Electronic Arts 2014 Annual Report Download - page 78

Significant Relationships
Channel Partners
Sony. Under the terms of agreements we have entered into with Sony Computer Entertainment Inc. and its
affiliates, we are authorized to develop and distribute disc-based and digitally-delivered software products and
services compatible with PlayStation 3 and 4. As of the date of this filing, we have not entered into a new
licensed publisher agreement with Sony for PlayStation 4, and the parties currently operate under the terms of
existing agreements subject to a new pricing structure with respect to PlayStation 4.
Microsoft. Under the terms of agreements we have entered into with Microsoft Corporation and its affiliates, we
are authorized to develop and distribute disc-based and digitally-delivered software products and services
compatible with Xbox 360 and Xbox One. Our publisher license agreement with Microsoft to publish our
products for Xbox One is included in Exhibit 10.27 of this Form 10-K.
Under the agreements with Sony and Microsoft, we are provided with the non-exclusive right to use, for a fixed
term and in a designated territory, technology that is owned or licensed by the console manufacturer in order to
publish our games on such platform. Our transactions for disc-based products are made pursuant to individual
purchase orders, which are accepted on a case-by case basis by Sony or Microsoft (or their designated
replicators), as the case may be. Many key commercial terms of our relationships with Sony and Microsoft –
such as manufacturing terms, delivery times, platform policies and approval conditions – are determined
unilaterally, and are subject to change by the console manufacturers. For packaged goods products, we pay the
console manufacturers a per-unit royalty for each unit manufactured. With respect to digitally-delivered products,
other online content and services sold by the console manufacturers, the console manufacturers pay us either a
wholesale price or a percentage royalty on the revenue they derive from their sales.
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 App Stores. We have agreements to distribute our mobile applications through
distribution partners worldwide, including Apple and Google. Consumers download our applications for their
mobile devices from third party-application storefronts. The distributor invoices the consumers a one-time fee if
there is a cost to download the application. If the application is a “free-to-download” application, the distributor
invoices the consumer for micro-transactions that are purchased by the consumer within the application. 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.
Retailers
In North America and Europe, our largest markets, we sell packaged goods products to retailers, including mass
market retailers (such as Walmart), electronics specialty stores (such as Best Buy) or game software specialty
stores (such as GameStop).
Our direct sales to GameStop Corp. represented approximately 13 percent, 13 percent and 15 percent of total net
revenue in fiscal years 2014, 2013, and 2012, respectively. Our direct sales to Walmart Stores, Inc. represented
approximately 10 percent of total net revenue in fiscal year 2012. Our direct sales to Wal-Mart Stores, Inc. did
not exceed 10 percent of net revenue for the fiscal years ended March 31, 2014 and 2013. 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.
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