Q1 2024 Take-Two Interactive Software Inc Earnings Call
Greetings welcome to take two interactive.
First quarter of fiscal year 'twenty 'twenty four earnings call at this time, all participants are in a listen only mode.
<unk> and answer session will follow the formal presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to Nicholas Shepherd, Vice President of Investor Relations and corporate communications. Thank you you may begin.
Good afternoon. Thank you for joining our conference call to discuss our results for the first quarter of fiscal year 2024 as of June 32023, today's call will be led by Strauss Zelnick take two's, Chairman and Chief Executive Officer, Carl laid up our President and Lee Goldstein, Our Chief Financial Officer, we will be available to answer your questions during the Q&A.
Session. Following our prepared remarks before we begin I'd like to remind everyone that statements made during this call that are not historical facts are considered forward looking statements under federal Securities laws. These forward looking statements are based on the beliefs of our management as well as assumptions made by and information currently available to US we have no obligation to update these forward looking statements.
Actual operating results may vary significantly from these forward looking statements based on a variety of factors. These important factors are described in our filings with SEC, including the company's most recent annual report on Form 10-K, and quarterly report on Form 10-Q, including the risks summarized in the section entitled Risk factors I'd also like to note that unless otherwise stated.
All numbers, we will be discussing today are GAAP and all comparisons are year over year.
Additional details regarding our actual results and outlook are contained in our press release, including the items that our management uses internally to adjust our GAAP financial results in order to evaluate our operating performance. Our press release also contains a reconciliation of any non-GAAP financial measure to the most comparable GAAP measure. In addition, we have posted to our website a slide deck that visually.
[noise] presents our results and financial outlook, our press release and filings with the SEC may be obtained from our website at T coupons Dot com and now I'll turn the call over to Sal. Thanks, Nicole Good afternoon, and thank you for joining us today.
I'm pleased to report that fiscal 'twenty 'twenty four is off to a strong start highlighted by first quarter net bookings of $1 $2 billion, which was at the high end of our expectations and management results were in line with our plans Congrats I'll start online and Grand theft auto five and M. B, a two K twenty-three exceeded our projections, which illustrates the long lasting benefits producer.
The highest quality offerings and I'm, asking one of the strongest and most diverse portfolios and entertainment.
In keeping with our core values of creativity innovation and efficiency. This quarter, we introduced new intellectual properties advanced the development of our eagerly anticipated pipeline and maintained our vigilance with cost management initiatives across our organization.
Turning to the results of our titles for the period.
Grand Theft auto five continue to outperform and today the title has sold in more than 185 million units.
On June 13th Rockstar games watched San Andreas mercenaries for Grand Theft Auto online, which offers six new major story based emissions as well as new Los Santos operations hangar upgrades smuggler source and sell mission seven new vehicles and more.
It also includes a range of fan requested experience improvements as well as the career progress feature offering players a new way to track their progression across criminal careers and claim rewards.
Andres mercenaries continues to deliver high value content post launch using a phased approach that is driving sustained engagement and recurrent consumer spending.
This is Jim Grand Theft Auto online recorded more players than any other June in its history outside at the height of the pandemic.
T J pause Rockstars premium membership service for GTA online, Playstation five and Xbox series X and S offered exclusive options for members to test drive and purchase an array of vehicles and we're continuing to see strong growth in GTA plus adoption with each passing quarter.
We were pleased with the performance of Red Dead redemption, two which has sold in more than 55 million units to date Rockstar games continues to support Red dead online with new bonuses and rewards, including free apparel inspired by the Red dead fashion, subreddit and seasonal content, such as Aprils Condor AG free motive at.
M B, a two K twenty-three exceeded our plants and the title has now sold in over 13 million units, representing 11% year over year growth driven by higher demand, especially in July and consoles.
As well as a more tailored promotional cadence.
This incredible performance marks the titled second higher sell through wherever with only only M. B a two K 20, achieving higher unit sales and engagement with NBA to K twenty-three remained strong with approximately 2.6 million daily active users delivering recurrent consumer spending that exceeded our expectations.
