2K Sports 2009 Annual Report Download - page 12

Arrangements with Platform Manufacturers
We have entered into license agreements with Sony, Microsoft, Nintendo and Apple to develop and
publish software in Australia, Europe and North America. We are not required to obtain any licenses from
hardware manufacturers to develop titles for the PC.
Sony. Sony Computer Entertainment, Inc. grants us the right and license to develop, market, publish and
distribute software titles for the PS3, PS2 and PSP. We are required to submit products to Sony for
approval and to make royalty payments to Sony based on the number of units manufactured or revenue
from downloaded content. In addition, products for the PS3, PS2 and PSP are required to be
manufactured by Sony.
Microsoft. Under the terms of the license agreements that we have entered into with Microsoft
Corporation and its affiliates, Microsoft granted us the right and license to develop, market, publish and
distribute software titles for the Xbox 360. The agreements require us to submit products to Microsoft for
approval and for us to make royalty payments to Microsoft based on the number of units manufactured or
revenue from downloaded content. In addition, products for the Xbox 360 are required to be
manufactured by Microsoft approved manufacturers.
Nintendo. Under the terms of the license agreements that we have entered into with Nintendo Co., Ltd.
and its affiliates, Nintendo granted us the right and license to develop, market, publish and distribute
software for Nintendo’s Wii, GameCube, DS and GBA. The agreements require us to submit products to
Nintendo for approval and for us to make royalty payments to Nintendo based on the number of units
manufactured. In addition, products for such platforms are required to be manufactured by Nintendo.
Apple. Under the terms of the license agreements that we have entered into with Apple and Apple
Subsidiaries, Apple granted us the right and license to develop applications for the iPhone and iPod touch.
The agreements require us to submit products to Apple for approval and for us to pay commissions based
on prices paid by end users.
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, Europe and Asia 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
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