TTWO
#Yes, in this instance, we would agree with what you're observing, which is that the bigger and better are getting stronger.
And that's consistent with the nature of the entertainment business.
Which is, as entertainment businesses mature, a greater proportion of consumer attention and therefore revenue goes to the highest-quality releases.
Essentially when entertainment businesses are nascent, people are willing to experiment among a number of brands.
And as they mature, all consumers' tastes tend to narrow and focus on the biggest titles in the businesses.
This has been true from time immemorial, since the beginning of the electronic entertainment business, across every different type.
And it's why we've had this strategy that we've had at this Company, which is ---+ create and put out the highest-quality releases, and do a limited number so you can really focus.
And focus not just on your existing IP, but try to launch new successful IP every year.
And we've been able to do that most years since we took over the Company.
And that's why we have 11 titles that have each sold over 5 million units in an individual release, and something like 45 that have each sold 2 million units or more in a (technical difficulty) release, which we think is the standard-bearer of the industry.
So yes, the strong get stronger, and that was true in motion pictures and in television and in music.
It's going to be true in interactive entertainment.
And that puts pressure on us and on our key competitors to continue to deliver the highest-quality titles, and to focus on doing so.
So we see it as an opportunity as much as a challenge, and certainly for the haves, it's a much better place to be than the have-nots.
So in talking about guidance from this past year, when we set original guidance, it was our best estimate at the time when we gave out those numbers.
We had a very light release schedule.
And as you mentioned, some of our titles performed stronger than we had expected ---+ GTA V and GTA Online.
And that, coupled with our tax credit, is what helped us to have these fantastic results for this year.
And <UNK>, in terms of Mafia III, obviously this is a title that we're very excited about here, from a creative perspective, but also from a commercial perspective.
We think this title has the perfect combination of what people are looking for in an open-world, story-based-driven title, with a lot of things that a lot of games don't have.
A lot of time and money has gone into us.
We've got a great creative team being led by Haden Blackman.
So we are very excited about this title and prospects of the title.
And when you get this right in this particular genre, you can obviously achieve significant success.
In terms of ---+ and we've done that before, in general.
So in terms of providing you with a specific model that you can go by, I don't have anything specific for you to go there.
But I can tell you that our expectation is that we should be exceeding anything that we've ever done on the Mafia side before, again, from a creative perspective and a commercial perspective.
So you can always look at the previous Mafia titles as a benchmark.
But again, I wouldn't stake too much on that, because we think this time, we'll vastly exceed what the previous Mafia had been able to accomplish over the past.
That's something that the labels will decide and talk about in due course.
Certainly we wouldn't rule it out.
It will be largely an economic decision.
We wouldn't do anything that's not going to look great creatively.
So the starting point is, is this going to delight consumers.
Is this going to look good.
You know that we're a Company that is not driven first and foremost by ---+ can we create revenue this way.
We will start by saying, will this be exciting to consumers.
Will they be happy with it.
Will it reflect well on our brand.
Will it reflect well on our Company.
And if the answer is yes, then it may well be a compelling opportunity.
But if the answer is indifferent or no, then even if we have an opportunity to make a few bucks, we probably would decline.
So I think that's the lens through which we look.
The actual decisions are made by the labels.
So in terms of our outlook, we have contemplated recurrent consumer spending in the outlook, we've contemplated product drops.
There could be changes there, and perhaps there's some opportunity.
But this is the outlook as we see it now, and we contemplated all aspects of our business.
But things can change.
In terms of metrics, we haven't really shared a great deal of metrics on our in-game spending.
We certainly give broad numbers around recurrent consumer spending.
And its been great.
More than a quarter of our non-GAAP net revenue last fiscal year was recurrent consumer spending.
So certainly the numbers are meaningful.
And we have mentioned that we have 31 million signed-up users of Grand Theft Auto ---+ or sorry, of NBA 2K Online in China.
So we have mentioned that metric.
We have talked about usage of Grand Theft Auto Online in the fourth quarter.
So we've given some metrics.
We don't tend to give a broad array of metrics, because this is still a work in progress, and it's still a developing activity here.
And because we don't want people to extrapolate ---+ even though the results have been excellent, we don't want one to extrapolate that they're perpetually a nice, gentle upward sloping curve.
Because it's too early in our experience to see that.
In terms of our strategy, our strategy ---+ and I know it sounds like motherhood and apple pie, but it genuinely is our strategy.
We're trying to delight consumers as they engage in our products.
And when we make a content drop, we want that to be something exciting to consumers.
And we know if we do that, then we will increase engagement, and therefore, we will increase spending, and therefore, we'll increase revenue and profits.
And of course, we are a profit-seeking enterprise.
We are focused squarely in the real world, and we're a for-profit Company.
But the way entertainment businesses survive and thrive ---+ with the backdrop, as <UNK> mentioned, of being exceedingly efficient, well-organized, professionally managed and fiscally, highly disciplined.
But with that backdrop, our focus turns entirely to creativity.
And that creativity surrounds what's going to make consumers most excited about our titles and most excited about our brands.
And most engaged with our titles, and repeatedly engaged with our titles.
