice to Publisher, suspend this Agreement, entirely or with respect to a particular Licensed Product or program, for a set period of time which shall be specified in writing to Publisher upon the occurrence of any breach of this Agreement. Election of suspension shall not constitute a waiver of or compromise with respect to any of the SCE Company’s rights under this Agreement and the SCE Company may elect to terminate this Agreement with respect to any breach.

14.5  No Refunds.  In the event that this Agreement expires or is terminated under any of Sections 14.2 through 14.4, no portion of any payments of any kind whatsoever previously provided hereunder shall be owed or be repayable or refunded to Publisher.

15.  Effect of Expiration or Termination.

15.1  Inventory Statement.  Within 30 days of the date of expiration or the effective date of termination with respect to any or all Licensed Products or this Agreement, Publisher shall provide the SCE Company with an itemized statement, certified to be accurate by an officer of Publisher, specifying the number of unsold Units of the Licensed Products as to which such termination applies, on a title-by-title basis, which remain in its inventory or under its control at the time of expiration or the effective date of termination. The SCE Company shall be entitled to conduct at its expense a physical inspection of Publisher’s inventory and work in process upon reasonable written notice during normal business hours in order to ascertain or verify such inventory and inventory statement.

15.2  Reversion of Rights.  Upon expiration or termination and subject to Section 15.3, the licenses and related rights herein granted to Publisher shall immediately revert to the SCE Company, and Publisher shall cease from any further use of the SCE Confidential Information, Licensed Trademarks and the SCE Materials and any SCE Intellectual Property Rights therein, and, subject to the provisions of Section 15.3, Publisher shall have no further right to continue the development, publication, manufacture, marketing, advertising, sale or other distribution of any Licensed Products, or to continue to use any Licensed Trademarks; provided, however, that for a period of one year after the effective date of termination, and subject to all the terms of Section 13, and provided this Agreement is not terminated due to any breach or default by Publisher, Publisher may retain such portions of the SCE Materials and the SCE Confidential Information as the SCE Company in its sole discretion agrees are required to support end users who possess Licensed Products but must return all these materials at the end of such one year period. Upon expiration or termination, the licenses and related rights herein granted to the SCE Company by Publisher shall immediately revert to Publisher, and the SCE Company shall cease from any further use of Product Information and any Publisher Intellectual Property Rights

24

therein; provided that the SCE Company may continue the manufacture, marketing, advertising, sale and other such distribution of any SCE Company demonstration discs containing Publisher’s Product Information which Publisher had previously approved.

15.3  Disposal of Unsold Units Upon Termination.  In the event of termination of this Agreement under sections 14.2(ii), (iv), or (v), Publisher may sell off existing inventories of Units of the Disc Products, on a non-exclusive basis, and strictly in accordance with this Agreement, for a period of 90 days from the date of expiration or effective date of termination of this Agreement, and provided such inventories have not been manufactured solely or principally for sale during such period. Subsequent to the expiration of such 90 day period, or in the event this Agreement is terminated under Sections 14.2(i), (iii), (vi), (vii), or (viii), any and all Units of the Disc Products remaining in Publisher’s inventory or otherwise under its control shall be destroyed by Publisher within five (5) business days of such expiration or termination date. Within five (5) business days after such destruction, Publisher shall provide the SCE Company with an itemized statement, certified to be accurate by an officer of Publisher, indicating the number of Units of the Licensed Products which have been destroyed (on a title-by-title basis), the location and date of such destruction, and the disposition of the remains of such destroyed materials.

15.4  Disposal of Unsold Units Upon Non-Renewal.  In the event that the Term expires and this Agreement is not renewed, Publisher may continue to publish those Licensed Products containing Executable Software whose development was completed before or during the Term, and to use the Licensed Trademarks strictly, only and directly in connection with such publication, until the Term expires or, if later, until the second anniversary of the 31 January next following such completion. Upon expiration of the Term or, the extended period for publishing Licensed Products, Publisher may sell off existing inventories of such Licensed Products on a non-exclusive basis for a period of 180 days from the applicable expiration date; provided that such inventory is not manufactured solely or principally for sale within such sell-off period.

