Electronic Arts 2013 Annual Report Download - page 139

Annual Report
Our ability to maintain sufficient liquidity could be affected by various risks and uncertainties including, but not
limited to, those related to customer demand and acceptance of our products, our ability to collect our accounts
receivable as they become due, successfully achieving our product release schedules and attaining our forecasted
sales objectives, the impact of acquisitions and other strategic transactions in which we may engage, the impact
of competition, economic conditions in the United States and abroad, the seasonal and cyclical nature of our
business and operating results, risks of product returns and the other risks described in the “Risk Factors” section,
included in Part I, Item 1A of this report.
Contractual Obligations and Commercial Commitments
Development, Celebrity, League and Content Licenses: Payments and Commitments
The products we produce in our studios are designed and created by our employee designers, artists, software
programmers and by non-employee software developers (“independent artists” or “third-party developers”). We
typically advance development funds to the independent artists and third-party developers during development of
our games, usually in installment payments made upon the completion of specified development milestones.
Contractually, these payments are generally considered advances against subsequent royalties on the sales of the
products. These terms are set forth in written agreements entered into with the independent artists and third-party
developers.
In addition, we have certain celebrity, league and content license contracts that contain minimum guarantee
payments and marketing commitments that may not be dependent on any deliverables. Celebrities and
organizations with whom we have contracts include: FIFA, FIFPRO Foundation, FAPL (Football Association
Premier League Limited), and DFL Deutsche Fußball Liga GmbH (German Soccer League) (professional
soccer); National Basketball Association (professional basketball); PGA TOUR, Tiger Woods and Augusta
National (professional golf); National Hockey League and NHL Players’ Association (professional hockey);
National Football League Properties, PLAYERS Inc., and Red Bear Inc. (professional football); Collegiate
Licensing Company (collegiate football); Zuffa, LLC (Ultimate Fighting Championship); ESPN (content in EA
SPORTS games); Hasbro, Inc. (most of Hasbro’s toy and game intellectual properties); and LucasArts and Lucas
Licensing (Star Wars: The Old Republic). These developer and content license commitments represent the sum
of (1) the cash payments due under non-royalty-bearing licenses and services agreements and (2) the minimum
guaranteed payments and advances against royalties due under royalty-bearing licenses and services agreements,
the majority of which are conditional upon performance by the counterparty. These minimum guarantee
payments and any related marketing commitments are included in the table below.
The following table summarizes our minimum contractual obligations as of March 31, 2013, and the effect we
expect them to have on our liquidity and cash flow in future periods (in millions):
Fiscal Year Ending March 31,
Total 2014 2015 2016 2017 2018 Thereafter
Unrecognized commitments
Developer/licensor commitments ................. $1,144 $158 $178 $228 $ 69 $53 $458
Marketing commitments ........................ 223 37 47 35 20 20 64
Operating leases .............................. 174 50 44 32 17 13 18
0.75% Convertible Senior Notes due 2016 interest(a) .... 175552— —
Other purchase obligations ...................... 39 28 9 2 — — —
Total unrecognized commitments ................ 1,597 278 283 302 108 86 540
Recognized commitments
0.75% Convertible Senior Notes due 2016 principal(a) ..633———633— —
Licensing and lease obligations(b) ................. 71 25 18 6 20 1 1
Total recognized commitments .................. 704 25 18 6 653 1 1
Total Commitments ........................... $2,301 $303 $301 $308 $761 $87 $541
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