Our product development methods and organization are modeled on those used in
other sectors of the entertainment industry. Employees whom we call “producers”
are responsible for overseeing the development of one or more products. The interactive
software games that we develop and publish are broken down into three major categories:
(1) EA studio products, (2) co-publishing products, and (3) distribution products.
EA Studio Products
We develop games internally and also engage third-parties to develop games
on our behalf at our development and production studios located near San Francisco,
Los Angeles, Orlando (Florida), Chicago, Vancouver, Montreal, London and Tokyo.
We publish our EA Studio products under three major brands:
EA SPORTSTM — examples of some of our recent products published under the EA
SPORTS brand are Madden NFL 2004 (professional football), NCAA® Football 2004
(collegiate football), FIFA Soccer 2004 (professional soccer), NBA Live 2004
(professional basketball), NHL® 2004 (professional hockey), MVP Baseball TM
2004 (professional baseball) and NASCAR ThunderTM 2004 (stock car racing),
EA GAMESTM — examples of some of our recent products published under the EA
GAMES brand are The Lord of the RingsTM; The Return of the KingTM, James Bond
007 TM: Everything or NothingTM, The SimsTM Bustin’ Out, Need for SpeedTM Underground
and Medal of HonorTM Rising Sun, and
EA SPORTS BIGTM — examples of some of our recent products published under the
EA SPORTS BIG brand are NFL STREET (football), SSX 3 (snowboarding), Def Jam
VENDETTA (wrestling) and NBA STREET Vol. 2 (basketball).
Co-publishing Products
Mainly through our EA Partners global business unit, we team with other game
developers who develop their own interactive software games with our assistance,
which we then publish, market and distribute. An example of a recent co-publishing
product is Battlefield VietnamTM, which was developed by Digital Illusions,
C.E. (“DICE”).
Distribution Products
We distribute interactive software games that are developed by other companies.
An example of a recent distribution product is Final Fantasy X-2, which was
produced by Square Co. Ltd.
Another strength of our business is that we have developed many of our products
to become franchise titles that can be regularly iterated. For example, every
year we release new versions of most of our EA SPORTS titles. Likewise, several
of the EA GAMES and EA SPORTS BIG products listed above are part of new or continuing
product franchises. We also release products called “expansion packs” for PC
titles that provide additional content (characters, storylines, settings, missions)
for games that we have previously published. For example, we have published
expansion packs for Battlefield 1942, including Battlefield 1942: The Road to
Rome and Battlefield 1942: Secret Weapons of WWII, each of which expands the
characters, settings and gameplay of the original Battlefield 1942 game. We
consider titles that iterate, sequel or spawn expansion packs to be franchise
titles.
Method of Delivery
The console, PC and hand-held games that we publish are made available to consumers
on a disk (usually CD or DVD format) or a cartridge that is packaged and typically
sold in retail stores and through our own online store. We refer to these as
packaged goods products. In North America and Europe, our largest markets, these
packaged goods products are sold primarily to retailers that may be mass market
retailers (such as Wal-Mart), electronics specialty stores (such as Best Buy)
or game software specialty stores (such as Electronics Boutique). We also maintain
a smaller business where we license to manufacturers of products in related
industries (for example, makers of personal computers or computer accessories)
rights to include certain of our products with the manufacturer’s product or
offer our products to consumers who have purchased the manufacturer’s product.
We call these combined products “OEM bundles”.
There are three ways in which we publish games that are playable online by
consumers. First, we include online capability features in certain of our PC
and PlayStation 2 products and soon Xbox, which enable consumers to play against
one another via the Internet. We also publish games that are playable only online.
One type of these online-only games is called “persistent state worlds” or massively
multiplayer online games and is server based. Consumers experience these games
as interactive virtual worlds where thousands of other consumers can interact
with one another. Examples of our persistent state world products are Ultima
OnlineTM and The Sims Online. These persistent state world games are often sold
to consumers in the form of a CD or DVD that contains much of the software necessary
to play the game online. Other types of online-only games that we publish are
available on the World Wide Web and include card games, puzzle games and word
games (marketed under the “Pogo” brand), all of which are made available to
consumers on our website, www.pogo.com, and on certain online services provided
by America Online, Inc.
Market
Historically, there have been multiple consoles available in our business segment
and vigorous competition between console manufacturers. While Sony has for the
past several years been the clear leader (with its PlayStation and PlayStation
2 consoles), Microsoft and Nintendo are large and viable competitors, and PCs
continue to be a strong interactive game platform. We develop and publish products
for multiple platforms, and this diversification continues to be a cornerstone
of our strategy.
The following table details select information on a sample of the console platforms
for which we have published titles:
We currently develop or publish products for ten different hardware platforms.
In fiscal 2004, our product releases were for PlayStation 2, Xbox, Nintendo
GameCube, PlayStation, PC, Game Boy Advance, Nokia N-Gage and online Internet
play. Our planned product introductions for fiscal 2005 are for the PlayStation
2, Xbox, Nintendo GameCube, PlayStation, PC, Game Boy Advance, Nokia N-Gage,
Sony PSP, Nintendo Dual Screen and online Internet play.
PlayStation 2. Sony released the PlayStation 2 console in Japan in March 2000,
in North America in October 2000, and in Europe in November 2000. The PlayStation
2 console is a 128-bit, DVD-based system that, with a network adaptor, is Internet
ready, as well as backward compatible with games published for its predecessor,
the PlayStation. We have published and are currently developing numerous products
for the Sony PlayStation 2.
Nintendo GameCube. Nintendo launched the Nintendo GameCube console in Japan
in September 2001, North America in November 2001 and in Europe in May 2002.
The Nintendo GameCube plays games that are manufactured on a proprietary optical
disk. We have published and are currently developing numerous products for the
Nintendo GameCube.
Xbox. Microsoft launched the Xbox console in North America in November 2001,
in Japan in February 2002 and in Europe in March 2002. The Microsoft Xbox is
a 128-bit, DVD-based system that is Internet ready. We have published and are
currently developing numerous products for the Microsoft Xbox.
Our early investment in products designed for play on 32-bit PCs and consoles
(such as the PlayStation), has been strategically important in positioning us
for the current generation of 128-bit machines. We believe that such investment
continues to be important. DVD-based game consoles and related software. The
transition to the current generation systems was initiated by the launch of
Sony’s PlayStation 2 in fiscal 2001, and continued with the launches of the
Nintendo GameCube and Microsoft’s Xbox in fiscal 2002.
Online Games. The online gaming component of our business is still in its early
stages. To date, we have had limited success in finding ways of generating revenue
and profits from online games, including subscription fees, “pay-to-play” fees
and advertising. In addition, we have had limited experience with developing
optimal pricing strategies or predicting usage patterns for our online games.
In our history, we have launched five persistent state world products with mixed
results. While we have achieved success with Ultima Online, our other persistent
state world products, most notably The Sims Online and Earth & Beyond TM,
have not met our expectations. Since the beginning of fiscal 2003, we have launched
our free EA SPORTS and EA GAMES NATION online offerings, which can be accessed
through certain of our PC and PlayStation 2 titles. The continued growth of
the online sector of our industry will depend on the following key factors:
Growing interest in multiplayer games,
Willingness by consumers to pay for online game content,
Rapid innovation of new online entertainment experiences,
Mass market adoption of broadband technologies,
Convergence of online capabilities in next-generation consoles, and
Ability to create on-line products that appeal to consumers in diverse global
markets.