(11) COMMITMENTS AND CONTINGENCIES

Lease Commitments

As of December 31, 2015, we leased certain facilities, furniture and equipment under non-cancelable operating lease agreements. We were required to pay property taxes, insurance and normal maintenance costs for certain of these facilities and any increases over the base year of these expenses on the remainder of our facilities.

Development, Celebrity, League and Content Licenses: Payments and Commitments

The products we produce in our studios are designed and created by our employee designers, artists, software programmers and by non-employee software developers (“independent artists” or “third-party developers”). We typically advance development funds to the independent artists and third-party developers during development of our games, usually in installment payments made upon the completion of specified development milestones. Contractually, these payments are generally considered advances against subsequent royalties on the sales of the products. These terms are set forth in written agreements entered into with the independent artists and third-party developers.

In addition, we have certain celebrity, league and content license contracts that contain minimum guarantee payments and marketing commitments that may not be dependent on any deliverables. Celebrities and organizations with whom we have contracts include, but are not limited to: FIFA (Fédération Internationale de Football Association), FIFPRO Foundation, FAPL (Football Association Premier League Limited), and DFL Deutsche Fußball Liga GmbH (German Soccer League) (professional soccer); Dr. Ing. h.c. F. Porsche AG, Ferrari S.p.A. (Need For Speed and Real Racing games); National Basketball Association (professional basketball); PGA TOUR (professional golf); National Hockey League and NHL Players’ Association (professional hockey); National Football League Properties, PLAYERS Inc., and Red Bear Inc. (professional football); Zuffa, LLC (Ultimate Fighting Championship); ESPN (content in EA SPORTS games); Disney Interactive (Star Wars); Fox Digital Entertainment, Inc. (The Simpsons); Universal Studios Inc. (Minions); and Respawn (Titanfall). These developer and content license commitments represent the sum of (1) the cash payments due under non-royalty-bearing licenses and services agreements and (2) the minimum guaranteed payments and advances against royalties due under royalty-bearing licenses and services agreements, the majority of which are conditional upon performance by the counterparty. These minimum guarantee payments and any related marketing commitments are included in the table below.

The following table summarizes our minimum contractual obligations as of December 31, 2015 (in millions):



			Fiscal Years Ending March 31,
			2016
			(Remaining
	Total		three mos.)		2017		2018		2019		2020		2021		Thereafter
Unrecognized commitments
Developer/licensor commitments	$	1,321	$	32	$	183	$	245	$	220	$	215	$	184	$	242
Marketing commitments	315		5		65		51		49		48		49		48
Operating leases	205		8		36		29		25		23		21		63
0.75% Convertible Senior Notes due 2016 interest ^(a)	2		1		1		—		—		—		—		—
Other purchase obligations	39		15		18		3		2		1		—		—
Total unrecognized commitments	1,882		61		303		328		296		287		254		353

Recognized commitments
0.75% Convertible Senior Notes due 2016 principal ^(a)	340		340		—		—		—		—		—		—
Licensing and lease obligations ^(b)	151		5		22		23		24		25		26		26
Total recognized commitments	491		345		22		23		24		25		26		26

Total commitments	$	2,373	$	406	$	325	$	351	$	320	$	312	$	280	$	379

(a)

We will be obligated to pay the $340 million principal amount of the Notes in cash and any excess conversion value in shares of our common stock upon redemption of the Notes at maturity on July 15, 2016, or upon earlier conversion. During the quarter ended December 31, 2015, the Sales Price Condition was met and as a result, the Notes are currently convertible at the option of the holder though April 2, 2016. During the quarter ending March 31, 2016, we expect to settle at least $177 million in cash and a number of shares of our common stock equal in value to the excess conversion value. See Note 10 for additional information regarding our Notes.


(b)	Lease commitments exclude the impact of sub-lease income due from third parties totaling approximately $2 million. See Note 7 for additional information regarding recognized obligations from our licensing-related commitments.

The unrecognized amounts represented in the table above reflect our minimum cash obligations for the respective fiscal years, but do not necessarily represent the periods in which they will be recognized and expensed in our Condensed Consolidated Financial Statements. In addition, the amounts in the table above are presented based on the dates the amounts are contractually due as of December 31, 2015; however, certain payment obligations may be accelerated depending on the performance of our operating results. Up to $32 million of the unrecognized amounts in the table above may be payable, at the licensor’s election, in shares of our common stock, subject to a $10 million maximum during any fiscal year. The number of shares to be issued will be based on fair market value at the time of issuance.

In addition to what is included in the table above, as of December 31, 2015, we had a liability for unrecognized tax benefits and an accrual for the payment of related interest totaling $62 million, of which we are unable to make a reasonably reliable estimate of when cash settlement with the taxing authority will occur.

Legal Proceedings

On July 29, 2010, Michael Davis, a former NFL running back, filed a putative class action in the United States District Court for the Northern District of California against the Company, alleging that certain past versions of Madden NFL included the images of certain retired NFL players without their permission. In March 2012, the trial court denied the Company’s request to dismiss the complaint on First Amendment grounds. In January 2015, that trial court decision was affirmed by the Ninth Circuit Court of Appeals and the case was remanded back to the district court. In October 2015, the Company filed a petition for a writ of certiorari to the United States Supreme Court which is pending.

We are also subject to claims and litigation arising in the ordinary course of business. We do not believe that any liability from any reasonably foreseeable disposition of such claims and litigation, individually or in the aggregate, would have a material adverse effect on our Condensed Consolidated Financial Statements.