2K Sports 2009 Annual Report Download - page 16

Item 1A. Risk Factors
Our business is subject to many risks and uncertainties, which may affect our future financial performance.
Because of the risks and uncertainties described below, as well as other factors affecting our operating results
and financial condition, past financial performance should not be considered to be a reliable indicator of future
performance and our business and financial performance could be harmed and the market value of our
securities could decline.
Risks relating to our business
We are dependent on the future success of our Grand Theft Auto products and we must continue to publish ‘‘hit’’
titles or sequels to such ‘‘hit’’ titles in order to compete successfully in our industry.
Grand Theft Auto and certain of our other titles are ‘‘hit’’ products and have historically accounted for a
substantial portion of our revenue. If we fail to continue to develop and sell new commercially successful
‘‘hit’’ titles or sequels to such ‘‘hit’’ titles or experience any delays in product releases or disruptions
following the commercial release of our ‘‘hit’’ titles or their sequels, our revenue and profits may decrease
substantially and we may incur losses. For the years ended October 31, 2009, 2008 and 2007, our Grand
Theft Auto titles accounted for 30.6%, 46.2% and 13.1% of our net revenue, respectively, and our 10 best
selling titles accounted for approximately 47.1%, 64.2% and 26.6% of our net revenue, respectively. In
addition, competition in our industry is intense and a relatively small number of hit titles account for a
large portion of total revenue in our industry. Hit products offered by our competitors may take a larger
share of consumer spending than we anticipate, which could cause revenue generated from our products to
fall below our expectations. If our competitors develop more successful products or services at lower price
points or based on payment models perceived as offering better value (such as pay-for-play or subscription-
based models), or if we do not continue to develop consistently high quality and well-received products and
services, our revenue and profitability may decline.
We are subject to product development risks which could result in delays and additional costs, and we must adapt to
changes in software technologies.
We depend on our internal development studios and third party software developers to develop new
interactive entertainment software within anticipated release schedules and cost projections. The
development cycle for new titles generally ranges from 12 to more than 24 months, and our top-selling
titles could take up to three years or longer to develop. Development times and costs of current generation
software have increased substantially as a result of the additional and enhanced features available in the
newest games. Further, after development of a product it may take between 9 and 12 additional months to
develop the product for other hardware platforms. If our third party software developers experience
unanticipated development delays, financial difficulties or additional costs we will not be able to release
titles according to our schedule and at budgeted costs. Certain of our licensing and marketing agreements
also contain provisions that would impose penalties if we fail to meet agreed upon game release dates.
There can be no assurance that our products will be sufficiently successful so that we can recoup these
costs or make a profit on these products.
Additionally, in order to stay competitive, our internal development studios must anticipate and adapt to
rapid technological changes affecting software development. Any inability to respond to technological
advances and implement new technologies could render our products obsolete or less marketable.
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