Our franchise extensions with the M. B, a continue to perform extremely well and N D. H U K twenty-three Arcade addition remains one of the top games on Apple arcade.
WWE <unk> 23, which is the highest rated game in a wrestling franchise's history and the second highest rated sports simulation titles year experienced strong engagement throughout the quarter with players logging nearly 22 million hours of gameplay and facing off in 170 million matches.
<unk> and visual concepts continue to support the title with a series of five DLC packs that can be purchased individually or as part of the season pass.
<unk> also continues to support PGA tour TK 'twenty, three with additional pros courses and clubhouse passes.
In May two K and visual concepts launched Lego to K drive the first game and a multi title partnership between Teekay and the Lego group. Following the launch our teams released the first of four drive past seasons for the title, which features 100 levels and new content inspired by the fast and furious saga.
Also in May private division in Piccolo studio launched after a sudden Playstation five Xbox series X nascent P. C, which has been praised by critics for its striking visuals and game world.
Zynga had a solid start to the year performing in line with our plans and we're pleased with the ongoing progress of our mobile business.
AD revenue grew approximately 11% year over year, driven by the addition of popcorn and our ability to open new inventory supplies in our portfolio.
Tuned blast has been introducing strong feature releases such as the tune race event, which drove outperformance versus our forecast and help the game recently surpassed $2 billion in lifetime gross bookings.
We made excellent progress on our profitability initiatives in mobile we expanded our offerings of our direct to consumer platforms and we continue to believe that over the next few years. The majority of our mobile games will leverage our highly profitable proprietary distribution channel.
We continue to enhance the performance and profitability of our hyper casual business with multiple new games scaling quickly and several titles generating bookings from in App purchases. In addition to ads.
A few key highlights of Zynga as live services. During the period include empires, <unk> puzzles grew quarter over quarter, driven by the new path of Giants Battle pass featuring daily and weekly challenges to unlock rewards.
Alex Twisted tangled reached the number one free Gamespot on the U S. Google play store.
Social casino again delivered strong results driven by hidden Richard's best quarter in three years and game of Thrones Casino second best quarter in its history.
Casual games continue to improve participation and engagement with words with friends launching the new club daily puzzle and Harry Potter puzzles, and spells, adding bonus levels and special delivery prize events.
With numerous games in development in soft launch across Zynga Studios, we're excited to start delivering several new offerings in the coming months.
Turning to our outlook, we are reiterating our prior guidance of $5.45 billion to $5 five $5 billion in net bookings for fiscal 2024, we remain highly optimistic about our future and our ability to deliver record results in the coming years Lanny will provide more details on.
Our outlook shortly.
In closing as we continue to execute our strategy. We believe that we can increase significantly our scale and prominence within the industry grow margins at pursue the vast opportunities to engage even larger audiences around the world.
Led by the passion creativity and innovation of our World Class development teams take two is in a powerful position to set new benchmarks for our player communities, which we believe will drive long term returns for our shareholders I'll now turn the call over to Carl.
Thanks Ross.
I'd like to thank our teams for a strong start to the year.
Turning to our announced launches for fiscal 2024.
Yesterday, Rockstar games announced that the beloved western experiences Red dead redemption, and undead nightmare will be coming to the Nintendo switch and Playstation four for the first time in a new single package, arriving August 17th.
The new conversion by double 11 studios switch and P. S. Four versions, bringing the two classic experiences together again for new players and original fans to enjoy it across modern consoles, including backward compatibility with the Playstations.
On September eight two came visual concepts will celebrate the 25th anniversary of our industry defining M. B, a two K series and once again redefine basketball simulation with the launch of NBA <unk> 24, featuring iconic Kobe Bryant as the game's cover athlete for the second time in the history of the franchise.
Players will be able to celebrate Brian legacy and replicate his skills and the brand new mamba moments mode.
