Electronic Arts Inc.
Q3 2013 Earnings Call Transcript

Published: 31 Jan 2013

[Operator:]

Welcome, and thank you for standing by. [Operator Instructions] This conference is being recorded. If you have any objections, you may disconnect at this time. Now I'll turn the meeting over to Mr. Rob Sison, Vice President of Investor Relations. Thank you. You may begin.

[Rob Sison:]

Thank you. Welcome to EA's Fiscal 2013 Third Quarter Earnings Call. With me on the call today are John Riccitiello, our CEO; Blake Jorgensen, CFO; and Peter Moore, our COO. Frank Gibeau, our President of Labels, will be joining us for the Q&A portion of the call. Please note that our SEC filings and our earning release are available at ir.ea.com. In addition, we have posted earnings slides to accompany our prepared remarks. Lastly, after the call, we will post our prepared remarks, an audio replay of this call and a transcript. This presentation and our comments include forward-looking statements regarding future events and the future financial performance of the company. Actual events and results may differ materially from our expectations. We refer you to our most recent Form 10-Q for a discussion of risks that could cause actual results to differ materially from those discussed today. Electronic Arts makes these statements as of January 30, 2013, and disclaims any duty to update them. Throughout this call, we will discuss both GAAP and non-GAAP financial measures. The comparable Q3 GAAP measures for certain non-GAAP measures to be discussed are

[John S. Riccitiello:]

Good afternoon. In the third quarter of fiscal year '13, EA's non-GAAP revenue was $1.18 billion, below expectations and guidance. The revenue shortfall was a result primarily of a miss with our Medal of Honor title, with stronger-than-expected sector headwinds for console packaged goods. Our Q3 non-GAAP diluted earnings per share was $0.57, above the midpoint of our guidance. We managed to deliver our Q3 EPS by driving our 3 brands aggressively, particularly FIFA, Battlefield and Need for Speed, via good digital growth and aggressive cost controls. The 2 leaders that did much to deliver the EPS in Q3 are here with me today. Peter and his team drove hard on revenues, while Blake marshaled the troops on the cost side. Blake will explain more about the cost savings shortly while Peter will outline the hits and misses on the revenue side. At the sector level, we continue to see strong industry growth in most digital areas

[Blake J. Jorgensen:]

Thanks, John. First, I'd like to start with some details of the gaming sector during the quarter. We estimate that the worldwide video game market grew in the mid-single-digit percentages for 2012. The digital market grew more than 25% over the prior year, with the mobile business being a significant contributor. The packaged goods market proved to be more challenging than initially anticipated, contracting about 20% relative to 2011. We encountered 2 major challenges this quarter

[Peter Robert Moore:]

Thanks, Blake. Today, I'm going to offer an overview on the sector, some color on EA's Q3 performance and an update on the games and services we're offering in the current quarter. I'll start with the sector overview. The most obvious trend is the distinction between the performance of high-definition consoles, the PS3 and the Xbox 360, versus standard definition consoles, that is, earlier generations and the Nintendo Wii. Both are trending down, but standard definition is down 46% year-over-year in 2012 versus a 13% decline in our HD titles. That's an important distinction as EA's console titles are singularly focused on that HD audience. The next trend is the concentration of consumer dollars behind chart-topping hits in the packaged goods sector. In the holiday quarter of 2011, the top 10 titles accounted for approximately 40% of Western World industry revenue. In 2012, the top 10 captured nearly 50%. EA had 2 of the top 5 in 2012, FIFA 13 and Madden NFL 13. We also had more top 20 hits, 6 in 2012 versus 4 for the prior year. But as John mentioned a moment ago, this market dynamic results in a clear distinction between winners and losers, and in Q3, EA had both. The digital trends are extremely positive. We estimate that the global revenue from digital games and services grew by more than 25% year-over-year. Mobile game revenues on iOS and Android doubled in size in 2012. Digital revenue related to PC games, including full game downloads, PDLC, social gaming and subscriptions, grew at approximately 20%, as did the digital revenue related to console games. Now turning to EA in the holiday quarter, we struggled with 2 challenges