15.5  Return of the SCE Materials and the SCE Confidential Information.  Upon the expiration or earlier termination of this Agreement or following either the 180 day period or the 90 day period referenced in Sections 15.4 and 15.3 and subject to Section 15.2, Publisher shall immediately deliver to the SCE Company, or if and to the extent requested by the SCE Company, destroy, all SCE Materials and any and all copies thereof, and Publisher and the SCE Company shall, upon the request of the other party, immediately deliver to the other party, or to the extent requested by such party destroy, all Confidential Information of the other party, including any and all copies thereof, which the other party previously furnished to it in furtherance of this Agreement. Within five (5) working days after any such destruction, Publisher or the SCE Company, as appropriate, shall provide the other party with a certificate of destruction and an itemized statement, each certified to be accurate by an officer of Publisher, indicating the number of copies or units of the SCE Materials or SCE Confidential Information which have been destroyed, the location and date of such destruction and the disposition of the remains of such destroyed materials. In the event that Publisher fails to return or certify the destruction of the SCE Materials or SCE Confidential Information and the SCE Company must resort to legal means (including any use of lawyers) to recover the SCE Materials or SCE Confidential Information or the value thereof, all costs, including the SCE Company’s reasonable lawyers’ fees, shall be borne by Publisher, and the SCE Company may, in addition to the SCE Company’s other remedies, withhold such amounts from any payment otherwise due from the SCE Company to Publisher under any agreement between the SCE Company and Publisher.

25

15.6  Extension of this Agreement; Termination Without Prejudice.  The SCE Company shall be under no obligation to extend this Agreement notwithstanding any actions taken by either of the parties prior to the expiration of this Agreement. Upon the expiration of this Agreement, neither party shall be liable to the other for any damages (whether direct, indirect, consequential or incidental, and including any expenditures, loss of profits or prospective profits) sustained or arising out of or alleged to have been sustained or to have arisen out of such expiration. The expiration or termination of this Agreement shall be without prejudice to any rights or remedies which one party may otherwise have against the other party, and shall not excuse either party from liability with respect to any events occurring prior to expiration or the effective date of termination.

16.  Miscellaneous Provisions.

16.1  Notices.  All notices or other communications required or desired to be sent to either of the parties shall be in writing and shall be sent by registered or certified mail, postage prepaid, or sent by recognized international courier service, or facsimile, with charges prepaid. The address for all notices or other communications required to be sent to the SCE Company or Publisher, respectively, shall be the mailing address stated in the preamble hereof, or such other address as may be provided by written notice from one party to the other on at least ten (10) days’ prior written notice. Any such notice shall be effective upon the date of actual receipt, as confirmed by the receiving party.

16.2  Audit Provisions.  Publisher shall keep full, complete, and accurate books of accounts and records covering all transactions relating to this Agreement. Publisher shall preserve such books of accounts, records, documents, and materials for a period of 24 months after the expiration or earlier termination of this Agreement. Acceptance by the SCE Company of any accounting statement, purchase order, or payment hereunder will not preclude the SCE Company from challenging or questioning the accuracy thereof at a later time. In the event that the SCE Company reasonably believes that the pricing information provided by Publisher with respect to any Licensed Product is not accurate, the SCE Company shall be entitled to request additional documentation from Publisher to support the pricing information provided for such Licensed Product. In addition, during the Term and for a period of two (2) years thereafter and upon the giving of reasonable prior written notice to Publisher, at the SCE Company’s expense, representatives of the SCE Company shall be given access to, and the right to inspect, audit, and make copies and summaries of and take extracts from, such portions of all books and records of Publisher, and Publisher’s affiliates and branch offices, as pertain to the Licensed Products and any payments due or credits received hereunder. Any such audit shall take place during normal business hours and shall, at the SCE Company’s sole election, be conducted either by an independent certified accountant or by an appropriately professionally qualified SCE Company employee. In the event that such inspection reveals any under-reporting of any payment due to the SCE Company, Publisher shall immediately pay the SCE Company such amount. In the event that any audit conducted by the SCE Company reveals that Publisher has under-reported any payment due to the SCE Company hereunder by [ * ] or more for the relevant audit period, then in addition to the payment of the appropriate amount due to the SCE Company, Publisher shall reimburse the SCE Company for all reasonable audit costs for that audit and any and all collection costs to recover any unpaid amounts.

