Take-Two takes $50 million Q2 loss

$26.3 million charge related to Amped 3 developer closure, next-gen transition torpedo publisher's bottom line; Elder Scrolls IV accounted for 40 percent of revenue.

Just hours after the Federal Trade Commission announced it had closed an investigation into Take-Two Interactive, the game publisher issued its earnings report for the three months that ended April 30, 2006. The quarter, the second of the New York-based company's fiscal year, saw a net loss of $50.4 million, or $0.71 per share. During the same period in 2005, the company suffered an $8.2 million net loss, or $0.12 per share.

The shortfall must've been a bitter pill for Take-Two executives to swallow, since net revenue for the quarter was $43 million higher than during the same period in 2005, going from $222.1 million to $265.1 million. "Total revenue in the second quarter was up about 19 percent compared to Q2 last year due to a 36 percent increase in our publishing business," said Take-Two CEO Karl Winters in a postannouncement conference call.

The reason for the uptick? "Publishing revenue was led by the sales of The Elder Scrolls IV for Xbox 360 and PC, which together represented 40 percent of publishing revenue," said Winters, indicating the Bethesda Softworks-developed title generated $106 million of net revenue all on its own. The CEO said the next-best-selling game was the multiplatform Major League Baseball 2K6, which was "approximately 14 percent of publishing revenue in the quarter," or around $37 million. Winters also singled out Top Spin 2, Grand Theft Auto: Liberty City Stories, and the now-bargain-priced Grand Theft Auto: San Andreas as other top sellers.

Unfortunately for Take-Two, brisk sales couldn't overcome a $26.3 million charge the company took "related to the write-off of several titles in development...and other costs from the closure of two development studios." The company recently revealed the cancellation of Snow, a drug-dealer sim that would've assuredly generated controversy. It also disclosed the closures of Rockstar Vienna (Xbox ports of Max Payne and Grand Theft Auto: Vice City) and Indie Built (Amped 3, Top Spin 2) in early May, the start of its third quarter.

Winters also cited other, more pervasive reasons for Take-Two's quarterly shortfall. One was that the company has a smaller-than-normal profit margin on Oblivion, which it copublishes with Bethesda. "As we've said in prior calls, co-publishing gross margins can range anywhere from 20 to 40 percent, and, in this case, tip toward the lower end of that range," he said. Winters also blamed the "fairly high royalty costs" of Major League Baseball 2K6 as a big factor for lessened profits. Take-Two currently holds the exclusive license to publish third-party MLB games.

"Our internally owned internally developed titles, which typically provide much higher margins, represented less than 20 percent of our publishing revenue in the quarter," said Winters, "[Our] sports business contributed over 30 percent of the quarter's publishing revenue, and our licensed external products were 50 percent."

For the six months ending April 30, 2006, Take-Two suffered a net loss of $79.5 million, versus a net income of $47.1 million in the same period in 2005. A big factor in that downfall was the game industry's current bogeyman--the current-to-next-generation console transition. "Second-quarter revenue declined year-over-year due...to reduced sales of current generation hardware and software and a decrease in average selling prices as the industry transitions to next-gen platforms," said Winters.

77 Comments

  • FuriousFragnito

    Posted Jun 28, 2006 7:28 pm GMT

    I hope Take Two goes under. They produce garbage games. Bethesda created Elder Scrolls, not Take Two. Someone else can produce the good games to come.

  • magusat999

    Posted Jun 13, 2006 11:22 am GMT

    That's why one company shouldn't "umbrella" others like that - if it goes down it takes too many with it - and the consumer gets shafted in the end.

  • GaaraZanta

    Posted Jun 12, 2006 10:05 pm GMT

    "Hardcoreforever
    Does this mean no more Grand theft auto games? Thank god. I've played the same one 3 separate times. Wait, they had all different names though. Doesn't make sense. /sarcasm"

    Wow, I wish i was as funny as you.

  • chrisdojo

    Posted Jun 11, 2006 5:14 pm GMT

    man...how can all these publishers continue to stay in business when losing millions all the time?

  • i_love_my_ds

    Posted Jun 10, 2006 2:40 pm GMT

    i feel so sorry for them......

  • ocdog45

    Posted Jun 9, 2006 5:53 pm GMT

    OMG..whomp whomp!

