Electronic Arts 2012 Annual Report Download - page 93

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 and the console manufacturers pay us either a
wholesale price or a percentage royalty on the revenue they derive from the distribution of our online content or
services.
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 regarding our games and services, including any
claims for patent, 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. The manufacturers are not obligated to enter into platform
license agreements with us for any future consoles, products or services.
Apple, Google and Other Mobile Carriers. We have agreements to distribute our mobile applications through
distribution partners worldwide, including Apple and Google. 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 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.
Facebook. We have an agreement with Facebook that revises certain of Facebook’s standard terms and
conditions as applied to our use of the Facebook platform; the changes to the Facebook standard terms include
the use and collection of data, operation of our game applications, including payments and promotions, as well as
other provisions dealing with the rights and obligations of Facebook and us. This agreement also requires the use
of Facebook Credits as the payment method for our games on the Facebook platform; for each purchase of
Facebook Credits in any of our games on the Facebook platform, we share 30 percent of the revenue. The
agreement with Facebook expires in October 2015.
Retailers
As our business becomes increasingly digital, our products and services are purchased over the Internet through
Origin, our direct-to-consumer platform, or through digital downloads from third party retailers or through
mobile application storefronts.
In North America and Europe, our largest markets, we sell packaged goods products 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).
Our direct sales to GameStop Corp. represented approximately 15 percent, 16 percent and 16 percent of total net
revenue in fiscal years 2012, 2011 and 2010, respectively. Our direct sales to Wal-Mart Stores, Inc. represented
approximately 10 percent and 12 percent of total net revenue in fiscal years 2011 and 2010, respectively. Our
direct sales to Wal-Mart Stores, Inc. did not exceed 10 percent of net revenue for the fiscal year ended March 31,
2012. 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.
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.
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