Licensing One on One with Gary Caplan

In the sixth and final installment of the series, Gary Caplan met up with Gary Rosenfeld, SVP of business development at Agoura Hills, California-based game publisher THQ. Caplan has known the THQ executive for his entire life, but learned a few things about how Rosenfeld approaches the acquisition of licenses and what goes into video game development at one of the top publishers in the US right now.
August 1, 2007

In the sixth and final installment of the series, Gary Caplan met up with Gary Rosenfeld, SVP of business development at Agoura Hills, California-based game publisher THQ. Caplan has known the THQ executive for his entire life, but learned a few things about how Rosenfeld approaches the acquisition of licenses and what goes into video game development at one of the top publishers in the US right now.

Gary Caplan: Hi Gary. Thanks a lot for meeting me today. As I told you, one the objectives of this interview series was to talk to people that I’ve known for a long time and ask questions not commonly brought up by full-time writers. So in your case, one criterion is certainly met. Remember when we first met? How could you? You were about six months old.

Gary Rosenfeld: That’s right! Thanks for having me here, Gary.

Can you tell us a little bit about your background? Where did you grow up?

I was born in Los Angeles, and never ventured very far beyond. I grew up in Encino and went to law school at UCLA. My first job was in downtown L.A. and now I work in Agoura Hills at THQ.

What made you decide to leave the practice of law to go into our business?

I never ever wanted to practice law in the traditional sense. I always felt that the background law school provided would give me a good foundation from which to get into the licensing and entertainment business.

Weren’t you in the toy industry at Playmates for quite a while?

That’s right. I joined Playmates Interactive Entertainment in 1996, right around the tail end of the Earthworm Jim days and I migrated from the interactive to toys around 1997, at the tail end of the first wave of the Teenage Mutant Ninja Turtles, so I guess there’s a bit of a pattern there. I reported primarily to John Sinclair and had a great six years working with him.

What were the best lessons you learned from John and your experience at Playmates?

I learned to be diligent in evaluating properties and gather all of the facts about a property before presenting it to senior executives or marketing. For example, if it’s a television show, it’s not just about the series being on Nickelodeon. It’s about the time slot it has, what’s it going to follow, where it sits in the schedule, how many episodes are going to be produced and whether or not the show is being sold internationally – all that information matters. And I also learned from John to always be alert at a hockey game.(laughs) We were talking over a beer or two and he explained to me that he grew up in Toronto, Canada and attended a Maple Leafs hockey game with his father. They were sitting, watching the game, and a puck came over the boards and hit his dad in the head.

Same thing with licensing, always be alert. You never know when that puck is going to hit you. Can you tell us a little bit about the history of THQ and when was it founded?

THQ was founded in 1990 as a toy and video game company and went public in 1991, and by about ’93 or ’94 it started focusing exclusively on the video game business.

For fiscal 2007 we reported US$1 billion in sales and in calendar 2006, THQ was the number-three independent publisher in the US. We’ve continued to grow market over the last few years, so we’re on a great trajectory.

What about game development? What percent of games are developed in-house versus out of house?

That varies from year to year. Right now, about 60% are developed internally and 40% are developed by externals. THQ has grown our internal studio system over the last five or six years to the point where we’ve got 1,400 THQ employees around the world working on product in 16 studios.

Does THQ invite submissions from outside developers and from licensors?

I wouldn’t say necessarily invite submissions, but we do always entertain submissions and from people that we have relationships with. We work with external development groups that are developing game ideas, concepts and demos. It’s a very important part of our business, external game development and licensing.

How important is licensing to THQ?

Licensed titles have been important to THQ since the inception of the company and will continue to be. Right now, we hold exclusive long-term agreements with Disney for Pixar movies, World Wrestling Entertainment and Nickelodeon. And these provide a great foundation to build our business. We’ve also established some balance between the licensed IP and original content in the last few years and the key is to maintain the balance. That said we’re very interested in expanding our roster of licenses.

I’m sure everybody comes to you with their new movies and TV series. What attributes do you look for when you’re deciding to license a property?

There are specific attributes that we are actually looking for when we’re evaluating an IP. The first is whether the property lends itself to a great video game, and hopefully a series of video games. So we like to see properties where there’s some level of continuity and we can go beyond its first public iteration. Timing is also very important. It takes two years, sometimes more, to develop a triple-A video game. So an opportunity that’s six to 10 months out is challenging; it’s probably not realistic. We’re usually looking at properties on a two-year horizon. Also, we’re spending a lot of money in developing our games based on other people’s IP, so we have to make sure that the business terms are correct.

What are THQ’s biggest titles, licensed and non-licensed?

THQ’s number one licensed product to date has been Finding Nemo, which has sold 8.5 million units to date. However, Cars is going very strong with more than 7 million units sold so far. We also have had several original franchises that have broken the one million dollar unit mark, including Saints Row and Destroy all Humans.

Gary, looking at your experiences in the toy and video game industries, what are the key differences between the two when it comes to licensed properties?

I think timing is a very key difference. It takes us a lot longer to develop our product than it took when for toys. When I was at Playmates toys, for example, we got an opportunity to create action figures based on the DreamWorks Antz movie about three months before the movie was set to launch. But we were able to get great product created and get it on shelf day and date with the movie. You couldn’t do anything like that in the video game business because the lead times are so different. And investment: We’re spending anywhere from US$8 million to US$20 million to create triple-A product. I know that’s a wide range, but I think it is a good indication of the type of investment video game companies are forced to make in order to establish licensed properties in this category.

What do you see for the future of the interactive game business?

It’s a great time and there’s a lot of innovation occurring, I think that game developers are breaking out of some pre-established molds and really innovating. We’ve seen some big game developers doing different things, smaller projects, things that can be released via Xbox Live Arcade or PlayStation Live that don’t require two years and US$20 million dollars to make.

Moving to your time outside of work, do you have any hobbies, Gary?

I spend a lot of time with my family and kids Zack and Jessie; they’re very active in their sporting lives. I’ve coached their little league baseball and softball teams up until this year, so that takes up a lot of time. And as far as hobbies go, we spend time at the beach and I try to get out and golf as much as I can.

I knew you when you were a little boy, but I don’t remember your favorite characters. What was your first lunch box, do you remember?

Charlie Brown with the e comic panels across the top …

Thermos, oh my goodness. I probably gave that to you.

Well Gary, you sent me off on my baseball-card collecting days, giving me the card binders that had all the team logos them.

Wow. That was one of my great contributions to marketing product. A lot of kids had used those binders to save their baseball cards. Who’s your favorite character today?

I love Spongebob. He’s obviously a man-sponge, or a boy-sponge in a man’s body, and I can relate to that. I just trying to keep a little bit of child-like enthusiasm in what I do every day.

In closing, Gary, is there any advice you could give to a new game developer?

I think it’s be patient. A new game developer that doesn’t have a history and a pedigree of creating strong titles has to be very thorough in their approach and game design and they have to be very realistic in driving a business deal. The notion that a new game developer is going to have a level of control over their IP perhaps isn’t realistic given the fact that publishers spend the amount of money they do to create these products. But we’re looking to partner with new game designers, people that are trying new things. It’s an exciting time.

Great Gary. I would like to thank you very much for meeting me here today and I know that you will have much success in the years to come in your career and at THQ.

Thank you, Gary . You’ve known me since I was in diapers, and I’ve watched how you have approached the business. I’ve learned a lot from you.

Gary Caplan is known in industry circles as ‘The
Godfather of Licensing’ and is president of Gary Caplan Inc., a Studio City, California-based consultancy
specializing in the marketing and management of licensing programs. For further information, check out

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