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Analyst: Darksiders A Disappointment For THQ?

THQ's Darksiders may have sold less than 1 million units, a disappointment considering the amount of time and marketing spend the publisher put behind it, says Signal Hill's Todd Greenwald.
THQ is hoping to continue narrowing its losses and achieving profitability this year, but it seems Darksiders, its latest original IP, might have ultimately dinged that goal. Signal Hill analyst Todd Greenwald believes THQ "spent fairly heavily" on marketing for the title -- without much result, he adds. "Darksiders didn't perform up to THQ's expectations, likely selling less than 1 million units despite heavy marketing dollars, 2-3 years of development costs, and was also subject to discounting just 2 weeks after its release," Greenwald suggests. He expects the publisher to report sales of $347 million overall for its March quarter, with year over year growth hurt by challenging comparisons to last year's release of Saints Row 2 and "weak sales and heavy discounting for WWE, MX vs. ATV Reflex, and numerous Wii titles." The company's recent settlement of its longstanding dispute with Jakks Pacific over the WWE license isn't likely to contribute as much as one might think, despite the fact that THQ now has a licensing deal with WWE exclusively. "While this reduces its payment to Jakks to just $6 million in FY11, down from roughly $13 million in FY10 and $20 million in FY09, we don't know what the new royalty paid to WWE will be," says Greenwald: "Much of the savings will likely accrue to WWE, therefore we don't see material upside for THQ as a result of this settlement." Overall, Greenwald is concerned that estimates for THQ, which predict 5 percent growth for the company in the coming fiscal year, are "still too high", as the publisher faces tough comparisons to a release lineup that was much stronger than this year's. "We'd also note that THQ will lack a Pixar title for the first time in 7 years, as Pixar is developing Toy Story 3 internally," Greenwald points out. Finally, the analyst says THQ relies on the Wii and DS market for 35-40 percent of its sales -- and that market will be "much weaker" in 2010.

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