Electronic Arts 2010 Annual Report Download - page 87

Annual Report
Competition in Online Gaming Services
The online (i.e., Internet-based) games market is characterized by frequent product introductions, new and
evolving business models and new platforms. As the proportion of households with a broadband connection
continues to grow, we expect new competitors to enter the market and existing competitors to allocate more
resources toward developing online games services. As a result, we expect competition in the online game
services market to intensify.
Our current and potential competitors in the online games market include major media companies, traditional
video game publishing companies, and companies that specialize in online games including social networking
game companies. In the massively multiplayer online game business, our competitors include Activision
Blizzard, Atari, NC Soft, and Sony. Competing providers of other kinds of online games include AOL, Big Fish,
MSN, Nexon, Popcap, Real, Yahoo!, and Zynga and other providers of games on social networking platforms
such as Facebook.
Intellectual Property
Like other entertainment companies, our business is significantly based on the creation, acquisition, exploitation
and protection of intellectual property. Some of this intellectual property is in the form of software code, patented
technology, and other technology and trade secrets that we use to develop our games and to make them run
properly. Other intellectual property is in the form of audio-visual elements that consumers can see, hear and
interact with when they are playing our games — we call this form of intellectual property “content.”
We develop products from wholly-owned intellectual properties we create within our own studios. We also
acquire the rights to include proprietary intellectual property in our products through acquisitions. In addition, we
obtain content and intellectual property through licenses and service agreements such as those with sports
leagues and players’ associations, movie studios and performing talent, authors and literary publishers, music
labels, music publishers and musicians. These agreements typically limit our use of the licensed rights in
products for specific time periods. In addition, our products that play on game consoles, handhelds and mobile
devices include technology that is owned by the console or mobile device manufacturer and licensed
non-exclusively to us for use. We also license technology from providers other than console and mobile device
manufacturers. While we may have renewal rights for some licenses, our business and the justification for the
development of many of our products is dependent on our ability to continue to obtain the intellectual property
rights from the owners of these rights on reasonable terms and at reasonable rates.
We actively engage in enforcement and other activities to protect our intellectual property. We typically own the
copyright to the software code, as well as the brand or title name trademark under which our products are
marketed. We register copyrights and trademarks in the United States and other countries as appropriate.
As with other forms of entertainment, our products are susceptible to unauthorized copying and piracy. We
typically distribute our PC products using copy protection technology, digital rights management technology or
other technological protection measures to prevent piracy and the use of unauthorized copies of our products. In
addition, console manufacturers typically incorporate technological protections and other security measures in
their consoles in an effort to prevent the use of unlicensed product. We are actively engaged in enforcement and
other activities to protect against unauthorized copying and piracy, including monitoring online channels for
distribution of pirated copies, and participating in various industry-wide enforcement initiatives, education
programs and legislative activity around the world.
Significant Relationships
Console Manufacturers
Sony. Under the terms of agreements we have entered into with Sony Computer Entertainment Inc. and its
affiliates, we are authorized to develop and distribute disk-based software products and online content
compatible with the PlayStation 2, PLAYSTATION 3 and PSP. Pursuant to these agreements, we engage Sony to
supply PlayStation 2, PLAYSTATION 3 and PSP disks for our products.
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