2K Sports 2009 Annual Report Download - page 18

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The loss of the services of our executive officers, ZelnickMedia or our key Rockstar employees could
significantly harm our business. In addition, if one or more key employees were to join a competitor or
form a competing company, we may lose additional personnel, experience material interruptions in
product development, delays in bringing products to market and difficulties in our relationships with
licensors, suppliers and customers, which would significantly harm our business. Failure to continue to
attract and retain other qualified management and creative personnel could adversely affect our business
and prospects.
The recent decline in consumer spending and other adverse changes in the economy have negatively affected our
business and any further declines in consumer spending or other adverse changes in the economy could have a
material adverse impact on our business and operating results.
Most of our products involve discretionary spending on the part of consumers. We believe that consumer
spending is influenced by general economic conditions and the availability of discretionary income. This
makes our products particularly sensitive to general economic conditions and economic cycles as
consumers are generally more willing to make discretionary purchases, including purchases of products
like ours, during periods in which favorable economic conditions prevail. As a result of the current national
and global economic downturn, overall consumer spending has declined and retailers globally have taken a
more conservative stance in ordering game inventory. Continued adverse economic conditions such as a
prolonged U.S. or international general economic downturn, including periods of increased inflation,
unemployment levels, tax rates, interest rates, energy prices or declining consumer confidence could also
reduce consumer spending. Reduced consumer spending has and may continue to result in reduced
demand for our products and may also require increased selling and promotional expenses, which has had
and may continue to have an adverse impact on our business, financial condition and operating results.
Furthermore, uncertainty and adverse changes in the economy could also increase the risk of material
losses on our investments, increase costs associated with developing and publishing our products, increase
the cost and availability of sources of financing, and increase our exposure to material losses from bad
debts, any of which could have a material adverse impact on our financial condition and operating results.
If economic conditions worsen, our business, financial condition and operating results could be adversely
affected.
Our quarterly operating results are dependent on the release of ‘‘hit’’ titles and are highly seasonal which may cause
our quarterly operating results to fluctuate significantly.
We have experienced and may continue to experience wide fluctuations in quarterly operating results. The
release of a ‘‘hit’’ title typically leads to a high level of sales during the first few months after introduction
followed by a rapid decline in sales. In addition, the interactive entertainment industry is highly seasonal,
with sales typically higher during the fourth calendar quarter (our fourth and first fiscal quarters), due
primarily to increased demand for games during the holiday season. Demand for and sales of our sports
titles are also seasonal in that they are typically released just prior to the start of the sport season which
they depict. Our failure or inability to produce ‘‘hit’’ titles or introduce products on a timely basis to meet
seasonal fluctuations in demand could adversely affect our business and operating results. The
uncertainties associated with software development, manufacturing lead times, production delays and the
approval process for products by hardware manufacturers and other licensors make it difficult to predict
the quarter in which our products will ship and therefore may cause us to fail to meet financial
expectations.
We may not be able to adequately adjust our cost structure in a timely fashion in response to a sudden decrease in
demand.
A significant portion of our selling and general and administrative expense is attributable to expenses for
personnel and facilities. In the event of a significant decline in revenue, we may not be able to dispose of
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