Electronic Arts 2010 Annual Report Download - page 89

Annual Report
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.
EA Partners
Through our EA Partners group, we team with external game developers and third party companies, to provide
these partners with a variety of services including development assistance, publishing, and distribution. For
example, through agreements with Crytek and Harmonix, a subsidiary of Viacom, we plan to release Crysis 2,
and have released The Beatles: Rock Band, respectively. Additionally, we have a development agreement with
Epic Games for our upcoming release of Bulletstorm.
Inventory, Working Capital, Backlog, Manufacturing and Suppliers
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
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 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 or cartridge component of our PLAYSTATION 3,
PlayStation 2, PSP, Wii and Nintendo DS products.
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. While our sales
generally follow this seasonal trend, there can be no assurance that this trend will continue. In addition, we defer
the recognition of a significant amount of net revenue related to our online-enabled packaged goods and digital
content over an extended period of time (generally 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, 2010, we had approximately 7,800 regular, full-time employees, over 4,600 of whom 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. Approximately 3 percent of our employees, all of
whom work for DICE, our Swedish development studio, are represented by a union.
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