Commitments and Contingencies

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Obligations

In the normal course of business, we enter into contractual arrangements with third parties for non-cancelable operating lease agreements for our offices, for the development of products which may include obtaining rights to intellectual property, and for hosting services to support our games and our administrative functions. Under these agreements, we commit to provide specified payments to a lessor, developer, or hosting provider, as the case may be, based upon contractual arrangements. The payments to third-party developers are generally conditioned upon the achievement by the developers of contractually specified development milestones. Further, these payments to third-party developers typically are deemed to be advances and, as such, are recoupable against future royalties earned by the developer based on sales of the related game. Assuming all contractual provisions are met, the total future minimum commitments for these and other contractual arrangements in place at December 31, 2019, are scheduled to be paid as follows (amounts in millions):



	Contractual Obligations (1)
	Facility and Equipment Leases		Developer and Hosting		Marketing		Long-Term Debt Obligations (2)		Total
For the years ending December 31,
2020	$	77	$	25	$	30	$	86	$	218
2021	71		6		—		736		813
2022	62		1		—		466		529
2023	56		—		—		60		116
2024	52		—		—		60		112
Thereafter	46		—		—		2,147		2,193
Total	$	364	$	32	$	30	$	3,555	$	3,981

(1)

We have omitted uncertain income tax liabilities from this table due to the inherent uncertainty regarding the timing of the potential issue resolution of the underlying matters. Specifically, either (a) the underlying positions have not been fully developed under audit to quantify at this time or (b) the years relating to the matters for certain jurisdictions are not currently under audit. At December 31, 2019, we had $438 million of net unrecognized tax benefits included “Other liabilities,” in our consolidated balance sheet.

Additionally, at December 31, 2019 we have a remaining net Transition Tax liability of $153 million associated with the U.S. Tax Reform Act. The remaining Transition Tax liability is payable over the next seven years and is not reflected in our Contractual Obligations table above.

(2)

Long-term debt obligations represent our obligations related to the contractual principal repayments and interest payments under the Notes, which are subject to fixed interest rates, as of December 31, 2019. There was no outstanding balance under our Revolver as of December 31, 2019. We have calculated the expected interest obligation based on the outstanding principal balance and interest rate applicable at December 31, 2019. Refer to Note 13 for additional information on our debt obligations.

Subsequent to year-end, we entered into certain agreements, for which, under the terms, we have future minimum commitments of approximately $600 million. The commitments relate primarily to advertising and hosting services which comprise approximately 60% and 40%, respectively, of the total future minimum commitment. Payments of these commitments will be made over the next three years to four years.

Legal Proceedings

In December 2017, we received a Notice of Reassessment from the FTA related to transfer pricing for intercompany transactions involving one of our French subsidiaries for the 2011 through 2013 tax years. The total assessment, including interest and penalties, was approximately €571 million (approximately $638 million). In December 2019, the Company reached a settlement with the FTA for the 2011 through 2018 tax years, resulting in the recognition of $54 million of tax expense in the period ended December 31, 2019 and a tax payment of €161 million (approximately $179 million), including interest and penalties, in January 2020.

In addition, we are party to routine claims, suits, investigations, audits, and other proceedings arising in the ordinary course of business, including with respect to intellectual property, competition and antitrust matters, regulatory matters, tax matters, privacy matters, labor and employment matters, compliance matters, unclaimed property matters, liability and personal injury claims, product damage claims, collection matters, and/or commercial claims. In the opinion of management, after consultation with legal counsel, such routine claims and lawsuits are not significant and we do not expect them to have a material adverse effect on our business, financial condition, results of operations, or liquidity.

Letters of Credit

As described in Note 13, a portion of our Revolver can be used to issue letters of credit of up to $50 million, subject to the availability of the Revolver. At December 31, 2019, we did not have any letters of credit issued or outstanding under the Revolver.