Electronic Arts 2002 Annual Report Download - page 28

EA 2002 AR
24
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist of personnel and related expenses of executive and administra-
tive staff, fees for professional services such as legal and accounting and allowances for bad debts.
RESEARCH AND DEVELOPMENT
Research and development expenses consist of personnel-related costs, consulting and equipment deprecia-
tion, customer relationship management expenses associated with Electronic Arts’ product and online
games and write-offs of prepaid royalties. EA.com has research and development expenses incurred by
Electronic Arts’ studios consisting of direct development costs and related overhead costs (facilities, net-
work and development management and supervision) in connection with the development and production of
EA.com online games. Research and development expenses also include product development expenses
incurred directly by EA.com.
NETWORK DEVELOPMENT AND SUPPORT
Network development and support costs consist of expenses associated with development of web content,
depreciation on server equipment to support online games, network infrastructure direct expenses, software
licenses and maintenance, and network and management overhead.
Cost of Goods Sold
% OF NET % OF NET
2002 REVENUES 2001 REVENUES % CHANGE
$807,611,000 46.8% $652,242,000 49.3% 23.8%
Cost of goods sold as a percentage of revenues decreased in fiscal 2002 compared to fiscal 2001 due to:
|•••»Revenues from the Xbox and Nintendo GameCube with lower cost of goods sold as a percentage
of revenue.
|•••»Higher mix of PlayStation 2 revenues in the current fiscal year.
|•••»Higher advertising revenues with low cost of goods sold as a percentage of revenue.
|•••»Lower revenue on N64 products with high cost of goods sold as a percentage of revenue.
|•••»Higher AL margins due to a higher number of co-publishing titles with lower cost of goods sold as a
percentage of revenue.
|•••»Higher average margins on PC products.
These items were partially offset by:
|•••»Higher cost of goods sold as a percentage of revenues on the PlayStation and PlayStation 2 products
as compared to the prior year.
|•••»Revenues from Nintendo Game Boy Advance and Game Boy Color with higher cost of goods sold as a
percentage of revenue.
|•••»Lower mix of high margin PC revenues in the current fiscal year.
Marketing and Sales
% OF NET % OF NET
2002 REVENUES 2001 REVENUES % CHANGE
$241,109,000 14.0% $185,336,000 14.0% 30.1%
As a percent of revenue, marketing and sales expense in fiscal 2002 was comparable to fiscal 2001 at 14%.
Marketing and sales expenses for fiscal 2002 increased 30.1%, primarily attributed to:
|•••»Higher marketing and advertising in North America and Europe for programs to support
Madden NFL
2002
, James Bond 007 in…Agent Under Fire , SSX Tricky , Harry Potter and the Sorcerer’s Stone ,
FIFA Soccer 2002 and NBA Live 2002 .
|•••»Higher EA.com marketing and sales expenses due to increased consumer promotions and advertising
media placement costs to promote new game offerings, particularly
Majestic and Motor City Online ,
and higher expenditures associated with selling advertising on both EA.com and Pogo’s gamesites.
|•••»The amortization of the AOL Carriage Fee, which began with the launch of EA.com in October 2000.
EA 2002 AR