Electronic Arts 2005 Annual Report Download - page 101

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versions of our titles on existing platforms, our ability to collect our accounts receivable as they become due,
successfully achieving our product release schedules and attaining our forecasted sales objectives, the impact
of competition, the economic conditions in the domestic and international markets, seasonality in operating
results, risks of product returns and the other risks described in the ""Risk Factors'' section below.
Contractual Obligations and Commercial Commitments
Letters of Credit
In July 2002, we provided an irrevocable standby letter of credit to Nintendo of Europe. The standby letter of
credit guarantees performance of our obligations to pay Nintendo of Europe for trade payables of up to
418 million. The standby letter of credit expires in July 2005. As of March 31, 2005, we had 40.5 million
payable to Nintendo of Europe covered by this standby letter of credit.
In August 2003, we provided an irrevocable standby letter of credit to 300 California Associates II, LLC in
replacement of our security deposit for oÇce space. The standby letter of credit guarantees performance of our
obligations to pay our lease commitment up to approximately $1 million. The standby letter of credit expires in
December 2006. As of March 31, 2005, we did not have a payable balance on this standby letter of credit.
Development, Celebrity, League and Content Licenses: Payments and Commitments
The products produced by our studios are designed and created by our employee designers, artists, software
programmers 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, usually in installment payments made upon the completion of speciÑed
development milestones. Contractually, these payments are considered advances against subsequent royalties
on the sales of the products. These terms are set forth in written agreements entered into with the independent
artists and third-party developers. In addition, we have certain celebrity, league and content license contracts
that contain minimum guarantee payments and marketing commitments that are not dependent on any
deliverables. Celebrities and organizations with whom we have contracts include: ESPN (content in EA
SPORTS games); FIFA and UEFA (professional soccer); NASCAR (stock car racing); John Madden
(professional football); National Basketball Association (professional basketball); PGA TOUR (professional
golf); Tiger Woods (professional golf); National Hockey League and NHLPA (professional hockey); Warner
Bros. (Harry Potter, Batman and Superman); MGM/Danjaq (James Bond); New Line Productions (The
Lord of the Rings); National Football League, Arena Football League and PLAYERS Inc. (professional
football); Collegiate Licensing Company (collegiate football and basketball); ISC (stock car racing); Island
Def Jam (Ñghting); and Viacom Consumer Products (The Godfather). These developer and content license
Annual Report
commitments represent the sum of (i) the cash payments due under non-royalty-bearing licenses and services
agreements, and (ii) the minimum payments and advances against royalties due under royalty-bearing
licenses and services agreements, the majority of which are conditional upon performance by the counterparty.
These minimum guarantee payments and any related marketing commitments are included in the table below.
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