THQ announces extension of WWE renewal notice; Pachter explains
THQ announced today that World Wrestling Entertainment has extended a deadline that allows the publisher to renew its licensing contract. The extension lasts until December 21, 2009 -- the original deadline was November 1. If signed, the agreement would be good through December 31, 2014.
THQ is cool with the WWE, but it's not very chummy with JAKKS Pacific, its longtime partner in the WWE licensing venture. The wounds also run deep between JAKKS and the WWE. When asked for comment on the license renewal and further details regarding the three-way deal, a THQ representative told Joystiq that the publisher plans to renew its contract with the WWE, and then added, "Beyond that, I cannot comment."
The business, politics and legal issues are certainly complicated. We spoke with Wedbush Morgan analyst Michael Pachter who laid out multiple scenarios, but in the end he believes the most likely outcome is that the joint venture between THQ and JAKKS will be terminated. If JAKKS enforces its (believed to be one-year) non-compete clause, then no WWE games can be produced. Neither side would benefit from that, however.
Pachter suggests that the WWE's renewal deadline was extended to give THQ and JAKKS time to settle their issues. What it sounds like to us: THQ and WWE want to move forward as a couple, and the previous arrangement, featuring JAKKS as the third wheel, has worn out its welcome. Check out Pachter's complete analysis after the break.
And now, a reading from the Book of Pachter:
"The WWE license is between WWE and a joint venture between JAKKS Pacific and THQI. The JV is a legal entity, and neither JAKKS or THQ can enter into a new contract with WWE on their own. JAKKS and THQ have been suing one another for a bunch of different reasons, but the relevant one is that THQ is trying to terminate the joint venture, so that it can enter into a license deal with WWE on its own. JAKKS said in a counterclaim that a) THQ cannot terminate the JV unilaterally (I'm not sure that I agree, but that's what they said) and b) even if the JV terminates, THQ signed a contract that said it would not produce WWE games for 12 months after the termination. THQ counterclaimed that a) it can terminate unilaterally (I think this is the right interpretation, but I don't have the contract) and b) it doesn't have to honor the 12-month non-compete upon termination (I think THQ has a very weak argument for this one, but again, I don't have the contract).
"The likely outcome is that the JV gets terminated and that JAKKS stops getting money from the deal in 2010. If JAKKS enforces its non-compete clause with THQ, both THQ and WWE get hurt, since there won't be any games produced. JAKKS doesn't gain anything but the good feeling it might derive from being spiteful. However, THQ and WWE lose something ...
"It's pretty clear that WWE doesn't want to deal with JAKKS any more, and neither does THQ. The alternatives are to keep the deal as is for another five years (THQ and WWE unhappy, JAKKS happy), terminate the JV and have no WWE games for a year (THQ and WWE unhappy, JAKKS neutral), or pay JAKKS something to go away (THQ and WWE slightly upset, but happy about being able to deal with one another without JAKKS, and JAKKS happy). I'd bet on the third alternative, and THQ has another two months to make it happen."
