Take-Two Interactive Software blew past revenue and earnings guidance as sales of its Red Dead Redemption video game continued to set records. That may be enough to silence (or at least soften) critics who say it spends too much on games and can’t diversify away from its Grand Theft Auto fan base. But despite the good news, the company confirmed suspicions and postponed the launch of its highly anticipated L.A. Noire game until the first half of next year.
Red Dead Redemption, a Wild West themed game that launched on May 18, has now shipped more than 6.9 million copies to retail (although New York-based Take-Two didn’t say how many copies have been sold through to consumers). Previously, on June 8, the company said it had shipped more than 5 million units.
In an interview, chief executive Ben Feder (pictured right), said the company now expects to achieve the goal that it set many years ago: to be profitable for a full fiscal year even when it has not released a major Grand Theft Auto title during that year.
“This is the new Take-Two,” Feder said. “We now expect to achieve one of our paramount goals.”
Beyond Red Dead Redemption, new titles such as Mafia II, Sid Meier’s Civilization V, and NBA 2K11 are expected to push the company’s fiscal year ending Oct. 31 into the black, Feder said. Mafia II launched on Aug. 31 and got mixed reviews. Feder said critics either loved it or hated it, giving it a Metacritic rating of 74 to 78. Metacritic is a review aggregator. He said it is on track to becoming a profitable game.
Red Dead Redemption has had an average review rating of 95 out of 100 (I gave it a 97) on Metacritic. Revenue for the third fiscal quarter ended July 31 was $354.1 million, up 273 percent from $94.9 million and much higher than the guidance of $250 – $300 million that the company set in June. Analysts had expected a consensus of $295 million.
Non-GAAP net income was $26 million, or 28 cents a share, compared to a net loss of $52.3 million, or 68 cents a share a year earlier. Analysts had expected a non-GAAP loss of 9 cents a share. The company said it had strong catalog sales of titles such as Grand Theft Auto: Episodes from Liberty City, Grand Theft Auto IV, NBA 2K10 and Borderlands. Digital online revenue was $18 million, up from $7 million a year ago.
Take-Two now has raised its guidance for the fourth fiscal quarter ending Oct. 31 to $270 – $320 million in revenue and non-GAAP earnings per share of 20 – 30 cents. For the fiscal year, it anticipates revenue of $1.05 – $1.1 billion and non-GAAP earnings per share of 60 – 70 cents. For the fourth quarter, 2K Games plans to release downloadable content packs for BioShock 2 and Borderlands. Mafia II has already been released, and other games launching this quarter include NBA 2K11 and Sid Meier’s Civilization V.
L.A. Noire, a crime game set in Los Angeles, was expected to debut this fall but has now been postponed by Take-Two’s RockStar Games division until the first half of 2011. Previously, Take-Two had postponed Max Payne 3, another big crime shooting game, until next year. Such postponements, as happened with Red Dead Redemption, are always done in the name of improving game quality. But they annoy investors. Meanwhile, 2K Games and Irrational Games say they expect their newly announced BioShock Infinite game to be released during 2012.
In a statement, Take-Two chairman Strauss Zelnick said, “Our strategic focus on producing a select number of high quality titles, diversifying our product portfolio, and capitalizing on new revenue opportunities has enabled Take-Two to deliver significant growth and profitability in the third quarter and positioned the company for a strong finish to the fiscal year.”
In our interview, Feder said he “appreciated the concern” among investors who have been frustrated with product delays. But he noted that Red Dead Redemption proved that Take-Two could exceed expectations on a game that saw serious delays. Red Dead Redemption took down many different titles that were on time and on budget and came out at the same time, Feder said.
The company has around 2,100 employees. It recently cut jobs at its Visual Concepts and RockStar San Diego studios. (Mafia II is pictured above).
“One thing that Red Dead Redemption taught us is that giving a title the time it needs to reach high quality will pay off in the market,” Feder said. “We feel L.A. Noire has tremendous potential and that it has things that no other games have. We think it needs more time.”
In conference call with analysts, Zenick said that L.A. Noire has a number of advances. We know that the lip-sync technology and realism of the graphics of human faces is quite incredible, thanks in part to technology from Australia’s Depth Analysis (pictured is a scene from L.A. Noire).
Take-Two continues to take game properties to the Apple iPhone and iPad. It recently announced that it will make Grand Theft Auto Chinatown Wars for the iPad.