16.3  Force Majeure.  Neither the SCE Company nor Publisher shall be liable for any loss or damage or be deemed to be in breach of this Agreement if its failure to perform or failure to cure any of its obligations under this Agreement results from any event or circumstance beyond its reasonable control, including any natural disaster, fire, flood, earthquake or other Act of God; shortage of equipment, materials, supplies or transportation facilities; strike or other industrial dispute; war or rebellion; shutdown or delay in power, telephone or other essential service due to the

*Confidential portion omitted and filed separately with the Securities and Exchange Commission.

26

failure of computer or communications equipment or otherwise; provided, however, that the party interfered with gives the other party written notice thereof promptly, and, in any event, within fifteen (15) business days of discovery of any such Force Majeure condition. If notice of the existence of any Force Majeure condition is provided within such period, the time for performance or cure shall be extended for a period equal to the duration of the Force Majeure event or circumstance described in such notice, except that any such cause shall not excuse the payment of any sums owed to the SCE Company prior to, during or after the occurrence of any such Force Majeure condition. In the event that the Force Majeure condition continues for more than 60 days, the SCE Company may terminate this Agreement for cause by providing written notice to Publisher to such effect.

16.4  No Agency, Partnership or Joint Venture.  The relationship between the SCE Company and Publisher, respectively, is that of licensor and licensee. Both parties are independent contractors and neither party is the legal representative, agent, joint venturer, partner or employee of the other party for any purpose whatsoever. Neither party has any right or authority to assume or create any obligations of any kind or to make any representation or warranty on behalf of the other party, whether express or implied, or to bind the other party in any respect whatsoever.

16.5  Assignment.  The SCE Company has entered into this Agreement based upon the particular reputation, capabilities and experience of Publisher and its officers, directors and employees. Except as provided in this Agreement, Publisher may not assign, sublicense, subcontract, encumber or otherwise transfer this Agreement or any of its rights hereunder, nor delegate or otherwise transfer any of its obligations hereunder, to any third party unless the prior written consent of the SCE Company shall first be obtained. Any attempted or purported assignment, delegation or other such transfer, directly or indirectly, without the required consent of the SCE Company shall be void and a material breach of this Agreement. Subject to the foregoing, this Agreement shall inure to the benefit of the parties and their respective successors and permitted assigns (other than in connection with any of the events referenced in Section 14.2(iv).) The SCE Company shall have the right to assign any and all of its rights and obligations hereunder to any Affiliate(s) or to any company in the Sony family group of companies.

16.6  Non-solicitation.  Neither Publisher nor any of its affiliates, by itself, its officers, employees or agents, or indirectly, shall during the Term, induce or seek to induce, on an individually targeted basis, the employment or the engagement of the services of, any employee of the SCE Company or any of its Affiliates, whose services are (a) specifically engaged in product development or directly related functions or (b) otherwise reasonably deemed by his or her employer to be of material importance to the protection of its legitimate business interests, and (c) with whom Publisher or any of its affiliates shall have had contact or dealings during the Term. The foregoing provisions shall continue to apply for a period of 12 months after this Agreement expires or is terminated.

16.7  Compliance with Applicable Laws.  The parties shall at all times comply with all applicable laws and regulations and all conventions and treaties to which their countries are a party or relating to or in any way affecting this Agreement and the performance by the parties of this Agreement, including the US Children’s Online Privacy Protection Act and all other laws and regulations relating to the gathering, handling and dissemination of all data from or concerning end users of Online Products. Each party, at its own expense, shall negotiate and obtain any approval, license or permit required in the performance of its obligations, and shall declare, record or take such steps to render this Agreement binding, including the recording of this Agreement with any appropriate governmental authorities (if required).

