What changed in this filing

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Item 1. Business

2022-05-17 compared with 2021-05-19 · 61 added, 41 removed, 175 unchanged (37% of the section changed)

Recent Developments

Pending Acquisition.

On January 9, 2022, we entered into a definitive merger agreement to acquire Zynga Inc.

("Zynga"), a leading developer of mobile games.

Under the terms and subject to the conditions of the merger agreement, Zynga stockholders will receive $3.50 in cash and a number of shares of our common stock equal to the exchange ratio for each share of Zynga common stock outstanding at the closing.

The transaction is valued at $9.86 per share of Zynga common stock based on the market closing as of January 7, 2022, implying an enterprise value of $12.7 billion.

The transaction includes a collar mechanism on the equity consideration, so that if the volume weighted average price ("VWAP") of Take-Two common stock on the Nasdaq Global Select Market for the consecutive period beginning at 9:30 a.m.

New York time on the twenty-third trading day immediately preceding the closing date of the transaction and concluding at 4:00 p.m.

New York time on the third trading day preceding such closing date is in a range from $156.50 to $181.88, the exchange ratio would be adjusted to deliver total consideration of $9.86 per Zynga share.

If the VWAP of our common stock for the period noted in the prior sentence exceeds the higher end of that range the exchange ratio would be 0.0350 per share, and, if the VWAP is below the lower end of that range, the exchange ratio would be 0.0406 per share.

The transaction, which is currently anticipated to close on Monday, May 23, 2022, is subject to approval by Take-Two and Zynga stockholders and the satisfaction of the other customary closing conditions.

In connection with the transaction, on April 14, 2022, we completed our offering and sale of $2.7 billion aggregate principal amount of our senior notes, consisting of $1.0 billion principal amount of our 3.300% Senior Notes due 2024 (the “2024 Notes”), $600 million principal amount of our 3.550% Senior Notes due 2025 (the “2025 Notes”), $600 million principal amount of our 3.700% Senior Notes due 2027 (the “2027 Notes”) and $500 million principal amount of our 4.000% Senior Notes due 2032 (the “2032 Notes” and, together with the 2024 Notes, the 2025 Notes and the 2027 Notes, the “Notes”).The Notes were issued under an indenture between the Company and The Bank of New York Mellon, as trustee (the “Trustee”).

The Notes are the Company’s senior unsecured obligations and rank equally with all of our other existing and future unsubordinated obligations.

The 2024 Notes mature on March 28, 2024 and bear interest at an annual rate of 3.300%.

Notes mature on April 14, 2025 and bear interest at an annual rate of 3.550%.

The 2027 Notes mature on April 14, 2027 and bear interest at an annual rate of 3.700%.

The 2032 Notes mature on April 14, 2032 and bear interest at an annual rate of 4.000%.

We will pay interest on the 2024 Notes semiannually on March 28 and September 28 of each year, commencing September 28, 2022.

We will pay interest on each of the 2025 Notes, 2027 Notes and 2032 Notes semi-annually on April 14 and October 14 of each year, commencing October 14, 2022.

We are a leading developer, publisher and marketer of interactive entertainment for consumers around the globe.

We develop and publish products principally through Rockstar Games, 2K, Private Division, Social Point, and Playdots.

We develop and publish products principally through Rockstar Games, 2K, Private Division, and T2 Mobile Games.

Our products are currently designed for console gaming systems, including, but not limited to, the Sony Computer Entertainment, Inc.

("Sony") PlayStation®4 ("PS4") and PlayStation5 ("PS5"), Microsoft Corporation ("Microsoft") Xbox One® ("Xbox One") and Xbox Series X|S ("Xbox Series X|S"), and Nintendo's Switch TM ("Switch"), as well as personal computers ("PC"), including smartphones and tablets.

We deliver our products through physical retail, digital download, online platforms, and cloud streaming services.

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Support World-Class Creative Teams.

Creativity and innovation remain the core tenets of our organization and are the lifeblood of our ongoing success.

Creativity and innovation remain two of the core tenets of our organization and are the lifeblood of our ongoing success.

We have 6,042 employees working in game development in studios around the world, including some of the most well-known names in the business.

The creative teams at Rockstar Games and 2K are renowned for their consistent ability to deliver games that set new benchmarks for excellence.

In addition, Private Division is dedicated to bringing titles from top independent developers to market, and Social Point and Playdots further enhance our development capabilities with a track record of producing multiple hits in the free-to-play mobile sector.

In addition, Private Division is dedicated to bringing titles from top independent developers to market, and T2 Mobile Games further enhances our development capabilities with a track record of producing multiple hits in the free-to-play mobile sector.

Whether expanding our portfolio of franchises, launching new intellectual property, or providing innovative ways for audiences to remain captivated and engaged, we prioritize producing the highest quality entertainment experiences.