And then as they are engaged, we need to give them opportunities to spend.
That in and of itself enhances the game experience ---+ doesn't detract from it ---+ that we don't put up toll booths and we don't annoy our consumers.
We simply get paid along the way.
And that's what we aim to do, and that has had a great result around here.
But many of our competitors are actually proud of the fact that they're primarily data-driven, that they're focused on the content supporting the data that supports the purchases, that supports the revenue, that supports the profitability.
We do not do it that way.
We are creative.
We make an incredible entertainment experience, and then we seek to monetize it.
Yes, it's a good question, <UNK>.
GTA V has continued to sell, as you know.
When we talk about the unit sales, certainly there's been great news there, because we've sold so many units.
We have not tracked what happens to the GTA V sales when new content has dropped into GTA Online.
So we would be speculating about what influence there would be.
But I think anything that makes GTA Online exciting is good for GTA V.
And I do expect that it's going to continue to be a very strong title going forward, and a great catalog title over time.
If history is any guide, that will be the case.
In terms of the pipeline for online content on an ongoing basis, that's something for Rockstar to talk about in due time, but there is content coming.
Yes, I mean the initial results are very encouraging, which is, I think we probably took away from those comments, but it is early yet.
The scores are good, consumers like it, a lot of people playing it and really loving the game play.
But I wouldn't want you to draw a conclusion that the Battleborn curve is necessarily the Borderlands curve.
Because we just don't have any of that information yet.
So we're encouraged, and we feel good about it.
It remains to be seen how it performs.
And in terms of ongoing digital content, we've said there's more content coming.
And again, we'll leave the specifics to the label.
Yes, I don't think we've talked about it yet, <UNK>.
So for digital, our financial outlook assumes that we're going to generate modestly lower digitally delivered revenue in FY17---+ like a percent decline in the mid-single digits.
This is driven by our assumption that recurrent consumer spending will be moderately lower, around 10%, and full-game downloads will be roughly flat.
For recurrent consumer spending, we expect it to be lower, based on our assumption that growth in virtual currency for NBA 2K and higher revenues from downloadable add-on content for a variety of our titles will be more than offset by moderating revenues from Grand Theft Auto Online.
And we expect our full-game downloads to be roughly flat, as last year benefited from the launch of Grand Theft Auto V for PC.
But over the long term, we expect digitally delivered revenue to grow.
And as we continue to execute our strategy to drive greater engagement in recurrent consumer spending, and as our industry transitions more towards full-game downloads, we expect it to grow over the long term.
Yes, and in terms of ---+ this is <UNK> ---+ in terms of Asia, our Asia strategy was set in motion a number of years ago ---+ [won't be] open the headquarters in Singapore, became a publisher in Japan, and entered a number of other markets.
And then we also tried new kinds of products that we felt would be quite challenging to launch in Europe or in the US, but could be opportune to launch in Asia ---+ largely, free-to-play, massive multi-player games.
We've had strong results with NBA 2K Online in China, and we mentioned those as part of today's call.
We've launched Civilization Online in Korea, and that will also launch in a number of other Asian markets.
And we're working on a number of other really interesting opportunities.
So that business has already been very fruitful for us, has grown from a very small part of our business to a meaningful part of our business.
And you know, it's a very exciting part of the world, and people's appetite for games is somewhat different than here in the US or in Europe, with a significant focus on massive multi-player games and a significant focus on the free-to-play model.
So we don't believe that all models work in all markets.
We think you have to tailor what we bring to a particular market for the needs and desires of the consumers in that market.
So we're incredibly excited about Asia.
And I would just like to make the comment that we, as an industry, are just scratching the surface in China, of what's possible.
And I do believe ---+ and that may be a contrarian point of view ---+ but I think that an area of China that has remained very challenging, which has been the distribution of Western products.
I think the Chinese government will realize more and more that it is actually not challenging, that it's actually beneficial.
That it's what consumers want.
That it will not cause consumers to have a view of Chinese society that is in any way unfortunate for the government.
And I think restrictions will probably be loosened.
My guess is, not within the next 12 months, but I do believe, in the coming years.
And that's going to be incredible news for us.
Because of course, the middle class alone in China is bigger than all US households.
So we think that there's an amazing opportunity there.
We're poised for the opportunity.
Naturally, we comply with government regulations wherever we are in the world, and China is no exception.
But I am of the view that it's time for restrictions to be softened, and that it will be beneficial for Chinese society ---+ as they see it, not just as I see it.
And I do believe that creates a massive opportunity for us, and not reflected in this year's numbers, next year's numbers or anyone's outlook for the industry.
Well, thank you so much for joining us today.
We're very pleased with our results.
We're proud of our outlook.
But what we're really proud of is our colleagues all around the world, almost 3,000 of them, who are engaged every day in trying to make the very best interactive entertainment properties on earth, to bring them to market.
And to run a really solid serious and responsible business, in making sure that we delight consumers as they experience our products.
So we feel very grateful to have an opportunity to work in this business about which we're so passionate, grateful to our colleagues, and we're really pleased with the results.
Thanks for joining us.
