Electronic Arts 2012 Annual Report Download - page 89

Annual Report
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. On a
non-GAAP basis, our digital revenue has grown significantly from fiscal year 2009 to fiscal year 2012 and the
average revenue of our ten best-selling brands has continued to increase each year during this same period. Our
profitability has also increased as digital revenue becomes a greater portion of our business, reflecting the lower
cost of digital revenue.
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. We expect sales of
social and casual games for wireless and other emerging platforms to continue to be an important part of our
business.
Global Operations
We were initially incorporated in California in 1982. In September 1991, we were reincorporated under the laws
of Delaware. Our principal executive offices are located at 209 Redwood Shores Parkway, Redwood City,
California 94065 and our telephone number is [phone].
We operate development studios (which develop products and perform other related functions) in North America,
Europe, Asia and Australia. We also engage third parties to assist with the development of our games at their
own development and production studios. Internationally, we conduct business through our international
headquarters in Switzerland and have wholly-owned subsidiaries throughout the world, including offices in
Europe, Australia, Asia and Latin America.
Our North America net revenue, which was primarily generated in the United States, was $1,991 million in fiscal
year 2012, as compared to $1,836 million in fiscal year 2011 and $2,025 million in fiscal year 2010. International
net revenue (revenue derived from countries other than Canada and the United States) increased by 23 percent to
$2,152 million, or 52 percent of total net revenue in fiscal year 2012, as compared to $1,753 million, or 49
percent of total net revenue in fiscal year 2011 and as compared to $1,629 million, or 45 percent of total net
revenue in fiscal year 2010. The amounts of net revenue and long-lived assets attributable to each of our
geographic regions for each of the last three fiscal years are set forth in Note 18 of the Notes to Consolidated
Financial Statements, included in Item 8 of this report.
In fiscal year 2012, revenue from sales of FIFA 12 and Battlefield 3 represented approximately 13 percent and
11 percent, respectively of our total net revenue. In fiscal year 2011, revenue from sales of FIFA 11 represented
approximately 11 percent of our total net revenue. In fiscal years 2010, no title accounted for 10 percent or more
of our total net revenue.
For the fiscal years ended March 31, 2012, 2011 and 2010, research and development expenses were
$1,212 million, $1,153 million and $1,229 million, respectively.
Our Operating Structure
Our studios and development teams are organized around our Label structure. Each Label operates globally with
dedicated game development and marketing teams. These Labels are supported by our Global Publishing
Organization that is responsible for the distribution, sales, and marketing of our products, including strategic
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