Electronic Arts 2011 Annual Report Download - page 104

Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
The following overview is a high-level discussion of our operating results, as well as some of the trends and
drivers that affect our business. Management believes that an understanding of these trends and drivers is
important in order to understand our results for the fiscal year ended March 31, 2011, as well as our future
prospects. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed
discussion and analysis provided elsewhere in this Form 10-K, including in the “Business” section and the “Risk
Factors” above, the remainder of “Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” or the Consolidated Financial Statements and related Notes.
About Electronic Arts
We develop, market, publish and distribute game software and content that can be played by consumers on a
variety of platforms, including video game consoles (such as the Sony PLAYSTATION 3, Microsoft Xbox 360
and Nintendo Wii), personal computers, mobile phones (such as the Apple iPhone and Google Android
compatible phones), tablets and electronic readers (such as the Apple iPad and Amazon Kindle), the Internet, and
handheld game players (such as the PlayStation Portable (“PSP”) and the Nintendo DS and 3DS). Some of our
games are based on content that we license from others (e.g., FIFA, Madden NFL, Harry Potter, and Hasbro’s toy
and game intellectual properties), and some of our games are based on our own wholly-owned intellectual
property (e.g., The Sims, Need for Speed, and Dead Space). Our goal is to publish titles with global mass-market
appeal, which often means translating and localizing them for sale in non-English speaking countries. In addition,
we also attempt to create software game “franchises” that allow us to publish new titles on a recurring basis that
are based on the same property. Examples of this franchise approach are the annual iterations of our sports-based
products (e.g., FIFA, Madden NFL, and NCAA Football), wholly-owned properties that can be successfully
sequeled (e.g., The Sims, Need for Speed, and Battlefield) and titles based on long-lived literary and/or movie
properties (e.g., Harry Potter).
Financial Results
Total net revenue for the fiscal year ended March 31, 2011 was $3,589 million, down $65 million as compared to
the fiscal year ended March 31, 2010. At March 31, 2011, deferred net revenue associated with sales of online-
enabled packaged goods and digital content increased by $239 million as compared to March 31, 2010, directly
reducing the amount of reported net revenue during the fiscal year ended March 31, 2011. At March 31, 2010,
deferred net revenue associated with sales of online-enabled packaged goods and digital content increased by
$505 million as compared to March 31, 2009, directly reducing the amount of reported net revenue during the
fiscal year ended March 31, 2010. Without these changes in deferred net revenue, reported net revenue would
have decreased by approximately $331 million during fiscal year 2011 as compared to fiscal year 2010. Net
revenue for fiscal year 2011 was driven by FIFA 11, Battlefield: Bad Company 2 and Madden NFL 11.
Net loss for the fiscal year ended March 31, 2011 was $276 million as compared to a net loss of $677 million for
the fiscal year ended March 31, 2010. Diluted loss per share for the fiscal year ended March 31, 2011 was $0.84
as compared to a diluted loss per share of $2.08 for the fiscal year ended March 31, 2010. Net loss decreased for
fiscal year 2011 as compared to fiscal year 2010 primarily as a result of (1) a $302 million increase in gross
profit due to a decrease in the change in deferred net revenue related to certain online-enabled packaged goods
and digital content and a greater percentage of net revenue from EA studio and digital products, which have
higher margins than our co-publishing and distribution products, (2) a $76 million decrease in research and
development costs, and (3) a $49 million increase in our gains (losses) on strategic investments, net. These
decreases were partially offset by (1) a $26 million decrease in the benefit from income taxes and (2) an increase
of $21 million in restructuring and other charges primarily from our fiscal 2011 restructuring.
During fiscal year 2011, we generated $320 million of cash from operating activities as compared to generating
$152 million in fiscal year 2010. The increase in cash provided by operating activities in fiscal year 2011 as
compared to fiscal year 2010 was primarily due to (1) a greater percentage of net revenue from EA studio and
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