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NBA 2K18, GTA Online drive Take-Two's Q2

CEO Strauss Zelnick says despite complaints of aggressive microtransactions, player spending "probably the best barometer of how a title's being received"

When Take-Two Interactive delayed Red Dead Redemption 2 to its next fiscal year in May, it confirmed a bare bones release slate for the year consisting almost entirely of NBA 2K18 and WWE 2K18. The company announced its results today for its second quarter (ended September 30), and the publisher is weathering its fiscal year of few releases better than one might expect.

Net revenue for the quarter was up 6% to $443.6 million, while the company posted a net loss of $2.7 million compared to net income of $36.4 million for the year-ago quarter. Without the effect of deferred revenues for GAAP numbers, the company's net bookings were up 20% to $577 million. The biggest contributors for net bookings were NBA 2K18, NBA 2K17, Grand Theft Auto Online, Grand Theft Auto V, the mobile titles Dragon City and Monster Legends, and XCOM 2.

Speaking with about the numbers, Take-Two CEO Strauss Zelnick said NBA 2K18 sold-in more than 6 million units in its launch quarter, up 20% compared to NBA 2K17. At the same time, total users and average daily users on the current-generation versions of the game were up 30% year-over-year, and recurrent consumer spending (DLC, microtransactions, etc.) for the game were up 57% year-over-year. It's on track to be Take-Two's most successful sports game to date, both in terms of units sold and recurrent spending.

That recurrent consumer spending figure bears particular attention, as NBA 2K18 has drawn criticisms for its implementation of virtual currency. While the publisher adjusted prices on some virtual items in response, the game's Metacritic user score continues to be hammered by players upset about virtual currency. As of this writing, the game has a 1.7 user score based on 496 ratings.

When asked how Take-Two parses conflicting feedback like robust sales and poor user reviews, Zelnick first stressed the company takes feedback seriously.

"We want to delight our consumers, and we are trying to create a perfect balance between what the game has to offer and how consumers feel about it," Zelnick said. "That's our primary goal. Our primary goal is not monetization and engagement. Our primary goal is delight. So we take any feedback incredibly seriously.

"At the end of the day, entertainment is not a must-have item. It's a wanna-have item. And so people's behavior reflected in engagement, unit sales, and ultimately spending, is probably the best barometer of how the title's being received. That said, we are very concerned about delighting consumers and we're very concerned about any feedback we get and are listening carefully."

The feedback on Grand Theft Auto V has been more consistently positive. The game has now sold in more than 85 million units lifetime-to-date and Take-Two cited the industry-tracking NPD Group with the news that it is now the all-time best-selling video game, both in revenues and units, based on combined US digital and physical sales across PC, console and portable devices. Meanwhile, it's stand-alone multiplayer component Grand Theft Auto Online continues to grow, posting another record quarter and leading the company's title when it comes to recurrent consumer spending.

While it may be tempting to consider GTA V something of a lightning-in-a-bottle success, Zelnick didn't seem too interested in managing expectations for the company's next time out.

"It's always a high-class problem when you have success and you say, OK, that becomes my new baseline. I think all of us here are really grateful for the success we've had with every one of our titles and all of us here have higher and higher expectations for ourselves. We're a high performing organization constantly seeking creative excellence and business excellence. So is it a challenge to innovate again, to be the most creative company, to be the most efficient company on an ongoing basis. Absolutely, but it's a challenge that we relish."

Zelnick also touched upon the current discourse surrounding single-player games in the industry. Grand Theft Auto used to be among the major AAA blockbuster franchises purely driven by a single-player narrative campaign, but it has grown to embrace multiplayer in recent installments.

"Certainly, conventional wisdom is that [the single-player narrative-focused game format] is under pressure right now," Zelnick said. "And we're not mindless about conventional wisdom. Our own view, though, is that formats appear to come in style and go out of style, but what really drives success is quality and excitement. And I wouldn't rule out the possibility of seeing big single-player hits come forth, from us or from other people."

Based on the results of its second quarter, Take-Two raised its full-year revenue expectations. The company now expects net revenues between $1.74 billion and $1.84 billion, up from the previous range of $1.62 billion to $1.72 billion. However, the bottom line will take a hit, as the publisher now expects a net income of $63 million to $91 million, compared to the previous forecast of $112 million to $140 million. A portion of that loss can be attributed to a chance in the expected cost of goods sold, which had been projected to be $732 million to $781 million, but now is set for $893 million to $944 million.

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Brendan Sinclair avatar
Brendan Sinclair: Brendan joined in 2012. Based in Toronto, Ontario, he was previously senior news editor at GameSpot.
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