Players in the U S and Canada can also purchase the WNBA edition of the game exclusively at Gamestop, featuring WNBA, All Star Sabrina honesty and this year's cover star.
NBA took a 24 well introduce cross play a community requested feature for Playstation five and Xbox series X and S.
Available in every multiplayer mode players will be able to compete with or against others from around the world and dynamic co op matches drilling online tournaments are casual pickup games between new generation consoles.
The title will also introduce proclaim a groundbreaking new technology that directly translates excellent MBA footage into gameplay teekay.
Teekay will have more to share on NBA <unk> 24 in the coming weeks.
In addition to <unk> and visual concepts remain hard at work on WWE UK 24. The next installment of our popular wrestling series, which set new creative and critical benchmarks with last year's highly successful release.
And Jim Private Division and evening Star announced pennies, they breakaway a new <unk> platform or from the team behind Connick Mania.
This genetic yoyo adventure is expected to launch in early 2024.
Zynga Star Wars hunters, which offers players the opportunity to join the greatest hunters from across the Star Wars Galaxy and expected to launch later this fiscal year.
Players will engage and thrilling third person combat and a range of competitive game modes across battlegrounds from the iconic world of Star Wars.
Also in mobile social Point's latest game top troops a medieval fantasy themed title in the TVP merge genre is progressing well in soft launch and we expect it to launch worldwide in this fiscal year.
In addition, our hyper casual studios will release, a steady cadence of mobile titles throughout the year focusing on games that have the potential for enhanced retention rates and the mix of in app purchases and advertising to drive higher monetization and profitability.
Our labels will also continue to provide new content and experiences that drive engagement and recurrent consumer spending across many of our offerings, including Grand theft Auto online Red dead online WWE, two K Lego Teekay drive PGA tour TK Kerbal space program, two and think as mobile portfolio.
Throughout fiscal year 2024, we look forward to launching in additional.
Additionally releases from what we believe to be the strongest and most exciting development pipeline in our company's history now.
Now I'll turn the call over to Laney.
Thanks, Carl and good afternoon.
I'll discuss the key highlights from our first quarter amplifier appealing our financial outlook for the full year and second quarter of fiscal 2024.
Our combination with Zynga closed on May 23, 2022, which affects the comparability of our results relative to last year.
Additional details regarding our actual results and outlook are contained in our press release.
We had a strong start to the fiscal year powered by a portfolio of iconic industry, leading intellectual property.
As we approach our next phase of our teams continue to make excellent progress advancing our development pipeline and capitalizing on a revenue driven opportunities and synergies.
We also partnered together to maintain our focus on efficiency in this challenging macroeconomic backdrop and classic consumer spending trend I'd like to thank our incredible team worldwide for their determination and passion for our business.
Now moving on to our results, we achieved net bookings of $1 $2 billion, which was at the high end of our guidance range.
In the current BACS App, many consumers are purchasing established franchises and noted that offer great value.
<unk> stands at the intersection of these two facts.
Accordingly, our performance reflects better than expected results from Grand theft auto online and Grand theft satisfied and N. The ATK 'twenty three.
During the quarter, we launched Marvel Midnight, Zhang Jenny cancelled neither Teekay drive an asset.
The current consumer spending and a 38% for the period, which was above our outlook of 35% and accounted for 85% of net bucking. The outperformance was primarily driven by Grand theft auto online and NBA Teekay 'twenty today.
GAAP net revenue increased 17% to $1 two $8 billion and cost of revenue increased 39% to $606 million driven by $187 million of amortization of acquired intangible.
Also recorded an impairment of $80 million related primarily to capitalized software and development cost for an unrealized title, which affected our management results compare to our guidance.
Operating expenses increased by 25% to $882 million.
On a management basis operating expenses grew by 46%, which primarily reflected a full quarter of zynga higher personnel cost and depreciation related to office buildout and capitalized it expenses.
Turning to our guidance I'll begin with our full fiscal year expectations as Jeff mentioned, our business is performing well and we are reiterating our net bookings outlook range of 5.45 billion to $5 five 5 billion.
