Electronic Arts 2010 Annual Report Download - page 88

Microsoft. Under the terms of agreements we have entered into with Microsoft Corporation and its affiliates,
we are authorized to develop and distribute DVD-based software products and online content compatible with the
Xbox 360.
Nintendo. Under the terms of agreements we have entered into with Nintendo Co., Ltd. and its affiliates, we are
authorized to develop and distribute proprietary optical format disk products and cartridges compatible with the
Wii and the Nintendo DS. Pursuant to these agreements, we engage Nintendo to supply Wii proprietary optical
format disk products and Nintendo DS cartridges for our products.
Under the agreements with each of Sony, Microsoft and Nintendo, we are provided with the non-exclusive right
to use, for a fixed term and in a designated territory, technology that is owned by the console manufacturer in
order to publish our games on such platform. Our transactions are made pursuant to individual purchase orders,
which are accepted on a case-by case basis by Sony, Microsoft or Nintendo, as the case may be, and there are no
minimum purchase requirements under the agreements. Many key commercial terms of our relationships with
Sony, Microsoft and Nintendo — such as manufacturing terms, delivery times and approval conditions — are
determined unilaterally, and, are subject to change, by the console manufacturers. We pay the console
manufacturers a per unit royalty for each unit manufactured or for revenue from downloaded content.
As each platform license expires, if we intend to continue publishing games on such platform, we must enter into
a new agreement or an amendment with the licensor to extend the term of the agreement. Certain agreements,
such as the licenses with Sony for the PLAYSTATION 3 and with Microsoft for the Xbox 360, automatically
renew for a specified period unless either party gives notice by the applicable date that it intends to terminate the
agreement.
The platform license agreements also require us to indemnify the manufacturers with respect to all loss, liability
and expense resulting from any claim against the manufacturer involving the development, marketing, sale, or
use of our games, including any claims for copyright or trademark infringement brought against the
manufacturer. Each platform license may be terminated by the manufacturer if a breach or default by us is not
cured after we receive written notice from the manufacturer, or if we become insolvent.
Retailers
The console, handheld and PC games that we publish are made available to consumers as packaged goods
(usually in Blu-ray Disc, CD, DVD, cartridge or Universal Media Disc format) that are typically sold at retailers
(including online retailers, such as Amazon). In North America and Europe, our largest markets, we sell these
packaged goods products primarily to retailers, including mass market retailers (such as Wal-Mart), electronics
specialty stores (such as Best Buy) or game software specialty stores (such as GameStop). Many of our products
and related content (such as booster packs, expansion packs and smaller pieces of game content) can also be
purchased over the Internet through digital download or through mobile application storefronts accessed directly
from videogame consoles or mobile devices.
We generated approximately 75 percent of our North America net revenue from direct sales to retailers in fiscal
year 2010, with the remaining net revenue being generated through a limited number of specialized and regional
distributors in markets where we believe direct sales would not be economical. We had direct sales to GameStop
Corp. which represented approximately 16 percent, 14 percent and 13 percent of total net revenue in fiscal years
2010, 2009 and 2008, respectively. We also had direct sales to Wal-Mart Stores, Inc. which represented
approximately 12 percent, 14 percent and 12 percent of total net revenue in fiscal years 2010, 2009 and 2008,
respectively. We sell our products to GameStop and Wal-Mart pursuant to numerous and frequent individual
purchase orders, which contain delivery and pricing terms. There is no commitment by either GameStop or
Wal-Mart to purchase or for us to sell to either GameStop or Wal-Mart, any minimum level of product.
Mobile Carriers
We have agreements to distribute our mobile applications through more than 320 carriers in over 55 countries.
Our customers download our applications to their mobile devices and their mobile carrier invoices them either a
one-time or monthly subscription fee. Our carrier distribution agreements establish the fees to be retained by the
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