16.8  Legal Costs and Expenses.  In the event it is necessary for either party to retain the services of a lawyer to enforce the provisions of

27

this Agreement or to file or defend any action arising out of this Agreement, then the prevailing party in any such action shall be entitled, in addition to any other rights and remedies available to it at law or in equity, to recover from the other party its reasonable fees for lawyers and expert witnesses, plus such court costs and expenses as may be fixed by any court of competent jurisdiction. The term “prevailing party” for the purposes of this Section shall include a defendant who has by motion, judgment, verdict or dismissal by the court, successfully defended against any claim that has been asserted against it.

16.9  Remedies.  Unless expressly set forth to the contrary, either party’s election of any remedies provided for in this Agreement shall not be exclusive of any other remedies at law or equity, and all such remedies shall be deemed to be cumulative. Any breach of Sections 2, 3, 5, 6, 7.1 – 7.7, 13 or 15 of this Agreement would cause significant and irreparable harm to the SCE Company, the extent of which would be difficult to ascertain and for which damages might not be an adequate remedy. Accordingly, in addition to any other remedies, including damages to which the SCE Company may be entitled, in the event of a breach or threatened breach by Publisher, or any of its directors, officers, employees, agents or permitted consultants or subcontractors, of any such Section or Sections of this Agreement, the SCE Company shall be entitled to the immediate issuance without bond or other security, of ex parte equitable relief, including injunctive relief, or, if a bond is required under applicable law, on the posting of a bond in an amount not to exceed USD [ * ], enjoining any breach or threatened breach of any or all of such provisions. In addition, if Publisher fails to comply with any of its obligations as set forth herein, the SCE Company shall be entitled to an accounting and repayment of all forms of compensation, commissions, remuneration or benefits which Publisher directly or indirectly realizes as a result of or arising in connection with any such failure to comply. Such remedy shall be in addition to and not in limitation of any injunctive relief or other remedies to which the SCE Company may be entitled under this Agreement or otherwise at law or in equity.

16.10  Severability.  In the event that any provision of this Agreement or portion thereof is determined by a court of competent jurisdiction to be invalid or otherwise unenforceable, such provision or portion shall be enforced to the extent possible consistent with the stated intention of the parties, or, if incapable of such enforcement, shall be deemed to be deleted from this Agreement, while the remainder of this Agreement shall continue in full force and remain in effect according to its stated terms and conditions.

16.11  Sections Surviving Expiration or Termination.  The following Sections shall survive the expiration or earlier termination of this Agreement for any reason: 5, 6.2, 6.3, 6.4, 7.10, 9, 10, 11, 13, 14.5, 15 and 16 and any terms in any Regional Rider that are expressly designated as surviving termination.

16.12  Waiver.  No failure or delay by either party in exercising any right, power or remedy under this Agreement shall operate as a waiver of any such right, power or remedy. No waiver of any provision of this Agreement shall be effective unless in writing and signed by the party against whom such waiver is sought to be enforced. Any waiver by either party of any provision of this Agreement shall not be construed as a waiver of any other provision of this Agreement, nor shall such waiver operate or be construed as a waiver of such provision respecting any future event or circumstance.

16.13  Modification and Amendment.  The SCE Company reserves the right, at any time upon reasonable notice to Publisher, to amend the relevant provisions of this Agreement or the Guidelines, to take account of or in response to any decision, order, or objection of any court or governmental or other competition authority of competent jurisdiction, or any statutory or similar measures that give effect to any such decision (from which this Agreement and the Guidelines are not exempt) or to reflect any undertaking by the SCE Company to any such authority. Any such amendment shall be of

*Confidential portion omitted and filed separately with the Securities and Exchange Commission.

28

prospective application only and shall not be applied to any Licensed Products submitted to the SCE Company pursuant to Section 6 prior to the date of the SCE Company’s notice of amendment. In the event that Publisher is unwilling to accept any such amendment, then Publisher shall have the right to terminate this Agreement by providing written notice to the SCE Company no more than 90 days following the date of the SCE Company’s notice of amendment. The provisions of Section 15.3 shall come into effect upon any such termination by Publisher. Subject to the remainder of this Section 16.14 and except as otherwise provided in this Agreement, no modification or amendment of any provision of this Agreement shall be effective unless in writing and signed by both of the parties.