[John S. Riccitiello:]

Thanks, Peter. Here's a quick summary of what we've told you today. First, Q3 was a disappointment on the revenue side. Medal of Honor didn't deliver, and we underestimated the overall softness in the console packaged goods sector. Helping to offset these challenges was the stellar performance on our 2 biggest brands

[Operator:]

. [Operator Instructions] Our first question comes from Edward Williams from BMO Capital Markets.

[Edward S. Williams:]

Just a quick question, first of all, on Medal of Honor. Can you talk a little bit about what you think drove the performance of Medal of Honor? And what steps so you can kind of take from that to prevent that from going forward? Then maybe you can provide a little bit of clarity on, Peter, on your comments on year-over-year continuity with first-person shooters?

[John S. Riccitiello:]

I think Frank will take this one.

[Frank D. Gibeau:]

Sure, let me start with Medal of Honor. Look, we're a hit-driven business, where it's about what you can build in a certain period of time and really deliver for the marketplace. And frankly, we missed on Medal of Honor, and we take responsibility for that. I would be remiss if I didn't point out that the rest of our studios have performed pretty well. We released 11 games this quarter, over 80 in the year, more than any other third-party developer. And we also deliver about 94% of our titles on time. And Medal of Honor, I admit, definitely overshadows these achievements, but we're proud of our team overall. Now if you look at Medal of Honor as a specific case, it was really about a hit missing, but the rest of the studios have really performed and delivered on their goals. As it relates to the comments that Peter talked about in shooters, we've already talked a little bit about that we have a Battlefield title coming next year, but we're not in a position right now to talk about our development plans and our SKU plan long term. That will come in about 90 days when we get to show you some Battlefield stuff.

[Operator:]

Brian Karimzad from Goldman Sachs.

[Brian Karimzad:]

A couple of questions, I guess, relating to costs. So the first one, I guess, it was somewhat refreshing to see that the absolute marketing expense came down about 20% year-on-year in the quarter; it had been tracking kind of flattish prior to that. So Blake, is it your sense this is something that's sustainable as we kind of think about things going forward? And maybe, do we kind of go back to the situation where 3, 4 years ago, you're able to get away with kind of a $600 million marketing expense base on a similar revenue base? And I have a follow-up.

[Blake J. Jorgensen:]

Yes. So I'll hesitate to say it's a trend, because it's really driven more by the titles and the activity in the quarter. But we are spending a substantial amount of time, both with our core marketing teams as well as our digital teams here, trying to determine how best to spend each marketing dollar. A lot of work's being done on how to get more out of each dollar, and we're being conscious in a difficult market as to when we spend, and if we think volumes are coming down, we will correspondingly wind back some of our marketing spend associated with some of those volumes. I'd say hold off on putting too much of a trend in your models going forward, but know that we're going to try to keep pushing that down. But it's really going to be driven by the slate of titles going forward.

[Brian Karimzad:]

Okay. And I guess leading off of that, so you generally talk about having 8, 10 recurring franchises. I guess we efficiently got rid of one with Medal of Honor going away. But, and I know you guys don't like to talk about individual game profitability, but I think we can all back into the fact that FIFA and Battlefield probably represents substantially all, if not more, of the profit of the company, at least over the last year or 2. So as you move into next generation here with the console cycle, what's changed in your thinking about your approach to rationalization?