  • nocoolnamejim Site moderator

    Posted Jun 9, 2006 2:44 pm GMT

    This just means one thing...

    When the next Grand Theft Auto game comes out, I'll just have to buy TWO copies. One for me, and one for my buddy who will be having a birthday around that time.

  • drgonzo619

    Posted Jun 9, 2006 1:56 pm GMT

    i wonder how much the MLB 2k6 feezing issue hurt sales of TTWO.

    Take two was my favorite publisher since GTA III, i hope they turn it around soon.

  • rileyhaj21

    Posted Jun 9, 2006 12:23 pm GMT

    That dude sounds like he doesn't even get out of his house much less has kids he need to take care of. I get so sick and tired of parents not doing their damn job and then blaiming it on popular culture. Face it the majority of people who have kids should not. They put them in front of the TV to shut them up, they buy them any video game the damn kid points to just so he will stop crying like a baby and then when the kids kills eight people and build a damn bomb out of fecal matter they act all suprise! Don't worry about your kid hanging out with the wrong crowd when they come home to a lazy parent.

  • Flan_Man

    Posted Jun 9, 2006 11:13 am GMT

    Figures that a company that could bring me such joy would be hit like that. Hopefully, they don't get hit any worse or they may end up in Oblivion... or at least that one plane where all those wacky people were getting beat up by the dremora...

  • ReyWing

    Posted Jun 9, 2006 11:07 am GMT

    This means they need better internally owned and internally developed games and bigger profit margins on their partnerships. Good learning lesson but $50 million is a big ass cost for that lesson. Poor R* Vienna and Indie Built =( sucks for the industry and economy. Snow woulda been a nice yet controversial game to play. I remember that old text game where you sold drugs... wat was that called? Oh yeah, Drug Wars. heheh Pimp Wars was another fantastic one.

  • RiotActing04

    Posted Jun 9, 2006 10:40 am GMT

    Looks like a great time to buy this stock...

  • Jd1680a

    Posted Jun 9, 2006 10:12 am GMT

    this is too bad for take two. i think the $50 million loss have to with all the development of new games. it might take another year for their hard work to pay off as profit. clearly it shows with oblivion with it having 40% its revenue. if this isnt the case, take two would need to explore new avenues to make money, maybe license elder scrolls to someone to make a movie.

  • xbox_gamer1

    Posted Jun 9, 2006 8:32 am GMT

    Im still hocked on Oblivion, it is one of the greatest games I have ever bought!!!!!!!

  • OPOLO

    Posted Jun 9, 2006 6:40 am GMT

    sounds & look like just a small hit - watch for their next report

  • Autolycus

    Posted Jun 9, 2006 5:31 am GMT

    elder scrolls - bought


    top spin 2 - wanted but couldnt justify the cost


    table tennis - bought because its different and done well


    I hope TAKE 2 starts to realize that you cant just pick up a license and throw the game out there and expect to make profit(lame stupid madden is the exception here). keep with the MLB. You have a lot of fans that appreciate you holding onto the license, though we would like to believe it's out of spite for EA...not need for profit(which is true in this situation). You'll get A LOT of loyal customers. And in case you never saw IGN's poll of TAKE 2 vs EA...TAKE2 owned...

  • PwnageUK1989

    Posted Jun 9, 2006 4:22 am GMT

    Sweet mate your not helping our cause! Im a christian and i dont paticualry care what other people do in their spare time! if they want to be sinnful and immoral an all that let em! its their soul innit? saying crap like that only makes u sound light a right wing nutjob which reflects on christianity as a whole. Its only weak minded people who are effected unduly by games and in hte case of youngins its the parents fault for letting them have it. its rated 18 cause only people ova 18 are supposed to have it.

  • animemog

    Posted Jun 9, 2006 2:52 am GMT

    Humans are so fascinating!

  • Hardcoreforever

    Posted Jun 9, 2006 2:34 am GMT

    Does this mean no more Grand theft auto games? Thank god. I've played the same one 3 separate times. Wait, they had all different names though. Doesn't make sense. /sarcasm

  • MedevilDragon

    Posted Jun 9, 2006 2:17 am GMT

    I just like to say that EA sucks!!! T2 make much better games.

  • azeem_ahmed

    Posted Jun 9, 2006 1:51 am GMT

    OMG!!! Could This Mean The Demise Of Take-Two In The Coming Years?!?!?

