1

Looking East

EA Play in China - Roadmap

Chinese Market Opportunity Size

Business Strategy

Tactical Considerations

Implementation Plan

Tracking Success

Online gaming in China is $6B large, growing at 18% y-o-y

Source: IDC, 2009, China gaming market 2009-2013 Forecast and Analysis

The Online Gaming Ecosystem

in game MTX portal MTX

social network

payment gateway

game portals/cloud smart phone

personal computer

internet mobile operators

source: Venice Blvd Analysis

So-Lo-Mo: The Road Ahead

So Lo Mo
Social Local Mobile
source: KPCB, Murphy, Meeker, 2011 top 10 mobile trends

Three Options For Entry In China

Enter via shell company

financial return

Revenue share with local company; Launch on multiple social networks/online gaming websites

Exclusive partnership with social network

cost of implementation
source: Venice Blvd Analysis

Shanda .. The perfect partner?

Strong Brand (#1 online gaming operator) Excellent R&D capabilities

Diverse game groups & huge user clusters

Solid Financials Good working relationship w/ Government

Partnerships w/ other online gaming

companies
source: IDC, Asia/Pacific Online Gaming Market 2009 - 2013 Forecast and Analysis

Gaming Publishers in China

source: Venice Blvd Analysis

Business Model: Free to play, MTX, Ad-Supported

Game Operator/Platform Provider

free to micro play transactions

product placements

Sponsors

Free adsupported

End User
source: Venice Blvd Analysis

So-cial Networks: PengYou (Qzone) and RenRen

source: BloggerInsight, Chinas top 10 Social Games

10

Q. Why PengYou and RenRen? A. Demographics Match!

Source: EA Presentation on SIMS Sims Demographic

PengYou and RenRen demographic

18-24

25-34

35-44

45-54

55-64

Peng you Repres entation

Ren Ren Repres entation

Over 50% gamers between 16 to 35

source: BloggerInsight, Chinas top 10 Social Games

Over-representation of 1834 in and RenRen

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The Lo element Go Local

local language, localize jargon, virtual goods architecture

eastern styles for characters

eastern lifestyle in games

source: Venice Blvd Analysis

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Gamify Localized Sims and SimCity

2. Gets a clue to visit local Coach store

4. Scans barcode with phone & wins virtual bag in SIMS

1. Gamer wants a Coach bag for her Sims Character

3. Finds the bag

Localized Gamification: Endless Opportunities

source: Venice Blvd Analysis

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The Mo-bile Treasure Cove

Active Mobile Game Players and Market Scale of Chinas Mobile Phone Game
35 30 25 20 15 10 5 0 2007 2008 2009 2010 e 2011 e Market Size (100m) 2012 e 70 60 50 40 30 20 10 0

Mobile Gamer Active Accounts (m)

Over 30M active users by 2012 and 6B RMB

source: iResearch Inc., 2010

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MobiMinTransactions (MMTX)

Mobile Gamer buys prepaid card from China Mobile Wants a new villa in SimCity

Pays for the Villa with his minutes

More money for China Mobile and EA

source: Venice Blvd Analysis

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Partnering with Telecom Providers

Massive popularity of telecom providers App Stores

Direct contribution of mobile gaming to telecoms top line

source: iResearch Inc., 2010, http://www.iresearch.com.cn/View/131930.html

Implementation Plan: Project Timeline

Partnership with Telco

Strategic Partnership with Shanda Targeted Marketing & Community Development

Launch on Social Network, Shanda Online & Mobile App Store New Virtual Goods, Adventures, Worlds

Analytics

Customize SIMs & SimCity for So-Mo Platforms

source: Venice Blvd Analysis

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Financial Projections: First year discounted revenues would payback costs

Payback
Refer to: Financial Analysis

$18M Projected NPV and 89% IRR

source: Venice Blvd Analysis

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Appendix

How does this strategy address the inherent risks in China?

Intellectual Property Risks
Free-to-play through online game providers and Social Networks ensures centralized distribution Prevents parallel ecosystem of virtual goods from developing

19

Policy Risks

Industry Risks

Shandas strong relationships with the government Local partnership means superior understanding of navigating through policy and legal hurdles

SIMS and SimCitys intellectual property and engaging game-play prevent them from being subjected to short life cycles Intense competition, but the strength of brands and loyalty can ensure stickiness of the gamer

source: Venice Blvd Analysis

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Financial Analysis
Assumptions
Cost to expand in China Projected Revenue in China per year 10.32 m 171 m

Refer to: Financial Analysis

Projected Net Income

% of Revenue
Projected Revenue Partnerships COGS Marketing and sales G&A R&D Profits 30% 20% 20% 9% 11%

Amount
171 51.31 34.20 34.20 15.39 19.38 16.53

Revenues and Costs over 3 years

Year 0
Revenues Costs 0 10.32

Year 1
85.51 76.96

Year 2
128 115

Year 3
171 154

Discounted Revenues and Costs

Discount factor Discounted revenues Discounted Costs 1.00 1.00 0.83 0.75

Year 0
0 10.32

Year 1
85.51 76.96

Year 2
106 95

Year 3
128 116

Capital Budgeting
Year 0
Cash flows -10.32

Year 1
8.27

Year 2
12.40

Year 3
16.53

NPV
$18.06

IRR
89%

Source: Team Venice Blvd. Analysis

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Revenue Projection
The China online gaming industry's concentration is increasing every day. In 2008, there were over 140 operators with 365 games in the market but the revenue of the 10 leading operators accounted for 90.2%. - EA Answers