2K Sports 2009 Annual Report Download - page 15

Trends and Factors Impacting our Business
Product Release Schedule. Our financial results are impacted by the timing of our product releases and
the commercial success of those titles. Our Grand Theft Auto products in particular have historically
accounted for a substantial portion of our revenue. The timing of our Grand Theft Auto releases varies
significantly, which in turn impacts our financial performance on a quarterly and annual basis.
Economic Environment and Retailer Performance. We continue to monitor the adverse changes in
economic conditions which may have unfavorable impacts on our businesses, such as deteriorating
consumer demand, pricing pressure on our products, credit quality of our receivables, and foreign currency
exchange rates. Our business is dependent upon a limited number of customers who account for a
significant portion of our revenue. The unfavorable economic environment has impacted several of our
customers, and is expected to continue to do so during fiscal 2010. Bankruptcies or consolidations of our
large retail customers could seriously hurt our business, due to uncollectible accounts receivables and the
concentration of purchasing power among the remaining large retailers. Our business is also negatively
impacted by the actions of certain of our large customers, who sell used copies of our games, which reduces
demand for new copies of our games. We have begun to offer downloadable episodes for certain of our
titles, which require the user to have a copy of the original game. While this may serve to reduce some used
game sales, we expect sales of used games to continue to increase.
Hardware Platforms. The majority of our products are made for the hardware platforms developed by
three companies—Sony, Microsoft and Nintendo. When new hardware platforms are introduced, demand
for software based on older platforms declines, which may negatively impact our business. Additionally,
our development costs are generally higher for titles based on new platforms, and we have limited ability to
predict the consumer acceptance of the new platforms, which may impact our sales and profitability. As a
result, we believe it is important to focus our development efforts on a select number of titles, which is
consistent with our strategy.
International Operations. Sales in international markets, primarily in Europe, have accounted for a
significant portion of our revenue. We have also recently expanded our Asian operations in an effort to
increase our geographical scope and diversify our revenue base. We are subject to risks associated with
foreign trade, including credit risks and consumer acceptance of our products, and our financial results
may be impacted by fluctuations in foreign currency exchange rates.
International Operations
Sales in international markets, principally in the United Kingdom and other countries in Europe, have
accounted for a significant portion of our net revenue. For fiscal 2009, 2008 and 2007, approximately
32.5%, 40.7% and 31.3%, respectively, of our net revenue was earned outside the United States. We are
subject to risks inherent in foreign trade, including increased credit risks, tariffs and duties, fluctuations in
foreign currency exchange rates, shipping delays and international political, regulatory and economic
developments, all of which can have a significant impact on our operating results. See Notes 1 and 15 to
the Consolidated Financial Statements.
Segment and Geographic Information
See Note 15 to the Consolidated Financial Statements for more information regarding our reportable
segments.
Employees
As of October 31, 2009, we had 2,263 full-time employees, of which 1,125 were employed outside of the
United States. None of our employees are subject to collective bargaining agreements. We consider our
relations with employees to be satisfactory.
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