The largest contributors to net bookings are expected to be NBA, CK Grand theft auto online and Grand theft satisfies a hyper casual marvell portfolio empires and puzzles, Tim blasts merge Dragons words with friends bad debt redemption tale and Red dead online and Zynga poker.
Expect the net bookings breakdown someone labels to be roughly 51% zynga, 30%, teekay, 17% Rockstar games and 2% other.
And we forecast our geographic net bookings, but to be about 65% United States and 35% internationally.
We continue to forecast the current consumer spending growth of 5% compared to fiscal 2023, representing 78% of net bucking mobile.
While the trends are projected to remain stable and thing as AD business continues to deliver growth.
We expect to generate approximately $100 million and non-GAAP adjusted unrestricted operating cash flow and to play a patently $180 million for capital expenditures, primarily to support our office build outs and larger footprint.
We continue to expect GAAP net revenue to range from $5 37 to $5 four 7 billion.
Our total operating expenses are expected to range from 3.3, $83 4 billion as compared to $3 four of $5 billion last year.
On a management basis, our operating expenses are expected to grow by approximately 15% year over year due primarily to a full year of zynga and increase in personnel and marketing expenses and higher depreciation of office build outs and capitalized it expenses that youre being partially offset by the realization of synergies from our combination with Zynga and.
Savings from our cost reduction program.
As we announced previously and teams are taking extensive measures to review our cost structure and reduce discretionary costs whenever possible to offset the current consumer backdrop and inflationary environment, while still investing for growth.
Now moving on to our guidance for the fiscal second quarter, We project net bookings to range from one four to one point for a $5 billion compared to $1 $5 billion in the second quarter last year.
Or at least say for the quarter includes Red dead redemption, an undead nightmare for switch and Playstation four and M. B a T K 24.
The largest contributors to net bookings are expected to be NBA T K Grand theft auto online and Grand theft satisfy a hyper casual mobile portfolio empires, and puzzles timberland, whereas at friends merge Dragons Red Dead redemption tale and Red Dead online and Zynga Poker, We project our current consumer spending just kind <unk>.
27%, but she seems modest declines in our mobile business and the ATK driven by changes to its summer promotional cadence and Grand theft auto online as well I'll save adaption in DLC lab M. From several titles that were released in prior years.
We expect GAAP net revenue to range from $1 <unk> to $1 three $1 billion.
Operating expenses are expected to range from $811 million to $821 million on.
On a management basis operating expenses are expected to grow by approximately 5% year over year, driven by last year's acquisition of popcorn and higher personnel costs, which are being partly offset by the zynga synergies and our cost savings initiatives.
In closing we are confident that the actions. Our teams are taking this year are preparing us for a strong trajectory of growth.
Through our collective efforts, we continue to believe that we are positioning our business for a significant inflection point difficult 2025 that will culminate in us delivering new record levels at the operating performance next year and beyond.
All of our stakeholders for their continued support and we look forward to delivering on this exciting next chapter. Thank you I'll now turn the call back to Strauss, Thanks, Manny and Karl on behalf of our entire management team I'd like to thank our colleagues for delivering a strong start to the fiscal year and to our shareholders I want to express our appreciation for your continued support.
We will now take your questions operator.
Thank you.
To ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star keys.
Our first question is from Andrew <unk> with Jefferies. Please proceed.
Yeah, I just had one I just have one question.
He called out consumer weakness.
Kind of continuing could you just give an update on <unk>.
On where you think the consumer's out is there a particular segment that it's weaker than other just kind of an update on where you think the consumers that today. Thank you.
Yeah, I mean, I love that people are debating, whether we're going to be in a recession from the point of view.
Digital Entertainment company.
<unk> been in a recession for the better part of 18 months of the the market for interactive Entertainment was down meaningfully in 2022 down for the first time in the history of the mobile business over 10% pretty much across the board things are looking a lot better.
The year over year comps have stabilized we're seeing growth in the console market. Its early but we are seeing some growth mobile sort of flat to slightly down.
