Electronic Arts 2014 Annual Report Download - page 98

Trends in Our Business
Console System Transition. In November 2013, the PlayStation 4 from Sony and Xbox One from Microsoft
were released. EA delivered five major products for each of these new-generation console systems around the
time of their launch, and we are continuing to make significant investments in products and services for these
new consoles. We also expect to continue to develop and market products and services for the Microsoft Xbox
360 and the Sony PlayStation 3. Industry sales of major games for these legacy consoles declined significantly
during our 2014 fiscal year. This sales decline trend is likely to continue and may accelerate. The success of our
products and services for the new-generation consoles depends in part on the commercial success and adequate
supply of, as well as our ability to develop commercially successful products and services for, these consoles.
Digital Transformation. Our business continues to transform from a traditional packaged goods business model
to one in which our games and services are sold and delivered via a network connection, with digitally-delivered
content, features and services helping to extend the life of the respective game offering. For example, many of
our products that traditionally have been sold only as packaged goods products can now also be purchased and
downloaded via a network connection. We also include digitally-delivered content, features and services as part
of the product offering, either made available for free or at additional cost. Additionally, our mobile and PC free-
to-play games are available solely via digital delivery and are typically monetized through a micro-transaction
business model through which we sell incremental content and/or features in discrete transactions.
We significantly increased the digital revenue that we derive from wireless, Internet-derived and advertising
products and services from $1,159 million in fiscal year 2012 to $1,440 million in fiscal year 2013. During fiscal
year 2014, digital revenue was $1,833 million and we expect this portion of our business to continue to grow in
fiscal 2015 and beyond.
Mobile and PC Free-to-Play Games. The proliferation of mobile phones and tablets has significantly increased
the consumer base for mobile games. The broad consumer acceptance of free-to-play business models, which
allow consumers to try new games with no up-front cost and pay for additional content or in-game items through
micro-transactions, has led to growth in the mobile gaming industry. Likewise, the mass introduction and wide
consumer acceptance of free-to-play, micro-transaction-based PC games played over the Internet has also
broadened our consumer base. We expect revenue generated from mobile and PC free-to-play games to remain
an important part of our business.
Concentration of Sales Among the Most Popular Games. In all major segments of our industry, we see a larger
portion of games sales concentrated on the most popular titles, and many of those titles are sequels of prior
games. We have responded to this trend by significantly reducing the number of games that we produce to
provide greater focus on our most promising intellectual properties. For example, in fiscal year 2011, we
published over 30 titles for consoles and PC, while in fiscal year 2014 we published 11; in fiscal year 2015, we
expect to release 10 titles for console and PC. We have similarly reduced the number of major mobile titles that
we publish.
Recent Developments
Stock Repurchase Program. In May 2014, a special committee of our Board of Directors, on behalf of the full
Board of Directors, authorized a new program to repurchase up to $750 million of our common stock. This new
stock repurchase program, which expires on May 31, 2016, supersedes and replaces the stock repurchase
authorization approved by our Board of Directors in July 2012. Under this program, we may purchase stock in
the open market or through privately-negotiated transactions in accordance with applicable securities laws,
including pursuant to pre-arranged stock trading plans. The timing and actual amount of the stock repurchases
will depend on several factors including price, capital availability, regulatory requirements, alternative
investment opportunities and other market conditions. We are not obligated to repurchase any specific number of
shares under this program and it may be modified, suspended or discontinued at any time.
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