2K Sports 2009 Annual Report Download - page 20

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other media placement costs increase, these factors could have a material adverse impact on our business
and operating results.
We rely on a primary distribution service provider for a significant portion of our products and the failure of this
service provider to perform as expected could harm our operating results.
We sell our products to our customers in the United States primarily through a distribution service
provider, Ditan Distribution, LLC. Ditan provides shipping, receiving, warehouse management and related
functions. If Ditan does not perform these services in a satisfactory manner, or if we desire or are required
to replace Ditan as our primary distributor and are unable to do so, our sales and operating results could
suffer.
The interactive entertainment software industry is highly competitive both for our publishing and distribution
operations.
We compete for both licenses to properties and the sale of interactive entertainment software with Sony,
Microsoft and Nintendo, each of which is a large developer and marketer of software for its own platforms.
We also compete with domestic game publishers, such as Electronic Arts, Activision Blizzard and THQ
and international publishers, such as Capcom, Square Enix, Konami, Namco-Bandai, SEGA and Ubisoft.
As our business is dependent upon our ability to develop hit titles, which require increasing budgets for
development and marketing, the availability of significant financial resources has become a major
competitive factor in developing and marketing software games. Some of our competitors have greater
financial, technical, personnel and other resources than we do and are able to finance larger budgets for
development and marketing and make higher offers to licensors and developers for commercially desirable
properties. Our titles also compete with other forms of entertainment, such as motion pictures, television
and audio and video products featuring similar themes, online computer programs and other
entertainment, which may be less expensive or provide other advantages to consumers.
Our distribution business also operates in a highly competitive environment. Competition is based
primarily on breadth, availability and quality of product lines; price; terms and conditions of sale; credit
terms and availability; speed and accuracy of delivery; and effectiveness of sales and marketing programs.
Our competitors include regional, national and international distributors, as well as hardware
manufacturers and software publishers. We may lose market share or be forced in the future to reduce our
prices in response to our competitors. Our distribution business has been adversely affected by lower sales
volume of software titles, the availability of certain hardware products and increased competition in the
value software market.
A number of software publishers who compete with us have developed and commercialized or are
currently developing online games for use by consumers over the Internet. If technological advances
significantly increase the availability of online games and if consumer acceptance of online gaming grows
substantially, it could result in a decline in our platform-based software sales and negatively impact sales of
our products.
Increased competition for limited shelf space and promotional support from retailers could affect the success of our
business and require us to incur greater expenses to market our titles.
Retailers have limited shelf space and promotional resources and competition is intense among newly
introduced interactive entertainment software titles for adequate levels of shelf space and promotional
support. Competition for retail shelf space is expected to increase, which may require us to increase our
marketing expenditures to maintain desirable sales levels of our titles. Competitors with more extensive
lines and more popular titles may have greater bargaining power with retailers. Accordingly, we may not be
able, or we may have to pay more than our competitors, to achieve similar levels of promotional support
and shelf space.
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