Electronic Arts 2012 Annual Report Download - page 114

Trends in Our Business
Digital Content Distribution and Services. Consumers are spending an ever-increasing portion of their money
and time on interactive entertainment that is accessible online, or through mobile digital devices such as smart
phones, or through social networks such as Facebook. We provide a variety of online-delivered products and
services including through our Origin platform. Many of our games that are available as packaged goods
products are also available through direct online download through the Internet. We also offer online-delivered
content and services that are add-ons or related to our packaged goods products such as additional game content
or enhancements of multiplayer services. Further, we provide other games, content and services that are available
only via electronic delivery, such as Internet-only games and game services, and games for mobile devices.
Advances in mobile technology have resulted in a variety of new and evolving devices that are being used to play
games by an ever-broadening base of consumers. We have responded to these advances in technology and
consumer acceptance of digital distribution by offering different sales models, such as subscription services,
online downloads for a one-time fee, micro-transactions and advertising-supported free-to-play games and game
sites. In addition, we offer our consumers the ability to play a game across platforms on multiple devices. We
significantly increased the revenues that we derive from wireless, Internet-derived and advertising (digital)
products and services from $743 million in fiscal year 2011 to $1,159 million in fiscal year 2012 and we expect
this portion of our business to continue to grow in fiscal 2013 and beyond.
Wireless and Other Emerging Platforms. Advances in technology have resulted in a variety of platforms for
interactive entertainment. Examples include wireless technologies, streaming gaming services, and Internet
platforms. Our efforts in wireless interactive entertainment are focused in downloadable games for mobile
devices. These platforms grow the consumer base for our business while also providing competition to existing
established video game platforms. We expect sales of games for wireless and other emerging platforms to
continue to be an important part of our business.
Growth of Casual and Social Games. The popularity of wireless and other emerging gaming platforms such as
smart phones, tablets and social networking sites, such as Facebook, has led to the growth of casual and social
gaming. Casual and social games are characterized by their mass appeal, simple controls, flexible monetization
including free-to-play and micro-transaction business models, and fun and approachable gameplay. These games
appeal to a larger consumer demographic of younger and older players and more female players than video
games played on console devices. These areas are among the fastest growing segments of our sector and we have
responded to this opportunity by developing casual and social games based on our established intellectual
properties such as The Sims, FIFA and Battlefield, and with our acquisition of PopCap Games. We expect sales
of casual and social and casual games for wireless and other emerging platforms to continue to be an important
part of our business.
Concentration of Sales Among the Most Popular Games. We see a larger portion of packaged goods games
sales concentrated on the most popular titles, and those titles are typically sequels of prior games. We have
responded to this trend by significantly reducing the number of games that we produce to provide greater focus
on our most promising intellectual properties. We published 36 primary packaged goods titles in fiscal year 2011,
22 in fiscal year 2012 and in fiscal year 2013, we expect to release 14 primary packaged goods titles and plan to
build additional online features, content and services around each of these titles.
Evolving Sales Patterns. Our business has evolved from a traditional packaged goods business model to one
where our games are played on a variety of platforms including mobile devices and social networking sites. Our
strategy is to transform our core intellectual properties into year-round businesses, with a steady flow of
downloadable content and extensions on new platforms. Our increasingly digital, multi-platform business no
longer reflects the retail sales patterns associated with traditional packaged goods launches. For example, we
offer our consumers additional services and/or additional content available through online services to further
enhance the gaming experience and extend the time that consumers play our games after their initial purchase.
Our social and casual games offer free-to-play and micro-transaction models. We also offer subscription-based
products, such as our MMO role-playing game Star Wars: The Old Republic. The revenues we derive from these
services has become increasingly more significant year-over-year. Our service revenue represented 13 percent, 8
percent, and 6 percent of total net revenue in fiscal year 2012, 2011, and 2010, respectively.
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