Hope that will improve.
I do feel like we're all seeing some green shoots across the across the economy.
It definitely is a mixed picture.
Having on who you ask so in the context of the entertainment business Live Entertainment is doing great.
But in the context of entertainment that people consumed at home during the pandemic, it's been challenging for a while and again I think it's beginning to normalize but it's early days yet when asked a couple of calls ago, what I thought would happen when the economy I said that I thought it would bottom out in June July .
And that by the end of calendar 'twenty three we began to see some good news in that we'd be in a reasonably good position from an economy economic point of view.
Early 'twenty four and I continue to believe that that's what will happen.
Got it and then just one quick follow up on that with around media I guess.
It's it's Hollywood stays in a recession is that positive negative or does it not matter for video games.
Look we live within the entertainment ecosystem, So we would never.
Correct.
Any other industry to have a problem, but if the strike means that new contact can't be delivered that I suppose it could be some small positive benefits for our business but.
But we aren't counting on that we're certainly not hoping for it.
Got it. Thank you so much guys I appreciate it.
Our next question is from Eric handler with <unk> M. Can please proceed.
Good afternoon, and thank you for the question.
Strauss I Wonder if you could just talk about.
With mobile advertising how much.
How many of your games beyond the hyper casual business have integrated advertising, though.
Some and we are moving in that direction selectively look historically for games, where you could make in app purchases.
Less than 10% of the audience actually spent so we're fielding our game for 100% of the audience of monetizing, 10% or so perhaps a bit more often a bit less and it's our view that we ought to be monetizing 100% of the audience. So if someone's going to spend that's great and if theyre not going to spend then we ought to be able to monetize through advertising.
The question is how do you do that and create a high quality experience and I think the answer is we can do that we can distinguish among those audiences.
We're not there yet, but I think we're moving in that direction.
Thanks, and just as a follow up I wondered if you could willing to give any specifics about how much of the mobile revenue at this point is.
On the DTC platform and how that's progressing.
So we don't actually give out that percentage some of our competitors do and so one of our biggest competitors I think has gone on the record to say it's about 25%.
And I think that's a good number we're not remotely in that vicinity theres plenty of room for growth I would note that zynga is advertising net bookings were up 11% year over year. So it's really good news and we're really happy about the growth of our direct to consumer platform and what that can mean for consumers and also for us.
Thank you.
Our next question is from Matthew Thornton with Truest Securities. Please proceed.
Hey, good afternoon surrounds carlini two quick ones for me.
This quarter, we talked about obviously.
Even north of 8 billion in bookings next year in North of 1 billion in operating cash flow I'm, just kind of curious if those are still the right bogey for next year.
And then just secondly, I apologize if I missed this any changes to this year or is it slate that's all we've got the.
The $18 million impairment charge here, but I guess relative to where we were three months ago. It is there any any change to this year's release slate. Thanks, so much.
So the answer to your question one is yes, and lineal answer question two so.
Separate question Taylor, there has been some movements within the back part of the ear within this late but we still are able to achieve the same guidance for the year. So reiterating our guidance of just some small changes within the slate, but it has nothing to do with the impairment.
The charge so they are still the same.
Perfect. Thank you.
Our next question is from Matthew cost with Morgan Stanley . Please proceed.
Hi, everybody. Thanks for taking the question.
Maybe I'll start just by asking about mobile M&A I mean that was historically, a very big part of the business. It seems like the market may be starting to fall out there in terms of deal activity. After a decrease of the past year or two I guess do you see an opportunity to lean back into M&A at Zynga business.
One and then number two is just Lanny you mentioned in the prepared remarks, some changes to the promotional cadence or M. B a T. K I was wondering if you could just give a little more detail about what those changes are.
The financial impact thank you.
So on the deal side, it's hard to know in terms of our strategy.
We think we're in a position to grow organically, we have a lot of new releases coming from Zynga. We're really excited about them. As you know hit ratios are very low in the mobile business. So we're not claiming success until it occurs but we do feel really good about some new launches.
