Electronic Arts 2011 Annual Report Download - page 85

Annual Report
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 a percentage royalty on the revenue we derive
from downloaded content.
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 on Blu-ray Disc, CD, DVD, cartridge or Universal Media Disc format) that are typically sold by 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.
Our direct sales to GameStop Corp. represented approximately 16 percent, 16 percent and 14 percent of total net
revenue in fiscal years 2011, 2010 and 2009, respectively. Our direct sales to Wal-Mart Stores, Inc. represented
approximately 10 percent, 12 percent and 14 percent of total net revenue in fiscal years 2011, 2010 and 2009,
respectively. We sell our products to GameStop Corp. and Wal-Mart Stores, Inc. pursuant to numerous and
frequent individual purchase orders, which contain delivery and pricing terms. There are no minimum sales or
purchase commitments between us and either GameStop or Wal-Mart.
Mobile Carriers
We have agreements to distribute our mobile applications through more than 320 distribution partners in over 55
countries. Consumers download our applications on their mobile devices and if the application is not a
“free-to-download” application, the distributor invoices them either a one-time or monthly subscription fee. Our
distribution agreements establish the fees to be retained by the distributor for distributing our applications. These
arrangements are typically terminable on short notice. The agreements generally do not obligate the distributors
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 to provide these developers with a
variety of services including development assistance, publishing, and distribution. For example, through
agreements with Crytek and Epic Games, we have released Crysis 2 and Bulletstorm, respectively.
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