QUOTE AND NEWS
SeekingAlpha  8 hrs ago  Comment 
By Amal Singh: Game publisher Take-Two Interactive (NASDAQ:TTWO) is riding the success of its latest games. The stock has gained an impressive 27% in 2014, and after robust first-quarter results, the company can get even better. Take-Two was able...
Market Intelligence Center  Aug 15  Comment 
For a hedged play on Take Two Interactive Software Inc (TTWO) MarketIntelligenceCenter.com’s algorithms selected the Dec. '14 $22.00 covered call for a net debit in the $20.37 area. That is also the break-even stock price for the covered call....
Market Intelligence Center  Aug 7  Comment 
Take Two Interactive Software Inc (TTWO) closed Wednesday at $20.57 and technical indicators recently have been bearish. Based in part on those numbers, MarketIntelligenceCenter.com's patented algorithms have identified a couple of attractive...
SeekingAlpha  Aug 5  Comment 
Take-Two Interactive Software (NASDAQ:TTWO) Q1 2015 Earnings Call August 05, 2014 4:30 pm ET Executives Henry A. Diamond - Senior Vice President of Investor Relations & Corporate Communications Strauss H. Zelnick - Chairman, Chief...
newratings.com  Aug 5  Comment 
WASHINGTON (dpa-AFX) - Take-Two Interactive Software Inc. (TTWO) Tuesday reported a narrower loss in the first quarter, as digital revenues increased and operating costs dropped. Both earnings and revenues for the quarter came in ahead of...
newratings.com  Aug 5  Comment 
TheStreet.com  Aug 5  Comment 
NEW YORK (TheStreet) -- Take-Two Interactive Software shares are down -3.7% to $21.15 in after-hours trading on Tuesday following the release of the company's second quarter earnings results.The 'Grand Theft Auto' and 'NBA 2K' video game producer...
Benzinga  Aug 4  Comment 
In a report published Monday, Brean Capital analyst Todd Mitchell reiterated a Hold rating on Take-Two Interactive Software (NASDAQ: TTWO). In the report, Brean Capital noted, “We see upside to guidance, but think it is priced into the stock....
Forbes  Aug 1  Comment 
Take-Two Interactive Software is expected to book a narrower loss than a year ago when it reports first-quarter earnings on Tuesday, August 5, 2014. Analysts are expecting a loss of 43 cents per share, up from a loss of 61 cents per share a year...
TheStreet.com  Jul 16  Comment 
NEW YORK (TheStreet) -- MKM Partners increased its price target on Take-Two Interactive Software  to $27, increased its estimates and set a "buy" rating. The firm said the video games Grand Theft Auto V and Evolve can drive near-term...
SeekingAlpha  Jul 16  Comment 
By SA Editor Miriam Metzinger: Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday July 15. CEO Interview: Strauss Zelnick, Take Two Interactive (NASDAQ:TTWO) In January, Cramer said Take-Two Interactive...




 

Take-Two Software is a publisher of video games for platforms such as Playstation, Xbox, Wii, and the personal computer. The company publishes its games through two subsidiaries: Rockstar Games and 2K. Take-Two's most coveted franchise, Grand Theft Auto, has sold millions of units across multiple titles, and has been widely criticized (or celebrated, depending on the audience) for its focus on violent and criminal content. The company also produces other popular titles such as Midnight Club, BioShock, and Civilization. In 2009, the company generated $968 million in revenue but incurred a net loss of $138 million.[1]

Take-Two faces challenges during a slow global economy from the weakening demand of video games. In 2009, video game software sales reached $24.5 billion on 604 million units sold. However, estimates for 2013 show sales value dropping to below $17 billion on just 460 million units sold. If the video game market shrinks, Take-Two, along with all other video game developers, will have a difficult time sustaining growth.[2]

Company Overview

Take-Two is a developer, publisher, and distributor of video games. It also competes on a variety of gaming platforms, such as the PC, XBox, Playstation, Wii, and other portable devices. TTWO divides its financial reporting into Publishing and Distribution segments. For more information about these two segments, please see Video Game Industry.

