2012 Annual Report
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TAKE-TWO INTERACTIVE SOFTWARE, INC. ANNUAL REPORT 2012 DEAR SHAREHOLDERS, During fiscal year 2012, we made signifificant progress on OUR STRATEGY FOR GROWTH our creative, operational and strategic objectives, even Take-Two’s strategy is to develop the highest-quality, though we were unable to achieve our revenue and profifit most compelling entertainment franchises in the business, goals. Our fi nancial results for the year were negatively and deliver them on any platform that is relevant to our affected by our decision to postpone the release of several audience. We are actively investing in both our core titles in order to allow for additional development time. console and PC businesses, as well as in offerings for We believe that our unwavering commitment to quality emerging online and mobile platforms. is the right approach for maximizing shareholder value, even though income may occasionally be deferred in the World-class creative teams: Everything starts with our short-term. We expect to generate substantial revenue investment in world-class creative teams. The talent we growth and profitability in fiscal year 2013. continue to attract and retain at our Rockstar Games and 2K labels is an essential ingredient to building what we KEY ACHIEVEMENTS believe is the strongest portfolio of intellectual property Over the past year, our team: in our industry. Today, we have approximately 1,700 developers in 15 studios around the world. Our creative • Launched L.A. Noire, which transcends the boundary teams have proven their ability to deliver games that between interactive entertainment and cinema. consistently achieve high critical praise. While strong This groundbreaking title received excellent reviews ratings may not necessarily guarantee blockbuster sales, and, according to NPD data for the U.S., was the there is certainly a correlation. In addition, quality games highest-selling new intellectual property in our tend to withstand the test of time, which is reflflected in industry during 2011. the robust catalog sales that many of our titles enjoy. • Delivered the top-ranked and top-selling basketball video game for the 11th year in a row with the release Diverse portfolio of industry-leading intellectual of NBA 2K12. The title received the highest Metacritic property: We believe our portfolio of intellectual property score in the history of 2K Sports and, for the second is the strongest in our industry. We have 9 franchises consecutive year, sold-in over 5 million units and with individual titles that have sold-in approximately led 2K Sports to achieve profifi tability. 5 million or more units. Since 2007, we have launched 5 successful new franchises and released 34 distinct • Grew our revenue from digitally delivered content multi-million unit selling titles. We aim to manage our to a record $107 million – representing 13% of our portfolio of intellectual property carefully in order to total net revenue in fiscal 2012. reap the benefifi ts of dependable hit franchises without creating untimely product fatigue. To that end, we • Released three new titles for iOS, as well as our continually strive to balance our development efforts fi rst offering for Android. Grand Theft Auto III – 10th between new IP and sequels to our existing hit franchises. Anniversary Edition for the first time delivered the full console experience of Grand Theft Auto to Driving value through evolving business models: smartphones and tablets and is our highest-selling Our willingness to embrace evolving business models is and most profifitable mobile release to date. an important driver of incremental growth and margins. • Launched our fi rst social game, Civ World, for Take-Two was among the first publishers to create Facebook, which received excellent reviews and is downloadable add-on content, and we continue to be a the most immersive game available on the platform. leader in delivering innovative offerings, both digitally and While not a meaningful contributor to revenue, this as packaged goods. Add-on content generates revenue project was invaluable in helping us understand and profifi ts, and prolongs consumer engagement with what drives success on social platforms. our titles. This not only extends the life and value of each release, it also helps mitigate demand for used copies of • Continued to make substantial progress on our our games. We had great success with add-on content three online games for Asian markets. for Grand Theft Auto IV, Borderlands and Red Dead • Raised $250 million through a convertible Redemption, and expect add-on content to play an notes offering and renewed our credit facility – integral role in enhancing most of our future releases. both on highly attractive terms. Investing in traditional and digital distribution • Launched new online stores for Rockstar Games platforms: The fi nal component of our growth strategy and 2K, which enable consumers to discover and is to distribute our products to consumers through all purchase games and branded merchandise directly