16.14  Interpretation.  The section headings used in this Agreement are intended primarily for reference and shall not by themselves determine the construction or interpretation of this Agreement or any portion hereof. Any reference to section numbers are to the sections of this Agreement. Any reference to persons includes natural persons as well as organizations, including firms, partnerships, companies and corporations. Any phrase introduced by the terms “including,” “include,” “in particular,” or any similar expression shall be construed as illustrative and shall not limit the category preceding those terms.

16.15  Integration.  This Agreement, together with the Guidelines, constitutes the entire agreement between the SCE Company and Publisher and supersedes all prior or contemporaneous agreements, proposals, representations, understandings and communications between the SCE Company and Publisher, whether oral or written, with respect to the subject matter hereof, including any PlayStation 3 Confidentiality and Nondisclosure Agreement between the SCE Company and Publisher. Publisher is not relying upon any statement, representation, warranty or understanding, whether negligently or innocently made, of any person other than as expressly set out in this Agreement.

16.16  Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, and together shall constitute one and the same instrument.

16.17  Construction.  This Agreement shall be fairly interpreted in accordance with its terms and without any strict construction in favor of or against either of the parties.

THIS AGREEMENT HAS BEEN ENTERED INTO ON THE DATE STATED AT THE BEGINNING OF IT.

SONY COMPUTER ENTERTAINMENT			THQ INC.
AMERICA INC.
By:			By:
Print Name:		Riley R. Russell	Print Name:
Title:	SVP-SCEA		Title:
Date:			Date:
NOT AN AGREEMENT UNTIL EXECUTED BY BOTH PARTIES

29

SONY COMPUTER ENTERTAINMENT AMERICA INC.

NORTH AMERICAN TERRITORY RIDER TO THE
GLOBAL PLAYSTATION3 FORMAT LICENSED PUBLISHER AGREEMENT

This North American Territory Rider to the Global PlayStation®3 Format Licensed Publisher Agreement (the “Rider” or “North American Rider”) is entered into and rendered effective as of this 5^th day of March, 2007 (the “Effective Date”).

1.Incorporation

This Rider’s terms and conditions are incorporated into and read in conjunction with the terms and conditions of the Global PlayStation 3 Format Licensed Publisher’s Agreement signed by Publisher (“PS3 LPA”).

2.Definitions

All capitalized words and phrases referenced in this Rider that are not expressly defined herein shall have the meanings set forth in the Definitions section of the PS3 LPA.

2.1  “PSN Services” means any function, feature, capability, utility or service provided by SCEA or its Affiliates via the PlayStation Network, including, but not limited to, user identification names, associated user lists and functions to maintain or control such lists, communication utilities such as chat and messaging and commerce-related services.

2.2  “Wholesale Price” or “WSP” means the initial wholesale price Publisher offers to retailers of Disc Products as evidenced by sell sheets or other trade materials. No deduction for volume discounts, cooperative marketing, merchandising incentives, or other sales or marketing programs shall be taken to determine the initial wholesale price for the purpose of calculating royalties.

3.Territory

A.The Territory pursuant to this Rider and the PS3 LPA is expressly limited to the following countries and territories:

(1)The United States of America and its territories and possessions;

(2)Canada; and

(3)Mexico.

B.SCEA shall be entitled to modify and amend the Territory from time to time during the Term by providing written notice of any such changes to Publisher. In the event a country is deleted from the Territory, SCEA shall deliver to Publisher a written notice stating the number of days within which Publisher must cease distributing Licensed Products and must retrieve any Development Tools located, in any deleted country.

C.Publisher shall not, directly or indirectly, solicit orders for or sell any Units of Disc Products in any situation where Publisher knows or reasonably should know that any of such Disc Products may be exported to or resold outside of the Territory.

30

4.Royalties Applicable to Licensed Products

A.Disc Products.

