Electronic Arts 2004 Annual Report Download - page 25

number of subscribers for The Sims Online and Earth & Beyond have been below our expectations. We intend
to discontinue our Earth & Beyond service in September 2004.
Our EA.com website oÅerings and persistent state world games focus on targeting and serving consumers by:
䡵OÅering engaging and accessible online games,
䡵Building a community in which consumers can interact with one another via chat, bulletin boards,
events and match-making services for multi-player games and other contests,
䡵Delivering innovative content that continually entertains, and
䡵Establishing a direct relationship with each audience member through personalization and
customization of user experiences.
Marketing and Distribution
We market the products produced by EA Studios under the EA GAMES, EA SPORTS and EA SPORTS
BIG brands. Products marketed under the EA SPORTS brand typically simulate professional and collegiate
sports and include franchises such as Madden NFL, FIFA Soccer and NBA Live. Products marketed under
the EA SPORTS BIG brand typically feature extreme sports or modiÑed traditional sports and include such
titles as SSX 3, Def Jam VENDETTA and NFL STREET.
Formerly known as Electronic Arts Distribution, our EA Partners global business unit operates under a variety
of deal types and structures with the intent of generating, leveraging and/or owning intellectual properties
conceived by third party developers, publishers or licensors worldwide. Through EA Partners we provide
direct development expertise to our partners via an internal production staÅ, while also making available our
publishing resources to provide sales, marketing and distribution services on a global basis.
EA Partners currently has relationships with DICE, Lionhead, Krome Studios, Black Hole Games, Free
Radical Design, Gas Powered Games, Castaway Entertainment and Eurocom Developments, among others.
EA Partners' largest co-publishing arrangement is with DICE, headquartered in Stockholm, Sweden, in
which we hold an equity interest. DICE is the creator of the hit BattleÑeld series of online multiplayer games,
which include worldwide best-sellers BattleÑeld 1942 and BattleÑeld Vietnam on the PC.
EA Partners also distributes Ñnished goods on behalf of other third-party publishers. These titles are
developed and manufactured by other publishers and delivered to us as completed products, for which we
provide distribution services. Our distribution partners have included Square Enix, Capcom, Namco, Koei and
NovaLogic.
The interactive software game business has become increasingly ""hit'' driven, requiring signiÑcantly greater
expenditures for marketing and advertising of our products, particularly for television advertising. There can
be no assurance that we will continue to produce ""hit'' titles, or that advertising for any product will increase
sales suÇciently to recoup those advertising expenses.
We generated approximately 95 percent of our North American net revenue from direct sales to retailers
through a Ñeld sales organization of professionals and a group of telephone sales representatives. The
remaining 5 percent of our North American sales were made through a limited number of specialized and
regional distributors and rack jobbers in markets where we believe direct sales would not be economical. We
had direct sales to one customer, Wal-Mart Stores, Inc., which represented 13 percent of total net revenue in
Ñscal 2004, 12 percent in Ñscal 2003, and 14 percent in Ñscal 2002.
Outside of North America, we derive revenues primarily from direct sales to retailers. Our largest indirect
sales relationship is with Pinnacle in Europe. Sales of our products through Pinnacle make up approximately
12 percent of our total net revenue. We use Pinnacle to provide logistical and collection services to our retail
customers. Under the terms of our agreement with Pinnacle, our products are held by Pinnacle on
consignment until shipment to the retailer. In addition, we authorize returns from, or price protection to,
retailers and we are obliged to give Pinnacle the corresponding credit. In a few of our smaller markets, we sell
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