Take-Two's usual performers carry company to solid quarter

No Red Dead, no problem. Take-Two Interactive's holiday quarter was originally intended to feature Red Dead Redemption 2, but the company today reported solid numbers even without the delayed Rockstar open-world sequel.

For the three months ended December 31, Take-Two reported net revenues up less than 1% to $480.8 million, with net income going from a $29.8 million loss to a $25.1 million gain (even with an $11.9 million incremental income tax expense related to the passage of the Tax Cuts and Jobs Act).

The company's preferred sales metric of net bookings was down more than 14% year-over-year to $653.9 million, a decline attributed primarily to a tough comparison of holiday release schedules. Where the year-ago quarter benefited from the launches of Mafia III and Civilization VI, the delay of Red Dead Redemption 2 left Take-Two leaning heavily on annualized franchises like NBA 2K and WWE 2K, the ongoing Grand Theft Auto Online, and re-releases of LA Noire on new platforms for its latest quarter.

Fortunately for the publisher, those offerings delivered. Grand Theft Auto Online and NBA 2K18 both enjoyed record quarters as far as recurrent consumer spending goes. Take-Two's recurrent consumer spending business grew 64% year-over-year, accounting for 32% of total net revenue. Digitally delivered revenues were up 8% to $258.4 million, accounting for 54% of the company's total sales.

In a briefing call, Take-Two CEO Strauss Zelnick told GamesIndustry.biz that NBA 2K18 was up 25% year-over-year with recurrent consumer spending up 30%, and was the no.2 selling title in the US for 2017 from a units perspective. Grand Theft Auto V (the core game which includes Grand Theft Auto Online) also continued its success, and has now sold-in 90 million units on various platforms since its 2013 debut.

As for WWE 2K18, Zelnick characterized it as a successful launch, though he didn't offer specifics. However, Take-Two's earnings report referenced "a substantial long-term opportunity to grow our WWE 2K series by leveraging further the development and marketing expertise of 2K and Visual Concepts." When asked what should be read into the absence of series co-developer Yuke's in that statement, Zelnick said, "I think you should read it the way it's written, which is that we have a very powerful label structure in Visual Concepts, a very powerful marketing structure in 2K. The relationship with Yuke's has been mutually beneficial. We really believe in this brand, and we've only had it for a few years. It's performed well. We think there's a lot of upside, so 2K and Visual Concepts are really digging in and creating that upside."

The quarter's performance was enough for Take-Two to bump its full-year financial projections up. Net revenues are now expected to be $1.8 to $1.85 billion (up from $1.74 to $1.84 billion), while net income is expected to be in the $170 to $181 million range, up from $63 to $91 million. Net bookings projections also increased modestly, from $1.93 to $2.03 billion to $1.99 to $2.04 billion.

However, the real focus now is on the company's next fiscal year, which will see the launch of Red Dead Redemption 2 on October 26 and "a highly anticipated new title from one of 2K's biggest franchises." Those titles are expected to push Take-Two to a company record $2.5 billion in bookings and $700 million in net operating income, numbers the company revealed after it first delayed Red Dead Redemption 2 into its fiscal 2019, and reiterated last week when it delayed the game from the spring to its current release date.

The lead up to Red Dead Redemption 2's release has some elements in common with that of the original Red Dead Redemption. Assuming the sequel sticks to its current release date, both games will have been delayed multiple times, pushing each to launch the better part of a year after its original announced window. For the original Red Dead Redemption, those delays produced not just a critically acclaimed hit but the Rockstar Spouse controversy, in which the game's developer was accused of prolonged mandatory crunch periods and poor working conditions during the year leading up to the game's launch.

When asked what Take-Two is doing to ensure the sequel to Red Dead Redemption isn't also producing a sequel to the Rockstar Spouse controversy, Zelnick said the company is "really proud" of its work practices.

"We have a hard-working company. It's a privilege to work at our company and our labels. And I believe that our work practices are sound and appropriate. It is a very busy time, but it's a time that people are anxious to participate in. And I stand behind it."