NBA Licensing and 2K Dynamics

This is Matt Reustle and today we are breaking down Take-Two Interactive Software. If you listened to our Business Breakdown on Electronic Arts, Take Two is another giant in the video game publishing space. They are best known for their Grand Theft Auto and 2K franchise.

To break down Take-Two I'm joined by Eric Kress, principal at Gossamer Consulting Group. Eric spent multiple decades inside the video game market, both as an investor and as an operator, and we tap into his perspective from both sides of the table. We drill into historic IP, the strategy behind new releases and what mobile means for the market, and specifically for Take Two. Please enjoy this breakdown of Take-Two.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Show Notes

(00:02:35) - (First question) - Brief overview of Take-Two

(00:03:32) - Take-Two's acquisition of Zynga represents a significant push into mobile gaming

(00:05:05) - Mobile gaming faces challenges from Apple's IDFA removal and Google's changes

(00:06:37) - Apple's privacy changes benefit them but hurt mobile publishers

(00:07:50) - How Take-Two evolved from PC and console to mobile

(00:10:48) - Console and PC target AAA games; mobile reaches a broader, less premium market

(00:12:53) - Creating new iconic AAA gaming IP is nearly impossible due to high costs

(00:15:08) - Big IP success in gaming historically depended on retail relationships and distribution

(00:17:39) - Sports games have almost 100% revenue visibility; others like GTA fluctuate

(00:19:31) - GTA's next release is anticipated and guaranteed to sell millions, but post-launch is uncertain

(00:25:24) - Risk of new console alignment affects expectations for next GTA game release

(00:27:57) - Updating titles for different consoles has become less complicated with PC architecture

(00:29:44) - Pricing at $60-$70; new tech may boost in-game spending

(00:31:30) - GTA's mature nature makes in-game advertising tough

(00:32:59) - NBA license with 2K is a partnership, not exclusive

(00:35:28) - Take-Two lacks profitable titles beyond GTA and 2K

(00:37:57) - EA smartly bought Respawn and built studios; Take-Two lacks similar capability

(00:39:29) - Gaming industry consolidated to fewer franchises; similar to film industry's trend

(00:44:07) - Zynga's acquisition was ill-timed; it's a declining asset with no value

(00:47:32) - Microsoft's deal may lead to Amazon or Comcast buying Take-Two

(00:50:11) - Valuing these businesses often relies on traditional PE methods

(00:52:06) - Key risks for Take-Two are overhyped GTA expectations and service burnout

(00:53:37) - Lessons learned from studying Take-Two