Atari 2010 Annual Report Download - page 13

ANNUAL FINANCIAL REPORT – REGISTRATION DOCUMENT
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with their respective hardware. The agreements include detailed provisions regarding the use of development kits,
publishing authorization procedures, royalties payable by the publisher to the manufacturer, the term of the relationship,
the territories concerned, manufacturing cost and the related logistics, payment terms and the parties’ respective
confidentiality obligations.
AGREEMENTS WITH MAJOR RETAILERS AND DISTRIBUTORS
The Group distributes its products through a centralized network made up of a series of major accounts. As of March 31,
2010, no single customer accounted for more than 23% of trade receivables outstanding. Risks stemming from
excessive dependency on certain customers are examined in the section of this Registration Document dealing with risks
to which the Group is exposed (see “Contractual risks”).
CAPITAL PROJECTS
The Group invests primarily in the purchase of licenses (rights to exploit a universe or a name on existing interactive
entertainment formats), the development of franchises (creation of attractive universes for video games) and the design
of games (specialized software), as well as to acquire distribution licenses. The Company’s principal capital projects
during the period concerned Test Drive Unlimited 2, and Star Trek Online. All of those projects were paid for with
available cash.
Investment spending can take the form of acquisitions (of companies, franchises, games - including in the form of
pickups, meaning purchases of games developed to a significant degree by a third-party studio and requiring additional
development and marketing) or may represent capitalized development expenses.
Additionally, the Group invests in conventional manufacturing capacity, as needed to carry out its activities (premises,
equipment, management software, etc.).
CAPITAL PROJECTS – RESEARCH AND DEVELOPMENT
Since April 1, 2005, the Company has been capitalizing its own game development costs incurred after the end of the
pre-production stage. The costs are then amortized on a declining balance basis over the six quarters that follow the
release of these games.
Spending over the past three fiscal years was as follows:
% of revenue % of revenue % of revenue % of revenue
Capitalized in-house R&D 6.9 6.0% 10.9 8.0% -4.0 -36.7% 8.0 8.9%
Capitalized outsourced R&D 15.7 13.5% 18.4 13.5% -2.7 -14.7% 17.1 18.9%
Other R&D expenditures in the income
statement* 16.3 14.1% 12.7 9.3% 3.6 28.3% 20.2 22.4%
Total R&D expenditures 38.9 33.6% 42.0 30.8% -3.1 -7.4% 45.3 50.2%
March 31, 2008
(€ millions)
March 31, 2010 March 31, 2009 Change
(*) This item includes mainly the operating expenses of studios, pre-production on initiated development, the publishing division’s
organizational costs and the cost of all projects whose feasibility has not been demonstrated.
Group research and development policy: the Group has developed a spending policy aimed at offering a catalog
of games for all platforms. Capital projects in publishing are examined in accordance with a strict procedure, project by
project, including with regards to the compatibility between the game’s concept, the technical expertise of the
development studio, the size and prospects of the installed base of the platform concerned, the targeted consumer
segment and an estimated income statement.
Production is handled by the Group's own development studios and by third parties selected on the basis of their
technological, content and creative expertise. Risk exposure is reduced by allocating projects among several platforms.
For the current technology cycle (Xbox 360, Wii, PS3, PSP and Nintendo DS and DSi), the Company has maintained its
strategy and plans to continue its policy of allocation among existing platforms.
Principal capital projects completed during the fiscal year ended March 31, 2010: included continued
investments by the Group in the development of major titles released during the year or scheduled for release this year
including Test Drive Unlimited 2, Champions Online, Star Trek Online, Ghostbusters and NeverWinter Nights. The
Company is also working on the development of other titles, which have not been announced yet.
These investments have been financed either with the Company’s own cash and/or through the use of credit facilities. In
fiscal year 2009-2010, the Group’s research and development expenditures amounted to €48.9 million.