TTWO » Topics » Strategy

These excerpts taken from the TTWO 10-K filed Dec 19, 2008.

Strategy

Overview.    We endeavor to be the most creative, innovative and efficient company in our industry. Our strategy is to capitalize on the growth of the interactive entertainment market, particularly the expanding demographics of video game players, and focus on creating premium quality games and successful

2


franchises for which we can create sequels. We develop most of our frontline products internally and own the intellectual property associated with most of our titles, which we believe best positions us financially and competitively. We have established a portfolio of proprietary software content for the major hardware platforms in a wide range of genres including action, adventure, racing, role-playing, sports and strategy. We believe that our commitment to creativity and innovation is a distinguishing strength, allowing us to differentiate many of our products in the marketplace by combining advanced technology with compelling story lines and characters that provide unique gameplay experiences for consumers. We have created, acquired or licensed a group of highly recognizable brands to match the variety of consumer demographics we aspire to serve, ranging from adults to children and game enthusiasts to casual gamers.

Support Multiple Labels to Target Distinct Market Segments.    We publish our titles under four separate labels: Rockstar Games, 2K Games, 2K Sports and 2K Play, with each label focused on distinct product genres and target demographics. We expect Rockstar Games, our wholly-owned publisher of the hit Grand Theft Auto and Midnight Club franchises, to continue to be a leader in the action product category by leveraging our existing titles as well as developing new brands. We expect 2K Games, developer and publisher of our successful Sid Meier's Civilization series and our critically acclaimed BioShock title, to continue to develop new and successful franchises in the future. Our 2K Sports series, which includes Major League Baseball 2K, NBA 2K and NHL 2K, provides us with consistent revenue streams because we publish them on an annual basis. We established the 2K Play label to focus on the growing market of casual and family-oriented games. Carnival Games has been a strong performing, internally developed and owned franchise, and 2K Play has leveraged this brand through sequels and product extensions, including Carnival Games™ MiniGolf. We have expansion initiatives in the rapidly growing Asia Pacific markets, where our strategy is to broaden the distribution of our existing products, develop a presence in Japan, and establish an online gaming presence, especially in China and Korea.

Maximize Product Selection and Development.    Our primary strategy is to publish a select number of high quality titles based on internally owned and developed intellectual property, which typically provide higher margins than licensed products. We currently have over 15 proprietary brands which we expect to leverage in the future. In addition, we will selectively develop titles based on licensed properties, including sports, and also publish externally developed titles.

We use a product investment review process to evaluate potential titles for investment, to review existing titles in development, and to review titles after their release to assess product performance. We apply this process to all of our products, whether externally or internally developed. The product investment review process includes in-depth reviews of each project at various stages of development by our executive management team and senior management of our publishing labels, and includes coordination between our sales and marketing personnel before the launch of the titles. This disciplined approach to product investment is expected to enhance the competitiveness and profitability of our titles.

We develop our products using a combination of our internal and external development resources acting under contract with us. We typically select our external developers based on their track record and expertise in developing products in the same category or genre. One developer will often produce the same game for multiple platforms and will also produce sequels to an original game. We believe that selecting and using development resources in this manner allows us to leverage the particular expertise of our internal and external development resources, which we believe increases the quality of our products.

Diversify Revenue by Title, Genre, Platform, and Target Demographic.    We believe the diversification of our product mix will reduce our operating risks and increase our revenue. We expect to increase revenue in our sports business as the installed base of current generation hardware grows and consumers purchase sports titles for these newer platforms, which generally sell at higher price points than software for prior generation systems. We also plan to develop and market additional titles under our Major League Baseball license and continue to focus on maximizing the quality of all of our sports titles. In addition, we expect to offer a wider variety of titles for an expanded group of customers through our 2K Play label, which is

3



focused on family and casual games. We also offer our titles on the popular hardware platforms to take advantage of their increasing installed base, including the PS3, Xbox 360, Wii, PSP and DS.