Publishing (72.4% of net sales)[3]

  • Rockstar Games - Take-Two's internal development and publishing operation, responsible for franchises like Grand Theft Auto and Midnight Club.
  • 2K - Publishes other non-Rockstar developed titles, focusing on specific markets and opportunities:
  1. 2K Games - The primary publisher to externally developed games fitting in the traditional "hard-core" gaming segment, publishing titles such as Oblivion. Also markets some internally developed titles such as the Sid Meier games, Civilization, and BioShock.
  2. 2K Sports - The primary publisher of internally developed sports games, such as NBA 2K, NHL 2K, etc. This segment has secured long-term licensing contracts with properties such as the NBA, MLB, etc.
  3. 2K Play - The primary publisher of externally developed games fitting in the new casual gaming segment, which include TV-show tie-ins, such as Dora the Explorer, and other family-oriented gaming titles.

Distribution (27.6% of net sales)[4]

The distribution business handles logistics of distribution for published titles, and also helps distribute other companies' software and hardware through Take-Two's retailer network. The company is able to do this due to the retailer-relationships it has established over the course of many years of operations, selling its games across North America, and thus it is able to offer it as a service to third parties as well.

Business Growth

FY 2009 (ended October 31, 2009)[1]

  • Net sales fell 37% to $968 million, down from $1.5 billion in the previous year. Publishing sales decreased 43% on lower Grand Theft Auto IV sales as well as on other titles. Distribution sales decreased 13%.
  • The company incurred a net loss of $138 million compared to a gain of $97 million last year.

Trends/Forces

Despite Increasing Popularity, Video Game Demand Hurt By Sluggish Economy

The Entertainment Software Association (ESA) estimates that more than two-thirds of all American households play PC or video games, with an estimated 68% of heads of households playing games. They also estimate that the average gamer is 35 years old and has been actively playing for 12 years. ESA studies show that video game popularity has grown tremendously over the past couple of decades and the audience is widening. However, despite this increasing popularity, studies estimate that the market for video games will decrease over the next few years from the as an effect of the sluggish global economy. In 2009, video game software sales reached $24.5 billion on 604 million units sold. However, estimates for 2013 show sales value dropping to below $17 billion on just 460 million units sold. If the video game market shrinks, Take-Two, along with all other video game developers, will have a difficult time sustaining growth.[2]

Grand Theft Auto, the Crown Jewel of Take-Two, Must Keep Up Sales

Take-Two's Grand Theft Auto (GTA) franchise is one of the most coveted brands within the Video Game industry. It's games has an untarnished track record of both quality and sales. In 2009, GTA games accounted for 30.6% of the company's net revenue. In order to keep revenue stream from this title, Take-Two must continue to publish successful sequels or new hit titles to make up for any lost revenue. Because the GTA series is known for its violence and gore, many parents have decided not to buy these games for their kids (GTA games are rated 17+). Additionally, some countries have even gone as far as trying to ban the game because of its content. Take-Two must be careful not to cross the line with its content, otherwise it will face regulation. If the demand for GTA games falls, Take-Two's bottom line will suffer.[5]

Low Number Of Casual Games Exposes Take-Two To The Casual vs Hard-core gamer Dichotomy

Most of Take-Two's games fit within the traditional "hard-core" gaming category, catering towards the specific 18-35 year old male demographic. While this has fostered a devoted fan base, it has also limited the company's ability to expand beyond into the growing gaming demographics of younger children, females, and older males. Take-Two has taken various steps to address this flaw, establishing the "2K Play" publishing label, obtaining an exclusive license with Nickelodeon to develop games around "Dora the Explore" and "Go, Diego, Go", and creating the Carnival Games franchise.

Competition

  • Electronic Arts (ERTS) is the world's largest video game publisher. EA's major franchises include Rock Band, Need for Speed and a number of EA Sports titles, including John Madden's NFL franchise and FIFA.
  • Activision (ATVI) is one of the world's largest video game publishers and distributors. ATVI develops software for the PC and video game console markets. The company is home to the popular games: Guitar Hero, DJ Hero, Call of Duty, World of Warcraft, and Starcraft.
  • Konami (KNM) is a Japanese publisher, which has published hits such as the Metal Gear franchise.
  • THQ (THQI) is a developer and publisher which houses 16 development studios.

References

  1. 1.0 1.1 TTWO 2009 10-K "Selected Financial Data" pg. 30
  2. 2.0 2.1 TTWO 2009 10-K pg. 1-2
  3. TTWO 2009 10-K "Our Publishing and Software Development Business" pg. 4-6
  4. TTWO 2009 10-K "Our Distribution Business" pg. 6
  5. TTWO 2009 10-K "We Are Dependent On The Future Success Of Our Grand Theft Auto Products..." pg. 11
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