Electronic Arts 2013 Annual Report Download - page 101

Annual Report
the financial terms on which these products or services are offered to our customers, our business could be
harmed.
Acquisitions, investments and other strategic transactions could result in operating difficulties, dilution to
our investors and other negative consequences.
We expect to continue making acquisitions or entering into other strategic transactions including (1) acquisitions
of companies, businesses, intellectual properties, and other assets, (2) minority investments in strategic partners,
and (3) investments in new interactive entertainment businesses (e.g., online and mobile publishing platforms) as
part of our long-term business strategy. These transactions involve significant challenges and risks including that
the transaction does not advance our business strategy, that we do not realize a satisfactory return on our
investment, that we acquire unknown liabilities, or that we experience difficulty in the integration of business
systems and technologies, the integration and retention of new employees, or in the maintenance of key business
and customer relationships of the businesses we acquire, or diversion of management’s attention from our other
businesses. These events could harm our operating results or financial condition.
Future acquisitions and investments could also involve the issuance of our equity and equity-linked securities
(potentially diluting our existing stockholders), the incurrence of debt, contingent liabilities or amortization
expenses, write-offs of goodwill, intangibles, or acquired in-process technology, or other increased cash and non-
cash expenses, such as stock-based compensation. Any of the foregoing factors could harm our financial
condition or prevent us from achieving improvements in our financial condition and operating performance that
could have otherwise been achieved by us on a stand-alone basis. Our stockholders may not have the opportunity
to review, vote on or evaluate future acquisitions or investments.
If we are unable to maintain or acquire licenses to include intellectual property owned by others in our
games, or to maintain or acquire the rights to publish or distribute games developed by others, we will sell
fewer hit titles and our revenue, profitability and cash flows will decline. Competition for these licenses
may make them more expensive and reduce our profitability.
Many of our products are based on or incorporate intellectual property owned by others. For example, our EA
SPORTS products include rights licensed from major sports leagues and players’ associations. Similarly, many
other franchises are based on film and literary licenses and our Hasbro products are based on a license for certain
of Hasbro’s toy and game properties. Competition for these licenses and rights is intense. If we are unable to
maintain these licenses and rights or obtain additional licenses or rights with significant commercial value, our
revenues, profitability and cash flows will decline significantly. Competition for these licenses may also drive up
the advances, guarantees and royalties that we must pay to licensors and developers, which could significantly
increase our costs and reduce our profitability.
Our business is subject to risks generally associated with the entertainment industry, any of which could
significantly harm our operating results.
Our business is subject to risks that are generally associated with the entertainment industry, many of which are
beyond our control. These risks could negatively impact our operating results and include: the popularity, price
and timing of our games and the platforms on which they are played; economic conditions that adversely affect
discretionary consumer spending; changes in consumer demographics; the availability and popularity of other
forms of entertainment; and critical reviews and public tastes and preferences, which may change rapidly and
cannot necessarily be predicted.
We rely on business partners in many areas of our business and our business may be harmed if they are
unable to honor their obligations to us.
We rely on various business partners, including third-party service providers, vendors, licensing partners,
development partners, and licensees, among others, in many areas of our business. In many cases, these third
parties are given access to sensitive and proprietary information in order to provide services and support to our
teams. These third parties may misappropriate our information and engage in unauthorized use of it. The failure
of these third parties to provide adequate services and technologies, or the failure of the third parties to
adequately maintain or update their services and technologies, could result in a disruption to our business
operations. Further, disruptions in the financial markets and economic downturns may adversely affect our
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