2K Sports 2008 Annual Report Download - page 11

This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties.
Forward-looking statements can be identified by words such as ‘‘may,’’ ‘‘anticipates,’’ ‘‘estimates,’’ ‘‘expects,’’
‘‘believes,’’ ‘‘plans,’’ ‘‘predicts,’’ and similar terms. Forward-looking statements are not guarantees of future
performance and our actual results may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such differences include, but are not limited to, those discussed in ‘‘Risk
Factors.’’ Unless otherwise stated, references in this Form 10-K to a particular year or quarter refer to our fiscal
year ended October 31 or to the associated quarter of that fiscal year. We assume no obligation to revise or
update any forward-looking statements for any reason, except as required by law.
PART I
Item 1. Business
General
We are a global publisher, developer and distributor of interactive entertainment software, hardware and
accessories. Our publishing segment consists of our Rockstar Games, 2K Games, 2K Sports and 2K Play
publishing labels. We develop, market and publish software titles for the leading gaming and entertainment
hardware platforms including: Sony’s PLAYSTATION↦3 (‘‘PS3’’) and PlayStation↦2 (‘‘PS2’’) computer
entertainment systems; Sony’s PSP↦ (PlayStation↦Portable) (‘‘PSP’’) system; Microsoft’s Xbox 360↦
(‘‘Xbox 360’’) video game and entertainment system; Nintendo’s Wii↩ (‘‘Wii’’) and DS↩ (‘‘DS’’) systems;
and for the PC and Games for Windows↦. The installed base for the prior generation of console
platforms, including PS2 (‘‘prior generation platforms’’) is substantial. The release of the PS3, Xbox 360,
and Wii platforms (‘‘current generation platforms’’) has further expanded the video game software market.
We are continuing to increase the number of titles released on the current generation platforms while also
developing titles for certain prior generation platforms such as PS2 and DS given their significant installed
base, as long as it is economically attractive to do so. Our distribution segment, which primarily consists of
our Jack of All Games subsidiary, distributes our products as well as software, hardware and accessories
produced by others to retail outlets in North America.
Expanding gamer demographics have driven demand for interactive entertainment software in recent
years, with video games becoming a mainstream entertainment choice for a maturing, sophisticated
audience. According to the Entertainment Software Association, U.S. computer and video game software
sales grew six percent in 2007 to $9.5 billion—more than tripling industry software sales since 1996. At
least half of all Americans claim to play PC or video games, with an estimated 65% of heads of households
playing games. The average game player is 35 years old and has been playing for nearly 13 years. The
‘‘Global Entertainment and Media Outlook: 2008-2012’’ published by PricewaterhouseCoopers’ Global
Entertainment and Media Practice estimates that the video game industry is expected to grow from
$48.3 billion in global sales in 2008 to $68.3 billion in 2012, a compounded annual growth rate of
approximately 10.3%. The largest category is console games, which is expected to grow from $27.8 billion
in 2008 to $34.7 billion in 2012, a compounded annual growth rate of approximately 6.9%.
The video game industry is cyclical and the installed base of hardware platforms has historically had a
significant effect on the demand for gaming software. In 2008, we saw demand for prior generation gaming
software diminish as consumers continued to upgrade to the current generation of hardware platforms. In
fiscal 2008, we developed and published nine titles for PS3, ten titles for Xbox 360, nine titles for the Wii,
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