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Item 1A. Risk Factors

2023-05-26 compared with 2022-05-17 · 345 added, 193 removed, 456 unchanged (54% of the section changed)

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Because of the risks and uncertainties described below, as well as other factors affecting our operating results and financial condition, past financial performance should not be considered to be a reliable indicator of future performance and our business and financial performance could be harmed and the market value of our securities could decline.

These risks are not presented in order of importance of probability of occurrence.

These risks are not presented in order of importance or probability of occurrence.

Summary of Risk Factors

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• We face development risks and must adapt to changes in software technologies

• Increased use of mobile devices for gaming will drive future growth of mobile gaming

• Increased competition for retailer support could increase expenses

• Increasing importance of digital sales exposes us to risks of that business model

• Our ability to develop successful products for current video game platforms

• We require approval of hardware licensors to publish titles

• Reliance on complex information technology systems and networks and potential adverse impact of security breaches

• Potential adverse impact of inadequate consumer data protection

• Potential adverse impact of security breaches

• Dependence on key management and product development personnel

• Attracting, managing, and retaining our talent is critical to our success

• Offensive consumer-created content can harm our results of operations or reputation

• We rely on software development arrangements with third parties

• Reliance on channel partners to distribute our games on their platforms

• Increasing importance of free-to-play games exposes us to the risks of that business model

• Increasing importance of digital sales and free-to-play games exposes us to the risks of that business model

• We must compete for advertisements and offers that are incorporated into our free-to-play games

• Our acquisitions and investments may not have the anticipated results

• International operations risks

• Connectivity issues could affect our profitability and online services

• Reliance on complex information technology systems and networks

• The loss of server capacity or lack of sufficient bandwidth could cause our business to suffer

• The loss of server capacity, lack of sufficient bandwidth, or connectivity issues could cause our business to suffer

• Use of open-source software exposes us to risks

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• The competitive position and value of our products could be adversely affected by unprotected intellectual property

• Contractual covenants can place certain limitations on our business

• We have a significant amount of outstanding debt

• The value of our virtual items is highly dependent on how we manage the economies in our games

• There is potential for unauthorized or fraudulent transactions of accounts and virtual items outside of our games

Risks related to legal or regulatory compliance

• Government regulation of the internet can affect our business

• Legislation could limit the retail market of our products

• Legislation could subject us to claims or otherwise harm our business

• Failure to comply with laws and regulations, including data privacy, could harm our business

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• We may be adversely affected by the effects of inflation

Risks Related to our Pending Acquisition of Zynga

• The Zynga acquisition may not be completed

• The Zynga acquisition presents risks before and after closing

• We are and may become involved in legal proceedings that may result in adverse outcomes

Risks relating to our business and industry

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the effect on consumer demand for our products and the discretionary spending patterns of our customers, including the ability of our customers to pay for our products;

our ability to develop, market, and sell our products, including as a result of travel restrictions and people working from home;

our ability to develop timely, market, and sell our products, including as a result of travel restrictions and people working from home;

the impact on the operations of our counterparties, including the physical retail, digital download online platforms, and cloud streaming services we rely on for the distribution of our products, the suppliers who manufacture our physical products, and other third parties with which we partner (e.g.

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additional volatility in exchange rates;

the impact of potential inflation;

and the impact of reductions in interest rates by the Federal Reserve and other central banks, including on our short-term investment portfolio.

Further, “shelter-in-place,” quarantine, or other such initiatives by governmental entities could also disrupt our operations.

In such situations, if employees or third-party developers who cannot optimally perform their responsibilities from home are not able to or are unwilling to report to work, we may experience material interruptions in product development and delays in bringing products to market.

Such circumstances may also impact the effectiveness of our quality controls and game testing measures.

An increase in the number of employees working remotely also increases the potential adverse impact of risk associated with information technology systems and networks, including cyber-attacks, computer viruses, malicious software, security breach, and telecommunication failures, both for systems and networks we control directly and for those that employees and third-party developers rely on to work remotely.

Any failure to prevent or mitigate security breaches or cyber risks or detect, or respond adequately to, a security breach or cyber risk, or any other disruptions to our information technology

systems and networks, can have adverse effects on our business.

The spread of COVID-19 has caused us to modify our business practices (including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners.

Further, key personnel could contract COVID-19, hindering their availability and productivity.

the impact of inflation;

and the impact of changes in interest rates by the Federal Reserve and other central banks, including on our short-term investment portfolio.