(i)Initial Orders. In accordance with Section 9 of the PS3 LPA, Publisher shall pay SCEA, either directly or through its designee, a royalty in United States dollars for each Unit of the Disc Products manufactured, as follows:

For product distributed on a [ * ]GB BD: [ * ]% of WSP + $ [ * ]

For product distributed on a [ * ]GB BD: [ * ]% of WSP + $ [ * ]

To insure quality, royalty payments include manufacturing of the BluRay disc and Packaging, excluding Printed Materials and inserts. In the future and at its sole discretion, SCEA may allow Publisher to use alternative packaging facilities provided that Publisher can prove that it can meet all of SCEA’s quality assurance criteria set forth in the Guidelines. At that time, SCEA may restructure royalties to account for costs related to Packaging.

In the absence of satisfactory evidence to support the WSP, the royalty rate that shall apply will be [ * ] ($ [ * ]) for a BluRay [ * ] disc and [ * ] ($ [ * ]) for a BluRay [ * ] disc, per Unit. Upon receipt of any notice of change in royalties under Section 9.1 of the PS3 LPA, Publisher shall have the option to terminate this Agreement upon written notice to SCEA and discontinue all production, publishing, marketing, advertising, sale, distribution and other exploitation of Licensed Products, rather than having such revised royalty structure go into effect.

(ii)Reorders and Other Programs. Royalties on additional orders for Disc Products shall be the royalty determined by the initial Wholesale Price as originally reported by Publisher for that Disc Product, regardless of the wholesale price of the Disc Product at the time of reorder, except: (a) in the event that the Wholesale Price increases for such Disc Product, in which case the royalty shall be adjusted upwards to reflect the higher Wholesale Price; or (b) the product qualifies for an alternative royalty program offered by SCEA. Disc Products qualifying for SCEA’s “Greatest Hits” programs or other SCEA alternative royalty programs shall be subject to the royalty rates applicable for such programs. As of the Effective Date, SCEA has not established a “Greatest Hits” or alternative royalty program for the PlayStation 3 computer entertainment system.

(iii)Third Party Publisher Demo Disc Program Royalties. Publisher shall be able to produce demonstration discs on such terms and conditions that shall be established by SCEA and published in the PlayStation 3 Source Book. The quantity of Units ordered shall comply with the terms of such SCEA Established Third Party Demo Disc Program.

B.Online Products.

On a site that allows end-users access to Online Gameplay, for revenue, income, or other monetary value (“Consumer Value”) that is earned, recognized, or otherwise derived by Publisher without cost to consumers, including revenue recognized through distribution of Licensed Products or services provided free of charge to end-users, the following fees apply:

For sites that use any PSN services: [ * ]% of Consumer Value

For sites that do not use any PSN services: [ * ]% of Consumer Value

Prior to distributing a Licensed Product to consumers without cost or other consideration, Publisher shall confer with SCEA to determine the deemed Consumer Value of a Licensed Product.

*Confidential portion omitted and filed separately with the Securities and Exchange Commission.

31

C.Advertising. Content or services that are supported by advertising shall be subject to a separate agreement and to SCEA’s advertising policies and procedures. No advertisements shall be placed in Online Products nor shall advertisements be placed or served dynamically in Licensed Products without a separate express license from SCEA. SCEA reserves the right to charge an additional or different royalty for third-party advertising in-game, whether dynamic or static.

5.Accounting.

Publisher shall provide SCEA with monthly reports of the gross Consumer Value revenues actually received by Publisher (or otherwise credited to its benefit). Such monthly reports shall be delivered on a per title basis to SCEA no later than thirty (30) days after the end of each month, beginning with the month in which Publisher launches a title-specific site that allows end-users access to Online Gameplay of that title. SCEA shall have the right to adopt and implement online royalty accounting verification mechanisms at its sole discretion.

6.Additional Regional Terms.

6.1 Payment Terms. In addition to the remedies and requirements set forth in the PS3 LPA, any overdue sums shall bear interest at the rate of [ * ] percent ( [ * ] %) per month, or such lower rate as may be the maximum rate permitted under applicable law, from the date when payment first became due through and including the date of payment.

6.2 Subpublishing Prohibited. Publisher’s license to publish Licensed Products in the Territory under the PS3 LPA does not extend to Licensed Products previously published for the PlayStation 3 computer entertainment system by another Licensed Publisher.