[Blake J. Jorgensen:]

Yes, I think we're going to continue to try to maintain a smaller slate of titles than we had historically. Does that go up or down 1 titles or 2 a year, it depends. I'll let Frank or John comment to that. But at the end of the day, we're trying to build around franchises, so Battlefield and FIFA are great examples, but Madden and others are also examples on that. And the franchise build is -- try to build the profitability by not just having a big title, but by having a long digital life associated with that title. Battlefield's a great example. If you look at the Battlefield Premium service that's come along with that. We're now over 1.5 years outside of when that title was released. And as we've said, we'll book at least $108 million in the fourth quarter on revenue associated with that Battlefield Premium service. FIFA Ultimate Team's another great example. We're trying to create a world in which people are playing FIFA on many different devices in many places during the day. So a team may play at night on a console with their friends, and may then the next morning, update the scores in their Ultimate Team on their smartphone or their tablet, while they're going to work, the may play at work on their tablet or smartphone, they may arrange for a game late in the evening, or for that coming evening, and then get back together with their friends on the console. And all of that can be monetized through different methods of digital, which help drive that profitability versus having single -- one single packaged goods title that's really driving it.

[John S. Riccitiello:]

So this is John. Let me add a little bit of that. So 2 thoughts. 10 franchises, Madden, FIFA, Sims, SimCity, Battlefield, FIFA, [indiscernible] I'm sorry about that, NHL, Dragon Age, Mass Effect, Need for Speed, so 10 titles, all profitable. So let me start by dispelling the notion that it's only Battlefield and FIFA that contribute to our profitability. We have a deep bench of highly profitable, great franchises. The second point that I would make is, you are correct that titles at the scale of FIFA and Battlefield are what drives your profitability inside of EA, and they're doing so increasingly for precisely the reasons Blake just outlined. And my view is that the top 5 franchises globally in the industry probably define half the industry's profitability or something close to that. I could be exaggerating a little bit, but I haven't calculated it that way. But I will assure you that -- we believe that FIFA and Battlefield have a shot at certainly remaining in the top 5, quite possibly being 1 and 2, if we're successful as we move through the next technology transitions we see coming. We do recognize as we move into what we determine or call Gen3, i.e., PlayStation 3, Wii, Xbox 360, we started weak, and we climbed forward, improved, but we lost market share coming into this transition, we climbed back. We think Battlefield and FIFA are going to help us lead as we move into the next set of technology opportunities and platform opportunities, and continue to get bigger. So you're right to believe that FIFA and Battlefield are vitally important to us. I think it's too simple to believe that's all that is important to us. I'm proud of the rest of the titles we have, and that's say, 10 or so titles, because it's through that, that we can be sure to have, from this point, 10 great years, 15 great years, not 1 generation of great years, defined by 1 or 2 franchises that may falter towards the end of an individual cycle.

[Operator:]

Colin Sebastian from R.W. Baird.

[Gregor Schauer:]

This is Gregor Schauer, I'm filling in for Colin, he's on another call at the moment. And I guess, maybe a bit of a tough question, but as you guys have mentioned, the biggest, say -- one of the biggest issues you guys are facing are just the secular headwinds as a result of the late stage of the console cycle. So to a certain extent, it seems that a lot is not in your control at the moment. And I guess, if one's anticipating, hopefully a positive and a good -- a well-selling new console, but in the event that the new consoles are not that competitive, what is plan B in that scenario? I mean, and I guess, that scenario could potentially involve the other platforms that are gaining penetration in the -- in this year or maybe evolving as console platforms. How do you -- is that something you can do a lot in terms of preparation for? Or what do you...

[John S. Riccitiello:]

