Electronic Arts 2007 Annual Report Download - page 5

Online subscriptions to our Club Pogo suite of casual games have passed 1.5 million — up 23 percent in just
one year. Additionally, Pogo began a roll out in Europe and a closed-beta test in the People’s Republic of
China. We estimate that more than half of all Pogo players are women over 30 who love the community
aspects of the site as much as the games. And last year’s acquisition of Mythic Entertainment sets up the
fiscal 2008 launch of one of the industry’s most anticipated massive-multiplayer subscription games,
Warhammer.
Online advertising continues to grow with revenue from dynamic advertisements and banner ads on our
websites. Dynamic in-game advertising — for instance billboards in Need for Speed show a soft drink
promotion on the first lap, and a movie promo on the next — debuted in three of our games. While the initial
revenue was small, over the long term we expect this opportunity to grow significantly.
Mobile — Games played on mobile phones are now a fundamental part of our business. A little over a year
ago, EA acquired JAMDAT, the world’s leading developer and publisher of games for mobile phones — a
strategic investment that has exceeded our expectations in fiscal 2007. Today, we are the world leader in
mobile gaming with annual revenue of $140 million. We’ve integrated EA content into the JAMDAT platform
and now have more than ten EA franchises available for mobile phones.
Asia — We are working to build our online business in Asia where our sports and game franchises have a
large following of eager fans. Today, broadband penetration and an explosion of internet game rooms make
this a powerful opportunity for future growth.
Last year we made a breakthrough in navigating the complex business environment in Asia. In Korea, we
acquired a 19 percent stake in Neowiz, a local operator which last year helped us make EA SPORTS FIFA
Online. Together, with Neowiz, we achieved a dramatic success — more than ten percent of the population of
Korea registered to play our game. In China, just recently, we acquired a 15 percent stake in The9, one of that
country’s top online publishers. Investing and partnering with established publishers gives us a much better
understanding of how to succeed in Asia.
New Content — We tap three sources for game concepts — new concepts that spring from the ideas of our
own creative people, licensed properties from other media like sports and movies, and publishing and
distribution partnerships with independent developers.
Our teams have created a fantastic legacy of wholly-owned blockbuster franchises like The Sims, Need for
Speed, Battlefield, Burnout and Command & Conquer. Today we have more than 15 new wholly owned
properties in development including Army of Two, SKATE, Boogie and EA Playground, which will debut this
year.
Games based on licensed content from sports, movies, books, TV and other formats are another pillar of EA’s
leadership and will always be part of our business model. Some of our most popular licensed franchises
include Harry Potter, The Simpsons, The Lord of the Rings and sports leagues like the NFL, FIFA, PGA
TOUR, the NBA and the NHL. These titles are extremely popular with our core audience and provide a great
bridge for introducing new players to gaming.
Another great source of content is our partnerships with independent developers. EA Partners offers the
independents access to the power of our global publishing and distribution reach in exchange for a royalty
stream. EA has teamed up with some of the most exciting developers in the industry including Crytek (Crysis),
Flagship (Hellgate: London), MTV/Harmonix (Rock Band), Pandemic (Mercenaries 2) and Valve (Half Life 2
The Orange Box).
Faster, Agile and More Accountable Management
In fiscal 2008, we are organizing our management structure to streamline decision making, manage costs, hold
people accountable and allow good ideas to move quickly into the market.
We are in the process of organizing the company into four major divisions, or labels which act as aligned but
vertical businesses with accountability for a P&L and aggressive growth targets. Each will have a president
Stockholder Letter