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79
17.Commitments and Contingencies
Asummary of annual minimum contractual obligations and commercial commitments as of March 31,
2007 is as follows (in thousands):
Contractual Obligations andCommercial Commitments
License /
Fiscal Software
Years Ending Development Letters of
March 31, Commitments(1) Advertising(2) Leases(3)Credit(4) Total
2008 ...........................$95,642 $14,078 $14,206$22,699 $146,625
2009 ...........................49,294 14,03413,669—76,997
2010 ...........................43,115 14,81513,151—71,081
2011 ...........................13,850 9,678 12,558—36,086
2012 ...........................850 1,461 10,637—12,948
Thereafter ......................1,100 2,557 23,044—26,701
$203,851 $56,623 $87,265$22,699 $370,438
(1) Licenses and SoftwareDevelopment.We enter into contractual agreements with third parties forthe
rights to intellectual property and for the development of products. Under these agreements, we
commit to provide specified payments to an intellectualproperty holder or developer. Assuming all
contractual provisions are met, the total futureminimum contract commitments for contracts in place
as of March 31,2007 are approximately $203.9 million. License/software development commitments in
thetable above include $67.0 millionof commitments to licensors that are included in our
consolidated balance sheetas of March 31, 2007 because thelicensors do not have any significant
performanceobligations to us. These commitments areincluded in both current and long-term
licenses and accrued royalties.
(2) Advertising.We have certain minimum advertisingcommitments under most of our major license
agreements. These minimum commitments generally range from 2% to 12% of net sales relatedtothe
respective license. We estimate that our minimum commitment for advertising in fiscal 2008 will be
$14.1 million.
(3) Leases.We arecommitted under operating leases with lease termination dates through 2015.Most
of our leases contain rent escalations. Rent expense was $14.0 million, $10.6 million and $6.0 million
for the fiscal years ended March 31, 2007, 2006 and 2005, respectively.
(4) Letters of Credit.As of March31, 2007, we had outstanding lettersof credit of approximately $22.7
million. Our previous credit facility expired on November 29, 2006 and we didnot renew it. On
October3,2006, we entered into an agreement with abank primarilyto provide stand-by lettersof
credit to aplatform manufacturer from whom we purchase products.We arerequired to pledge cash
equivalents and investments to the bank as collateral in an amount equal to 110% of the amount of
theoutstanding stand-by letters of credit.
Other potential future expenditures relate to the following:
Manufacturer Indemnification.We must indemnify the platform manufacturers (Microsoft, Nintendo,
Sony) of our games with respect to all loss, liability and expenses resulting from any claim against such
manufacturer involving thedevelopment, marketing, sale or useof our games, including any claims for
copyrightor trademark infringement brought against such manufacturer. As a result, we bear arisk that
the properties upon which the titles of our games are based, or that the information and technology
licensed from othersandincorporated into theproducts, may infringetherights of third parties. Our
agreements with our third-party software developers and property licensors typically provide
indemnification rights for us with respect to certain matters. However, if a manufacturer brings a claim