Leverage Emerging Technologies.    The technological advances in our industry are leading to new revenue streams which we are seeking to capitalize on. We see opportunities in a variety of areas, including downloadable content, in-game advertising, micro-transactions and massively multiplayer online gaming ("MMOG"). We released downloadable content for BioShock® on the PlayStation®Network, and plan to release downloadable content for Grand Theft Auto IV on Xbox Live®, Microsoft's online entertainment and gaming network, in fiscal 2009. We currently include advertising in many of our sports titles. We also plan to pursue opportunities that exist for networked gameplay, particularly for our wholly-owned franchises, as well as micro-transactions, where gamers can pay to download additional content to enhance their game playing experience.

Expand International Business.    The global market for interactive entertainment continues to grow, and we seek to increase our presence internationally, particularly in Asia, Eastern Europe and Latin America. In 2008, we purchased 2K Czech, formerly known as Illusion Softworks, a Czech Republic developer of the Mafia video game franchise. We also have expansion initiatives in the rapidly growing Asia Pacific markets, where our strategy is to broaden the distribution of our existing products, develop a presence in Japan, and establish an online gaming presence, especially in China and Korea. Historically, we typically distributed our products in Asia through license and royalty agreements with local publishers. While we retain title to all intellectual property, local publishers are responsible for localization of software content, distribution and marketing of the products in their respective local markets. We intend to build upon these relationships and also establish new relationships to expand our international business.

Strategy



Overview.    We endeavor to be the most creative, innovative and efficient company in our industry. Our strategy is to
capitalize on the growth of the interactive entertainment market, particularly the expanding demographics of video game players, and focus on creating premium quality games and successful



2









franchises
for which we can create sequels. We develop most of our frontline products internally and own the intellectual property associated with most of our titles, which we believe best positions
us financially and competitively. We have established a portfolio of proprietary software content for the major hardware platforms in a wide range of genres including action, adventure, racing,
role-playing, sports and strategy. We believe that our commitment to creativity and innovation is a distinguishing strength, allowing us to differentiate many of our products in the
marketplace by combining advanced technology with compelling story lines and characters that provide unique gameplay experiences for consumers. We have created, acquired or licensed a group of highly
recognizable brands to match the variety of consumer demographics we aspire to serve, ranging from adults to children and game enthusiasts to casual gamers.



Support Multiple Labels to Target Distinct Market Segments.    We publish our titles under four separate labels:
Rockstar Games, 2K Games, 2K Sports and 2K Play, with each label focused on distinct product genres and target demographics. We expect Rockstar Games, our wholly-owned publisher of the hit
Grand Theft AutoSIZE=2> and Midnight Club franchises, to continue to be a leader in the action product category
by leveraging our existing titles as well as developing new brands. We expect 2K Games, developer and publisher of our successful
Sid Meier's
Civilization
series and our critically acclaimed BioShock title, to continue to develop new and successful franchises in the
future. Our 2K Sports series, which includes
Major League Baseball 2K, NBA 2K and NHL 2K, provides us with
consistent revenue streams because we publish them on an annual basis. We established the 2K Play label to focus on the growing
market of casual and family-oriented games.
Carnival Games has been a strong performing, internally developed and owned franchise, and 2K Play has
leveraged this brand through sequels and product extensions, including
Carnival Games™ MiniGolf. We have expansion initiatives in the
rapidly growing Asia Pacific markets, where our strategy is to broaden the distribution of our existing products, develop a presence in Japan, and establish an online gaming presence, especially in
China and Korea.



Maximize Product Selection and Development.    Our primary strategy is to publish a select number of high quality
titles based on internally owned and developed intellectual property, which typically provide higher margins than licensed products. We currently have over 15 proprietary brands which we expect to
leverage in the future. In addition, we will selectively develop titles based on licensed properties, including sports, and also publish externally developed titles.



