This excerpt taken from the ERTS 10-K filed May 30, 2007.
Development of Our Games
The console, handheld, PC and online games we publish are developed primarily by our EA Studios, while the games we offer for cellular handsets are developed primarily by third parties. In addition, through our EA Partners group, we team with other game development companies to assist them with the development of games on our behalf. For the fiscal years ended March 31, 2007, 2006 and 2005, research and development expenses were $1,041 million, $758 million and $633 million, respectively.
We develop packaged goods games internally at our development and production studios located in the United States, Canada, England, Sweden, Germany, Singapore and China. We invest in the creation of software tools to more efficiently develop games for multiple platforms. We also make investments in facilities and equipment that allow us to create and edit video and audio recordings that are used in our games. Employees whom we call executive producers are responsible for overseeing the development of one or more products or franchises (a series of sequeled or related products). We also engage third parties to develop games on our behalf at their own development and production studios.
Following our acquisition of JAMDAT Mobile Inc. in February 2006, we merged our existing cellular handset software game development and publishing business into JAMDATs to establish our EA Mobile business. We engage third parties to develop games for cellular handsets on our behalf at their own development and production studios and, to a lesser extent, we develop cellular handset games internally at our development and production studios located in the United States, Canada, England, Romania and India.
We develop online games and content internally at our development and production studios located in the United States, Canada and Singapore. In fiscal 2007, we acquired Mythic Entertainment, Inc., a developer and publisher of massively multiplayer online role-playing games. We also engage third parties to develop online games on our behalf at their own development and production studios.
In fiscal 2007, we generated approximately 65 percent of our net revenue from games developed by our EA Studios that were initially released during the year, as compared to approximately 73 percent in fiscal 2006. Excluding titles developed for cellular handsets, during fiscal 2007 we released 32 EA Studio titles compared to 31 EA Studio titles in fiscal 2006. In fiscal 2007, we released over 190,000 stock keeping units, or SKUs (a version of a title designed for play on a particular platform), for cellular handsets.
Co-publishing, Distribution and Third Party Development
Through our EA Partners group, we team with other game development companies to assist with the development of their own interactive software games, which we then publish, market and distribute. We refer to these types of arrangements as co-publishing. For example, in fiscal 2007, we signed a co-publishing agreement with NAMCO BANDAI Games America for Hellgate: Londontm, which is being developed by Flagship Studios.
We also distribute interactive software games that are developed and published by other companies. An example of one of our recent distribution products is Half-Life® 2: Episode One, which was developed and published by Valve and distributed worldwide by us.
We also engage third parties to develop games on our behalf.