6.3 Liquidated Damages. As an additional option in lieu of termination under Section 14.4 of the PS3 LPA, SCEA may require Publisher to pay liquidated damages of [ * ]($[ * ]) for certain breaches of the Agreement, including violations of SCEA’s trademark rights under Section 5.6.2 of the PS3 LPA. Liquidated damages may be invoiced separately or on Publisher’s next invoice for Disc Products. Election of liquidated damages shall not constitute a waiver of or compromise with respect to any of SCEA’s rights under this Rider or the PS3 LPA and SCEA may elect to terminate the PS3 LPA with respect to any breach.

6.4 Additional Ground for Termination. If Publisher fails to pay any sums owed to SCEA (including liquidated damages pursuant to Section 6.3 of this Rider) on the date due and such default is not fully corrected or cured within ten (10) business days of the date on which such payment was originally due, SCEA shall be entitled to terminate under Section 14.2 of the PS3 LPA.

6.5 Subcontractors. SCEA requires that Publisher enter into a Subcontractor Agreement for use of subcontractors under Sections 2.1(i), 3.2 and 16.7 of the PS3 LPA. Each Subcontractor Agreement shall provide that SCEA has the full right to bring any actions against the signing subcontractor, to require the subcontractor to comply with all the terms and conditions of the PS3 LPA or the Subcontractor Agreement. Publisher shall provide a copy of any proposed Subcontractor Agreement to SCEA prior to, and a fully-executed copy promptly following, execution of the Subcontractor Agreement. Publisher shall give SCEA written notice of the identity of any prospective subcontractor no less than ten (10) business days prior to entering into an agreement or other arrangement with the prospective subcontractor.

7.Notices.

Any notices required under this Rider or the PS3 LPA shall be delivered addressed to the following persons:

*Confidential portion omitted and filed separately with the Securities and Exchange Commission.

32

For Publisher:	Business and Legal Affairs
	THQ, Inc.
	29903 Agoura Road
	Calabasas, CA 90301
For SCEA:	ATTN: General Counsel
	Sony Computer Entertainment America Inc.
	919 East Hillsdale Boulevard
	Foster City, CA 94404

8.Governing Law

The Agreement and this Rider shall be governed by and interpreted in accordance with the laws of the State of California, excluding that body of law related to choice of laws, and of the United States of America.

9.Dispute Resolution

The Parties shall attempt in good faith to resolve through informal discussions or negotations any dispute, controversy or claim of any kind or nature arising under or in connection with this Agreement, including breach, termination or validity thereof (a “Dispute”). Any Dispute that the Parties are unable to resolve through informal discussions or negotiations after 30 days will be submitted to binding arbitration conducted in accordance with and subject to the Commercial Arbitration Rules of the American Arbitration Association (“AAA”) except to the extent otherwise required under this dispute resolution clause. One arbitrator will be selected by the Parties’ mutual agreement or, failing that, by the AAA. The arbitrator must have substantial experience in disputes involving technology licensing agreements. The arbitrator will allow such discovery as is appropriate, and impose such restrictions as are appropriate, consistent with the purposes of arbitration in accomplishing fair, speedy and cost-effective resolution of disputes, except that (i) no requests for admissions will be permitted; (ii) interrogatories will be limited to (a) identifying persons with knowledge of relevant facts and b) identifying expert witnesses and obtaining their opinions and the bases therefor; and (iii) each party will be limited to five (5) depositions. Judgment upon the award rendered in any such arbitration may be entered in any court having jurisdiction thereof. Any arbitration conducted pursuant to this section will take place in San Francisco, California. Each Party will bear its own costs. The Parties will share equally in paying the expenses and fees of the arbitrator. The arbitrator may not alter the foregoing allocation of the parties’ costs, nor of the arbitrator’s fees and expenses. Other than those matters involving injunctive relief or any action necessary to enforce the award of the arbitrator, the Parties agree that the provisions of this section are a complete defense to any suit, action or other proceeding instituted in any court or before any administrative tribunal with respect to any Dispute. Notwithstanding the foregoing, SCEA may apply to any court of competent jurisdiction within the Licensed Territory seeking a temporary restraining order, preliminary injunction, or other interim or conservatory relief, with respect to the protection of any intellectual property rights or Confidential Information of or concerning the SCE Group Companies or the System, including, without limitation, the SCE Materials and Licensed Trademarks.