We support our teams by focusing on talent retention and acquisition, and our label structure enables us to target distinct market segments and opportunities.

We support our teams by focusing on talent acquisition and retention, and our label structure enables us to target distinct market segments and opportunities.

Focus on Core Strength of Producing High Quality Titles.

We focus on publishing a select number of high-quality titles based on internally owned and developed intellectual properties.

We currently own the intellectual property rights to 27 proprietary brands.

We focus on publishing a number of high-quality titles based on internally owned and developed intellectual properties.

We and our subsidiaries currently own the intellectual property rights to 30 proprietary brands.

In addition, we selectively develop titles based on licensed properties, including sports leagues, and also publish externally developed titles.

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We apply this process to all of our products, whether internally or externally developed.

The product investment review process includes reviews of each project at various stages of development by our executive management team and the senior management of our publishing labels and also includes coordination between our sales and marketing personnel before the launch of titles.

Our product investment review process

includes reviews of each project at various stages of development by our executive management team and the senior management of our publishing labels and also includes coordination between our sales and marketing personnel before the launch of titles.

This disciplined approach to product investment is expected to enhance the competitiveness and profitability of our titles.

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Leverage Emerging Technologies, Platforms, and Distribution Channels, Including Digitally-Delivered Content.

Interactive entertainment played online and on mobile platforms, such as tablets and smartphones, presents opportunities to enhance our growth and profitability.

Interactive entertainment played online and on Mobile, presents opportunities to enhance our growth and profitability.

In addition, the interactive entertainment software industry is delivering a growing amount of content for traditional platforms through digital download.

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Virtually all of our titles that are available through retailers as packaged goods products are also available through direct digital download (from websites we own or third-party websites).

We also publish an expanding variety of titles for tablets and smartphones, which are delivered to consumers through digital download.

We also publish an expanding variety of titles for Mobile, which are delivered to consumers through digital download.

We will continue to invest in emerging opportunities in mobile and online gameplay, particularly for our wholly-owned franchises, as well as downloadable content and microtransactions that enable gamers to pay to download additional content to enhance their game playing experience.

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Operating margins are dependent in part upon our ability to release new, commercially successful software products and to manage effectively their development and marketing costs.

We have internal development studios located in Australia, Canada, China, Czech Republic, Hungary, India, South Korea, Spain, the United Kingdom (U.K.), and the United States (U.S.).

We have internal development studios located in Australia, Canada, China, Czech Republic, Hungary, India, Serbia, South Korea, Spain, the United Kingdom (U.K.), and the United States (U.S.).

As of March 31, 2022, we had a research and development staff of 6,042 employees with the technical capabilities to develop software titles for all major consoles, PCs, and mobile platforms in multiple languages and territories.

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Red Dead Redemption 2 , which has been a critical and commercial success that set numerous entertainment industry records, has sold-in more than 40 million units worldwide to date.

Rockstar Games is also well known for developing brands in other genres, including the LA Noire , Bully, and Manhunt franchises.

Rockstar Games continues to expand on our established franchises by developing sequels, offering downloadable episodes, and additional content.

Rockstar Games confirmed that active development for the next entry in the Grand Theft Auto franchise is well underway with more details to be shared over time.

Rockstar Games is also well known for developing brands in other

genres, including the LA Noire , Bully, and Manhunt games.

Rockstar Games continues to expand on our established series by developing sequels, offering downloadable episodes, and additional content.

Rockstar Game's titles are published across all key platforms, including Mobile.

Our 2K label has published a variety of popular entertainment properties across all key platforms and across a range of genres including shooter, action, role-playing, strategy, sports and family/casual entertainment.

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2K's realistic sports simulation titles include our flagship NBA 2K series, which continues to be the top-ranked NBA basketball video game, the WWE 2K professional wrestling series, and PGA TOUR 2K .

In March 2020, 2K announced a multi-year partnership with the National Football League encompassing multiple future video games that will be non-simulation football game experiences.

2K has announced a multi-year partnership with the National Football League encompassing multiple future video games that will be non-simulation football game experiences.

2K also publishes mobile titles, such as WWE SuperCard .

Private Division.

Our Private Division label is dedicated to bringing titles from the industry's leading creative talent to market and is the publisher and owner of Kerbal Space Program.

Private Division also released The Outer Worlds and Ancestors:

The Humankind Odyssey , based on new IP from renowned industry creative talent.

Our Private Division label is dedicated to bringing titles from the industry's leading creative talent to market and is the publisher and owner of Kerbal Space Program and OlliOlli World .

Kerbal Space Program 2 is planned for release in fiscal year 2023.

Social Point.

