Challenges for Game Industry Persist in 2010, Take-Two’s Strauss Says

It “will continue to be challenging” for Take-Two Interactive and the game industry in 2010, Take-Two Chairman Strauss Zelnick said in a Wednesday earnings call. “U.S. retailers haven’t changed their conservative outlook and they're still limiting initial launch quantities,” while consumers “remain equally careful with their spending,” he said.

The results that Take-Two reported for Q1 ended Jan. 31 (CED March 4 p8) were better than the company had projected in its last forecast, Strauss said. Revenue increased to $163.2 million from $149.4 million in Q1 last year. Take-Two posted another loss, but narrowed the loss from continuing operations to $33.8 million, 43 cents a share, from $53.8 million, 71 cents.

Take-Two released the game sequel BioShock 2 Feb. 9 and has shipped 3 million units of it globally, said CEO Ben Feder. The company shipped more than 7 million units of both BioShock games to date, he said. He later said it was hard to quantify the impact of used game sales on sales of the first BioShock game, but Take-Two saw “an uptick” in sales of the original game since BioShock 2’s release.

The publisher delayed the release of Mafia II for the PS3, Xbox 360 and PC until Q4 “to provide some additional development time,” Feder said. Max Payne 3 for the same platforms and L.A. Noire for the PS3 and 360 are scheduled for Q4 release also. “We're working hard to deliver all of these titles on schedule,” but Feder said the company’s fiscal 2010 earnings forecast “reflects the potential movement of one of these titles into fiscal 2011."

Take-Two expects to report revenue of $725-925 million and a non-GAAP loss per share from continuing operations of 40-60 cents for the fiscal year ending Oct. 31. It expects to report sales of $250-300 million and non-GAAP earnings per share from continuing operations of 20-30 cents.

The company recently “initiated a targeted restructuring focused on our corporate departments” that’s designed “to align our cost structure more closely with our current goals,” Feder said. It will save about $8 million in fiscal 2010 and annual savings of about $15 million, he said. The restructuring includes a 15 percent cut in corporate headcount and other unspecified cost savings initiatives, Take-Two said without elaborating.

Other coming Take-Two games include NHL 2K11 for the Wii. Take-Two is “taking a year off” from the PS3 and Xbox 360 versions of that franchise because “we think those platforms need a breather so we can go back, redesign and rethink” the series, Feder said. “As a result of that, the following year we'll just come back a lot stronger,” he said. The company has 31 games in development overall, said Chief Financial Officer Lainie Goldstein.

Take-Two is still looking “carefully” at the new PS3 and Xbox 360 motion control systems, and is “pretty excited by it,” Feder said, providing no specifics.

The company sold more than 6 million units of Carnival Games for the DS and Wii to date, Take-Two said. The game “is selling so well,” after more than two years, “there’s no need for” a sequel yet, Feder said.