And in terms of the promotional cadences.
And so <unk> 25, we expect to be at from Teekay twenty-three, but teekay twenty-three versus UK 22, there is some less promotional and timing in this quarter versus what we did with 22 last year. So that's why we expect the titles, we had a little bit down versus last year.
Great. Thank you.
Our next question is from Doug Crudes with TD Cowen. Please proceed.
Hey, thanks.
You alluded this whole, but earlier you you and others have talked about how difficult. It is to launch a new mobile title. These days, we did see however, a few months ago, a competitor of yours launched scope, we launched monopoly go which is shot to number one in the App store charts wrote rapidly.
<unk> has had a lot of success as you observe observe that is there anything that you would sort of any lessons you would draw from their success or do you think but could you could apply to your own games that you have coming out soon.
Look I think it's an established intellectual property, that's been known and beloved for a very long time, and if you combine that with a high quality expression. I think you can do very well, we don't we obviously don't know what their spending.
To be in a position that they're in I do know that we're very focused on profitability. So we're being careful to make sure that our user acquisition spending reflects a higher lifetime value for for our customer.
Okay. Thank you.
Yes.
Our next question is from Eric Sheridan with Goldman Sachs. Please proceed.
Perfect experience the quality of the title is what governs not the business model. So we have to create something great. The consumers want if we do they'll show up and if we don't they won't.
Thank you.
Next question is.
With Barclays. Please proceed.
Great. Thank you for taking the questions. The first one is an M. B a T. K 24, you guys mentioned the upcoming cough play feature was a largely asked one by the community.
That being said I curious if there's any data points you can share in terms of how impactful. This feature will be in terms of using engagement or current consumer spending and then is there any reason why it was not included on on P. C and the last name.
Uhm. So so this is Carl Mario So we're very excited about crossway, it's something that our customers have been asking for something that's a natural for M. B a so obviously, we don't do anything.
Don't put any new boats into a game lets you think that's going to have a significant impact on <unk> experience for the consumer that's something that consumers Gonna love and as you have ended up end up leading.
Leading to increased engagement and obviously as we say when you get increased engagement you get increased modernization and then everyone's happy in that regard. So all of these decisions are economic decisions, but it starts off first with the experience itself and at this point, we're very confident that two K is cracking down on costs like experiences and we're looking for.
To that as it relates to P C and <unk> in terms of it's really just to get an allocation of resources. These decisions.
Got it that makes sense and then just on a separate note in terms of the topic of charging a higher price for users to get access to a game like early access during the launch I noticed it was included in the two k's preorder pricing is is this an opportunity and a future or just something.
You know you guys opted out of thanks.
Yeah, we have most of the time, it's funny, you say a higher price cause when we have a we have some early access games of the Mark right now, we typically would I'll send them at a lower price because it would apply that there's more to come in the game and it's not necessarily the final version we have seen the early access models out there in terms of holding back access and making people pay more for earlier access that's nothing.
And that we've done today I would never say never but I'll I'll <unk> honestly, that's a marketing decision and our priority is really making sure that the game comes out comes out in a timely fashion is the best experience possible. If that's something that makes sense. So went down the line. We can experiment with it but to date that has not been something that we've been that we've looked at.
Got it thank you.
Our next question is from David kind of the ski with J P. Morgan. Please proceed.
Alright. Thank you just handle bookings by label I wanted to follow up on the guidance for Zing I think that's down slightly on a maintain bookings figures I wanted to see if you could walk through the adjustment there and then sticking with mobile you talked about hyper casual focus on you know releasing games to retain better have a higher mixer by piece, but I just wanted to see if you can unpack.
<unk> the thinking behind this strategy, there with attractions pain, and maybe how that impacts the the AD revenue potentially from Raleigh popcorn. Thanks.
So far the Buckings for for <unk> for mobile there's some game ships within a year and so there was somebody forecasting of some of the existing games and that's uhm what has changed within Melba.