We
use a product investment review process to evaluate potential titles for investment, to review existing titles in development, and to review titles after their release to assess product
performance. We apply this process to all of our products, whether externally or internally developed. The product investment review process includes in-depth reviews of each project at
various stages of development by our executive management team and senior management of our publishing labels, and includes coordination between our sales and marketing personnel before the launch of
the titles. This disciplined approach to product investment is expected to enhance the competitiveness and profitability of our titles.



We
develop our products using a combination of our internal and external development resources acting under contract with us. We typically select our external developers based on their track record
and expertise in developing products in the same category or genre. One developer will often produce the same game for multiple platforms and will also produce sequels to an original game. We believe
that selecting and using development resources in this manner allows us to leverage the particular expertise of our internal and external development resources, which we believe increases the quality
of our products.



Diversify Revenue by Title, Genre, Platform, and Target Demographic.    We believe the diversification of our product
mix will reduce our operating risks and increase our revenue. We expect to increase revenue in our sports business as the installed base of current generation hardware grows and consumers purchase
sports titles for these newer platforms, which generally sell at higher price points than software for prior generation systems. We also plan to develop and market additional titles under our
Major League
Baseball
license and continue to focus on maximizing the quality of all of our sports titles. In addition, we expect to offer a wider
variety of titles for an expanded group of customers through our 2K Play label, which is



3











focused
on family and casual games. We also offer our titles on the popular hardware platforms to take advantage of their increasing installed base, including the PS3, Xbox 360, Wii, PSP and
DS.



Leverage Emerging Technologies.    The technological advances in our industry are leading to new revenue streams which
we are seeking to capitalize on. We see opportunities in a variety of areas, including downloadable content, in-game advertising, micro-transactions and massively multiplayer online gaming
("MMOG"). We released downloadable content for
BioShock® on the PlayStation®Network, and plan to release downloadable
content for
Grand Theft Auto IV on Xbox Live®, Microsoft's online entertainment and gaming network, in fiscal 2009. We currently include
advertising in many of our sports titles. We also plan to pursue opportunities that exist for networked gameplay, particularly for our wholly-owned franchises, as well as micro-transactions, where
gamers can pay to download additional content to enhance their game playing experience.



Expand International Business.    The global market for interactive entertainment continues to grow, and we seek to
increase our presence internationally, particularly in Asia, Eastern Europe and Latin
America. In 2008, we purchased 2K Czech, formerly known as Illusion Softworks, a Czech Republic developer of the
Mafia video game franchise. We also
have expansion initiatives in the rapidly growing Asia Pacific markets, where our strategy is to broaden the distribution of our existing products, develop a presence in Japan, and establish an online
gaming presence, especially in China and Korea. Historically, we typically distributed our products in Asia through license and royalty agreements with local publishers. While we retain title to all
intellectual property, local publishers are responsible for localization of software content, distribution and marketing of the products in their respective local markets. We intend to build upon
these relationships and also establish new relationships to expand our international business.



This excerpt taken from the TTWO 10-K filed Dec 20, 2007.

Strategy

Overview.    Our strategy is to capitalize on the growth of the interactive entertainment market, particularly the expanding demographics of video game players, through a focus on creating premium quality games and successful franchises for which we can create sequels. We have established a portfolio of successful proprietary software content for the major hardware platforms in a wide range of genres including action, adventure, strategy, role-playing, sports, racing, music, party and puzzle. We believe that our commitment to creativity and innovation is a distinguishing strength, allowing us to differentiate many of our products in the marketplace by combining advanced technology with compelling story lines and characters to provide unique gameplay experiences for consumers. We have created, licensed and acquired a group of highly recognizable brands to match the variety of consumer demographics we aspire to serve, ranging from adults to children and hard-core game enthusiasts to casual gamers.

