2K Sports 2008 Annual Report Download - page 17

Manufacturing
Sony, Nintendo and Microsoft either manufacture or control selection of approved manufacturers of
software products sold for use on their respective hardware platforms. We place a purchase order for the
manufacture of our products with Sony, Nintendo or Microsoft and then send software code and a
prototype of the product to the manufacturer, together with related artwork, user instructions, warranty
information, brochures and packaging designs for approval, defect testing and manufacture. Games are
generally shipped within two to three weeks of receipt of our purchase order and all materials.
Production of PC software is performed by third party vendors in accordance with our specifications and
includes CD-ROM pressing, assembly of components, printing of packaging and user manuals and
shipping of finished goods. We send software code and a prototype of a title, together with related artwork,
user instructions, warranty information, brochures and packaging designs to the manufacturers. Games are
generally shipped within two weeks of receipt of our manufacturing order.
We occasionally experience difficulties or delays in the manufacture of our titles; however such delays have
not significantly harmed our business to date. We have not experienced material delays due to
manufacturing defects. Our software titles typically carry a 90-day limited warranty.
Sales
We sell software titles to retail outlets in North America and Europe through direct relationships with
large retail customers and third party distributors. Our customers in North America include leading mass
merchandisers such as Wal-Mart; specialty retailers such as GameStop; video stores such as Blockbuster;
electronics stores such as Best Buy; toy stores such as Toys ‘‘R’’ Us; national and regional drug stores; and
supermarket and discount store chains. Our European customers include Media Markt, Game Stores, and
GEM Distribution. We have sales operations in the Asia Pacific region, Australia, Austria, Canada, France,
Germany, Italy, the Netherlands, New Zealand, Spain, Switzerland, the United Kingdom and the United
States.
We are dependent on a limited number of customers that account for a significant portion of our sales.
Sales to our five largest customers in fiscal 2008 accounted for approximately 40.2% of our net revenue,
with GameStop accounting for 13.1%. No other customer accounted for more than 10.0% of our net
revenue for the year ended October 31, 2008.
Marketing
Our marketing and promotional efforts are intended to maximize exposure and broaden distribution of
our titles, promote brand name recognition, assist retailers and properly position, package and
merchandise our titles.
We market titles by:
• Implementing public relations campaigns, using print and online advertising, television, radio spots
and outdoor advertising. We believe that we label and market our products in accordance with the
applicable principles and guidelines of the Entertainment Software Rating Board, or the ESRB, an
independent self-regulatory body that assigns ratings and enforces advertising guidelines for the
interactive software industry.
• Actively pursuing relationships with participants in the music and entertainment industries. We
believe that the shared demographics between various media and some of the software titles
marketed by our publishing labels provide excellent cross-promotional opportunities. We continue
to work with popular recording artists to create sophisticated game soundtracks, enter into
agreements to license high-profile names and likenesses, and make arrangements for co-branding
opportunities.
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