And then in terms of the the <unk> the Kuiper casual business Uhm, what we've seen is that there are some games, particularly one with with the average or opt for better bit stickier than the typical hyper casual business and they have the opportunity to engage consumers uhm for longer periods of time and also potentially lead to not just necessarily monetizing through advertising, but I'll.
Monetizing purchases. So we're starting to see that we're starting to experiment with that and we think that there's a market there for us I think people than we've been calling as a hybrid casual market.
Where you have the ability to not only monetize with advertising, but also and I purchases just because the experiences are 54, and my last a little bit longer. So we think that's very exciting.
No that doesn't necessarily impact the advertising opportunity overall, but it certainly creates new opportunities with <unk> purchases force.
Okay.
Our next question is from Walmart Firstly with Bank of America. Please proceed.
Hi, Thank you for taking my question.
So you didn't change your for your guidance and I wanted to know I think David Cardinal Ski asked a question and you talked about so I got a little bit I wanted to know what whether you're in you're implied.
Like for like guidance on mobile has changed at all since.
Since the last time you got it.
And then within that do you expect the advertising to grow on an organic basis that is excluding popcorn and I have one more question.
So we just mention that I'm seeing that has changed a little bit because there's no point in a really schedule and some updates to the four cats. So we did have some changes and the rest of the year city by some changes in a really schedule. All uhm. So there are some ups and downs with an ear, but overall.
We've kept the entire year. The same so we were at the higher end in <unk> in the first quarter, but we kept we reiterated a full year and then in terms as I'm expecting advertising to ground, yes, Uhm, we do expect it to grow and that's all ye organically organically yet.
Okay, Great and then the other part of the question I want to ask was in terms of a direct to consumer channel.
<unk> said that the majority of mobile games in a few years, we'll leverage that channel. So you have a lot of games I you know we've counted well over 100 not all of them are your your big winners I think it was a long tail of games. So I guess I wanted to ask you know is it that the the biggest games the big.
Games are gonna be on your D. P. C platform or is it just the just the sheer number of games because I'm trying to get a sense of how much revenue could potentially for flow through that channel. If you understand what I mean.
Yes, I do understand what you mean, it really varies game by game. So if if the game is not suited to direct to consumer to may not be because of its style. It's.
The interaction the consumers have with the title then there may not be an opportunity to even though it's a big title and then there are other titles were it's terrific opportunity.
Again, we haven't we haven't established a number that we're shooting for but I did quote the number that a competitor has outlined and I think that number is kind of high end of the possibility.
Thank you.
Our next question is from my Caky with bench for a company. Please proceed.
<unk>, calling Nicole nice corner guys. Thanks for taking our questions.
<unk> sort of big picture pardon the pun curious what you're thinking on.
Film opportunity I know you're not.
Trainband bandwagon Guy so, but maybe this isn't that uhm no hard not to notice that result from Super Mario brothers and the last of us.
And this is an area, where historically been challenge pre-k might be to have success.
Medium looks.
It looks like.
The Formula is kind of you know involved the creative piece to the original game and have a great story lines and look at your portfolio by P. Now you've got a ton of opportunities and it seemed like.
You certainly have the creative talent you definitely have a great great story lines. So two questions on that Strauss I'm curious if you're creative teams are <unk>.
Motivated to expand their I P and the new entertainment mediums like.
Or streaming episodic content and then curious if you see I P expansion.
<unk> film consuming complement your glucose strategy over the longterm next to us.
Thanks, Mike we think it's probably a relatively small opportunity economically we're not going to use our balance sheet to invest in film and television projects those are.
Typically very challenged asset classes, with which I'm quite familiar and to point out two successes notable as they may be.
<unk>. The fact that there are many many failures where money was lost so so far we've taken a very selective approach to licensing we do have a borderlands movie coming from Lions gate.
We have bioshock movie coming as well, we're excited about both and selectively we could see licensing in the future when there's a creative imperative and an economic opportunity.
