Electronic Arts 1999 Annual Report Download - page 11

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Net revenues from shipments of AL products in fiscal 1999 increased to $248,105,000, or 20% of total revenue, compared
to $185,865,000, or 20% of total revenue in fiscal 1998. The increase was due to higher sales of AL products in North
America and Europe. This increase was primarily attributable to the distribution of products published by Square EA in
North America and the acquisition of ABC Software in Switzerland. We expect revenues from AL 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 generated by 16-bit video game cartridge-based products were $635,000 in fiscal 1999, compared to
$17,314,000, or 2% of net revenues in fiscal 1998. As the 16-bit video game market has been replaced by 32-bit and 64-bit
systems, we did not release any new titles in fiscal 1999. We do not expect to release any new titles in fiscal 2000 and
revenues from the sales of 16-bit products are not expected to be significant.
Licensing of EA Studio products generated $17,788,000 in fiscal 1999, compared to $15,431,000 in fiscal 1998. The increase
was primarily the result of an increase in the revenues generated by the licensing of our products in Europe.
North America net revenues increased by 36% to $704,998,000 in fiscal 1999 as compared to $519,423,000 in fiscal 1998.
The increase was mainly attributable to strong growth in N64 and PlayStation systems, the distribution of AL titles and
growth in PC-CD sales. Net revenues from PlayStation and N64 revenues increased $148,181,000 due to a larger market
and greater installed base for these platforms as well as more title releases for N64 in comparison to the prior year.
North America AL sales increased by $39,813,000, compared to the prior year primarily due to the distribution of products
published by Square EA. PC-CD revenues increased by $13,439,000 due to key title releases during the year.
International net revenues increased by 33% to $516,865,000, or 42% of consolidated fiscal 1999 net revenues,
compared to $389,429,000, or 43% of the fiscal 1998 total. Europe’s net revenues increased by $117,999,000 primarily
due to an increase in sales of PlayStation and AL products. Japan’s net revenues increased by $11,371,000 primarily
due to the sales of FIFA: Road to World Cup 98. Asia Pacific net revenues decreased by $1,934,000 due to the weakness
in Asian currencies. In local currency, in spite of weak economies, net revenues for Asia Pacific increased compared to the
prior year.
1999 1998 % change
Cost of goods sold $ 625,547,000 $480,766,000 30.1
As a percentage of net revenues 51.2% 52.9%
Cost of goods sold as a percentage of revenues decreased in fiscal 1999 primarily due to lower artist royalties, including
savings related to an acquisition of a software development company during fiscal 1999, partially offset by higher sales of
lower margin N64 products.
Operating Expenses 1999 1998 % change
Marketing and sales $ 163,407,000 $128,308,000 27.4
As a percentage of net revenues 13.4% 14.1%
General and administrative $ 75,556,000 $ 57,838,000 30.6
As a percentage of net revenues 6.2% 6.4%
Research and development $202,080,000 $146,199,000 38.2
As a percentage of net revenues 16.5% 16.1%