Electronic Arts 2006 Annual Report Download - page 84

Products and Product Development
In Ñscal 2006, we generated approximately 73 percent of our net revenue from EA Studio-produced
products, released during the year as compared to approximately 71 percent in Ñscal 2005. During Ñscal
2006, we released 31 EA Studio titles, excluding titles developed for cellular handsets, compared to 35 EA
Studio titles in Ñscal 2005. We released 131 stock keeping units, or SKUs (a version of a title designed for
play on a particular platform) in Ñscal 2006, compared to 109 SKUs in Ñscal 2005. In Ñscal 2006, we had
27 titles that sold over one million units (aggregated across all platforms). In Ñscal 2005, we had 31 titles
and in Ñscal 2004 we had 27 titles that sold over one million units (aggregated across all platforms). In
Ñscal 2006, we had one title, Need for Speed Most Wanted, published on eight diÅerent platforms, which
represented approximately 10 percent of our total net revenue. In Ñscal 2005, we had one title, Need for
Speed Underground 2, published on Ñve diÅerent platforms, which represented approximately 11 percent of
our total net revenue. No title represented more than 10 percent of our total net revenue in Ñscal 2004.
The products produced by EA's studios are designed and created by our employee designers and artists
and by non-employee software developers (we call them ""independent artists'' or ""third-party
developers''). We typically advance development funds to the independent artists and third-party
developers during development of our games. These 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.
During Ñscal 2006, the retail selling prices of our newly released products in North America ranged from
$29.99 to $59.99. Other titles, including re-releases of older titles marketed as ""Classics'', had retail selling
prices that ranged from $9.99 to $29.99. These ranges may not be indicative of our future retail selling
prices in North America, which are based on prevailing market conditions. 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 video game consoles,
PCs and mobile platforms. We will continue to invest in tools and technologies designed to facilitate
development of our products for current and next-generation consoles, mobile platforms and online. We
have incurred and expect to incur higher costs during this transition to next-generation consoles. During
this transition, we intend to continue to develop titles for current-generation video game consoles while we
also continue to make signiÑcant investments in the development of products that operate on next-
generation consoles such as the Xbox 360, PlayStation 3 and Nintendo Wii. These investments are
recorded in research and development in our Consolidated Statement of Operations. We had research and
development expenditures of $758 million in Ñscal 2006, $633 million in Ñscal 2005 and $511 million in
Ñscal 2004.
Online Games
We publish three types of games that are played online by consumers: online casual games, massively
multiplayer online games, and online-enabled packaged goods games.
Online Casual Games. Our online casual games are marketed under three brands: Pogo (our free online
games service), Club Pogo (our subscription-based online games service) and Pogo-To-Go (downloadable
games).
‚Pogo Ì Pogo provides approximately 80 free online games geared towards family entertainment.
The oÅerings include sports, arcade, card, board, casino, word, trivia and puzzle games. This games
service incorporates prizes, tournaments, community-building activities and the popularity of free,
familiar games to appeal to a broad consumer market.
‚Club Pogo Ì In Ñscal 2004, we launched Club Pogo, a subscription-based service oÅering exclusive
games and premium features. We oÅer approximately 30 additional games for Club Pogo
subscribers. To join Club Pogo, players must register and subscribe online. Players have the option
of selecting a monthly or annual subscription fee plan. When a player joins Club Pogo, they have
access to all of the games and content they had on the free Pogo service, plus premium features
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