Social Point develops and publishes popular free-to-play mobile games that deliver high quality, deeply-engaging entertainment experiences, including its two most successful games, Dragon City and Monster Legends .

In addition, Social Point has a robust development pipeline with a number of exciting games planned for launch in the coming years.

On September 4, 2020, we acquired privately held Playdots, Inc.

("Playdots") for consideration having an acquisition date fair value of $195.5 million, consisting of $97.8 million in cash and the issuance of 0.6 million shares of our common stock.

(See Note 22 - Acquisitions of our Consolidated Financial Statements.) Founded in 2013 and based in New York, New York, Playdots builds mobile games with unique and thoughtful designs.

Playdots is best known for Two Dots , which has been downloaded over 80 million times since its launch six years ago and continues to deeply engage audiences throughout the world.

Private Division also released The Outer Worlds and Ancestors:

The Humankind Odyssey .

T2 Mobile Games T2 Mobile Games includes Socialpoint, Playdots, and Nordeus, which publish popular free-to-play mobile games that deliver high quality, deeply engaging entertainment experiences and generates revenue from in-game sales and in-game advertising.

T2 Mobile Games' titles include Dragon City , Monster Legends , Two Dots , and Top Eleven .

On June 1, 2021, we acquired Nordeus Limited ("Nordeus"), for consideration having an acquisition date fair value of $289.8 million, consisting of $132.9 million in cash and the issuance of 0.5 million shares of our common stock, and a contingent earn-out consideration arrangement that requires us to pay up to an aggregate of $153.0 million in cash if Nordeus achieves certain performance measures over the 12- and 24- month periods following the closing (see Note 22 - Acquisitions of our Consolidated Financial Statements).

Founded in 2010, Nordeus is a mobile games company based in Belgrade, Serbia, best known for Top Eleven, which has over 240 million registered users.

We are continuing to execute on our growth initiatives in Asia, where our strategy is to broaden the distribution of our existing products and establish an online gaming presence, especially in China and South Korea.

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The NBA 2K League follows a professional sports league format:

head-to-head competition throughout a regular season, followed by a bracketed playoff system and a finals match-up that was held in August in each of the NBA 2K League's first three seasons.

The NBA 2K League's fourth season is set to take place in calendar year 2021.

head-to-head competition throughout a regular season, followed by a bracketed playoff system and a finals match-up.

The NBA 2K League is currently in its fifth season.

Intellectual Property

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The intellectual property rights we have created or acquired for our internally-owned portfolio of brands include BioShock , Bully , Carnival Games , Dragon City , Grand Theft Auto , Kerbal Space Program , L.A.

Noire , Mafia , Manhunt , Max Payne , Midnight Club , Monster Legends , Red Dead , Sid Meier's Civilization , Two Dots , and XCOM .

Noire , Mafia , Manhunt , Max Payne , Midnight Club , Monster Legends , OlliOlli World , Red Dead , Sid Meier's Civilization , Top Eleven , Two Dots , and XCOM .

We believe that content ownership facilitates our internal product development efforts and maximizes profit potential.

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Effective as of July 1, 2020, we entered into an Xbox Console Publisher License Agreement with Microsoft for the Xbox Series X|S and Xbox One consoles (the “Xbox Next Gen Agreement” and together with Xbox 360 Agreement, the “Xbox Agreements”).

The term of Xbox 360 Agreement expires on May 31, 2022, and the term of the Xbox Next Gen Agreement expires on March 31, 2023, each with automatic one-year renewal terms thereafter (unless one party gives the other advance notice of non-renewal).

These Xbox Agreements may be terminated by Microsoft immediately in the event of a breach by us, and the Xbox Next Gen Agreement may also be terminated by Microsoft

immediately in the event of our bankruptcy or insolvency.

The term of Xbox 360 Agreement expires on March 31, 2023, and the term of the Xbox Next Gen Agreement expires on March 31, 2023, each with automatic one-year renewal terms thereafter (unless one party gives the other advance notice of non-renewal).

These Xbox Agreements may be terminated by Microsoft immediately in the event of a breach by us, and the Xbox Next Gen Agreement may also be terminated by Microsoft immediately in the event of our bankruptcy or insolvency.

Upon expiration or termination of each of the Xbox Agreements, we have certain rights to sell off existing inventories.

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• Implementing public relations campaigns, using social, digital, online, television, outdoor, and print marketing, including certain performance marketing programs.

We believe that we label and market our products in accordance with the applicable principles and guidelines of the Entertainment Software Rating Board, or the ESRB, an independent self-regulatory body that assigns ratings and enforces advertising guidelines for the interactive software industry.

We believe that we label and market our products in accordance with the applicable principles and guidelines of the Entertainment Software Rating Board, ("ESRB"), an independent self-regulatory body that assigns ratings and enforces advertising guidelines for the interactive software industry.