33

EX-21

Exhibit  21

Subsidiaries

THQ Inc.

Big Huge Games, Inc.	Maryland
Blue Tongue Entertainment Pty. Ltd.	Australia
Juice Games Limited	United Kingdom
Locomotive Games, Inc.	California
Mass Media, Inc.	California
Rainbow Multimedia Group, Inc.	Arizona
THQAC, Inc.	Texas
THQ/JAKKS Pacific, LLC	Delaware
THQ Asia Pacific Pty. Ltd.	Australia
THQ Canada Inc.	British Columbia
dba Relic Entertainment
THQ Entertainment GmbH	Germany
THQ France S.a r.l.	France
T.HQ (Holdings) Limited	United Kingdom
THQ Interactive Entertainment Espana, S.L.	Spain
THQ International GmbH	Switzerland
THQ International Operations Limited	United Kingdom
THQ Italy Srl	Italy
THQ Japan K.K.	Japan
THQ Korea Ltd.	Korea
THQ Mobile USA, Inc.	Delaware
THQ Nordic ApS	Denmark
THQ Studio Australia Pty. Ltd.	Australia
THQ (UK) Limited	United Kingdom
THQ Wireless Inc.	Delaware
THQ Wireless International S.a r.l.	Luxembourg
THQ Wireless Singapore Pte. Ltd.	Singapore
Universomo Ltd.	Finland
Vigil Games	Texas
Volition, Inc.	Delaware

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-30655, 333-74747, 333-74715, 333-78521, 333-78567, 333-83725, 333-35806, 333-62502, 333-84010, 333-90986, 333-91002, 333-117334 and 333-137396 on Form S-8 and Registration Statement Nos. 333-32221, 333-60277, 333-70335, 333-85269, 333-92361, 333-32526, 333-40698, 333-47914, 333-67978, 333-73274, 333-81170, and 333-84932 on Form S-3 of our report dated May 28, 2008 relating to the consolidated financial statements of THQ Inc. and its subsidiaries (the “Company”) as of and for the year ended March 29, 2008 (which expresses an unqualified opinion and includes an explanatory paragraph referring to a change in the accounting for share-based payments and income taxes) and our report dated May 28, 2008 relating to the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of THQ Inc. for the year ended March 29, 2008.

DELOITTE & TOUCHE LLP

Los Angeles, California

May 28, 2008

EX-31.1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 31.1

CERTIFICATIONS

I, Brian J. Farrell, Chief Executive Officer of THQ Inc., certify that:

1.

I have reviewed this Annual report on Form 10-K of THQ Inc., the registrant;



2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

By: /s/ Brian J. Farrell Brian J. Farrell
Chief Executive Officer
May 28, 2008

QuickLinks

Exhibit 31.1

CERTIFICATIONS

EX-31.2

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 31.2

CERTIFICATIONS

I, Colin L. Slade, Chief Financial Officer of THQ Inc., certify that:

1.

I have reviewed this Annual report on Form 10-K of THQ Inc., the registrant;



2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

By: /s/ Colin L. Slade Colin L. Slade
Chief Financial Officer and Chief Accounting Officer
May 28, 2008

QuickLinks

Exhibit 31.2

CERTIFICATIONS

EX-32.1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ENACTED BY
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report on Form 10-K of THQ Inc. (the "Company") for the period ended March 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Brian J. Farrell, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Brian J. Farrell Brian J. Farrell
Chief Executive Officer
May 28, 2008

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

QuickLinks

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.2

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ENACTED BY
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report on Form 10-K of THQ Inc. (the "Company") for the period ended March 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Colin L. Slade, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Colin L. Slade Colin L. Slade
Chief Financial Officer and Chief Accounting Officer
May 28, 2008

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

QuickLinks

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002