(12) COMMITMENTS AND CONTINGENCIES

Lease Commitments

As of December 31, 2017, 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 E.V. (German Soccer League) (professional soccer); Dr. Ing. h.c. F. Porsche AG, Ferrari S.p.A. and Automobili Lamborghini S.p.A (Need For Speed and Real Racing games); National Basketball Association (professional basketball); National Hockey League and NHL Players’ Association (professional hockey); National Football League Properties and PLAYERS Inc. (professional football); William Morris Endeavor Entertainment LLC (professional mixed martial arts); ESPN (content in EA SPORTS games); Disney Interactive (Star Wars); and Fox Digital Entertainment, Inc. (The Simpsons). 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, 2017 (in millions):



			Fiscal Years Ending March 31,
			2018
			(Remaining
	Total		three mos.)		2019		2020		2021		2022		2023		Thereafter
Unrecognized commitments
Developer/licensor commitments	$	987	$	26	$	224	$	229	$	205	$	222	$	80	$	1
Marketing commitments	355		9		86		83		77		73		27		—
Operating leases	249		8		43		39		39		32		25		63
Senior Notes interest	227		7		41		41		41		20		19		58
Other purchase obligations	109		9		30		27		14		9		6		14
Total unrecognized commitments	1,927		59		424		419		376		356		157		136

Recognized commitments
Senior Notes principal and interest	1,013		13		—		—		600		—		—		400
Licensing obligations	107		6		23		25		26		27		—		—
Total recognized commitments	1,120		19		23		25		626		27		—		400

Total commitments	$	3,047	$	78	$	447	$	444	$	1,002	$	383	$	157	$	536

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, 2017; however, certain payment obligations may be accelerated depending on the performance of our operating results. Furthermore, 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 their fair market value at the time of issuance.

In addition to what is included in the table above, as of December 31, 2017, we had a liability for unrecognized tax benefits and an accrual for the payment of related interest totaling $98 million, of which we are unable to make a reasonably reliable estimate of when cash settlement with a taxing authority will occur. Furthermore, we had a $104 million income tax payable recorded during the three months ended December 31, 2017 related to the provisional Transition Tax, which we expect to pay in installments over the next 8 years. Of the $104 million, $8 million is included in accrued and other current liabilities and the remaining $96 million is included in income tax obligations on our Condensed Consolidated Balance Sheet.

In addition to what is included in the table above, as of December 31, 2017, we may be required to pay up to $140 million of cash consideration in connection with the Respawn acquisition based on the achievement of certain performance milestones through the end of calendar year 2022 at the latest. As of December 31, 2017, we have recorded $122 million of contingent consideration on our Condensed Consolidated Balance Sheet representing the estimated fair value.

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 United States District Court for the Northern District of California, where the case 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.