  • faizali86

    Posted Jun 9, 2006 12:31 am GMT

    cancellation of snow? that would have been the next gta. why cant parents take care of their children. why do businesses have to do it?
    bad news for take-two

  • Monkeyseat

    Posted Jun 8, 2006 11:13 pm GMT

    Bad day for Take-Two...

  • CWEBB04z

    Posted Jun 8, 2006 10:04 pm GMT

    Ouch!, where is this God of your take two??

  • Onyx87

    Posted Jun 8, 2006 9:52 pm GMT

    It's amazing how completely ignorant some people can be with topics like this... I'd be lying if I said I wasn't even slightly offended by Sweet 1337's statement... Even if it was just to make people mad...

    I will admit that it is sink or swim for T2... But I'd like to think that Take Two would be fine as long as they take extra measures to make sure something like that doesn't happen again... They are one of my favorite developers after all...

  • Ghost_Warrior

    Posted Jun 8, 2006 9:12 pm GMT

    2k would be fine if they could still make a football game, ESPN 2k6 would have killed Madden 06. Too bad for Take-Two though.

  • lozandier

    Posted Jun 8, 2006 9:11 pm GMT

    Not to be smart but according to Wikipedia; They already in development for the next Oblivion; But I personally don't trust their game sources Wikipedia.... And I don't think Oblivion would go to PS3; Xbox 360 port was easy to do as 360 is Developer Friendly specificly PC games. for PS3; it would be harder.....

  • coreyb42

    Posted Jun 8, 2006 9:03 pm GMT

    Right on, erik and darkghost...actually, I imagine there are far more ignorant people outside of the cities, where edumacation is dubious at best. Sweet1337 is a racist if they're being serious, though I'm a bit skeptical. Stirring up the old ant nest.

    Take Two will sink or swim, only time will tell. Such is capitalism. We'll all be better off for it, after the other game companies finish fighting over the scraps that is Take Two. 55 million net loss is HUGE. We're not talking expense, we're talking (revenue - expense), where expense >> revenue. I think I hear the funeral bells, I don't see how any company could survive being so far down in the red.

  • CrunchyFrog000

    Posted Jun 8, 2006 8:57 pm GMT

    Its amazing what can happen when congress paints a target on your back, eh?
    (And on the whole baseball license thing, who buys baseball video games?)

  • Sango_Fighter

    Posted Jun 8, 2006 8:52 pm GMT

    Man i've been waiting to see this stock go down under $10. This company needs to reorganize big time. Definitely worth to buy under $10.

    I hear Electronic Arts is getting upgraded cause of the World Cup. I don't know how much money they can make from just one sports game.

  • erikthe10man

    Posted Jun 8, 2006 7:53 pm GMT

    BTW..... to the ultra-conservative on this thread who abhors violence yet tracks fighting games: if you want to keep your kids from being violent, then don't teach 'em religion. The most violent pyschos usually kill in the name of (insert favorite diety here). Just ask Bin Laden and G.W. Bush. Videogames don't create nutjobs - parents with their hypocritcal religious idealisms do. So "pray" for the games you don't like to be banned for violent content....and you'll soon find your precious fighting games to be contraband.....

  • DLUX85

    Posted Jun 8, 2006 7:50 pm GMT

    erik10theman-right on. They totally destroyed the mlb license.

  • erikthe10man

    Posted Jun 8, 2006 7:35 pm GMT

    Serves these bozos right. They absolutely butchered the MLB license with MLB2k6 and the NHL game isn't even worth mentioning. Why get exclusive rights on baseball when you have no intentions on developing a mind-blowing game? EA's MVP series was GREAT. Bethesda better jump ship fast....this is a boat that's going nowhere.

  • DarkGhost89

    Posted Jun 8, 2006 7:31 pm GMT

    Sweet1337, first while I doubt you actually what you seem to be, (using 1337 as part of your name is suspicious and the games you are tracking seems dubious on your idea of no violence) the media is not why we have crime, inner cities have just as many intellegent people as any other places (though the not-so-intellegent are alot more visible), and our minorities (myself included) are not a bunch of impressionable idiots. If you want to look at why crime exist at such a rate compared to others in cities, you have to look at drugs and income at those places not how much GTA they play (which should not be anymore than any other places). If you want your children to not emulate the negative culture, hope they pick the right friends, not the "right" games.

