Atari 2009 Annual Report Download - page 51

ANNUAL FINANCIAL REPORT – REGISTRATION DOCUMENT
51
Risks related to the life span and success of games
The main intrinsic risks to which video game publishers are exposed have to do with the inherently short life span of
individual games and the speed at which technology evolves. In the highly-competitive interactive entertainment market,
where having a hit product is becoming of ever greater importance, the Company‟s financial position and outlook depend
on its ability to regularly offer new titles that reflect what players want and to obtain commercial success on these
products, particularly hit products. The commercial success of games depends on their popularity, a factor that is not
easily predictable.
Besides using creative and technical resources to ensure that each new game released is of the highest quality, Atari
seeks to minimize its exposure to market risks by offering a balanced and diversified product line containing a mix of
original titles, its own franchises and games based on licensed popular themes.
Risks related to piracy
A pragmatic approach to fighting piracy is used, based on the degree of risk exposure and the countries concerned. In
France and elsewhere in Europe, Atari works closely with the anti-piracy unit set up by institutions such as SELL (the
French association of entertainment software manufacturers), the Entertainment Leisure Software Publishing Association
(ELSPA) and customs authorities.
The company works with customs authorities in the US in the fight against piracy.
It works with specialized companies to fight against unlawful downloading of its products and includes software in its
products designed to prevent unlawful duplication.
Risks related to the seasonal nature of the business
Sales of video games are subject to sharp seasonal fluctuations, with most revenue being generated in the second half
of the year and more specifically during the third quarter of the Company‟s fiscal year, around the Christmas holiday
period. These fluctuations are likely to affect the Group‟s interim and annual financial results.
LEGAL RISKS
In the ordinary course of business, Group entities may be involved in various court, arbitration, administrative and tax
proceedings. The significant legal risks to which the Group is exposed are presented below.
Other than litigation referred to in this document, there are no other administrative, legal or arbitration proceedings,
including pending or threatened proceedings of which the Company is aware, that could have or in the last twelve
months have had a material impact on the financial position or income of the Company and/or the Group.
The Company considers that, given the status of the proceedings and based on the information at its disposal,
contingent liabilities should be classified as contingent liabilities within the meaning of IAS 37, and that accordingly no
provisions need to be set aside.
Disputes to which the Company is a party
1) Former employee
A significant case arose in a previous year, in which the Company was sued by a former employee who claimed that he
had co-authored one of the Group‟s best-selling franchises. The plaintiff claimed approximately €17 million in damages
for financial and non-financial loss suffered as a result of the Group‟s allegedly unlawful distribution of games based on
that theme. At this stage of the proceedings, the Company is categorically rejecting the plaintiff's claim of authorship
and/or co-authorship and considers the grounds and amount of his claim to be unfounded.
The parties have filed their pleadings with the court but no significant progress was made in fiscal year 2008-2009. No
hearing date has been set and judgment is not expected before November 2009.
In view of the status of the proceedings and based on the information available, the Company considers that this dispute
should be accounted for as a contingent liability within the meaning of IAS 37. Consequently no provision has been
recorded in relation to this matter.
2) Stanley v. IESA, Atari Inc. and the members of the Atari Inc. Board of Directors
On April 18, 2008, an Atari Inc. minority shareholder filed a Verified Class Action Complaint against Atari Inc., certain of
its directors and former directors, and the Company in the Delaware Court of Chancery. The plaintiff alleges that the Atari
Inc. director defendants breached their fiduciary duties to Atari Inc.‟s minority shareholders by entering into an agreement
that allowed the Company to acquire the outstanding shares of Atari Inc.‟s common stock at an unfairly low price. The
plaintiff asked the court to enjoin the proposed merger transaction, or alternatively, to rescind it in the event that it was
consummated, and was seeking damages.