Electronic Arts 2014 Annual Report Download - page 82

Item 1A. Risk Factors
Our business is subject to many risks and uncertainties, which may affect our future financial performance. If any
of the events or circumstances described below occurs, our business and financial performance could be harmed,
our actual results could differ materially from our expectations and the market value of our stock could decline.
The risks and uncertainties discussed below are not the only ones we face. There may be additional risks and
uncertainties not currently known to us or that we currently do not believe are material that may harm our
business and financial performance.
Our business is intensely competitive and “hit” driven. If we do not deliver “hit” products and services, or
if consumers prefer our competitors’ products or services over our own, our operating results could suffer.
Competition in our industry is intense. Many new products and services are regularly introduced in each major
industry segment (console, mobile and PC free-to-play), but only a relatively small number of “hit” titles account
for a significant portion of total revenue in each segment. Our competitors range from large established
companies to emerging start-ups, and we expect new competitors to continue to emerge throughout the world. If
our competitors develop and market more successful products or services, offer competitive products or services
at lower price points or based on payment models perceived as offering a better value proposition, or if we do not
continue to develop consistently high-quality and well-received products and services, our revenue, margins, and
profitability will decline.
In recent years, we have narrowed our product portfolio in an effort to focus on developing high-quality products
with the potential to become “hits”. High-quality titles, even if highly-reviewed, may not turn into “hit” products.
Many “hit” products within our industry are iterations of prior hit products with large established consumer bases
and significant brand recognition, which makes competing in certain product categories challenging. In addition,
hit products or services of our competitors may take a larger share of consumer spending than we anticipate,
which could cause our products and services to underperform relative to revenue expectations. Publishing fewer
major titles also concentrates risk in a smaller number of titles and means each major title has greater associated
risk. The underperformance of a single major title may have a large adverse impact on our financial results.
Our operating results will be adversely affected if we do not consistently meet our product development
schedules or if key events or sports seasons that we tie our product release schedules to are delayed or
cancelled.
Our business is highly seasonal with the highest levels of consumer demand and a significant percentage of our
sales occurring in the quarter ending in December and a seasonal low in sales volume in the quarter ending in
June. While our sales generally follow this seasonal trend, there can be no assurance that this trend will continue.
If we miss key selling periods for products, for any reason, including product delays, product cancellations, or
delayed introduction of a new platform for which we have developed products, our sales are likely to suffer
significantly. Additionally, macroeconomic conditions or the occurrence of unforeseen events that negatively
impact retailer or consumer buying patterns during the quarter ending in December are likely to affect us
disproportionately. Our ability to meet product development schedules is affected by a number of factors both
within and outside our control, including the creative processes involved, the coordination of large and
sometimes geographically dispersed development teams, the increasing complexity of our products and the
platforms for which they are developed, and the need to fine-tune our products prior to their release. We have
experienced development delays for our products in the past, which caused us to push back or cancel release
dates. We also seek to release certain products in conjunction with key events, such as the beginning of a sports
season or major sporting event, or the release of a related movie. If a key event or sports season to which our
product release schedule is tied were to be delayed or cancelled, our sales would likely suffer disproportionately.
In the future, any failure to meet anticipated production or release schedules would likely result in a delay of
revenue and/or possibly a significant shortfall in our revenue, increase our development and/or marketing
expenses, harm our profitability, and cause our operating results to be materially different than anticipated.
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