TECH TALK—Spate of Recent Deals Boost Video-Game Maker THQ

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After going through a rough patch when it lost the rights to make pro wrestling video games, THQ Inc. has bounced back with a spate of recent licensing deals and acquisitions.

The Calabasas-based company recently penned an agreement with LucasArts Entertainment Co. LLC to publish Game Boy games based on the popular “Star Wars” and “Indiana Jones” brands. Game Boy Color owners will be able to play the first title, “Obi-Wan’s Adventures,” this fall, and “Indiana Jones and the Infernal Machine” in the spring. Four additional games will follow for the next-generation Game Boy Advance, slated for release next year.

“We’ve had a longstanding relationship with Lucas,” said Brian Farrell, chief executive of THQ. “This is one of the larger (deals).”

As in almost all video-game publishing deals, THQ will pay LucasArts an advance for the use of characters and other material from the movies. Then it will make the games, sell them, and collect the revenue. THQ will then pay LucasArts a percentage of sales as royalties.

This deal is likely to be very profitable for THQ, considering the revival of interest in “Star Wars” thanks to the new trilogy of movies that started with last year’s “Star Wars: Episode I, The Phantom Menace.”

“This deal takes us through the ‘Episode II’ universe,” Farrell said. “So we’ve got all the ‘Star Wars’ that either was or will be in the next couple of years. We think that’s very positive.”

In addition to producing a number of games for LucasArts, THQ currently acts as the company’s distributor in Germany.

Meanwhile, THQ has acquired Champaign, Ill., video-game developer Volition Inc. in a deal worth about $20 million. Executives from the two companies met about 18 months ago and have collaborated on two titles for the Playstation 2 and personal computer, “Summoner” and “Red Faction.”

“We’re always looking for quality development studios with either great technology or intellectual property. Volition fits both those models,” Farrell said.

Volition’s employees will stay in Illinois and the company’s current management will stay in place. “It’s not broken, so we’re not even going to try to fix it,” Farrell explained.

Finally, THQ is moving into the next level of video-game entertainment through its deal with German electronics producer Siemens AG. THQ will provide game content for handheld devices manufactured by Siemens, such as devices that combine wireless phone services, an Internet connection and a personal digital assistant.

“There’s all sorts of devices coming down the road,” Farrell said. “(Games will be available) probably mostly through the Internet. You can imbed simple games (directly into the device’s hardware), but the real win is when we can download levels or questions through the Internet, through the wireless devices.”

GoTo.com and AOL

GoTo.com has penned a several-year deal with America Online Inc. to provide search features to three AOL entities.

The Pasadena-based company will pay $50 million to have its search listings included within the AOL service, on the AOL.com Web site, and in the search feature on the AOL subsidiary, Netscape.

“We’re effectively making a guarantee on the revenue that will result from these deals. We’re pretty comfortable with it,” said Ted Meisel, president and chief executive of GoTo.com. “We’re comfortable enough that we were able to move our date of profitability up by a quarter as a result of the deal fourth quarter (of 2001) for whole company, and third quarter for the search business.”

GoTo.com’s search engine differs from most others in that companies wanting to be listed pay a negotiated amount to GoTo.com every time a user clicks through to their site. The more a company pays, the higher the company appears on the list of results when a user performs a search.

GoTo.com currently offers two products to other Web sites: It provides a standalone search engine to sites with only one search function, and it provides a smaller selection of listings to large portals that are using multiple search engines. GoTo.com will provide the latter, a selection of listings, to AOL.

“(GoTo’s results) will be labeled distinctly, which we think is the right way to do it,” Meisel explained.

That setup is appropriate because different search engines arrive at their results in different ways, he said. Breaking out the results from different search engines recognizes those differences, so users can see a variety of listings in focused groups instead of one jumbled listing of results.

Though this is the company’s first deal with behemoth AOL, GoTo.com previously had deals with Netscape and Compuserve, both now AOL subsidiaries.

NetZero in Message Business

Free Internet access provider NetZero Inc. will be adding unified messaging services to its offerings.

Unified messaging systems collect a variety of messages voicemail and e-mail, for example and make them available through one centralized voicemail or e-mail address.

The Westlake Village-based NetZero has partnered with ThinkLink, a unified messaging services provider based in San Francisco, to offer its customers a way to check all their messages in one place.

“The majority of the services that we will be offering our consumers will be free,” said Mark Goldston, chairman and chief executive of NetZero, probably the best-known provider of free Internet access.

With the company’s new unified messaging service, one free feature will be access to a toll-free number through which users can in one centralized voicemail box check messages from voicemail boxes at home, at the office and on cell phones. The company will generate revenues by offering additional features, such as pager notification of new messages, for a fee.

The company’s first priority is to attempt to sign up new users who are interested in receiving NetZero’s free Internet access service. Then the company will target its current user base with e-mails promoting the unified messaging service and detailed information on the company’s home page.

“We’ve been thinking about unified messaging for almost six months,” Goldston said. “In the U.S., unlike Europe and Asia, we’re kind of in the dark ages when it comes to wireless and unified messaging. Here, we all have different phone numbers and e-mail addresses, and it’s a mess.”

The potential customer base for such services is enormous, he added. “Virtually everyone has voicemail and e-mail, even if they don’t know how to use the Internet,” he said.

Staff reporter Laura Dunphy can be reached at [email protected].

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