So this is John. Let me take that for you, just a little bit. So as a starting point, the data on game usage and game revenue is exceptionally clear. So we have added gamers to the universe of paying game customers in a dramatic way each year over the last several years, and there's absolutely nothing that I see that suggests that's going to slow down. The second thing is, that's been driving very substantial growth in what we referred to as digital. Over the last 12 months, we've generated 37% growth to get us to a $1.5 billion digital business over the last 12 months. I mean, I would -- I could make a reasonable argument that absent all of our packaged goods business, that $1.5 billion digital business growing at 37% might well be more valuable than the entirety of our current market cap, if I were to venture a guess. I -- you guys value it, I don't. But so I think that's a vital fact, growing massive opportunity business for us. But sitting on some pretty sound fundamentals, great brands, strong consumer franchises, great technology and compelling entertainment content. So I think we've got that. What drives that is a talent base that I think no one else in our industry has. Some folks -- and some of the social gaming companies are good at data, some companies that make simple console games are great at entertainment, not so great at monetization. I think we've got both here in that team. Now I think we've got a great story absent consoles. But as you might well expect, we know more about the roadmap and more about what's coming in consumer electronics in terms of the specifics of devices that would play games than you might otherwise be disposed to. The information we have, we remain bullish. It's why we have outlined our plan to invest, this past fiscal year, the current fiscal year, $80 million in that opportunity. So I think plan A is, explode along with the opportunities we see on digital and console, and plan B is console rip [ph] a little smaller, but we have high confidence in what we see coming.

[Operator:]

Justin Post from Bank of America.

[Ryan Gee:]

This is Ryan Gee calling in for Justin. I guess first, going back to the digital, it's solid substantially, quarter-over-quarter, and even if you go back and factor in the Battlefield 3, 15% growth. What else is driving that deceleration? And if we see that FIFA digital has pretty much doubled year-over-year, what else is driving down that growth? And then is there any sign that comps get better moving into the next quarter outside of FIFA -- I'm sorry, outside of the Battlefield 3 digital?

[Blake J. Jorgensen:]

Yes, so this is Blake. The reminder is, that full game downloads are really PC-centric, and so, when you have a title like Battlefield, which was a substantially bigger title than anything we had in this quarter, and you have a title like Star Wars that starts up, so we had the startup of Star Wars in Q3 last year, those 2 combined, are primarily PC-based businesses, and that drove a huge amount of extra content -- or excuse me, or full game downloads during the quarter. So if you look at the slides that we distributed with our earnings package on Page 9, you can see it pretty clearly, $103 million in Q3, full game downloads, versus $44 million in this quarter. Almost all of that's driven by Battlefield and Star Wars startups in that quarter. Yes, the other is just pure math, right? We're now at north of $400 million a quarter in digital business. The law of averages, you can't keep growing that at the high percentage rates that we've been growing them at. Year-over-year growth, 37%, we're fairly confident we're going to continue to see growth because all components of that business, absent the product-driven growth in full game downloads, you're going to see a lot more growth coming out of that going forward.

[Ryan Gee:]

Okay, great, and then another question. I know you guys didn't ever really quantify it, but it sounds like you're more optimistic on Battlefield 3 digital, it had some good sales in the quarter. And then SimCity, looks like that's tracking well for next quarter. Should we assume that maybe that 4Q benefit next quarter is maybe a little bit bigger? Again, you've never really quantified it, but should we expect to maybe a bigger benefit for next quarter than maybe we were modeling going into this quarter?

[Blake J. Jorgensen:]

Well, you take Battlefield Premium, we know we disclosed today that $108 million will drop into the fourth quarter at a minimum, right, because that's, that game has been up through the third quarter. In the third quarter, we had $28 million generated from Battlefield 3 Premium. Obviously, we're down to the last expansion pack in that series in the quarter, so you might see that trend down a little bit. But you probably, if you did your math and you're somewhere in the $120 million to $130 million in the fourth quarter, you probably see that. I think the one thing to keep in mind is that as we mentioned, most of the costs for developing or delivering that product were incurred as the quarters went along, and so that revenue, when it comes into the fourth quarter, will be a very high gross margin. And so you're looking at the guidance, you might be asking the question, your gross margins must be relatively high compared to say, third quarter and that's indeed true, driven by both that Battlefield Premium as well as the owned IP from titles like SimCity or Dead Space 3, which run at higher margins than some of our other titles. So that's going to give you -- help give you your boosted gross margin, which will pencil out on the guidance that we just gave you guys.