I think you're right. The reason there's been success lately was because you had great I T. And then there was a great project that was made from it.
And the reason you type failure in the past is with the expression of the can you just wasn't very good despite people's best efforts.
It's a really hard business and we're not gonna bet this company's future or the value of our intellectual property based on someone else's execution in another area of the entertainment business. So will continue to be very selective indeed.
Even if we did take a broad based approach and the absence of investing ourselves the economic opportunity in the context of the much greater economic opportunity for our core business.
Is limited.
Thank you.
Our next question is from Brian Fitzgerald, Splitsville, sorry that please proceed.
Thanks to quick ones <unk> not to get wrapped around the axle with Samantha <unk>, but you said hey, we had a phased approach when you were talking about G. T airline anything to call up there is a difference or an evolution familiar marketing and delivering incremental content or no. It's just more of the normal ammo and then the second question is.
M B, a two K twenty-three added to Playstation plus game of the month.
That <unk>.
Definitely contributes a strong engagement, but we're curious whether or not you also see a meaningful uptick in arts, yes, there among those Playstation plus players being you know if if they if they are waiting to engage with it once it's in a subscription services or a lower propensity to spend on the game.
Or no actually we see we see an uptick in Rcs there as well.
So on the on the first question Ah by phased approach I was referring to delivering somewhat smaller chunks of really high quality contact as opposed to waiting for a longer period of time to deliver something that's much larger and both approaches can work and of late the phased approach has been <unk>.
King really well however, there's not one right approach it varies with what the team has a mind creatively at any given time.
And then in terms of the things like subscription services or game of the month, where the consumer isn't necessarily buying the individual game. Obviously, we don't do these things unless we think there's a significant economic opportunity for us to do so so you can.
If you see it going into one of those services you can assume that that math has been done and.
And yes, we do see it I've taken recurrent consumer spending generally because it's bringing a lot of new players.
And those players are valuable players and as long as they're engaged with the game itself. The engagement is strong and aren't that conversion to Rcs is very strong.
It's all about and get in there at various cohorts cohort and various game the game, but if we do drive significant engagement from folks are coming into the game. We we are saying I'm very favorable venereal says it as it relates to modernization.
Awesome. Thanks, Carl Thanks drops.
Our next question is from Benjamin sauce with Deutsche Bank. Please proceed.
Hey, guys. Thanks for the question just wanted to get back into the revenue breakdown by studio it looks like the percentage for rock Star and other went up and I'm. Just wondering if that's a function of sheer shift from the things you talked about with mobile or if your expectations for those segments. It actually improved and if so could you talk a little bit.
More about that thanks.
Let's see so the update <unk> thighs and based on the momentum and their current business. So there is Sam Sam G. T. A five units out and <unk>, yeah, the Baghdad updates and some virtual currency with G. T online updating so it's just.
Overall, we forecasting them <unk>.
Okay got it and then just couldn't talk broadly about the competitive environment in the industry and whether you think it'll be sort of at this level of more competitive less competitive you know six or 12 months from now thanks.
I I think it'll be about the same it's always hard to know, it's a very competitive business with at any given time.
But ultimately we're really competing with ourselves because.
If there's a lot in the market to consumers want generally speaking don't go consume it and if there's nothing that they want it's not like they consume the next best they just stay away. So we have to deliver the highest quality properties and if we do that they'll show up.
In good times, and the bad I mean, you're saying that even in a mixed economy, the best titles Stokehole bigger audiences.
We have reached the end of our question and answer session I would like to turn the conference back of like a management for closing comments.
I just wanted to take a minute to think our teams again for delivering a superb quarter and we're really thrilled with the way. This year is unfolding our titles continue to be a phenomenal quality, we're really excited about our upcoming releases.
And and obviously very excited about the future beyond this fiscal year and we also want to thank all of you for attending the call for your great questions and I'm not sure we were grateful to our shareholders for their continued support so thanks, so much and have a great evening.
Thank you this will conclude today's conference.
And she may disconnect your lines at this time and thank you again for your participation.
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