Electronic Arts 1999 Annual Report Download - page 10

ELECTRONIC ARTS AND SUBSIDIARIES
Management’s Discussion and Analysis
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Annual Report, including the “Letter to Stockholders” at pages 17 to 21 and the following “Management’s Discussion
and Analysis of Financial Condition and Results of Operations,” contains forward looking statements regarding future
events or our future financial performance that involve certain risks and uncertainties including those discussed in “Risk
Factors” at page 35 of this Annual Report and under the same heading in our Annual Report on Form 10-K for the year
ended March 31, 1999. Actual events or actual future results may differ materially from any forward looking statements
due to such risks and uncertainties.
RESULTS OF OPERATIONS
Comparison of Fiscal 1999 to 1998
1999 1998 % change
Net revenues $1,221,863,000 $908,852,000 34.4
We derive revenues primarily from shipments of entertainment software, which includes EA Studio CD products for
dedicated entertainment systems (“CD-video games”), EA Studio CD personal computer products (“PC-CD”), EA Studio
cartridge products and Affiliated Label (“AL”) products that are published by third parties and distributed by us. We also
derive revenues from licensing of EA Studio products and AL products through hardware companies (“OEMs”) and online
subscription revenues.
Our total net revenues increased compared to the prior year due to increased sales of products on PlayStation, Nintendo
N64, PC-CD and increased worldwide distribution of AL products. This increase was partially offset by a decrease in sales
of Sega Saturn®products and 16-bit video game products.
Sales of PlayStation products in fiscal 1999 increased to $519,830,000, or 43% of total revenue, compared to $380,299,000,
or 42% of total revenue in fiscal 1998. We released 21 new PlayStation titles in fiscal 1999 compared to 25 in fiscal 1998.
The increase in sales was attributable to the greater installed base of PlayStation game consoles and the releases of
key titles for this platform including FIFA 99, World Cup 98 and Madden NFL 99. We expect revenues from PlayStation
products to continue to grow in fiscal 2000, but as revenues for these products increase, we do not expect to maintain
these growth rates.
Net revenues derived from other 32-bit products, primarily for Saturn, were $749,000 in fiscal 1999 compared to $17,507,000
in fiscal 1998. We released no new Saturn titles in fiscal 1999 compared to eight in fiscal 1998. We do not expect to
release any new Saturn titles in fiscal 2000 and revenues from the sales of Saturn products are not expected to be
significant in future years.
Net revenues from PC-CD products increased to $270,793,000 in fiscal 1999, representing 22% of total net revenues,
from $231,034,000, or 25% of total net revenues in fiscal 1998. We released 29 PC-CD titles in fiscal 1999 compared to 30
PC-CD titles in fiscal 1998. The worldwide increase in sales of PC-CD products was primarily attributable to an increase in
sales in Europe and North America due to the related releases of key titles for this platform including Sim City 3000.
Net revenues derived from N64 video game cartridge products were $152,349,000, or 12% of total net revenues, compared
to $56,677,000, or 6%, in fiscal 1998. The increase in N64 revenues was primarily due to more title releases for this platform
compared to last year and a larger N64 market. We released nine titles in fiscal 1999, including NASCAR 99, compared to
two titles in fiscal 1998. We do not expect significant growth in revenues for N64 products in fiscal 2000.