In a statement released today, Grand Theft Auto IV
publisher Take-Two reported that its fourth quarter losses doubled over the same period last year to $15 million.
Looking ahead in a poor economy to a year with no major console retail Grand Theft Auto
release planned, board chairman Strauss Zelnick says that the company is "drastically" reducing its expectations for next year.
But alongside the doubled quarterly loss, Take-Two reported quarterly sales up 11 percent to $323.4 million. And the company saw overall fiscal year profits of $97.1 million, results Zelnick calls "the strongest revenue and earnings in our company's history" -- driven primarily by Grand Theft Auto IV
On the company's call to investors, Take-Two revealed that the Grand Theft Auto
franchise, including catalog titles, accounted for $710 million -- 60 percent -- of the company's publishing revenue for the year, and only $40 million, or 17 percent, of its fourth quarter.
Zelnick also says Midnight Club: Los Angeles, NBA 2K9
and Sid Meier's Civilizations: Revolution
played key roles in the fourth quarter results, which were in line with its own guidance.
The Take-Two Chairman expressed marked concern about the economic climate, but urged investors that the company is well-positioned, having begun conservative cost-cutting initiatives as far back as 2007, when the current management team was brought in to lead the company's restructuring efforts.
Studio Losses Are Take-Two's Opportunity?
President Ben Feder said, however, that the Take-Two would "continue to look" at the company's structure. Although he maintained that there's "no need for additional dramatic cost initiatives," Feder added the company's management will still "explore areas where we could derive additional benefits."
Notably, Feder said the company's still interested in hiring. "We're continuing to invest in the growth of our creative resources," he explained. Noting numerous studio closings and layoffs across the industry recently, Feder said Take-Two views them as an "opportunity to acquire strong talent."
Feder also noted that, to drum up capital for its holiday season, the company has borrowed $71 million from a credit facility that it secured last year, and that Take-Two is "fortunate" to have lenders available given the circumstances.
Addressing Next Year's Uncertainty
Given Grand Theft Auto IV
's strong results, many analysts have expressed doubt as to whether Take-Two can continue to perform in 2009.
One area of uncertainty was the fate of the Rockstar studio talent, whose contract is up in February 2009 -- and Take-Two addressed this issue
today by negotiating a new agreement with key employees Sam and Dan Houser and Leslie Benzies that would keep them with the publisher until 2012.
Feder also assured investors that the company is focused on future opportunities to broaden its offering, noting that downloadable content is a "significant opportunity... in the near term."
The Lost & Damned
expansion pack for GTA IV
launches on February 17th, and the company is "looking across our entire portfolio" for other opportunities to create DLC revenue streams.
Feder noted online play as a way to staunch revenue leakage from the sale of used games, and the potential for microtransactions and subscriptions to "enhance the packaged goods business by offering multiple revenue channels."
"We're driving toward continued success," stressed Zelnick. "We believe in our strategy, we believe in our team, and therefore, we believe in our future."
: The company's much-reduced outlook for 2009 is disappointing shareholders and analysts, with Reuters noting that
Take-Two "...expects profit for the year ending in October 2009 to range between nil and 20 cents per share, significantly missing the average analysts' estimate of $1.21 per share."
First-quarter outlook was also massively reduced from analyst estimates - as a result, Take-Two shares are down almost 20% to $9.90 in after-market trading.]