Electronic Arts 2011 Annual Report Download - page 129

Annual Report
sales objectives, the impact of acquisitions and other strategic transactions in which we may engage, the impact
of competition, economic conditions in the United States and abroad, the seasonal and cyclical nature of our
business and operating results, risks of product returns and the other risks described in the “Risk Factors” section,
included in Part I, Item 1A of this report.
Contractual Obligations and Commercial Commitments
Development, Celebrity, League and Content Licenses: Payments and Commitments
The products we produce in our studios are designed and created by our employee designers, artists, software
programmers and by non-employee software developers (“independent artists” or “third-party developers”). We
typically advance development funds to the independent artists and third-party developers during development of
our games, usually in installment payments made upon the completion of specified development milestones.
Contractually, these payments are generally considered advances against subsequent royalties on the sales of the
products. These terms are set forth in written agreements entered into with the independent artists and third-party
developers.
In addition, we have certain celebrity, league and content license contracts that contain minimum guarantee
payments and marketing commitments that may not be dependent on any deliverables. Celebrities and
organizations with whom we have contracts include: FIFA, FIFPRO Foundation, FAPL (Football Association
Premier League Limited), and DFL Deutsche Fußball Liga GmbH (German Soccer League) (professional
soccer); National Basketball Association (professional basketball); PGA TOUR and Tiger Woods (professional
golf); National Hockey League and NHL Players’ Association (professional hockey); Warner Bros. (Harry
Potter); National Football League Properties, PLAYERS Inc., and Red Bear Inc. (professional football);
Collegiate Licensing Company (collegiate football); ESPN (content in EA SPORTS games); Hasbro, Inc. (most
of Hasbro’s toy and game intellectual properties); LucasArts and Lucas Licensing (Star Wars: The Old
Republic), and the Estate of Robert Ludlum (Robert Ludlum novels and films). These developer and content
license commitments represent the sum of (1) the cash payments due under non-royalty-bearing licenses and
services agreements and (2) the minimum guaranteed payments and advances against royalties due under royalty-
bearing licenses and services agreements, the majority of which are conditional upon performance by the
counterparty. These minimum guarantee payments and any related marketing commitments are included in the
table below.
The following table summarizes our unrecognized minimum contractual obligations as of March 31, 2011, and
the effect we expect them to have on our liquidity and cash flow in future periods (in millions):
Contractual Obligations
Fiscal Year Ending March 31, Leases(a)
Developer/
Licensor
Commitments Marketing
Other
Purchase
Obligations Total
2012 ..................................... $ 44 $ 331 $ 90 $ 8 $ 473
2013 ..................................... 36 199 37 3 275
2014 ..................................... 26 124 66 3 219
2015 ..................................... 21 114 32 2 169
2016 ..................................... 15 83 33 — 131
Thereafter ................................ 9 366 95 — 470
Total ................................ $151 $1,217 $353 $16 $1,737
(a) See discussion on operating leases in the “Off-Balance Sheet Commitments” section below for additional
information. Lease commitments have not been reduced by minimum sub-lease rentals for unutilized office
space resulting from our reorganization activities of approximately $12 million due in the future under
non-cancelable sub-leases.
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