For more than three years, THQ and Jakks Pacific have been wrangling with one another over return rates related to their joint venture to make games based on the World Wrestling Entertainment license. Having entered into their joint venture in 1999, THQ initially paid Jakks Pacific a 10 percent cut of net sales associated with its WWE wrestling games. However, that rate reset in July 2006, and the two companies have since been in disagreement over THQ's new payment amount.
Today, that conflict reached a resolution, with THQ declaring victory. After a prolonged binding arbitration hearing that was itself a point of contention, an arbitrator has set the new rate at 6 percent of WWE game sales, 40 percent below its previous level. The rate applies to all payments scheduled between July 1, 2006 and December 31, 2009, when THQ and Jakks' rights to make games based on the WWE license is currently set to expire.
"As we expected, we have prevailed in this matter," said James M. Kennedy, THQ's executive VP of business and legal affairs, in a statement. "We are gratified the arbitrator agreed the preferred return rate to Jakks Pacific on WWE video games will be significantly lower."
With the new return rate set at 6 percent, THQ will pay Jakks Pacific $34 million for the period between July 1, 2006 and March 31, 2009. THQ notes that this figure is $23 million less than what it would have owed the toy company had the rate not been settled in its favor.
THQ and Jakks Pacific's arbitration settlement brings to a close yet one more chapter in a litigious history between the two companies and the WWE. The WWE has sued the THQ-Jakks joint venture twice in a bid to have its licensing agreement terminated. Earlier this month, THQ sued Jakks over the toy maker's decision to unilaterally renew the two companies' joint venture through December 31, 2014.