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If our marketing and advertising efforts fail to resonate with our customers, our business and operating
results could be adversely affected.
Our products are marketed worldwide through a diverse spectrum of advertising and promotional programs such
as television and online advertising, print advertising, retail merchandising, website development and event
sponsorship. Our ability to sell our products and services is dependent in part upon the success of these programs.
If the marketing for our products and services fail to resonate with our customers, particularly during the critical
holiday season or during other key selling periods, or if advertising rates or other media placement costs increase,
these factors could have a material adverse impact on our business and operating results.
The majority of our sales are made to a relatively small number of key customers. If these customers
reduce their purchases of our products or become unable to pay for them, our business could be harmed.
During the fiscal year ended March 31, 2013, approximately 61 percent of our North America sales were made to
our top ten customers. In Europe, our top ten customers accounted for approximately 30 percent of our sales in
that territory during the fiscal year ended March 31, 2013. Worldwide, we had direct sales to one customer,
GameStop Corp., which represented approximately 13 percent of total net revenue for the fiscal year ended
March 31, 2013. Though our products are available to consumers through a variety of retailers and directly
through us, the concentration of our sales in one, or a few, large customers could lead to a short-term disruption
in our sales if one or more of these customers significantly reduced their purchases or ceased to carry our
products, and could make us more vulnerable to collection risk if one or more of these large customers became
unable to pay for our products or declared bankruptcy. Additionally, our receivables from these large customers
increase significantly in the December quarter as they make purchases in anticipation of the holiday selling
season. Having such a large portion of our total net revenue concentrated in a few customers could reduce our
negotiating leverage with these customers. If one or more of our key customers experience deterioration in their
business, or become unable to obtain sufficient financing to maintain their operations, our business could be
Our channel partners have significant influence over the products and services that we offer on their
Our products and services are sold to customers, primarily through retailers and online through our channel
partners, including Sony, Microsoft, Nintendo, Apple, Google and Facebook. In many cases, our channel partners
set the rates that we must pay to provide our games and services through their online channels. These partners
also have retained the flexibility to change their fee structures, or adopt different fee structures for their online
channels, which could adversely impact our costs, profitability and margins.
Outside of the financial arrangements, our agreements with our channel partners typically give them significant
control over other aspects of the distribution of our products and services that we develop for their platform. For
example, our agreements with Sony, Microsoft and Nintendo typically give significant control to them over the
approval, manufacturing and distribution of our products and services, which could, in certain circumstances,
leave us unable to get our products and services approved, manufactured and provided to customers. Currently, a
majority of our revenue is derived through sales on two hardware consoles that are wholly owned by others.
60%, 61% and 57% of our sales were for products and services on Sony's PLAYSTATION 3 and Microsoft's
Xbox 360 consoles combined, for the years ended March 31, 2013, 2012 and 2011, respectively. For our digital
products and services delivered direct to consumers via digital channels such as Sony's PlayStation Network,
Microsoft's Xbox LIVE Marketplace, Apple's App Store, the Google Play store and Facebook, the channel
partner has policies and guidelines that control the promotion and distribution of these titles and the features and
functionalities that we are permitted to offer through the channel.
In addition, while we have negotiated agreements in place with our channel partners these agreements reserve
the right by our channel partners to determine and change unilaterally certain key terms and conditions, including
the ability to change their user and developer policies and guidelines, which can negatively impact our business.
If our channel partners establish terms that restrict our offerings through their channels, or significantly impact