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Finance

Red Dead propels 2K financial results

Fri 03 Sep 2010 7:34am GMT / 3:34am EDT / 12:34am PDT
FinancePublishing

Sales almost quadruple compared to Q3 2009 numbers; investors pleased as guidance is raised

Red Dead Redemption has helped publisher Take-Two Interactive to a set of stronger-than-expected third quarter financial results, with net revenue jumping by over 270 per cent from $94.9 million to $354.1 million in the three months ending July 31.

The Rockstar-developed Western title has now sold almost 7 million units worldwide since its release in May this year, while catalogue sales of GTA titles, NBA 2K10 and Borderlands also contributed.

After costs that translated to a net profit of $6 million, compared to a loss last year of $56 million, causing the company to raise its guidance for the fourth quarter and full year results.

Expanding the picture to the first nine months of the year, the business is still facing a net loss overall of $11 million from revenues of $785 million - but those numbers compare well to last year as all, when losses were $116 million and sales just $418 million.

Full year sales are now expected to sit between $1.05 and $1.1 billion (from $880-980 million), with Bioshock 2, Mafia II and NHL 2K11 all releasing in the company's fourth quarter.

"Our strategic focus on producing a select number of high quality titles, diversifying our product portfolio, and capitalising on new revenue opportunities has enabled Take-Two to deliver significant growth and profitability in the third quarter and positioned the company for a strong finish to the fiscal year," said chairman Strauss Zelnick of the results.

"At a time when the interactive entertainment industry has continued to feel the impact of an uncertain economy, the exceptional response to Red Dead Redemption shows the value of compelling content and its power to capture consumer interest.

"These results clearly demonstrate the Company's capacity to translate its world-class creative resources into meaningful financial performance and a solid competitive position in our industry."

Take-Two's share price closed up 3.4 per cent yesterday ahead of the results being released, but jumped a massive 13.5 per cent in after hours trading to sit at $10.05.

6 Comments

Terence Gage Freelance writer

1,288 120 0.1
I've enjoyed lots of Take-Two's output this year and they generally seem to have high-quality products, but is anyone else baffled by how a company like this can earn hundreds of millions revenue, and yet still only turn a measley profit of $6 million?!

Posted:4 years ago

#1

Tom Hully Studying Business Information Systems, University of Portsmouth

12 0 0.0
Terence: the net profit of $6 million will be after all taxes/charges/expenditure have been taken of the income/revenue, I'm assuming that includes development costs, support, staff pay, studio rent/utilities etc.

Back to RDR, I would say at this moment in time it is right up there tied with Mass Effect 2 for my game of the year for 2010 - however that could all change in the next 11 days when Halo Reach arrives.

Posted:4 years ago

#2

Private Industry

1,176 182 0.2
Maybe if Rockstar brings in another team to work on open world games they could more consistently release those great games? In years without GTA or now Red Dead Redemption they usually loose some money. The Rockstar games are the major income for them.

Yeah Chris that was a nice point in the game when landing in Mexico in the night and ride slowly around and then later when you are riding back home after finishing your job also nice with the music. Shame that when enemies attack or you dismount the music stops.

Posted:4 years ago

#3

Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.

2,283 2,492 1.1
Terrence's point still seems valid. Even after all expenses are paid in, $6 million seems awfully low for having such an incredibly successful title. Even if they took a very low $20 per unit, that's $140 million in RD2 revenue alone. Plus decent money from catalog titles and a total revenue of $354 million. And then to have a nine month outlook of an $11 million loss from $785 million?

It is rather baffling.

Congrats on looking better than last year but something seems amiss when a studio pumps out such fantastic games (quality and sales wise) and yet looks to have financial troubles on a constant basis.

Posted:4 years ago

#4

Nick McCrea Gentleman, Pocket Starship

215 441 2.1
I remember posing this very same question to a bunch of people - how on earth could RDR ship 7 million copies and barely scrape into profitability?

I was told that, essentially, the Rockstar development model is broken, from a publisher point of view - the developers are on such huge royalties that the games have to ship multiple millions to make any profit. This was offered as the primary reason for Activision's deliberate bursting of the Infinity Ward bubble - they had no desire to end up with a Rockstar of their own - a golden goose that could not be controlled and gradually sucked the profit out of the franchise.

No idea how valid that is, but it was certainly food for thought for me. Though it's great to see devs profiting from their hard work.

Posted:4 years ago

#5

Private Industry

1,176 182 0.2
The very long development time surely does not help to get a big profit out if. The first trailers where from 2005 so you can probably add 6-12 months before the project actually started so something around 6 years. But yes if you get a 6 million profit when 1 game alone sells 7 million units, plus a few other games that sell decently like Bioshock 2 and Borderlands something must go wrong somewhere.

A bit strange, but "with Bioshock 2, Mafia II and NHL 2K11 all releasing in the company's fourth quarter." Bioshock wasn`t released in the fourth quarter, same goes for Mafia 2 that was released in August and is therefore released in the third quarter. It was end of August but that`s still third quarter.

Posted:4 years ago

#6

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