[Ryan Gee:]

Okay, great. And then, just one last big picture question, maybe for John. I know Nintendo came out today and was a little bit more cautious on its outlook for Wii U sales. Doesn't sound like this is a platform you guys are really pursuing aggressively early on. What does this really say about consumer's willingness to adopt the next gen consoles? We should have something new from Sony or Microsoft. So what does that say, just with Nintendo going through the struggles early on, on the Wii U?

[John S. Riccitiello:]

Well, a couple of things. I'd first say, you never count Nintendo out. They've got some of the best IP probably in the game industry. When their marquee titles show up, that's when you usually see the bounce. I'm deeply respectful of the achievements they've had over the last several years and as I said, you just never really count them out. Having said that, I wouldn't say that we see much correlation between the results that Nintendo just shown with their console debut of the Wii U, and what we see coming. We see a pretty sharp distinction, and unfortunately, unable to go any further than that. Ours is an industry where a lot of devices come in and represent themselves as the next generation or the next generation after that. In many ways, we would argue that the gen -- what we're describing as Gen4 is yet to come. And it's with that, we're excited about, and that's what we're investing in. And frankly, we've been quite consistent with that for some time, recognizing the frustration or inability to articulate precisely why causes for you.

[Operator:]

Brian Fitzgerald from Jefferies.

[Brian Patrick Fitzgerald:]

A couple of questions, guys. The first one, with the recent events that happened, any softness around first-person shooters or more mature rated games impact that you're seeing or potentially expect to see around Gun Club? And then just to follow on, what's your view of the media and political focus and how it pans out, maybe historically looking back at other hits than inside of happened [ph]?

[John S. Riccitiello:]

All right, so I was hopeful we weren't going to do this question, but thanks for asking. So first off, no, we're not seeing softness on -- in the FPS sector. Secondly, I would say, I've got a somewhat unique advantage or vantage point here, working at EA and also chairing the ESRB and the ESA. Some reasonable exposure to the goings-on in Washington. I want to underline the first point. The game industry is a very mature, responsible industry, more so than you might otherwise imagine. First off, we're very confident in the quality of our content and the lack of actual factual linkage to any of the actual violence that takes place in America and markets around the world. So there's no doubt we, like you, were stunned and horrified by the violence in Connecticut or Colorado or other -- in many other places over the years. But there's been an enormous amount of research done in the entertainment field about looking for linkages between entertainment content and actual violence. And they haven't found any. And there -- I could give you long stories about how people in Denmark or U.K. or Ireland or Canada consume as much or more violent games and violent media as they do in the United States, and yet they have an infinitely smaller incidence of gun violence, but that's not really the point. The point is that direct studies that have been done, hundreds of millions of dollars of the research have been done, has been unable to find a linkage because there isn't one. And that went all the way up to the Supreme Court this past summer. A number of folks had summarized the available data, provided it to the Supreme Court, and the Supreme Court came out in favor of, basically stating that we deserve all the First Amendment right freedoms that are accorded to any media. And the key part of that, is I think, they were swayed by the evidence that was presented to them of all these studies. Now having said all of that, and with all, if you will, humility about the world we live in, we understand that while there may not be an actual problem, given all the finger-pointing going on in the press, there appears to be the perception of a problem, and we do have to wrestle with that. Ours is an industry with an association that has risen to that call many times before, and will, as we move forward. We're responsible, we're mature, we intend to be part of the solution. Our media reaches literally every American, and that can be used as a voice for good. And I think you'll hear more from Mike Gallagher, the head of the ESA and other industry participants, including ourselves, over how we can be part of a solution to this perception problem as opposed to, if you will, the butt of the joke. So quick summary, we're horrified, like you. It's not about games. There's a perception issue. We can be part of that solution, and we're ready to step up to do that.

