Electronic Arts 2016 Annual Report Download - page 91

Annual Report
From time to time, we contract with external game developers, such as Respawn Entertainment, to develop our
games or to publish and distribute their games. We also partner with third parties to publish our mobile and PC
games in certain Asian territories, such as our partnerships with Tencent Holdings Limited and Nexon Co. Ltd.
for FIFA Online 3 in China and Korea, respectively. We believe that leveraging established brands across a
diverse range of genres and platforms enables us to build long-term relationships with a wide variety of players.
In fiscal year 2016, revenue from sales of FIFA 16 represented approximately 16 percent of our total net revenue;
in fiscal year 2015, revenue from sales of FIFA 15 represented approximately 15 percent of our total net revenue;
and in fiscal year 2014, revenue from sales of FIFA 14 represented approximately 15 percent of our total net
revenue.
We also are investing in a number of long-term initiatives that we believe will allow us to better serve and
deepen our engagement with our players, such as our EA Competitive Gaming Division through which we will
focus our efforts in competitive gaming and eSports.
Significant Relationships
Sony & Microsoft. Under the terms of agreements we have entered into with Sony Computer Entertainment Inc.
and its affiliates and with Microsoft Corporation and its affiliates, we are authorized to develop and distribute
disc-based and digitally-delivered software products and services compatible with PlayStation 3 and 4 and the
Xbox 360 and Xbox One, respectively. As of the date of this filing, we have not entered into a licensed publisher
agreement with Sony for PlayStation 4, and the parties currently operate under the terms of existing agreements
subject to a new pricing structure with respect to PlayStation 4.
Under the agreements with Sony and Microsoft, we are provided with the non-exclusive right to use, for a fixed
term and in a designated territory, technology that is owned or licensed by them to publish our games on their
respective platform. Our transactions for disc-based products are made pursuant to individual purchase orders,
which are accepted on a case-by case basis by Sony or Microsoft (or their designated replicators), as the case
may be. For packaged goods products, we pay the console manufacturers a per-unit royalty for each unit
manufactured. With respect to digitally-delivered products, other online content and services sold by the console
manufacturers, the console manufacturers pay us either a wholesale price or a percentage royalty on the revenue
they derive from their sales. Many key commercial terms of our relationships with Sony and Microsoft — such
as manufacturing terms, delivery times, platform policies and approval conditions — are determined unilaterally,
and are subject to change by the console manufacturers. Our direct sales to Sony represented approximately 16
percent of total net revenue in fiscal years 2016. Our direct sales to Microsoft represented approximately 14
percent and 10 percent of total net revenue in fiscal years 2016 and 2015 respectively.
The platform license agreements also require us to indemnify the console manufacturers for any loss, liability
and expense resulting from any claim against the console manufacturer regarding our games and services,
including any claims for patent, copyright or trademark infringement brought against the console manufacturer.
Each platform license may be terminated by the console manufacturer if a breach or default by us is not cured
after we receive written notice from the console manufacturer, or if we become insolvent. The console
manufacturers are not obligated to enter into platform license agreements with us for any future consoles,
products or services.
Apple, Google and Other App Stores. We have agreements to distribute our mobile applications and additional
content through distribution partners worldwide, including Apple and Google. Consumers download our
applications for their mobile devices from third party-application storefronts. The distributor charges the
consumers a one-time fee if there is a cost to download the application. If the application is a “free-to-download”
application, the distributor may still charge the consumer for additional content that is purchased by the
consumer within the application. Our distribution agreements establish the fees to be retained by the distributor
and the amounts passed through to us for distributing our applications and additional content. These
arrangements are typically terminable on short notice. The agreements generally do not obligate the distributors
to market or distribute any of our applications.
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