relevant platforms and channels, whether as packaged from our labels. goods or through digital downloads. TAKE-TWO INTERACTIVE SOFTWARE, INC. ANNUAL REPORT 2012 Mobile gaming, especially on tablets, represents an With action-packed single- and cooperative multiplayer important growth opportunity for our Company. We will experiences, Borderlands 2 will continue to defifine the continue to invest to bring both our deep catalog of role-playing shooter genre. titles and select new releases to mobile platforms. In October, 2K Sports will release NBA 2K13. We are Our online gaming initiatives currently are focused confident that the title will once again raise the bar for on Asian markets, where we have partnered with three of excellence in a basketball video game. This new installment the region’s leading developers and publishers. Working in the top-selling and top-rated NBA simulation franchise with Tencent, we are in the open beta phase of publishing features the Oklahoma City Thunder’s Kevin Durant, an online version of NBA 2K for distribution in China and Los Angeles Clippers’ Blake Griffifin and the Chicago other key markets. We are also co-developing an online Bulls’ Derrick Rose as the chosen trio of cover athletes baseball game for the South Korean market with Nexon representing the new dynasty of NBA future legends. Corporation and a massively multiplayer online game for Also in October, 2K Games will bring one of gaming’s Asia based on a 2K Games franchise with XL Games. These most beloved franchises back to fans with XCOM: Enemy partnerships are enabling Take-Two to enter the world’s Unknown. Developed by Firaxis Games, the strategy largest online gaming market with a measured approach experts behind our Civilization franchise, the title to managing risk. If successful, these initiatives will be combines strategy with intense combat as players fight signififi cantly accretive to revenue and earnings, and to control the fate of the human race by defending against provide a more predictable and recurring revenue stream a terrifying global alien invasion. In addition, 2K Marin to complement our core business. continues to move forward with the development of XCOM, By making our products available wherever and a tactical squad-based shooter offering a strong character- however consumers want them, we are maximizing our driven experience, which is planned for release during audiences, expanding our business, creating value over fiscal year 2014. time and informing our business decisions for the future. BioShock Infifinite is currently in development at Irrational Games and is planned to launch on February 26, Solid financial foundation: Take-Two possesses the 2013. Fans of the franchise can look forward to classic strongest liquidity and balance sheet in its history – and BioShockk gameplay and an immersive story, as well the ability to invest aggressively for long-term growth. as exciting innovations that include aerial combat on As of March 31, 2012, we had $420 million in cash and no high-speed Sky-Lines and an arsenal of new weapons borrowings under our $100 million line of credit. and abilities. And, Grand Theft Auto V is in full development and ROBUST LINEUP OF NEW RELEASES promises to continue Rockstar Games’ incredible track Our strong outlook for fi scal 2013 and beyond is record of delighting fans by setting new benchmarks in driven by the most robust lineup of new releases in interactive entertainment through this iconic franchise. Take-Two’s history. In May, Rockstar Games launched their eagerly OUR FUTURE anticipated Max Payne 3, which fused action gameplay Looking ahead, we believe that success in our industry seamlessly with a dark single-player story and their requires four key elements: deepest multiplayer experience to date. The title received • Top creative talent; critical acclaim, including from The New York Times which • The highest quality owned intellectual property; wrote, “Max Payne 3 is a taut and compelling action • Cutting-edge technology; and game wrapped in the sumptuous, gritty and delightful • A sound fi nancial footing. production detail that is the Rockstar hallmark.” In June, 2K Games released Sid Meier’s Civilization V: Today, Take-Two possesses all of these attributes and Gods & Kings, a massive expansion pack for the is stronger than ever before in every facet of its business. award-winning strategy title, and Spec Ops: The Line, We are exceedingly optimistic about our long-term outlook a military shooter that combines intense action with a for growth and profifitability. riveting narrative set against the backdrop of a We’d like to thank our colleagues for their continued sandstorm-ravaged Dubai. dedication and hard work throughout this past year and Starting this summer, 2K Play will launch a new slate our shareholders for their valued support. of mobile titles, including Herd, Herd, Herd; House Pest Starring Fiasco the Cat; GridBlock; Carnival Games MiniGolf; and Comedy Central’s Indecision Game – Sincerely, a battle of political wits kept honest by ballot peeks, smear campaigns and recounts.