Take-Two: ‘Our business has been transformed’ by digital

The news of Red Dead Redemption 2’s delay until spring 2018 may have come as something of a disappointment this morning, but Take-Two’s fourth quarter and fiscal year 2017 results show the publisher couldn’t be in better shape to weather the storm.

A huge growth in digital sales has been one of the main drivers behind the company’s recent success, with net revenue growing 52 per cent year-on-year in Q4 to $571.6m and digital net revenue rising to 43 per cent year-on-year to $278.7m.

Indeed, Take-Two’s recurrent consumer spending (RCS) accounted for 50 per cent of its digitally delivered net revenue last quarter, and 24 per cent of the publisher’s total net revenue – something that Take-Two CEO Strauss Zelnick says will be a key focus during the extra six month wait until Red Dead Redemption 2 arrives next year:

"Now we have an opportunity to focus on catalogue and focus on recurring consumer spending," Zelnick told MCV. "We start by trying to delight consumers, so the question is can we build that engagement, and if we can, that engagement will translate into economics.

"What’s exciting is even with a rather light frontline release slate – only our sports titles – we’re still expecting to have an excellent year," he continued. "So we feel gratified by that. It’s only really a six-month move [for Red Dead Redemption 2] and while we don’t take these things lightly, Rockstar feels more time is required to deliver the excellence that they’re hoping for – the excellence that consumers expect – and we respect their views. It’s a choice that’s occasionally been made in the past, and it’s a choice that’s always paid off."

Bookings also grew 14 per cent in Q4 to $370.6m, with the largest contributors being, of course, the unstoppable Grand Theft Auto V and Grand Theft Auto Online. Indeed, Grand Theft Auto V has now sold over 80m units, according to Take-Two, while Grand Theft Auto Online has had "another record year," Zelnick tells us, becoming the single-largest contributor to the company’s RCS.

Not all of GTA V’s success is necessarily digital, though, as Zelnick told us the title’s current distribution split stands at 75 per cent physical and only 25 per cent digital: "What’s driving this is that consumers love this title and want more of it," he says.

LOOKING FORWARD TO 2018

With such a strong Q4 under its belt, Take-Two’s fiscal year 2017 results were equally robust, "significantly exceeding" the publisher’s expectations. Net revenue grew 26 per cent to $1.78bn, while digital net revenue grew 32 per cent to $921.7m. RCS was also at its highest level ever, accounting for 50 per cent of Take-Two’s digital net revenue, or 26 per cent of its total net revenue.

Take-Two won’t be resting on its laurels while the rest of the world waits for Red Dead Redemption 2, however, as Zelnick told us he’s always looking for ways to improve:

"We’re a pretty self-critical organisation, and I think when we have success, it’s in our nature to say what can we do better? And for us, doing better means delighting consumers, and when we are successful at doing that, then our results follow, so that’s how to tend we look at the world.

"We are proud that digital distribution has grown our company. We’re very proud that we’ve built a recurring consumer spending business that bookings from recurrent consumer spending grew 52 per cent year-over-year. They counted for about 32 per cent of our total bookings, so our business has been transformed. Five years ago, there was no such thing as recurrent consumer spending. We were an innovator with Grand Theft Auto IV, and we have, we felt, been a leader in this space ever since."

Indeed, despite admitting Take-Two’s upcoming review slate is "rather light," Zelnick is still expecting a bumper year for the company, led primarily by its upcoming releases in its NBA 2K and WWE 2K series, robust GTA V catalogue sales, a new title from one of 2K’s biggest franchises, and, of course, Red Dead Redemption 2.

"We’re super gratified that our initial thoughts about the following fiscal year, so fiscal 2019, look like $2.5bn in net sales and $700m in cashflow from operation," he told us.

Take-Two may not have a huge presence at this year’s E3, then, but Zelnick told us the show is still vital to the industry as a whole:

"It will be an interesting year for us," he said. "We’re not really showing products. We have a corporate presence at E3, and we’re excited to be there. We’ll be meeting with investors and meeting with the press naturally, and meeting with retail partners. I think it’s an important show and it’s important for the industry, and it’s very important for us as the number three company in the space to be there."