Electronic Arts 2015 Annual Report Download - page 78

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. 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. 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.
The platform license agreements also require us to indemnify the console manufacturers with respect to all loss,
liability and expense resulting from any claim against the console manufacturer regarding our games and
services, including any claims for patent, copyright or trademark infringement brought against the console
manufacturer. Each platform license may be terminated by the console manufacturer if a breach or default by us
is not cured after we receive written notice from the console manufacturer, or if we become insolvent. The
console 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 charges 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
may still charge the consumer for additional content that is purchased by the consumer within the application.
Our distribution agreements establish the fees to be retained by the distributor for distributing our applications
and additional content. These arrangements are typically terminable on short notice. The agreements generally do
not obligate the distributors to market or distribute any of our applications.
Publishing Partners in Asia. We have entered into agreements whereby we partner with certain companies,
including Tencent Holdings Limited and Nexon Co., Ltd. or their respective affiliates, pursuant to which these
companies publish our mobile and PC free-to-download games in certain Asian territories, including China and
Korea. Our players download games from the publishers’ platforms, and are charged for additional content
purchased within our game environment. The agreements generally establish the amounts that are retained by the
publishers, and the amounts that are passed through to us.
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 11 percent, 13 percent and 13 percent of total net
revenue in fiscal years 2015, 2014, and 2013, respectively. In fiscal year 2015, our direct sales to Microsoft
represented approximately 10 percent of total net revenue. Our direct sales to Microsoft did not exceed 10
percent of net revenue in fiscal years 2014 and 2013. We sell our products to GameStop Corp. 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 GameStop.
As our business becomes increasingly digital, more of our products and services are purchased from a digital
retailer and delivered via a network connection. Our digital retail outlets include Origin (our direct-to-consumer
platform), mobile application storefronts, the digital marketplaces operated by Sony for PlayStation 3 and
PlayStation 4 and Microsoft for Xbox 360 and Xbox One, and various third party retailers offering digital game
downloads.
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