Support Multiple Labels to Target Distinct Market Segments.    We publish our titles under four separate labels: Rockstar Games, 2K Games, 2K Sports and 2K Play, with each label focused on distinct product genres and target demographics. We expect Rockstar Games, the publisher of our blockbuster Grand Theft Auto and Midnight Club franchises, to continue to be a leader in the action product category by leveraging our

2



existing titles as well as developing new brands. We also anticipate that 2K Games, the publisher of the critically acclaimed BioShock title and Civilization series, will continue to develop new and successful franchises in the future. Our 2K Sports label, which publishes the Major League Baseball 2K, NBA 2K, NHL 2K and College Hoops 2K series, is intended to provide more consistent year over year revenue streams because we publish these titles on an annual basis. Our recently launched 2K Play label, publisher of our successful Carnival Games title, is focused on the growing casual and family gaming market, and we recently entered into a licensing agreement with Nickelodeon to publish games based on top rated Nick Jr. preschool television properties, including Dora the Explorer and Go, Diego, Go!.

Maximize Product Selection and Development.    Our primary strategy is to publish a select number of high quality titles based on internally owned and developed intellectual property, which tends to offer higher margins than licensed products. We currently have over 15 proprietary brands which we expect to leverage in the future. In addition, we will selectively develop titles based on licensed properties, including sports, and also publish externally developed titles. We have recently implemented a product investment review process to evaluate potential titles for investment, to review existing titles in development, and to review titles after their release to assess product performance. We apply this process to all of our products, whether externally or internally developed. The product investment review process includes in-depth reviews of each project at various stages of development by our executive management team and senior management of our publishing labels, and includes coordination between our sales and marketing personnel before the launch of the title. This disciplined approach to product investment is expected to enhance the competitiveness and profitability of our titles.

We develop our products using a combination of our internal development resources and external development resources acting under contract with us. We typically select our external developers based on their track record and expertise in producing products in the same category. One developer will often produce the same game for multiple platforms and will produce sequels to the original game. We believe that selecting and using development resources in this manner allows us to leverage the particular expertise of our internal and external development resources, which we believe adds to the quality of our products.

Diversify Revenue by Title, Genre, Platform, and Target Demographic.    We believe the diversification of our product mix will reduce our operating risks and increase our revenue. We expect to continue to increase revenue in our sports business and offer a wider variety of titles for an expanded group of customers through the recent launch of our 2K Play label, focused on family and casual games. We are also increasingly offering our titles on additional hardware platforms to take advantage of the increasing installed base of these platforms, including the Xbox 360, PlayStation 3, Wii, PlayStation Portable, Nintendo DS and PC.

Improve Financial Performance.    We are seeking to return to profitability in fiscal 2008 through a combination of our company-wide cost reduction program, the introduction of a greater number of internally owned and developed titles, the reduction of legal expenses and professional fees as we resolve our outstanding regulatory and litigation issues, and the enhanced financial performance of our distribution business. We expect to improve financial performance in our sports business through a combination of higher average retail price points as more of our titles are sold on next-generation platforms, increased unit sales, and the introduction of new titles, including proprietary, non-licensed sports titles. We also expect to expand our low cost development capabilities in Asia.

Leverage Emerging Technologies.    The technological advances in our industry are leading to new revenue streams which we are seeking to capitalize on. We see opportunities in a variety of areas, including episodic content, in-game advertising, micro-transactions and networked gameplay. We plan to release episodic content for Grand Theft Auto IV on Xbox Live in fiscal 2008. We are currently including advertising in many of our sports titles. We also plan to pursue opportunities that exist for networked gameplay, particularly for our wholly-owned franchises, as well as micro-transactions, where gamers can pay to download additional content to enhance their game playing experience.

3



Expand International Business.    The global market for interactive entertainment continues to grow, and we seek to increase our presence internationally, particularly in Asia, Eastern Europe and Latin America. We typically distribute our products in Asia through license and royalty agreements with local publishers. While we retain title to all intellectual property, local publishers are responsible for localization of software content, distribution and marketing of the products in their respective local markets. We intend to build upon these relationships and establish new relationships to expand our international business.

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