Take-Two Interactive is a video game publisher and distributor, with a broad portfolio of properties including Grand Theft Auto, Borderlands and Red Dead Redemption.
Take-TwoDecember 06, 2020
Thesis - Take-Two is one of the leading video game developers, with popular titles such as Red Dead Redemption, Civilisation and Grand Theft Auto. Gaming as an industry is having its moment; with people spending more time at home and many forms of entertainment closed, the hours spent gaming have rocketed and many people have been introduced to gaming who might otherwise not have. However, gaming as a business has historically been categorised as hits-based or even cyclical, closely linked to the release of consoles and dependent on new titles. More recently this has been changing. Game developers are utilising in-game transactions and downloadable content to commercialise games after initial release. Take-Two in particular has improved its ability to make their games sustained successes, with GTA now in its 24th year! Gaming is also becoming more culturally relevant, with the rise of e-sports and in-game concerts (see Lil Nas X or Travis Scott), you can expect to hear and read about gaming more in day to day media. Take-Two is an owner and producer of the core IP that drives a growing industry.
Financials & Performance - Over their 2020 fiscal year, Take-Two recorded almost $3b in revenues, a company high. $2.38b of that (80%) was delivered digitally, and 51% was from recurring spending (micro-transactions). Both those numbers are on the rise, highlighting the changing nature of the business. Gross margins are typically between 45-55% and the company is both cash-flow positive and profitable.
Risks - Founded in 1993, Take-Two is one of the mature players in the space. They were late to mobile gaming, although have made some smart acquisitions in the space. As with any creator of IP, their success will rely on their ability to continue building and promoting games that people love.