The global work-from-home operating environment caused some strain and fatigue within parts of our global workforce.

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In addition, the long-term effects of the COVID-19 pandemic on the nature of the office environment and remote working are not certain and may present operational challenges and impact our ability to attract and retain talent, and our teams’ ability to collaborate creatively, each of which may adversely affect our business.

While we have developed and continue to develop plans to help mitigate the negative impact of the pandemic on our business, these efforts may not be effective, and a protracted economic downturn may limit the effectiveness of our mitigation efforts.

Any of these considerations described above could cause or contribute to the risks described elsewhere herein and could materially adversely affect our business, financial condition, results of operations or stock price.

Additionally, while we have seen increased demand for our products due to stay-at-home orders, the curtailment of certain other forms of entertainment, and other pandemic-related factors that make consumers more inclined to spend time at home, benefiting our financial results and operating metrics, the trends in fiscal year 2021 with respect to our revenues, net income, and other financial results and operating metrics may not be indicative of results for future periods, particularly if these pandemic-related factors become less significant.

As expected, during fiscal year 2022, we experienced a moderation in engagement from the all-time highs experienced in fiscal year 2021, but overall engagement continued to be notably higher than it was pre-pandemic

Any of the considerations described above could cause or contribute to the risks described elsewhere herein and could materially adversely affect our business, financial condition, results of operations or stock price.

Additionally, while we saw increased demand for our products due in part to stay-at-home orders, the curtailment of certain other forms of entertainment, and other pandemic-related factors that made consumers more inclined to spend time at home, benefiting our financial results and operating metrics, any such trends with respect to our revenues, net (loss) income, and other financial results and operating metrics may not be indicative of results for future periods, particularly as these pandemic-related factors become less significant.

We have experienced a moderation in engagement from the all-time highs experienced during certain periods of the pandemic, particularly in fiscal year 2021, but overall engagement continues to be higher than it was pre-pandemic.

The interactive entertainment software industry is highly competitive.

We compete for both licenses to properties and the sale of interactive entertainment software with Sony and Microsoft, each of which is a large developer and marketer of software for its own platforms.

We also compete with game publishers, such as Activision Blizzard, Inc., Electronic Arts Inc., Ubisoft Entertainment S.A., and Embracer Group AB.

In addition, the gaming, technology/internet, and entertainment industries have converged in recent years and larger, well-funded technology companies are pursuing and strengthening their interactive entertainment capabilities, as evidenced, for example, by Microsoft's pending acquisition of Activision Blizzard.

We also compete with game publishers, such as Activision Blizzard, Inc., Electronic Arts Inc., Embracer Group AB, Microsoft, Nintendo, Playrix, Playtika, Scopely, Sony, Tencent, and Ubisoft Entertainment S.A.

We also face competition from online game developers and distributors who have primarily focused on specific international markets and with high-profile companies with significant online presences with new and expanded mobile gaming offerings, such as Apple, Google, and Microsoft.

As our business is dependent upon our ability to develop hit titles, which require increasing budgets for development and marketing, the availability of significant financial resources has become a major competitive factor in developing and marketing software games.

Some of our competitors have greater financial, technical, personnel, and other resources than we do and are able to finance larger budgets for development and marketing and make higher offers to licensors and developers for commercially desirable properties.

Our titles also compete with other forms of entertainment, such as social media and casual games, in addition to motion pictures, television and audio and video products featuring similar themes, online computer programs and other entertainment, which may be less expensive or provide other advantages to consumers.

A number of software publishers who compete with us have developed and commercialized or are currently developing online games.

As technological advances significantly increase the availability of online games and as consumer acceptance of online gaming grows substantially, it could result in a decline in our platform-based software sales and negatively affect sales of such products.

Some of our competitors have greater financial, technical, personnel, and other resources than we do and are able to finance larger budgets for development and marketing, make higher offers to licensors and developers for commercially desirable properties, adopt more aggressive pricing policies to develop more commercially successful video game products than we do, recruit our key creative and technical talent or otherwise disrupt our operations.

Competitors may develop content that imitates or competes with our best-selling games, potentially reducing our sales or our ability to charge the same prices we have historically charged for our products.

These competing products may take a larger share of consumer spending than anticipated, which could cause product sales to fall below expectations.

Our titles also compete with other forms of entertainment, such as social media, in addition to motion pictures, television and audio and video products featuring similar themes, online computer programs and other entertainment, which may be less expensive or provide other advantages to consumers.

