Red Dead delay does little to temper Take-Two expectations
Despite an "unusually light release slate" thanks to tardy Rockstar game, publisher still projects revenue and income growth this year
Red Dead Redemption 2 was going to be the tentpole release of Take-Two's current fiscal year, but the publisher is still projecting healthy revenue and income growth for the campaign despite yesterday's delay to the highly anticipated Rockstar Games title.
In announcing its fourth quarter and full-year earnings today, Take-Two chairman and CEO Strauss Zelnick downplayed the impact the delay would have on the publisher.
"[W]e still expect fiscal 2018 to be a year of strong earnings and cash provided by operating activities for Take-Two, despite an unusually light release slate, driven by new releases of NBA 2K and WWE 2K, our robust catalog led by Grand Theft Auto, and innovative offerings designed to drive engagement and recurrent consumer spending," Zelnick said.
For the fiscal year ended March 31, Take-Two reported revenues up 26% to $1.78 billion, with $67.3 million of net income compared to the previous year's net loss of $8.3 million. As for sales drivers, Grand Theft Auto V and Grand Theft Auto Online continue to put up numbers, with the latter having a record year. Mafia III was also a significant revenue contributor, as were WWE 2K17, Sid Meier's Civilization VI, and both NBA 2K16 and NBA 2K17. For the fourth quarter alone, revenue was up almost 52% to $572 million, with net income more than doubling to $99 million.
Even with a lighter release slate, Take-Two is projecting a strong year ahead, with net revenues between $1.95 billion and $2.05 billion, a jump of 10-15%. Meanwhile, the bottom line is set to grow considerably more with earnings before income taxes projected between $549 million to $588 million.
To reassure investors dismayed by the Red Dead Redemption 2 delay (which sent Take-Two stock down nearly 10% in after-hours trading), Zelnick's prepared statements on the results also included projections for the fiscal year ending in March of 2019.
"Looking ahead to fiscal 2019, we expect to deliver both record Net Sales and record net cash provided by operating activities, in excess of $2.5 billion and $700 million, respectively, led by the launches of Rockstar Games' Red Dead Redemption 2 and a highly anticipated new title from one of 2K's biggest franchises," Zelnick said.
Speaking with GamesIndustry.biz about the results, Zelnick said the growth in the current fiscal year will be driven partly by catalog sales, and partly by recurrent consumer spending like downloadable content and virtual currency, which he called a "transformative business" for Take-Two.
"I think we now look at a big game as an opportunity not just to create something for consumers to take home, love and abandon, but as a living, breathing, ongoing organism that consumers can engage with over a long period of time," Zelnick said. "We don't tend to look at the world as a revenue opportunity expressed in entertainment. We look at the world as an opportunity to entertain people, and if they're highly engaged, we will also get paid."
While competitors like Ubisoft are looking at the games-as-a-service model as a way to extend the window between a franchise's major releases, Zelnick suggested it hasn't changed Take-Two's approach much.
"Not to break my arm patting myself on the back, but this has been our stated strategy since we took over the company 10 years ago," Zelnick said. "We didn't believe in annualizing non-sports titles because we believe in having the highest possible quality and it takes time to deliver that. We also believe you need to create anticipation and annual releases fly in the face of anticipation. I think it's been shown we're right.
"From our point of view, we have a sense of urgency around everything we do. We already have meaningful periods of time in between our key releases, and I don't see our cadence changing. I think we're very focused on bringing our titles to market as early as we can. That said, we only want to do that when a title can be as fantastic as it can possibly be."
Take-Two also delivered shipment updates for a pair of its games, confirming that WWE 2K17 has sold-in approximately 3 million units to date, while Civilization VI (the fastest-selling installment in series history) has sold-in nearly 2 million copies.
UPDATE: More details have emerged from the investor call that followed the release of Take-Two's latest earnings report.
With Red Dead Redemption 2 delayed, Take-Two has warned that it will not be showing any new titles at E3, Kotaku reports. This means show attendees will only be able to see this year's instalments in the publisher's WWE and NBA franchises.
Meanwhile, MCV is reporting that Zelnick has revealed sales for Grand Theft Auto V have now surpassed 80m since the game first launched in 2013. This means the game has racked up 5m sales since the publisher's previous earnings report in February - no small accomplishment for a game that's nearly four years old.