2020 yearsYEARS ofOF interactiveINTERACTIVE entertainmentENTERTAINMENT TAKE-TWO INTERACTIVE SOFTWARE, INC. ANNUAL REPORT 2013 2013 marks our 20th anniversary. Take-Two’s success is rooted in our belief that the best way to succeed in our industry is to create franchises with long-term value. Our unwavering commitment to deliver consistently the highest-quality entertainment experiences embodies that philosophy. The talent at Rockstar Games and 2K is the essential ingredient to building what we believe is the strongest portfolio of intellectual property in the business. Take-Two has nine franchises with individual titles that have sold-in 5 million or more units. Since 2007, we’ve added seven new successful franchises; and, to date, have released more than 35 distinct titles that are multi-million unit sellers. Take-Two InTeracTIve SofTware, Inc. AnnuAl RepoRt 2013 Dear SHareHoLDerS, Fiscal year 2013 was an exceptional year for Take-Two, highlighted by 47% net revenue growth. Our results were driven by robust demand for our groundbreaking new releases, iconic catalog titles and expanding portfolio of digitally delivered offerings. Take-Two’s commitment to delight consumers with the highest-quality interactive entertainment enabled our organization to deliver strong results, despite a challenging environment for many in our industry. Today, we are better positioned for success than at any other time in our 20-year history. oUr keY acHIeveMenTS • Launched BioShock Infinite, the highest-rated release of 2013 to date on Xbox 360 and the Over the past year, our team: Pc with a 94 average Metacritic score. • Launched Max Payne 3, which delivered • Broadened our mobile slate with core releases rockstar Games’ signature cinematic style of including Max Payne Mobile, Borderlands Legends, action and storytelling. NBA 2K13 and Grand Theft Auto: Vice City; casual releases such as Gridblock and Herd, Herd, Herd; • Released , which is on-track to Borderlands 2 and our first mobile social game for Japan,NBA become the highest-selling release in the history 2K All-Stars. of 2k, with over 6 million units sold-in to date. • Made significant progress on our initiatives to • Delivered the top-ranked and top-selling develop online games for asia, including the basketball video game for the 12th year in a commercial launches of NBA 2K Online in China row with . The title won more than NBA 2K13 and Pro Baseball 2K in Korea. 38 editorial honors and quickly became the most profitable sports release in the history • Delivered record revenue from digitally delivered of 2K. This was the third consecutive release content, driven by strong demand for full-game of our annual basketball series to sell-in over downloads, add-on content for our new releases, 5 million units. in-game sales of virtual goods, and our expanding portfolio of mobile titles. • Released XCOM: Enemy Unknown, which reimagined one of the industry’s most beloved • Enhanced our portfolio of industry-leading franchises as a unique turn-based strategy franchises by acquiring the exclusive worldwide game. The title was one of the highest-rated rights to publish the WWE video game series releases of 2012, achieving a near-90 average across all major platforms and distribution Metacritic score. channels. 2 Take-Two InTeracTIve SofTware, Inc. AnnuAl RepoRt 2013 oUr STraTeGY Driving value through evolving business models: Our ability to capitalize on evolving business models Take-Two’s strategy is to deliver the highest is a key driver of incremental growth and margins. quality, most innovative and compelling interactive For example, downloadable add-on content (DLC) entertainment experiences. We are actively investing generates incremental revenue and profits, and in offerings for current and next-generation consoles, extends the life and value of our franchises by the PC, and emerging mobile and online platforms. engaging consumers with our titles for longer periods Our strong fiscal 2013 results demonstrate that our of time. We expect DLC to continue to play an integral strategy works and we believe it remains the best role in enhancing the experience of most of our course for our continued success. upcoming releases. In addition to DLC, we are also World-class creative teams: The foundation of our now receiving high-margin revenue from in-game success is the creative talent at our labels – Rockstar purchases of virtual goods, both in front-line titles Games and 2K. It is their vision and drive that has built such as NBA 2K13, and in mobile and online titles, our diverse portfolio of industry-leading franchises. many of which are free-to-play. We have approximately 1,800 developers in 14 studios Expanding offerings for tablets and smartphones: We around the world. Our creative teams have proven their believe that the popularity of video games on mobile ability to deliver games that consistently achieve high platforms, especially tablets, will grow at a rapid pace. critical praise. While strong ratings don’t necessarily This represents