A number of software publishers who compete with us have developed and commercialized or are currently developing online and mobile games.

Technological advances that significantly increase the availability of online and mobile games could result in a decline in our platform-based software sales and negatively affect sales of such products.

Other large companies that to date have not actively focused on mobile and social games may decide to develop mobile and social games or partner with other developers.

Some of these current and potential competitors have significant resources for developing or acquiring additional games, may be able to incorporate their own strong brands and assets into their games, have a more diversified set of revenue sources than we do and may be less severely affected by changes in consumer preferences, regulations or other developments that may impact our industry.

As there are relatively low barriers to entry to develop a mobile or online game, we expect new game competitors to enter the market and existing competitors to allocate more resources to develop and market competing games and applications.

We also compete or will compete with a vast number of small companies and individuals who are able to create and launch games and other content for devices and platforms using relatively limited resources and with relatively limited start-up time or expertise.

The proliferation of titles in these open developer channels makes it difficult for us to differentiate ourselves from other developers and to compete for players without substantially increasing our marketing expenses and development costs.

Increasing competition could result in loss of players, increasing player acquisition and retention costs, and loss of talent, all of which could harm our business, financial condition or results of operations.

Additionally, we compete with other forms of entertainment and leisure activities.

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Failure to adequately identify and adapt to these competitive pressures could have a negative impact on our business.

The inability of our products to achieve significant market acceptance, delays in product releases or disruptions following the commercial release of our products may have a material adverse effect on our business, financial condition and operating results.

The inability of our products to achieve significant market acceptance, the failure to retain existing players, delays in product releases or disruptions following the commercial release of our products may have a material adverse effect on our business, financial condition and operating results.

New products may not achieve significant market acceptance, generate sufficient sales, or be introduced in a timely manner to permit us to recover development, manufacturing and marketing costs associated with these products.

These products or enhancements may not be well-received by consumers, even if well-reviewed and of high quality.

The life cycle of a title generally involves a relatively high level of sales during the first few months after introduction followed by a rapid decline in sales.

Because sales associated with an initial product launch generally constitute a high percentage of the total sales associated

with the life of a product, delays in product releases or disruptions following the commercial release of one or more new products could have a material adverse effect on our business, financial condition, and operating results and therefore cause our operating results to be materially different from our expectations.

The life cycle of a console or PC title generally involves a relatively high level of sales during the first few months after introduction followed by a rapid decline in sales.

Because sales associated with an initial product launch on console or PC generally constitute a high percentage of the total sales associated with the life of a product, delays in product releases or disruptions following the commercial release of one or more new products could have a material adverse effect on our business, financial condition, and operating results and therefore cause our operating results to be materially different from our expectations.

In addition, to retain players, we must devote significant resources so that players stay engaged, which could also result in attracting them to our other games.

We might not succeed in our efforts to increase monetization rates, particularly if we are unable to retain our paying players.

If we fail to grow or sustain the number of our paying players, if the rates at which

we attract and retain paying players declines (whether due to financial hardship as a result of an economic downturn or for any other reason), or if the average amount our players pay declines, our financial results could be negatively affected.

We are subject to product development risks which could result in delays and additional costs, and we must adapt to changes in software technologies.

We depend on our internal development studios and third-party software developers to develop new interactive entertainment software within anticipated release schedules and cost projections.

The development cycle for new titles generally ranges from 12 months for annual sports releases, to multiple years for certain of our top-selling titles.

The development cycle for new titles generally ranges from 12 months or less for most mobile titles and annual console/PC sports releases, to multiple years for certain of our top-selling titles.

Therefore, our development costs can be substantial.

If we or our third-party developers experience unanticipated development delays, financial difficulties, or additional costs, for example, as a result of COVID-19, we may not be able to release titles according to our schedule and at budgeted costs.

If we or our third-party developers experience unanticipated development delays, financial difficulties, or additional costs, for example, as a result of COVID-19 or other unforeseen circumstances, we may not be able to release titles according to our schedule and at budgeted costs.

There can be no assurance that our products will be sufficiently successful so that we can recoup these costs or make a profit on these products.

Additionally, in order to stay competitive, our internal development studios must anticipate and adapt to rapid technological changes affecting software development, such as cloud-based game streaming, and evolving business models, such as free-to-play and subscription-based access to a portfolio of interactive content, to stay competitive.

