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Morningstar | Take-Two Benefits From Its Expanded Franchise Roster

Take-Two is one of the larger third-party video game publishers and it owns one of the largest and well-known video game franchises in "Grand Theft Auto." We believe the firm is well positioned not only to capitalize on the success of "Grand Theft Auto," but also to continue diversifying its revenue beyond its signature franchise. We expect Take-Two to continue to benefit from both continued growth of the current generation of consoles (Xbox One, PlayStation 4, and Nintendo Switch) and ongoing revitalization of PC gaming. Take-Two has capitalized on the shift within the industry toward a bifurcated market consisting of major AAA blockbuster titles on one side and smaller independent games on the other. Take-Two generally focuses on the higher end, using both its capital to fund the higher-budget blockbusters and its marketing advantage to support its titles. Over the past 10 years, the firm has established new franchises such as "Borderlands" while reinvigorating older ones like "Xcom." Its largest annual franchise, "NBA 2K," had its most popular release with "NBA 2K18," which shipped 9 million units and outsold EA's "Madden NFL 18" in the United States. We expect the company to continue to invest in new intellectual property and to fund the development via sequels. Like its peers, the firm is focused on engaging users beyond the initial game sale via widening the monetization window by expanding the use of multiplayer options and releasing downloadable content, or DLC. Online multiplayer games or game modes lead users to develop social networks thus encouraging player loyalty via either informal friendship networks or actual teams/clans. DLC can either refresh the multiplayer experience by introducing new maps and increasing the level cap or extend single-player engagement by extending the storyline. Take-Two introduced a separate multiplayer mode. "GTA Online," with the launch of "Grand Theft Auto V" in 2013. The mode has helped this installment sell over 95 million units by expanding the life cycle and monetization of the game with free DLC and microtransactions.