  • thekey

    Posted Jun 8, 2006 7:18 pm GMT

    This is just a case of spent too much money too fast.

  • DLUX85

    Posted Jun 8, 2006 7:15 pm GMT

    HAHAHA, man i wish R* would find a new publisher, taketwo would be down the damn toilet.

  • comthitnuong

    Posted Jun 8, 2006 7:05 pm GMT

    ouch that has to hurt

  • ultimate_zero

    Posted Jun 8, 2006 7:04 pm GMT

    If they can publish more games like Oblivion, then good things can happen

  • Sweet1337

    Posted Jun 8, 2006 6:55 pm GMT

    [This message was deleted at the request of a moderator or administrator]

  • rbarahona

    Posted Jun 8, 2006 6:27 pm GMT

    Bad news for Take-Two... They really publish some great games, and although I'm not a fan lf the GTA series, I must admit that those are one of the best games in the market. I'm sure that with more inside projects for the next generation consoles they will be able to make even greater profits.

  • edwardnortan

    Posted Jun 8, 2006 6:14 pm GMT

    Sweet1337
    Praise the lord. This is a victory for concerned parents! I am so sick and tired of companies not being responsible for their deviant, degenerate, lustfilled devices that they try to foist onto our innocent children and the impressionable minorities in the inner cities. I wish they would have lost more. These games should be banned and burned. The individuals responsible for this filth should be arrested and tried in court for terrorism towards our youth and communties.

    -------------------------------------------------------------------------------------------------------

    ..........or you could watch your own kids instead of making a console babysit them. jus because you don'y have the ability to link two braincells and realise that when your kids alone in his room for hours, without making a sound.....they are in thier room staring at a TV, using a "joystick" doing things they're lazy ass parents wont ever catch them for because thier too busy!!!!......so again RAISE YOUR KIDS. Still On the Bright Side bcoz of people like you Take Two will be back to normal real soon because while your on here writin that junk, your kid's probably in the next room pre-ordering the next copy of grand theft auto!!!

  • Sweet1337

    Posted Jun 8, 2006 5:53 pm GMT


    FoxExecutive
    Or should it be the parents who pay no attention to what their kids are doing? These companies have a right to make games for adults if they want. If you allow a child to see a rated R movie that is the parents fault, not the movie studio.

    You're wrong. this affects our whole community. When I send my seedlings to school, I don't want to have them coming home talking about that rip rapper stuff, and wearing gold fronts and playing violent lustfilled games.
    The media is the reason why we have crime. The least intelligent of us(the inner city folk) are talking these games and music and running our communities into the ground. can't you see that? Negativity breeds negativity. I don't want my children emulating that culture.

  • mrgokugf

    Posted Jun 8, 2006 5:48 pm GMT

    comon sheep, this is good news for us, its not like they're gonna ever make another game for our consoles

  • NeoJedi

    Posted Jun 8, 2006 5:46 pm GMT

    All will be well again when GTA IV is released.

  • rocklegacy2

    Posted Jun 8, 2006 5:39 pm GMT

    Sucks for them.

    I just hope this doesn't effect me.

  • FoxExecutive

    Posted Jun 8, 2006 5:35 pm GMT

    Or should it be the parents who pay no attention to what their kids are doing? These companies have a right to make games for adults if they want. If you allow a child to see a rated R movie that is the parents fault, not the movie studio.

  • Mindphaser

    Posted Jun 8, 2006 5:31 pm GMT

    I'm surprised EA hasn't bought them yet for the GTA and Elder Scrolls franchises alone.

  • Sweet1337

    Posted Jun 8, 2006 5:23 pm GMT

    Praise the lord. This is a victory for concerned parents! I am so sick and tired of companies not being responsible for their deviant, degenerate, lustfilled devices that they try to foist onto our innocent children and the impressionable minorities in the inner cities. I wish they would have lost more. These games should be banned and burned. The individuals responsible for this filth should be arrested and tried in court for terrorism towards our youth and communties.

  • Dinghy_Dog

    Posted Jun 8, 2006 4:41 pm GMT

    this totally sucks. blasted hot coffee!!!!!!

  • Bizzar3

    Posted Jun 8, 2006 4:34 pm GMT

    ...it's only obvious Oblivion will head to the PS3 to make up for some of the loss.

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