2K Sports 2008 Annual Report Download - page 18

• Satisfying certain shelf life and sales requirements under our agreements with hardware
manufacturers in order to qualify for Sony’s Greatest Hits Programs and Microsoft’s Platinum Hits
Program. In connection with these programs, we receive manufacturing discounts from Sony and
Microsoft. Similarly, Nintendo has also established a Player’s Choice Program for the Wii.
• Stimulating continued sales by reducing the wholesale prices of our products to retailers at various
times during the life of a product. Price concessions may occur at any time in a product’s life cycle,
but typically occur three to nine months after a product’s initial launch. In fiscal 2008, 2007 and
2006, price concessions to retailers amounted to $52.3 million, $68.1 million and $73.9 million,
respectively. In certain international markets, we also provide volume rebates to stimulate
continued product sales.
We also employ various other marketing methods designed to promote consumer awareness, including
in-store promotions and point-of-purchase displays, direct mail, co-operative advertising, as well as
attendance at trade shows. We employ separate sales forces for our publishing and distribution operations.
As of October 31, 2008, we had a sales and marketing staff of approximately 250 people.
Our products generally sell at retail prices ranging from $19.99 to $59.99 in North America. Products that
are designated Sony’s Greatest Hits (for PS3, PS2 and PSP) and Microsoft’s Platinum Hits (for Xbox 360)
generally sell at prices ranging from $19.99 to $29.99.
Distribution
We distribute our own titles as well as software, hardware and accessories developed by others in North
America through our Jack of All Games subsidiary. The products we distribute consist principally of newly
released and popular software titles, budget and catalog software titles, and hardware for third party
console, handheld and PC products. Our Jack of All Games, Ohio-based subsidiary outsources the pick,
pack, ship and warehousing functions and maintains a sales office, while our Jack of All Games, Ontario,
Canada-based subsidiary maintains a warehouse facility and a sales office. We generally ship products by
common carrier. Backlog is not material to our business as we generally ship products within seven days
after receipt of orders.
We procure products from suppliers principally using standard purchase orders based on our assessment of
market demand, as well as pre-orders from retailers. We periodically enter into agreements with our
suppliers that provide exclusive distribution rights to certain products. We carry inventory quantities that
we believe are necessary to provide rapid response to retailer orders. We utilize electronic data
interchange with many of our customers to enhance the efficiency of placing and shipping orders and
receiving payments.
Competition
In our publishing business, we compete with:
• Companies that range in size and cost structure from very small with limited resources to very large
companies with greater financial, marketing and technical personnel and other resources than ours,
such as Activision Blizzard, Electronic Arts, Midway Games and THQ and international companies,
such as Capcom, Eidos, Konami, Namco-Bandai, SEGA and Ubisoft.
• Sony, Microsoft and Nintendo for licenses to properties and the sale of interactive entertainment
software, each of which is a large developer and marketer of software for its own platforms. Each of
these competitors has the financial resources to withstand significant price competition and to
implement extensive advertising campaigns.
• Other software, hardware, entertainment and media for limited retail shelf space and promotional
resources. The competition is intense among an increasing number of newly introduced
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