Electronic Arts 2004 Annual Report Download - page 23

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Xbox, compared to 16 titles in Ñscal 2003. Our top Ñve Xbox releases for the year were Need for Speed
Underground, Madden NFL 2004, Medal of Honor Rising Sun, The Lord of the Rings; The Return of the King
and FIFA Soccer 2004.
Nintendo. Under the terms of a licensing agreement we entered into with Nintendo of America, eÅective as
of November 2001, we are authorized to develop and distribute proprietary optical format disk products
compatible with the Nintendo GameCube. Pursuant to this agreement, we engage Nintendo to supply
Nintendo GameCube proprietary optical format disk products for our products.
In Ñscal 2004, approximately seven percent of our net revenue was derived from sales of EA Studio software
for the Nintendo GameCube, compared to seven percent in Ñscal 2003. We released 19 titles worldwide in
Ñscal 2004 for the Nintendo GameCube, compared to 17 titles in Ñscal 2003. Our top Ñve Nintendo
GameCube releases for the year were Need for Speed Underground, The Lord of the Rings; The Return of the
King, Medal of Honor Rising Sun, Madden NFL 2004 and James Bond 007: Everything or Nothing.
Products and Product Development
In Ñscal 2004, we generated approximately 69 percent of our net revenue from EA Studio-produced products
released during the year. During Ñscal 2004, we introduced 32 EA Studios titles, representing 97 stock
keeping units, or SKUs, compared to 31 EA Studios titles, comprising 86 SKUs, in Ñscal 2003. In Ñscal 2004,
we had 27 titles that sold over one million units (aggregated across all platforms). In Ñscal 2003, we had
22 titles and in Ñscal 2002 we had 16 titles that sold over one million units (aggregated across all platforms). A
SKU is a version of a title designed for play on a particular platform and intended for distribution in a
particular territory.
For Ñscal 2004, no title represented more than 10 percent of our total Ñscal 2004 net revenue. For Ñscal 2003,
we had one title, Harry Potter and the Chamber of Secrets
TM
, published on seven diÅerent platforms, which
represented approximately 10 percent of our total Ñscal 2003 net revenue. For Ñscal 2002, Harry Potter and
the Sorcerer's Stone
TM
, published on four diÅerent platforms, represented approximately 12 percent of our total
Ñscal 2002 net revenue.
The products produced by EA Studios are designed and created by our employee designers and artists and by
non-employee software developers (""independent artists'' or ""third-party developers''). We typically advance
development funds to the independent artists and third-party developers during development of our games,
which payments are considered advances against subsequent royalties based on the sales of the products.
These terms are typically set forth in written agreements entered into with the independent artists and
third-party developers.
We publish products in a number of categories such as sports, action, strategy, simulations, role playing and
adventure, each of which is becoming increasingly competitive. Our sports-related products, marketed under
the EA SPORTS brand name, accounted for a signiÑcant percentage of net revenue in Ñscal years 2004,
2003 and 2002. The sports category is highly competitive, and there can be no assurance that we will be able
to maintain our historical success in this category or that our licenses will be renewed.
The retail selling prices of our newly released products in North America (excluding re-releases of older titles
marketed as ""Classics''), typically range from $30.00 to $50.00. ""Classics'' titles have retail selling prices that
range from $10.00 to $20.00. The retail selling prices of our titles outside of North America vary widely
depending on factors such as local market conditions.
Our goal is to maintain our position as a leading publisher of games sold for play on the current generation of
128-bit video game consoles and to extend our success into the next generation of consoles and technology.
We will continue to invest in tools and technologies designed to facilitate development of our products for
current generation platforms while also investing in tools and technologies for the next generation of consoles
and technology. These investments are recorded in research and development in our Consolidated Statement
of Operations. We had research and development expenditures of $511 million in Ñscal 2004, $401 million in
Ñscal 2003 and $381 million in Ñscal 2002.
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