2K Sports 2009 Annual Report Download - page 8

established a portfolio of proprietary software content for the major hardware platforms in a wide range of
genres including action, adventure, racing, role-playing, sports and strategy. We believe that our
commitment to creativity and innovation is a distinguishing strength, allowing us to differentiate many of
our products in the marketplace by combining advanced technology with compelling storylines and
characters that provide unique gameplay experiences for consumers. We have created, acquired or licensed
a group of highly recognizable brands to match the variety of consumer demographics we aspire to serve,
ranging from adults to children and game enthusiasts to casual gamers.
Support Label Structure to Target Distinct Market Segments. Our publishing business consists of our wholly-
owned labels Rockstar Games and 2K, which publishes its titles under 2K Games, 2K Sports and 2K Play.
Each group focuses on distinct product genres and target demographics. We expect Rockstar Games, our
wholly-owned publisher of the hit Grand Theft Auto and Midnight Club franchises, to continue to be a
leader in the action product category by leveraging our existing titles as well as developing new brands,
including Agent. We expect 2K Games, developer and publisher of our successful Sid Meier’s Civilization
series and our critically acclaimed BioShock title, to continue to develop new and successful franchises in
the future. Our 2K Sports series, which includes Major League Baseball 2K, NBA 2K and NHL 2K, are
generally published on an annual basis. 2K Play focuses on the market of casual and family-oriented games
such as Carnival Games, an internally developed and owned franchise. 2K Play has leveraged this franchise
through sequels and product extensions, including Carnival Games MiniGolf. We also have expansion
initiatives in the rapidly growing Asia-Pacific markets, where our strategy is to broaden the distribution of
our existing products, expand our business in Japan, and establish an online gaming presence, especially in
China and Korea.
Maximize Product Selection and Development. Our primary strategy is to publish a select number of high
quality titles based on internally owned and developed intellectual property, which typically provide higher
margins than licensed products. We currently have 12 proprietary brands which we expect to leverage in
the future. In addition, we will selectively develop titles based on licensed properties, including sports, and
also publish externally developed titles.
We use a product investment review process to evaluate potential titles for investment, to review existing
titles in development, and to assess titles after release to measure their performance in the market and the
return on our investment. We apply this process to all of our products, whether internally or externally
developed. The product investment review process includes reviews of each project at various stages of
development by our executive management team and senior management of our publishing labels, and
includes coordination between our sales and marketing personnel before the launch of the titles. This
disciplined approach to product investment is expected to enhance the competitiveness and profitability of
our titles.
We develop our products using a combination of our internal and external development resources acting
under contract with us. We typically select our external developers based on their track record and
expertise in developing products in the same category or genre. One developer will generally produce the
same game for multiple platforms and will also produce sequels to an original game. We believe that
selecting and using development resources in this manner allows us to leverage the particular expertise of
our internal and external development resources, which we believe increases the quality of our products.
Diversify Revenue by Title, Genre, Platform, and Target Demographic. We believe the diversification of our
product mix will reduce our operating risks and increase our revenue. We have expansion initiatives in the
rapidly growing Asia-Pacific markets, where our strategy is to broaden the distribution of our existing
products, expand our business in Japan, and establish an online gaming presence, especially in China and
Korea. In addition, we expect to offer a wider variety of titles for an expanded group of customers through
2K Play, which is focused on family and casual games. To take advantage of their increasing installed base
we selectively offer our titles on the PS3, Xbox 360, Wii, PSP, DS, iPhoneand iPodtouch.
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