[Brian Patrick Fitzgerald:]

I really appreciate your candid and thorough and sincere comments there.

[Operator:]

Doug Creutz from Cowen.

[Douglas Creutz:]

We've seen in the past years some, most or all companies have some real success in mobile and somewhat social in the midcore genre. And I was just wondering where you guys are, with respect to that genre, what your plans are, do you view as an opportunity?

[Frank D. Gibeau:]

Yes, this is Frank. Absolutely, we are looking at the midcore segment for mobile. Real Racing is a good example of a game that appeals to a core gamer that's going to be coming out shortly on Android and iOS, and we have a number of titles planned going forward, that will start to reach that audience. We're big believers in it.

[Douglas Creutz:]

Any updates on Plants vs. Zombies 2?

[Frank D. Gibeau:]

We have nothing to announce at this time. The PopCap business is doing really well on mobile, Plants vs. Zombies being a key title in that mix. And we are looking at a great plan going forward from PopCap to grow the Plants vs. Zombies franchise.

[Operator:]

Mike Hickey from National Alliance Security.

[Michael Hickey:]

Valve at CES has this year created, I think, some noise with their official introduction of Steam Box. As Nintendo kind of fades a bit, maybe from this cycle, and there's uncertainty around Sony and Microsoft in terms of excitement, you think Valve could be a competitor within the home console market, moving forward?

[John S. Riccitiello:]

This is John. First off, let me admit that I am squarely in the Gabe Newell fan club, really enjoy my conversations with him, certainly have enjoyed a whole lot of content they've produced, and at one time, and certainly even today, I'd say Portal represents one of my all-time favorite bits of game software that's ever been produced. Having said that, Valve really hasn't put enough information out there to suggest whether or not they've got the wherewithal to compete in console. There are lots and lots of issues. But large-scale success in game console usually goes with multiple billions of dollars of investment, both in content development, investments made across a blend of developers and publishers, retail relationships, online relationships, consumer marketing, chip fabrication, manufacturing, supply pipeline and the rest. So based on what they've said so far, it could be anything from a cool niche product that appeals to Gabe and his friends, and people like me, to a product that actually has the shoulders to give help -- lift our industry forward into what we're describing as Gen4. They need to give us -- put a few more breadcrumbs on the ground to tell us what path we're on. Good people, smart people, technologically innovative people. And right now, there's just not enough information out there to really answer.

[Operator:]

Sean McGowan from Needham & Company.

[Sean P. McGowan:]

A couple of questions, if I can. First, more probably quicker, what do you think you could take away as learnings from your success with Simpsons for the mobile market? What's either in that title or monetization techniques that you think you can apply to other titles?

[Frank D. Gibeau:]

Well, The Simpsons brand was a great opportunity for us to bring a bunch of new thinking and new ideas related to episodic content to the market. So one of the things that really stood out for The Simpsons and was the key growth driver was the release of Treehouse of Horrors Packet at Halloween, and we have a commitment to ongoing, episodic theme-based content releases for The Simpsons. And so at its core, it's a hilarious game, working directly with the writers at Gracie really gave the game an edge and an attitude and authenticity that resonated with fans. And then the fact that we're committed to releasing and continuing to release high-quality, episodic content has really proven to be the growth driver there.

[Sean P. McGowan:]

Okay, and then, maybe for John or anyone, could you give us a little bit more specifics on what's driving the guidance for the fourth quarter? Is it just, you don't like what you kind of generally see out there? Or is there something more specific that says, "Here's something that we were expecting, and we knew were going to see a lot less of it?"

