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Take-Two Outlook Disappoints on Lack of Hot Game Titles

(Bloomberg) -- Take-Two Interactive Software Inc., the video game publisher known for the best-selling franchises Grand Theft Auto and Red Dead Redemption, cut its outlook for bookings in fiscal 2023 and gave a disappointing forecast for the current quarter as a dearth of new titles keeps players on the sidelines.

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Bookings, which exclude deferred sales from online purchases, will be $1.31 billion to $1.36 billion in the fiscal fourth quarter, ending in March, the company said in a statement Monday. Analysts had expected $1.49 billion, according to data compiled by Bloomberg. For the fiscal year 2023, Take-Two said it expects bookings of $5.2 billion to $5.25 billion. The company had already reduced its annual forecast in November. The shares fell about 1% in extended trading.

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The company has embarked on a cost reduction program intended to save more than $50 million annually. That comes on top of the $100 million of projected savings as the company absorbs mobile-game maker Zynga, which it acquired for $11 billion in 2022.

“We’re taking another hard look at our cost structure,” Chief Executive Officer Strauss Zelnick said in an interview. “I have to do better and I have to drive the things we can address that won’t stand in the way of making great products that our consumers love, and that’s our job every day.”

He said the reductions will not affect personnel in any game development teams, though there will be cuts in travel and the corporate management summer internship program will be eliminated.

In the fiscal third quarter, net bookings were $1.38 billion, missing analysts’ forecasts for $1.45 billion. Zelnick said the company believes consumers shifted their holiday spending toward “established blockbuster franchises and titles that were offered with pricing promotions in light of macroeconomic conditions.”

Last year was a disappointment for the games industry due to a slow pace of new releases and the beginnings of an economic downturn. Covid-related delays pushed several anticipated titles from many publishers into 2023, including one of Take-Two’s smaller games, Kerbal Space Program 2. Overall spending on content declined 4.3% in 2022 to $184.4 billion, according to estimates from analytics firm NewZoo. Several publishers have signaled that sales over the holiday period were weak, including Microsoft Corp., where revenue from its gaming unit fell 13%.

Last week, rival Electronic Arts Inc. pushed back the release of its next highly anticipated Star Wars game by six weeks and shuttered development of two mobile offerings. The Star Wars delay prompted the company to lower its outlook for net bookings in the current quarter, sending shares tumbling.

New York-based Take-Two, the parent of game publishing studios Rockstar Games and 2K, has made a bet on mobile gaming with the purchase last year of Zynga, the company behind popular mobile franchises such as FarmVille. But mobile gaming has been “a very challenged part of the industry, including at Take-Two, over the last year,” Colin Sebastian, an analyst at Robert W. Baird, said before the results were released.

This year is supposed to mark the big comeback for the games industry, with a packed slate of top releases expected to help gin up excitement from fans. One of the most anticipated will be Rockstar’s Grand Theft Auto VI, though it doesn’t have a solid release date yet. Industry analysts expect that the next installment in the series will be out sometime in Take-Two’s 2024 fiscal year, which runs from April 2023 through March 2024, but developers have been skeptical that it can meet that deadline, Bloomberg has reported.

The fiscal third quarter includes holiday sales of Take-Two’s latest NBA 2K game and a new Marvel game, Midnight Suns. The company doesn’t yet have any major games scheduled for 2023. Zelnick said the entire release schedule for the 2024 fiscal year has not yet been disclosed.

Adjusted earnings per share were 86 cents in the three months ending in December, in line with Wall Street projections. Take-Two said it expects adjusted EPS of 60 to 70 cents in the current quarter, while analysts were looking for $1.03.

(Updates with CEO comments in third, fourth and penultimate paragraphs, updates shares)

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