Electronic Arts 2016 Annual Report Download - page 99

Annual Report
disruptions of our online services, the games and services offered by our competitors, our marketing and
advertising efforts or declines in consumer activity generally as a result of economic downturns, among others.
Any decline or fluctuation in the recurring portion of our business may have a negative impact on our financial
and operating results.
Our adoption of new business models could fail to produce our desired financial returns.
From time to time we seek to establish and implement new business models. Forecasting our revenues and
profitability for any new business models is inherently uncertain and volatile. Our actual revenue and profit for
these businesses may be significantly greater or less than our forecasts. Additionally, these new business models
could fail, resulting in the loss of our investment in the development and infrastructure needed to support these
new business models, as well as the opportunity cost of diverting management and financial resources away from
more successful and established businesses.
If we are unable to maintain or acquire licenses to include intellectual property owned by others in our
games, or to maintain or acquire the rights to publish or distribute games developed by others, our
business may be harmed.
Many of our products and services are based on or incorporate intellectual property owned by others. For
example, our EA SPORTS products include rights licensed from major sports leagues and players’ associations
and our Star Wars products include rights licensed from Disney. Competition for these licenses and rights is
intense. If we are unable to maintain these licenses and rights or obtain additional licenses or rights with
significant commercial value, our revenue, profitability and cash flows may decline significantly. Competition
for these licenses also may increase the amounts that we must pay to licensors and developers, through higher
minimum guarantees or royalty rates, which could significantly increase our costs and reduce our profitability.
If external game developers fail to meet product development schedules or are unable to honor their
obligations to us, our financial results may be harmed.
We may contract with external game developers to develop our games or to publish or distribute their games.
While we maintain contractual protections, we have less control over the product development schedules of these
games developed by external game developers, and we depend on their ability to meet product development
schedules. If these developers cannot meet product development schedules, acquire certain approvals or are
otherwise unable to honor their obligations to us, we may delay or cancel previously announced games, which
could result in a delay or significant shortfall in anticipated revenue, harm our profitability and reputation, and
cause our financial results to be materially affected.
Our business could be adversely affected if our consumer protection, data privacy and security practices
are not adequate, or perceived as being inadequate, to prevent data breaches, or by the application of
consumer protection and data privacy and security laws generally.
In the course of our business, we collect, process, store and use consumer and other information, including
personal information, passwords and credit card information. Although we take measures to protect this
information from unauthorized access, acquisition, disclosure and misuse, our security controls, policies and
practices may not be able to prevent the improper or unauthorized access, acquisition or disclosure of such
information. In addition, third party vendors and business partners which in the course of our business receive
access to information that we collect also may not prevent data security breaches with respect to the information
we provide them or fully enforce our policies, contractual obligations and disclosures regarding the collection,
use, storage, transfer and retention of personal data. The unauthorized access, acquisition or disclosure of this
information could significantly harm our reputation, compel us to comply with disparate breach notification laws
and otherwise subject us to proceedings by governmental entities or others and substantial legal liability. A
perception that we do not adequately secure consumer and other information could result in a loss of current or
potential consumers and business partners, as well as a loss of anticipated revenues. Our key business partners
also face these risks with respect to information they collect and data security breaches with respect to such
information could cause reputational harm to them and negatively impact our ability to offer our products and
services through their platforms.
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