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Annual
Report
devices that feature fully-functional browsers and additional gaming capabilities continues to deepen, the demand
for applications continues to increase and there are more mobile application storefronts through which developers
can offer products. Mobile game applications are currently being offered by a wide range of competitors,
including Capcom Mobile, DeNA, Gameloft, Glu Mobile, Gree, Rovio, and Zynga, and hundreds of smaller
companies. We expect new competitors to enter the market and existing competitors to allocate more resources
to develop and market competing applications. As a result, we expect competition in the mobile entertainment
market to intensify.
Competition in Online Gaming Services
The online (i.e., Internet-based) games market is characterized by frequent product introductions, new and
evolving business models and new platforms. We expect new competitors to enter the market and existing
competitors to allocate more resources toward developing online games services. As a result, we expect
competition in the online game services market to intensify.
Our competitors in the online games market include major media companies, traditional video game publishing
companies, and companies that specialize in online games including social networking game companies. In the
MMO game business, our primary competitor is Activision Blizzard. Competing providers of other kinds of
online games include Big Fish, King.com, Nexon, Tencent and Zynga and other providers of games on social
networking platforms such as Facebook.
Intellectual Property
Like other entertainment companies, our business is based on the creation, acquisition, exploitation and
protection of intellectual property. Some of this intellectual property is in the form of software code, patented
technology, and other technology and trade secrets that we use to develop our games and to make them run
properly. Other intellectual property is in the form of audio-visual elements that consumers can see, hear and
interact with when they are playing our games we call this form of intellectual property "content."
We develop products and services from wholly-owned intellectual properties we create within our own studios
and obtain through acquisitions. In addition, we obtain content and intellectual property through licenses and
service agreements such as those with sports leagues and players' associations, movie studios and performing
talent, authors and literary publishers, music labels, music publishers and musicians. These agreements typically
limit our use of the licensed rights in products for specific time periods. In addition, our products that play on
game consoles and mobile devices, or other proprietary platforms may include technology that is owned by the
device manufacturer or platform operator and licensed non-exclusively to us for use. We also license technology
from other providers. While we may have renewal rights for some licenses, our business and the justification for
the development of many of our products is dependent on our ability to continue to obtain the intellectual
property rights from the owners of these rights on reasonable terms.
We actively engage in enforcement and other activities to protect our intellectual property. We typically own the
copyright to our software code and content, as well as the brand or title name trademark under which our
products are marketed. We register copyrights and trademarks in the United States and other countries as
appropriate.
As with other forms of entertainment, our products are susceptible to unauthorized copying and piracy. We
typically distribute our PC products using copy protection technology, digital rights management technology or
other technological protection measures to prevent piracy and the use of unauthorized copies of our products. In
addition, console manufacturers typically incorporate technological protections and other security measures in
their consoles in an effort to prevent the use of unlicensed product. We are actively engaged in enforcement and
other activities to protect against unauthorized copying and piracy, including monitoring online channels for
distribution of pirated copies, and participating in various industry-wide enforcement initiatives, education
programs and legislative activity around the world.
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