Electronic Arts 2008 Annual Report Download - page 87

invoices them a one-time fee or monthly subscription fee. Our carrier distribution agreements establish the
fees to be retained by the carrier for distributing our applications. These arrangements are typically terminable
on short notice. The agreements generally do not obligate the carriers to market or distribute any of our
applications.
Content Licensors
Many of our products are based on or incorporate content and trademarks owned by others. For example, our
products include rights licensed from third parties, including major movie studios, publishers, artists, authors,
celebrities, traditional game and toy companies, athletes and the major sports leagues and players associations.
Inventory, Working Capital, Backlog, Manufacturing and Suppliers
For all of our labels, we manage inventory by communicating with our customers prior to the release of our
products, and then using our industry experience to forecast demand on a product-by-product and
territory-by-territory basis. Historically, we have experienced high turnover of our products, and the lead times
on re-orders of our products are generally short (e.g., approximately two to three weeks). Further, as discussed
in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, we have
practices in place with our customers (such as stock balancing and price protection) that reduce product
returns.
We typically ship orders immediately upon receipt. To the extent that any backlog may or may not exist at the
end of a reporting period, it would be both coincidental and an unreliable indicator of future results of any
period.
In many instances, we are able to acquire materials on a volume-discount basis. We have multiple potential
sources of supply for most materials, except for the disk component of our PLAYSTATION 3, PlayStation 2,
PSP and Wii and Nintendo DS cartridges.
Our online games and cellular handset applications are delivered digitally, and therefore, are not manufactured.
Seasonality
Our business is highly seasonal. We have historically experienced our highest sales volume in the holiday
season quarter ending in December and a seasonal low in sales volume in the quarter ending in June. Starting
in fiscal 2008, we began to defer the recognition of a significant amount of net revenue related to our online-
enabled packaged goods over an extended period of time (i.e., typically six months). As a result, the quarter in
which we generate the highest sales volume may be different than the quarter in which we recognize the
highest amount of net revenue. Our results can also vary based on a number of factors, including title release
dates, consumer demand for our products, shipment schedules and our revenue recognition policies.
Employees
As of March 31, 2008, we had approximately 9,000 regular, full-time employees, of whom over 5,100 were
outside the United States. We believe that our ability to attract and retain qualified employees is a critical
factor in the successful development of our products and that our future success will depend, in large measure,
on our ability to continue to attract and retain qualified employees. Less than 3 percent of our employees, all
of whom work for DICE, our Swedish development studio, are represented by a union, guild or other
collective bargaining organization.
Annual Report
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