Electronic Arts 2007 Annual Report Download - page 129

Contractual Obligations and Commercial Commitments
Development, Celebrity, League and Content Licenses: Payments and Commitments
The products we produce in 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 specified development milestones.
Contractually, these payments are generally 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 may not be dependent on any deliverables. Celebrities and
organizations with whom we have contracts include: FIFA, FIFPRO Foundation, UEFA and FAPL (Football
Association Premier League Limited) (professional soccer); NASCAR (stock car racing); National Basketball
Association (professional basketball); PGA TOUR and Tiger Woods (professional golf); National Hockey
League and NHL Players’ Association (professional hockey); Warner Bros. (Harry Potter, Batman and
Superman); New Line Productions and Saul Zaentz Company (The Lord of the Rings); Red Bear Inc. (John
Madden); National Football League Properties and PLAYERS Inc. (professional football); Collegiate Licensing
Company (collegiate football, basketball and baseball); Simcoh (Def Jam); Viacom Consumer Products (The
Godfather); ESPN (content in EA SPORTS
TM
games); Twentieth Century Fox Licensing and Merchandising
(The Simpsons); and Marvel Entertainment, Inc. (Marvel character fighting games). These developer and
content license commitments represent the sum of (1) the cash payments due under non-royalty-bearing
licenses and services agreements and (2) the minimum guaranteed payments and advances against royalties
due under royalty-bearing licenses and services agreements, the majority of which are conditional upon
performance by the counterparty.
The following table summarizes our minimum contractual obligations and commercial commitments as of
March 31, 2007, and the effect we expect them to have on our liquidity and cash flow in future periods (in
millions):
Fiscal Year Ending March 31, Leases
(1)
Developer/
Licensor
Commitments
(2)
Marketing
Letter of Credit,
Bank and Other
Guarantees Total
Contractual Obligations
Commercial
Commitments
2008 ............................. $ 56 $ 200 $ 58 $ 7 $ 321
2009 ............................. 54 202 31 — 287
2010 ............................. 39 166 31 — 236
2011 ............................. 27 263 31 — 321
2012 ............................. 23 27 17 — 67
Thereafter ......................... 46 697 169 — 912
Total ......................... $245 $1,555 $337 $ 7 $2,144
(1)
See discussion on operating leases in the “Off-Balance Sheet Commitments” section below for additional
information.
(2)
Developer/licensor commitments include $9 million of commitments to developers or licensors that have
been recorded in current and long-term liabilities and a corresponding amount in current and long-term
assets in our Consolidated Balance Sheets as of March 31, 2007 because payment is not contingent upon
performance by the developer or licensor.
Annual Report
55