Electronic Arts 2000 Annual Report Download - page 22

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COST OF GOODS SOLD Cost of goods sold as a percentage of revenues decreased in fiscal 2000 due to:
•An increase in sales of higher margin PC titles as a percentage of revenues.
•An increase in sales of higher margin AL co-published titles which make up a greater amount of total Al revenues as com-
pared to the prior year.
•Adecrease in sales of lower margin N64 titles.
•Higher average margin for PC sales due to higher percentage of revenues from internally developed and Intellectual Property
owned titles, such as
Command and Conquer: Tiberian Sun, Sim City 3000
and
The Sims.
•Partially offset by a decrease, as a percentage of revenues, of PlayStation products.
MARKETING AND SALES Marketing and sales expenses increased in absolute dollars by 15% primarily attributed to:
•Increased print, Internet and television advertising to support new releases.
•Increased cooperative advertising associated with higher revenues in North America and Europe as compared to the prior year.
•Additional headcount related to the continued expansion of our worldwide distribution business.
GENERAL AND ADMINISTRATIVE General and administrative expenses increased in absolute dollars by 21% primarily due to:
•An increase in payroll and occupancy costs to support the increase in growth in North America and Europe.
•Increased general and administrative spending for EA.com. EA.com expanded its staff and incurred additional administrative
related costs required to support growth of the business. We anticipate a continued increase in the absolute dollars spent
on general and administrative related expenses for EA.com.
RESEARCH AND DEVELOPMENT The increase in absolute dollars by 31% for research and development expenses (including
Network Development and Support) was due to:
•Increased research and development spending due to the ongoing investment in our online business. EA.com increased the
number of online projects in development and increased development staff. We believe that continued spending for EA.com
game development is critical to the growth of the business and to meet certain targeted launch commitments. EA.com
intends to increase the number of online games in development and significantly increase development and production
staff. As a result, research and development expenses are expected to increase in absolute dollars.
•Additional headcount-related expenses attributable to the increased in-house development capacity and a higher number of
SKUs released in fiscal 2000.
•An increase in development spending for next generation console products including development for the PlayStation 2 console.
We released a total of 69 new products in fiscal 2000 compared to 59 in fiscal 1999.
NETWORK DEVELOPMENT AND SUPPORT The increase in network development and support expenses was due to:
•The ongoing investment in our online business.
•EA.com’s network and development support expenses increased due to increased spending for network infrastructure in
preparation for new online products and the EA.com game site. In addition, we incurred higher infrastructure costs related to
increased server capacity for
Ultima Online,
allowing EA.com to serve a higher number of active subscribers.
We expect network development and support expenses to increase in absolute dollars in the future.
MD&A
20