• Stimulating continued sales by reducing the wholesale prices of our products to retailers, digital storefronts, and platform providers at various times during the life of a product.

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• Other interactive entertainment companies, including those offering mobile games, that range in size and cost structure from very small with limited resources to very large with greater financial, marketing, technical, and other resources than ours.

Examples of our competitors include Activision Blizzard, Inc., Electronic Arts Inc., and Ubisoft Entertainment S.A.

Examples of our competitors include Activision Blizzard, Inc., Electronic Arts Inc., Ubisoft Entertainment S.A., and Embracer Group AB.

• Sony, Microsoft, and Nintendo for the sale of interactive entertainment software.

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77% of our employees are focused on product development.

Due to COVID-19, this past year was a challenging one for our employees, and, given the largely remote working environment, we implemented programs to make sure our people felt supported in their roles, providing enhanced manager training to help strengthen teams despite the physical distance, broadening our wellness and mental health offerings, encouraging people to step away from their screens when they could and spending a lot of time listening to employee feedback.

Despite the challenges of the pandemic, creativity and innovation remained the core tenets of our organization and the lifeblood of our ongoing success.

Due to COVID-19's continued impact, this past year was a challenging one for our employees, and, given the largely remote working environment, we continued programs to make sure our people felt supported in their roles, including enhanced manager training to help strengthen teams despite the physical distance, broadening our wellness and mental health offerings, encouraging people to step away from their screens when they could and spending a lot of time listening to employee feedback.

Despite the challenges of the ongoing pandemic, creativity and innovation remained two of the core tenets of our organization and the lifeblood of our ongoing success.

The creative teams at our labels are renowned for their consistent ability to deliver games that set new benchmarks for excellence.

We support our creative and corporate teams by focusing on talent retention and acquisition, including through:

offering job development and skills training initiatives, extensive employee benefits and numerous well-being programs, and partnering with the leadership at our labels to foster the types of cultures our leaders believe best support and grow the creative processes for their particular teams.

We support our creative and corporate teams by focusing on talent acquisition and retention, including through offering job development and skills training initiatives, extensive employee benefits and numerous well-being programs, and partnering with the leadership at our labels to foster the types of cultures our leaders believe best support and grow the creative processes for their particular teams.

Diversity, Equity, and Inclusion.

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We also recognize the importance of our employees staying current in an ever-changing industry.

To that end, our global Learning & Development team curates a wide variety of training materials and programs

targeting both hard skills development and career progression as well as programs in leadership development and employee round tables.

To that end, our global Learning & Development team curates a wide variety of training materials and programs targeting both hard skills development and career progression as well as programs in leadership development and employee round tables.

Further, our compliance training program seeks to ensure that our employees recognize and report any signs of harassment, discrimination, retaliation, or other inappropriate behaviors in the workplace and that they understand and abide by our Code of Business Conduct and other internal policies.

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The feedback generated through these tools helps to ensure we are providing a supportive, dynamic, and stimulating work environment for all of our employees.

These efforts and more contributed to Take-Two being named one of The Wall Street Journal’s Best Managed US Companies in 2018, included among EM360’s Top 10 Companies with the Best Employee/Employer Relations in 2019, and listed on Fortune’s Great Places to Work list in 2019 and 2021 and Best Places to Work in NYC list in 2020.

These efforts and more contributed to Take-Two being named one of The Wall Street Journal’s Best Managed US Companies and included in Forbes' Best Mid-Size Employers list four years in a row, beginning in 2018.

In addition, we were included on Fortune’s Great Places to Work list for the past three years and were recently honored by Gay Gaming Professionals in 2021 as a DEI&B leader in the interactive entertainment industry.

Compensation and Benefits.

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We regularly review our compensation and benefits packages from both an internal and external standpoint to ensure competitiveness, including through industry benchmarking analysis.

We seek to link compensation (including annual changes in compensation) to our overall and business unit performance, as well as each individual’s contribution to the results achieved.

We seek to link compensation (including annual changes in compensation)

to our overall and business unit performance, as well as each individual’s contribution to the results achieved.

The emphasis on our overall performance is intended to align our employees’ financial interests with the interests of our shareholders.

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We also provide a comprehensive benefits package that includes traditional offerings, such as medical, dental vision, retirement, disability, accident and life insurance, prescription drugs, and leaves, and also includes programs such as well-being, fitness reimbursement, mental health benefits, mental health awareness training for Human Resources personnel and managers throughout the Company, and charitable giving with a company match.

We have hosted 100+ company-wide bootcamps to promote physical fitness and employee comradery.

We have hosted more than 150 company-wide bootcamps to promote physical fitness and employee comradery.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business