Electronic Arts Value Stock - Dividend - Research Selection

We are a global leader in digital interactive entertainment. We develop, market, publish and distribute games, content and services that can be played by consumers on a variety of platforms, which include game consoles, PCs, mobile phones and tablets.

We have three core pillars to our strategy:

•Players First

•Commitment to Digital

•One EA

Players are the foundation of our success, and we are committed to thinking about players first in everything we do. Our goal is to build deep, on-going and meaningful relationships with our players. We aim to build these relationships by creating amazing games and services that deliver long-lasting fun and enduring value, by connecting with our players across platforms and by delivering flexibility and innovation in our business models.

Our games and services are based on a portfolio of intellectual property that includes established brands such as FIFA, Madden NFL, Star Wars, Battlefield, the Sims and Need for Speed. Our goal is to develop and publish a broad and deep portfolio of games and services that engages players across geographies, platforms and business models. We were the number one publisher on PlayStation 4 and Xbox One consoles in the Western World for fiscal year 2017 based on available sources and EA estimates and in calendar year 2016, FIFA 17 was the best-selling console title in the world.

Players increasingly purchase our games digitally and engage with the live services associated with our portfolio of games. Our live services engagement model includes microtransactions, downloadable content, subscriptions, esports, among others. For example, features such as the Ultimate Team mode in our FIFA, Madden NFL and NHL games and live services for our Star Wars, Battlefield and Sims franchises have extended the life of those games by engaging players over longer periods of time. This digital transformation also is creating opportunities in platforms, content models and modalities of play. For example, we have leveraged franchises historically associated with consoles and traditional PC gaming, such as FIFA, Madden NFL, The Sims, SimCity, and Star Wars, to create mobile and PC free-to-download games that are monetized through a business model in which we sell incremental content and/or features in discrete transactions.

We have significantly increased our digital net revenue from $2.199 billion in fiscal year 2015 to $2.409 billion in fiscal year 2016 and $2.874 billion during fiscal year 2017. We believe that our digital revenue, which generally has a higher gross margin relative to packaged goods revenue, will continue to increase during fiscal year 2018 relative to packaged goods revenue and in absolute terms as we continue to focus on developing and monetizing products and services that can be delivered digitally.

The pursuit of our goals requires that we operate as one team that is fast, focused and constantly evolving and we have undertaken a cultural shift across our organization to become more flexible. We are transitioning from developing our console and PC products and services on over twenty game engines to developing on a single game engine. This transition has created operational flexibility as our development teams code in the same language, increases the pace of our development as content can be leveraged across franchises and allows us to transition our products and services to new platforms quickly and cost-effectively.

We are also working to strengthen our player network, connecting our players to each other and to the games they love. We are investing in a technology foundation to enable us to build personalized player relationships that can last for years instead of days or weeks by connecting our players to us and to each other. This connection allows us to market and deliver content and services for popular franchises like FIFA, Battlefield and Star Wars to our players more efficiently. That same foundation also enables new player-centric ways to discover and try new experiences, such as our subscription-based EA Access and Origin Access services.

We develop games and services for a variety of platforms, including consoles, PCs, mobile phones and tablets. We market and sell our games and services through digital distribution channels and through retail channels. We believe that flexibility across platforms, distribution channels and business models is critical to maintaining and growing our player base, as well as increasing engagement with our games and services. New gaming platforms, engagement models and business models are expected to continue to emerge in the future, and we intend to evaluate these opportunities on a case-by-case basis.

Digitally, our console games and services can be purchased through third-party storefronts, such as Sony’s PlayStation Store and Microsoft’s Xbox Store. Our direct sales to Sony and Microsoft represented approximately 19 percent and 17 percent of total net revenue, respectively in fiscal 2017. Our direct sales to Sony and Microsoft represented approximately 16 percent and 14 percent of total net revenue, respectively in fiscal 2016. Our direct sales to Microsoft represented approximately 10 percent of total net revenue in fiscal 2015. Our mobile and tablet games and services are available through third-party application storefronts such as the Apple App Store and Google Play. Our PC games and services can be downloaded directly through our Origin platform, as well as through third-party online download stores. We also partner with third parties to publish our mobile and PC games on their platforms in certain Asian territories, such as our partnerships with Tencent Holdings Limited and Nexon Co. Ltd. for FIFA Online 3 in China and Korea, respectively. Players can also access a catalog of our console and PC games through our subscription-based EA Access and Origin Access services, respectively.

Our packaged goods games are sold directly to mass market retailers, electronics specialty stores and game software specialty stores or through distribution arrangements. Our direct sales to GameStop represented approximately 11 percent of total net revenue in fiscal year 2015 and were not greater than ten percent of total net revenue in either fiscal year 2016 or fiscal year 2017. We sell our games to GameStop pursuant to numerous and frequent individual purchase orders, which contain delivery and pricing terms. There are no minimum sales or purchase commitments between us and GameStop.

In our games, we use established brands that we either wholly own (such as Battlefield, Mass Effect, Need for Speed, The Sims and Plants v. Zombies) or license from others (such as FIFA, Madden NFL and Star Wars). From time to time, we contract with external game developers, such as Respawn Entertainment, to develop our games or to publish and distribute their games. We believe our established brands give us the opportunity to engage an increasing number of players across more platforms, more geographies and through more business models.

In fiscal year 2017, net revenue from our Ultimate Team services and FIFA 17 represented approximately 16 percent and 11 percent, respectively, of our total net revenue. In fiscal year 2016, net revenue from our Ultimate Team services and FIFA 16 represented approximately 15 percent and 11 percent, respectively, of our total net revenue. In fiscal year 2015, net revenue from our Ultimate Team services, Battlefield 4 and FIFA 15 represented approximately 13 percent, 11 percent and 11 percent, respectively, of our total net revenue.

We also are investing in a number of long-term initiatives that we believe will allow us to better serve and deepen our engagement with our players, such as our EA Competitive Gaming Division through which we will focus our efforts in competitive gaming and esports.

Source: www.sec.gov