[John S. Riccitiello:]

I think it's less specific than that, and Frank may -- Frank has actually provided a detailed explanation, and as Peter did on the -- their prepared comments, but I'll give you some color. I think most industry analysts were looking at the holiday quarter, the December quarter, expecting a rack of really good titles, headlined by things like a very rich and positive game coming out of Ubisoft, Assassin's Creed, Microsoft's entry, with Halo. Obviously, CoD, which is a stalwart of the industry and some of the biggest games in history. Together with strong entries like Need for Speed from EA, and the continued strength on FIFA and Madden, and expected that, that title slate would have resulted in much stronger performance that we had seen in the first half of the year, which was not supported by the same richness on the content side. Despite great games well marketed, the December quarter was weaker than we had anticipated going in. And that often happens when the consumer carries the expectation of a console transition. And another hallmark of a -- consumers behaving as if there's a transition afoot or coming, is when you start to see certain titles overperform and other titles underperform in relatively dramatic ways, and that's something else we saw in the December quarter. So when we look at that, it's both down and erratic. And now we're down and erratic and it's the end of January, and with the exception of a small title that was released from Capcom, there are no industry examples thus far this year in January that we can point to, to say, is the market up, down, or sideways, is it performing consistently with the December quarter, or is it going to trend down or up? We just don't have that information. And we're about to launch the first of 3 major packaged goods titles that will define our quarter. So we know we've got a fast boat, we just don't know how deep the water is right now. So we don't know precisely what to do with that. We're -- that's why we've widened the range a bit, to give us room to be sure we have the right answer. We think the content's great, we're anxious a little bit about the sector, and if the sector ends up a little bit smaller and more volatile, that gets us closer to the bottom end of the range, and if the sector performs better, our titles will go with it, we'll be at the upper end of the range.

[Operator:]

Todd Mitchell from Brean Capital.

[Todd T. Mitchell:]

Just 2 quick questions and then a follow up. Just look, to clarify on Battlefield. Can I assume from the comments that you're dropping Medal of Honor, that you're going to annualize Battlefield? And the second question is related to the guidance for 4Q. It seems to me -- is there some kind of back end tax loading in the non-GAAP number versus what you were thinking before?

[Frank D. Gibeau:]

I'll take the first question, this is Frank. We are not announcing an annualization of Battlefield today. What we've said is that we will be launching a Battlefield game next year, and we're very excited to show you guys more detail on that coming soon. But we're not announcing an annualization of Battlefield at this time.

[Blake J. Jorgensen:]

And on the guidance, I think what you were asking is there some tax benefit that's in our non-GAAP numbers, and no, you're pursuing the same...

[Todd T. Mitchell:]

No, just the opposite. Versus what you were thinking with your prior non-GAAP guidance for the full year, is the tax bill gone up?

[Blake J. Jorgensen:]

No, we're assuming the same tax rate through the full year.

[John S. Riccitiello:]

28%, right?

[Blake J. Jorgensen:]

Yes, 28%, so...

[Todd T. Mitchell:]

Okay, all right. And then one last question, if you don't mind. In terms of your digital initiatives, there's a lot of acquisition, a lot of internal organic building. Could you just briefly discuss in terms of what's working and what's not working? Is there areas where you intend to sort of rethinking in, retrenching some of your investments, in sort of new digital revenue streams?

[John S. Riccitiello:]

So, this is John, I'll take that question to close out today's call. First off, what's working for us is mobile. Digital downloads of full games, although that's obviously very confident with the success of individual titles, and our PDLC business and things like FIFA Ultimate Team, Madden Ultimate Team, and that's both selectable, PC and console. So we feel very, very good about, if you will, it's really console, PC and mobile. It's both the Premium business on a download, and it's a whole bunch of free-to-play models that are working really, really well for us. So that would capture individual examples, like FIFA Ultimate Team, doing really well. That's a microtransaction-based business, mostly related to console. A big part of Battlefield Premium is related to PC. And when I say free-to-play, titles like FIFA in Korea and Japan are both free-to-play but generating very substantial revenues or The Simpsons

[Rob Sison:]

And with that, Angie, we'll wrap it up now.

[Operator:]

Thank you. That does conclude today's conference. Thank you for your anticipation. You may now disconnect from the audio portion.