2K Sports 2008 Annual Report Download - page 13

franchises for which we can create sequels. We develop most of our frontline products internally and own
the intellectual property associated with most of our titles, which we believe best positions us financially
and competitively. We have established a portfolio of proprietary software content for the major hardware
platforms in a wide range of genres including action, adventure, racing, role-playing, sports and strategy.
We believe that our commitment to creativity and innovation is a distinguishing strength, allowing us to
differentiate many of our products in the marketplace by combining advanced technology with compelling
story lines and characters that provide unique gameplay experiences for consumers. We have created,
acquired or licensed a group of highly recognizable brands to match the variety of consumer demographics
we aspire to serve, ranging from adults to children and game enthusiasts to casual gamers.
Support Multiple Labels to Target Distinct Market Segments. We publish our titles under four separate labels:
Rockstar Games, 2K Games, 2K Sports and 2K Play, with each label focused on distinct product genres
and target demographics. We expect Rockstar Games, our wholly-owned publisher of the hit Grand Theft
Auto and Midnight Club franchises, to continue to be a leader in the action product category by leveraging
our existing titles as well as developing new brands. We expect 2K Games, developer and publisher of our
successful Sid Meier’s Civilization series and our critically acclaimed BioShock title, to continue to develop
new and successful franchises in the future. Our 2K Sports series, which includes Major League Baseball
2K, NBA 2K and NHL 2K, provides us with consistent revenue streams because we publish them on an
annual basis. We established the 2K Play label to focus on the growing market of casual and family-
oriented games. Carnival Games has been a strong performing, internally developed and owned franchise,
and 2K Play has leveraged this brand through sequels and product extensions, including Carnival Games↩
MiniGolf. We have expansion initiatives in the rapidly growing Asia Pacific markets, where our strategy is
to broaden the distribution of our existing products, develop a presence in Japan, and establish an online
gaming presence, especially in China and Korea.
Maximize Product Selection and Development. Our primary strategy is to publish a select number of high
quality titles based on internally owned and developed intellectual property, which typically provide higher
margins than licensed products. We currently have over 15 proprietary brands which we expect to leverage
in the future. In addition, we will selectively develop titles based on licensed properties, including sports,
and also publish externally developed titles.
We use a product investment review process to evaluate potential titles for investment, to review existing
titles in development, and to review titles after their release to assess product performance. We apply this
process to all of our products, whether externally or internally developed. The product investment review
process includes in-depth reviews of each project at various stages of development by our executive
management team and senior management of our publishing labels, and includes coordination between
our sales and marketing personnel before the launch of the titles. This disciplined approach to product
investment is expected to enhance the competitiveness and profitability of our titles.
We develop our products using a combination of our internal and external development resources acting
under contract with us. We typically select our external developers based on their track record and
expertise in developing products in the same category or genre. One developer will often produce the same
game for multiple platforms and will also produce sequels to an original game. We believe that selecting
and using development resources in this manner allows us to leverage the particular expertise of our
internal and external development resources, which we believe increases the quality of our products.
Diversify Revenue by Title, Genre, Platform, and Target Demographic. We believe the diversification of our
product mix will reduce our operating risks and increase our revenue. We expect to increase revenue in our
sports business as the installed base of current generation hardware grows and consumers purchase sports
titles for these newer platforms, which generally sell at higher price points than software for prior
generation systems. We also plan to develop and market additional titles under our Major League Baseball
license and continue to focus on maximizing the quality of all of our sports titles. In addition, we expect to
offer a wider variety of titles for an expanded group of customers through our 2K Play label, which is
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