Electronic Arts 2007 Annual Report Download - page 162

one five-year option to extend the lease term. The campus facilities comprise a total of 140,000 square feet
and provide space for research and development functions. Our rental obligation over the initial five-and-a-half
year term of the lease is $15 million.
In July 2003, we entered into a lease agreement with an independent third party (the “Landlord”) for a studio
facility in Los Angeles, California, which commenced in October 2003 and expires in September 2013 with
two five-year options to extend the lease term. Additionally, we have options to purchase the property after
five and ten years based on the fair market value of the property at the date of sale, a right of first offer to
purchase the property upon terms offered by the Landlord, and a right to share in the profits from a sale of the
property. Existing campus facilities comprise a total of 243,000 square feet and provide space for research and
development functions. Our rental obligation under this agreement is $50 million over the initial ten-year term
of the lease. This commitment is offset by expected sublease income of $6 million for a sublease to an
affiliate of the Landlord of 18,000 square feet of the Los Angeles facility, which commenced in October 2003
and expires in September 2013, with options of early termination by the affiliate after five years and by us
after four and five years.
In October 2002, we entered into a lease agreement, with an independent third party for a studio facility in
Vancouver, British Columbia, Canada, which commenced in May 2003 and expires in April 2013. We
amended the lease in October 2003. The facility comprises a total of approximately 65,000 square feet and
provides space for research and development functions. Our rental obligation under this agreement is
approximately $16 million over the initial ten-year term of the lease.
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
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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.
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