an exciting opportunity for Take-Two, ensure blockbuster sales, there is a clear positive which we’re actively pursuing through a multi-faceted correlation. High quality games tend to withstand the global strategy, including both core gaming and casual test of time, which is reflected in the robust catalog titles. As mobile technology continues to evolve, we sales that many of our titles enjoy. In fiscal year 2013, fully expect to release our most groundbreaking and catalog sales accounted for 25% of our net revenue, immersive new titles on every mobile device that core providing an important competitive advantage that gamers choose to embrace. delivers a relatively stable and predictable profit stream to supplement our new release schedule. Actively investing in online / MMO games: Currently, our online gaming initiatives are focused on Asian Diverse portfolio of industry-leading intellectual markets, where we’ve partnered with three of the property: We believe we have one of the most valuable region’s most successful developers and publishers. collections of intellectual property in our industry, To date, we have commercially launched NBA 2K Online including nine franchises with individual titles that with Tencent in China and Pro Baseball 2K with Nexon have sold-in 5 million or more units. These franchises Corporation in Korea. Civilization Online, 2K’s massively are diversified across a range of genres. To date, we multiplayer online game, is currently in development have released more than 35 distinct titles that are with XL GAMES in Korea. These partnerships enable multi-million unit sellers. We continually strive to Take-Two to enter the world’s largest online gaming balance our development efforts between new market with a measured approach to managing risk. intellectual property and sequels to our existing If successful, they will be significantly accretive to hit franchises. earnings and provide a recurring revenue stream to complement our core business. Innovative marketing and global distribution: Creating great games is only part of our formula for Solid financial foundation: Take-Two ended the fiscal success. Our marketing teams roll-out well-coordinated year with a strong balance sheet and ample liquidity. global campaigns that leverage both traditional and As of March 31, 2013, we had $403 million in cash and online media. We work in lockstep with our key retail no borrowings under our $100 million line of credit. partners to drive promotions when they matter the In June 2013, we enhanced our solid financial most - at point of sale. Our global distribution network foundation with the completion of a $250 million enables our products to be available to consumers offering of 1% convertible senior notes due 2018. wherever they want them, whether through traditional This offering enabled us effectively to refinance retail or emerging digital distribution platforms. our 4.375% convertible senior notes due 2014 on 3 Take-Two InTeracTIve SofTware, Inc. AnnuAl RepoRt 2013 substantially improved terms. It also provides us raise the bar not only for this franchise – but for all with additional capital to take advantage of potential interactive entertainment. opportunities for acquisitions, strategic investments, On October 1, 2K will release NBA 2K14 – which is share repurchases and other initiatives to grow our poised once again to set the standard for excellence in business and create shareholder value. sports gaming. Featuring NBA MVP, LeBron James, as its cover athlete, the title will be our first offering for roBUST LIneUP of new reLeaSeS the Xbox One and PlayStation 4. And, on October 29, 2K will put gamers in the We’re incredibly excited about our lineup of titles for ring with some of today’s biggest names in sports fiscal year 2014, which has already gotten off to a entertainment with the release of WWE 2K14. promising start. In April, 2K released Borderlands 2: Ultimate Vault oUr fUTUre Hunter Upgrade Pack, downloadable content for our successful shooter-looter franchise. Our industry appears to be entering an exciting In May, 2K expanded our mobile offerings with growth period, driven by the upcoming launches of the releases of Haunted Hollow and Sid Meier’s Ace next-generation consoles, as well as the increasing Patrol for iOS-enabled devices. The Wall Street Journal popularity of emerging mobile and online platforms. noted Ace Patrol as marking one of Take Two’s “biggest With our world-class creative teams, diverse and steps in its efforts to become an influential player in owned portfolio of the highest-quality franchises in the mobile market.” the business, cutting-edge technology and strong In June, 2K released two more mobile titles - XCOM: balance sheet, Take-Two has all of the assets required Enemy Unknown for iOS and Beejumbled. In addition, to capitalize on these opportunities. Fiscal year 2014 they released the Borderlands 2: Tiny Tina’s Assault on is poised to be one of our best years ever, highlighted Dragon Keep downloadable add-on content.