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Take-Two's Q1 shaped by Zynga acquisition, recession

Publisher delays Midnight Suns again as CEO Zelnick says economic downturn hurt recurrent consumer spending

Take-Two Interactive reported its earnings for the three months ended June 30 -- during which Zynga officially joined the publisher -- and that acquisition loomed large over the results.

Take-Two Interactive Q1 numbers

Revenue: $1.1 billion (up 36% year-over-year)
Bookings: $1 billion (up 41% year-over-year)
Net loss: $104 million (compared to net profit of $152 million in the year-ago quarter)

The Zynga acquisition drove all those figures, with nearly $117 million in business acquisition costs driving the bottom line into the red.

The revenue and bookings numbers are also less impressive when considering the combined Zynga and Take-Two is being compared against just Take-Two's results from last year, when Take-Two reported $813 million in revenue and Zynga reported $720 million on its own.

Comparing this quarter's sales to the individual companies' sales a year ago, revenues would have been down about 28%.

Speaking with GamesIndustry.biz, Take-Two chairman and CEO Strauss Zelnick said he was happy with how the companies have come together, but acknowledged the downturn of sales.

"We feel like this is a great start," Zelnick said. "The integration is going along well… The cultures align nicely. We are certainly seeing the effects of the overall economy, which is soft. And I think we see it more on recurrent consumer spending than we do on games."

Zelnick said Take-Two sales had "excellent" results in full game sales for the quarter, adding that it was the top publisher for the past 13 weeks according to the NPD Group.

"In the case of mobile games, you can obviously play for free and spend only if you want to," Zelnick said. "So it shouldn't surprise anyone that we would see the softer economy reflected in softer mobile sales versus softer console sales."

Even with the effects of the economy being felt more on recurrent consumer spending, that part of the business still made up 75% of Take-Two's revenue for the quarter.

Given Take-Two's recent emphasis on live service games and increasing stake in mobile with the acquisition of Zynga, we asked how Zelnick expects the company to fare if the economy is in for a prolonged slide.

"I've never felt that entertainment businesses were recession-resistant or the like, and I've said so when asked over and over again," Zelnick said. "Ultimately though, we aren't a particularly expensive item for consumers, and if we give consumers what they want, we believe they'll show up.

"But it wouldn't surprise me that our results would be a bit softer than I'd like for as long as we're in a slower period, and my own view is we're in a slower period now. I don't the question is if we'll be in a recession; I think we're in a recessionary environment right now."

Regardless, Zelnick reiterated his belief that while the industry might give back some of the gains it made in the early days of the pandemic, it will still emerge in a better place than it had been before.

Additionally, Take-Two delayed Firaxis' upcoming title Midnight Suns "to ensure the teams at Firaxis Games and 2K deliver the best possible experience for our fans."

Previously set for October 7, the game is now expected to launch by the end of Take-Two's fiscal year (March 31, 2023). This is the second time it has been delayed.

Sales updates

Take-Two also provided its customary sales updates, saying revenue contribution was led by NBA 2K22, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Empires & Puzzles, Tiny Tina's Wonderlands, WWE 2K22, Rollic's hyper-casual portfolio, Toon Blast, The Quarry, and Top Eleven.

As for specific numbers, NBA 2K22 has now sold-in 12 million units to date, putting it ahead of NBA 2K21's performance over the same span of time.

Meanwhile GTA 5 roughly matched its recent 5-million-per-quarter pace and has now sold-in nearly 170 million copies, and the company said GTA Online's audience is now 49% higher than it was before the pandemic.

Red Dead Redemption 2 has added another million since the last quarterly report, reaching 45 million copies shipped.

When asked about the announcement that the company would not be supporting the game with further expansions, Zelnick explained, "We support the live services of the titles based on our view of consumer demand and based on our team's passion for what they're working on. When they have stories to tell and characters to bring to life, they do so. We're not driven by a mechanical cadence of updates; we're driven by creativity and passion."

Looking ahead

For the full fiscal year, Take-Two now expects to post net bookings between $5.8 billion and $5.9 billion, up from $3.4 billion in net bookings it reported the previous fiscal year. (In its last full fiscal year, Zynga posted net bookings of $2.83 billion.)

While Zelnick acknowledged the forecast was below consensus expectations, he said it takes into account unspecified movement in the release schedule as well as macroeconomic concerns.

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Brendan Sinclair avatar

Brendan Sinclair

Managing Editor

Brendan joined GamesIndustry International in 2012. Based in Toronto, Ontario, he was previously senior news editor at CBS-owned GameSpot in the US.

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