Electronic Arts 2001 Annual Report Download - page 18

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2001 AR
Under the terms of a licensing agreement entered into with Sony Computer Entertainment of America in July
1994 (the “Sony Agreement”), as amended, we are authorized to develop and distribute software products compat-
ible with the PlayStation. Pursuant to the Sony Agreement, we engage Sony to manufacture PlayStation Compact
Disks for distribution by us. Accordingly, we have limited ability to control our supply of PlayStation products or
the timing of their delivery.
PlayStation 2 Product Net Revenues We released 15 titles worldwide in fiscal 2001 for the PlayStation 2. Key releas-
es for the year included Madden NFL 2001, SSX, FIFA 2001, NBA Live 2001 and NHL 2001. Revenue was lower than
expected due to the shortage of PlayStation 2 hardware in the year resulting from component shortages which lim-
ited the number of units that could be manufactured, according to Sony. We expect Sony to correct these issues for
the next fiscal year, and expect revenues from PlayStation 2 products to grow in fiscal 2002.
Affiliated Label Product Net Revenues The decrease in Affiliated Label net revenues for fiscal 2001 compared to the
prior fiscal year was primarily due to the strong sales of Final Fantasy
®
VIII in the prior year, our acquisition of
DreamWorks Interactive, formerly an AL, in the fourth quarter of the prior year, fewer hit AL product releases and
product release slips in Europe.
N64 Product Net Revenues We released three N64 titles in fiscal 2001 compared to eight titles during fiscal 2000.
The expected decrease in N64 revenues for the fiscal year, compared to the prior fiscal year, was primarily due to
fewer releases. The decrease was also due to the weaker market for N64 products in the current year. With the
expected release of Nintendo GameCube in North America in November 2001, per Nintendo, we expect revenues
for N64 products to continue to decline significantly in fiscal 2002. The key release for the year was The World Is
Not Enough.
Under the terms of the N64 Agreement, we engage Nintendo to manufacture our N64 cartridges for distribution
by us. Accordingly, we have little ability to control our supply of N64 cartridges or the timing of their delivery. A
shortage of microchips or other factors outside our control could impair our ability to obtain an adequate supply
of cartridges.
Online Net Revenues The increase in online revenues for fiscal 2001 as compared to fiscal 2000 was attributable to
the following:
• The average number of paying customers for Ultima Online increased to approximately 200,000 for fiscal 2001
as compared to over 140,000 for fiscal 2000. This increase was due to continued strong sales of Ultima Online,
the addition of new events and parties within the Ultima worlds and the release of Ultima Online Renaissance in
April 2000.
• We generated over $5,100,000 in subscription revenues for Kesmai and Worldplay online games for fiscal 2001.
These products were not part of EA.com last year due to the Kesmai acquisition in the fourth quarter of fiscal
2000. Revenues associated with these services will continue to decrease as some of these products will be con-
verted into our advertising supported free offerings or incorporated in our bundled subscription offerings.
License, OEM and Other Revenues The decrease in license, OEM and other revenues for fiscal 2001 as compared to
fiscal 2000 was primarily a result of lower license revenue of certain titles on the Game Boy platform.
Advertising Following the launch of EA.com on the worldwide web and the AOL Games Channel in October, we
began selling advertising on EA.com and AOL properties, including the Slingo game. In addition, we generated
advertising revenue from Pogo’s websites as a result of the purchase of Pogo Corporation (now referred to as
“Pogo”) in February 2001.