Take-Two cutting costs again as Q3 sales dip 3%

Sign up for the GI Daily here to get the biggest news straight to your inbox

Take-Two today released its financial results for its third fiscal quarter, covering the three months ended December 31, and while it reported slightly sagging sales and bookings, the company did beat its guidance and posted its smallest quarterly net loss since the May 2022 acquisition of Zynga.

Here's what you need to know:

The numbers

• Net revenue: $1.37 billion (down 3% year-over-year)
• Net loss: $91.6 million (compared to $153 million in the year-ago quarter)
• Total net bookings: $1.34 billion (down 3% year-over-year%)

The highlights

Some of the usual suspects for Take-Two did well in the third quarter, with Grand Theft Auto 5 and Online, Red Dead Redemption, and Zynga's lineup beating the company's expectations, but one of its usual mainstays, NBA 2K, missed a step, with the company reporting "softness" in NBA 2K24 sales, which in turn hurt recurrent consumer spending.

NBA 2K24 has now sold-in 7 million units, compared to about 8 million for NBA 2K23 at this point in its lifespan.

"Remember, this is still a very good news story," Take-Two CEO Strauss Zelnick told GamesIndustry.biz in a briefing call on the earnings. "This is the number one-selling sports title in North America, obviously the number one basketball title. We've sold-in over 7 million units, and in the fullness of time, NBA 2k24 will generate net bookings in line with NBA2K23. So this is largely a timing matter."

Zelnick pointed to slower sales for the game on older systems contrasted with enthusiasm on the newer generation of systems, suggesting it is "a reflection of consumers transitioning to the new hardware."

Elsewhere in the catalog, Grand Theft Auto 5 hit 195 million units sold-in to retailers, with the largest ever increase in new Grand Theft Auto Online accounts driven by the game's holiday Chop Shop update.

Red Dead Redemption 2 has now hit 61 million units shipped, and Zelnick was particularly upbeat about the company's mobile performance and the quarter's debuts from Zynga: Top Troops and Match Factory.

Given how much had been made about the difficulty of launching new games in mobile in recent years, we asked Zelnick if that trend is letting up.

"I do think it's been changing of late," Zelnick said. "Outside of our business, [2023 new release] Monopoly Go is a very significant hit. And inside of our company, we have two significant hits: Match Factory which is doing really, really well, and Top Troops, which is doing extraordinarily well also. And then we have some other titles in-market bubbling up that are looking super-promising.

"I do think it's a reflection of the consumer rebounding. As you know, in 2022 mobile had its first down year ever, and it's been recovering ever since. So I'm very encouraged that staying the course and being willing to invest in what we believe is the highest quality mobile interactive entertainment is beginning to pay off."

He added, "Match Factory is not just, 'Oh that looks good, let's invest behind it.' Match Factory looks huge."

Despite that optimism, Take-Two is carrying out another "cost reduction plan" incremental to the one it announced last year. While Zelnick would not say how many people were laid off in that original plan or how many will be cut in the current one, he did say the current plan is expected to be "more robust" than the last one.

"After ten years of unbridled industry growth and plenty of company growth, we think it's time to become really efficient at everything we do, especially in advance of this extraordinary pipeline," Zelnick said. "We want to make sure we can avail ourselves of the maximum operating leverage possible.

"And remember, our cost profile isn't just about headcount. Our biggest line-item expense is marketing, actually. So optimizing marketing would be a terrific way to make sure the company gets more efficient."

Some parts of the company have already seen layoffs, with cuts reported this year at 31st Union and Visual Concepts Austin.

Despite beating expectations in the third quarter, Take-Two lowered its full-year guidance to $5.25 billion - $5.3 billion, down from its previous range of $5.37 billion - $5.47 billion.

It attributed the lowered guidance to NBA 2K24's softness and weakness in its mobile advertising business, combined with a planned fourth quarter release being delayed and plans to ramp up the marketing spend around Match Factory in response to its early over-performance.

Sign up for the GI Daily here to get the biggest news straight to your inbox