Take Two Posts FY09 Loss, Predicts Tough FY10 News

A soft retail market, poor performing Christmas titles, and strong losses from its Major League Baseball business today led to Take Two releasing lower than expected results for its 09 fiscal year.  The continued expected losses associated with the MLB franchise ($30 - $35 million) and the decision to delay an unannounced AAA title also led to the publisher forecasting a loss for the fiscal year ending October 31st 2010.
 
The forecast came from the publisher's financial report for the FY09 fourth quarter (ended October 31st 2009), in which the company generated preliminary estimated revenues of $325 to $350 million and $950 to $975 million for the full fiscal year.  These figures are down from previous expectations of $350 to $375 million and $975 million to $1 billion respectively.
 
"Looking at our current forecast for our baseball titles we took into consideration the lack of growth in the category and the terms of our MLB contract and our projecting that our MLB business will generate a net loss in fiscal 2010 in the range of approximately $30 million to $35 million," Take Two President & CEO Ben Feder claimed.  "We have contractual agreement with the MLB business for a couple of more years and will remain focused on improving our products and performance in this category.  If we're able to deliver a title that's a hit with consumers and overall sector conditions improve we could possibly exceed our current expectations for the MLB business"
 
Positives came from the success of Gearbox Software's Borderlands, which Take Two believes can become an "important long-term franchise" and deliver numerous sequels, but that appeared to be the only light in a disappointing year for the US publisher.  Take-Two failed to draw any positives from the recent Thanksgiving weekend and also highlighted "softness specifically on the PSP and DS handheld business," which was "especially disappointing because of the high quality of our handheld releases."
 
Feder also revealed that additional development costs asigned to the publisher's key 2010 releases (Red Dead Redemption, Max Payne 3, Bioshock 2, Mafia 2) was a factor in the forecast loss for 2010 which as a result "will likely reduce the potential profit from these products."
 
"We do expect each of these titles to make a positive contribution and we believe that delaying the launches was the right decision to ensure their quality and potential in the market," Feder added.
 
Take Two has also verged on the side of caution for its 2010 titles, reducing its sales estimates for these titles based on a continued challenging retail environment.
 
"While it's still early in the season we remain cautious in our outlook for consumer spending," Feder warned.  "We believe the retail environment may remain challenging in 2010 and that our retail partners will continue to remain conservative with their initial product orders.  The result, we've assumed lower unit sales for the majority of our titles in 2010."
 
Nevertheless Take Two remains confident that "the safest place to be certainly is in AAA, the safest place to be is in the kind of products that Take two develops", and suggested that the situation surrounding lower/casual titles is currently not clear.
 
The publisher appeared to put a definite clamp on suggestions that 2010 will bring the next title in the GTA series, "We don't feel that GTA ought to be an annualised franchise," Zelnick claimed.
 
"Of course there's a balance between how long it takes to develop such an incredible title and meet consumer expectations and how long you need to make sure that an appetite has been both satisfied and whetted for the next franchise.  That's something I think the company has historically done rather well and I think the high profitability and resiliency of the franchise reflects that.  So I wouldn't see that changing."