For our products with live services, we are required to support continued development.

There can be no assurance that these continued efforts will generate sufficient revenue to offset these costs.

Rapid changes in our industry require us to anticipate, sometimes years in advance, the ways in which our products and services will be competitive in the market.

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In either case, our products and services may be technologically inferior to those of our competitors, less appealing to consumers, or both.

If the use of mobile devices as game platforms and the proliferation of mobile devices generally do not increase, our business could be adversely affected.

Following our acquisition of Zynga, an increased percentage of our operations consists of mobile gaming.

The number of people using mobile Internet-enabled devices has increased dramatically over time, and we expect that this trend will continue.

However, the mobile market, particularly the market for mobile games, may not grow in the way we anticipate.

Our future success is substantially dependent upon the continued growth of the market for mobile games.

In addition, we do not currently offer our games on all mobile devices.

If the mobile devices on which our games are available decline in popularity or become obsolete faster than anticipated, we could experience a decline in revenue and bookings and may not achieve the anticipated return on our development efforts.

Any such declines in the growth of the mobile market or in the use of mobile devices for games could harm our business, financial condition or results of operations.

Increased competition for limited shelf space and promotional support from retailers could affect the success of our business and require us to incur greater expenses to market our titles.

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Competition is intense among newly introduced interactive entertainment software titles for adequate levels of shelf space and promotional support, with most and highest quality shelf space devoted to those products expected to be best sellers.

We cannot be certain that our new products will consistently achieve best seller status.

We cannot be certain that our new products will consistently achieve bestseller status.

Competition for retail shelf space is expected to continue to increase, which may require us to increase our marketing expenditures to maintain desirable sales levels of our titles.

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Similarly, as digital sales increase in importance to our business, there is increasing competition for premium placements of products on websites.

Such placement is subject to many similar risks as physical shelf space discussed above.

The increasing importance of digital sales exposes us to the risks of that business model, including greater competition.

The proportion of our revenues derived from digital content delivery, as compared to traditional retail sales, may continue to increase.

The increased importance of digital content delivery in our industry, including through subscription-based access to a portfolio of interactive content, increases our potential competition, as the minimum capital needed to produce and publish a digitally delivered game is significantly less than that needed to produce and publish one that is delivered through retail distribution.

This shift also requires us to dedicate capital to developing and implementing alternative marketing strategies, which may not be successful.

If either occurs, we may be unable to effectively market and distribute our products, which could materially adversely affect our business, financial condition, and operating results.

In addition, a continuing shift to digital delivery could result in a deprioritization of our products by traditional retailers.

Also, while digitally‑distributed products generally have higher profit margins than retail sales, as business shifts to digital distribution, the volume of orders from retailers for physical discs has been, and is expected to be, reduced.

Such placement is subject to many risks similar to the physical shelf space risks discussed above.

Our business is subject to our ability to develop commercially successful products for the current video game platforms.

We derive most of our revenue from the sale of products made for video game platforms manufactured by third parties, such as Sony's PS4 and PS5 and Microsoft's Xbox One and Xbox Series X|S, which comprised 72.2% of our net revenue by product platform for the fiscal year ended March 31, 2022.

We derive a significant portion of our revenue from the sale of products made for video game platforms manufactured by third parties, such as Sony's PlayStation consoles and Microsoft's Xbox consoles, which comprised 43.1% of our net revenue

by product platform for the fiscal year ended March 31, 2023.

The success of our business is subject to the continued popularity of these platforms and our ability to develop commercially successful products for these platforms.

We also rely on the availability of an adequate supply of these video game consoles (which sometimes has been negatively affected by supply chain issues) and the continued support for these consoles by their manufacturers, including our ability to reach consumers via the online networks operated by these console manufacturers.

If the consoles for which we develop new software products or modify existing products do not attain significant consumer acceptance, we may not be able to recover our development costs, which could be significant.

In 2020, Sony and Microsoft each launched their respective next generation consoles.

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As a result, our business and operating results may be more volatile and difficult to predict during console transitions than during other times.

We cannot publish our titles without the approval of hardware licensors that are also our competitors.

Additionally, we derive a significant portion of our revenue from distribution of our games on the Apple App Store and the Google Play Store, and the virtual items we sell in our games are purchased using the payment processing systems of these platform providers.

In the fiscal year ended March 31, 2023, we derived 98.0% of our mobile revenue on Apple and Google platforms.

We are subject to the standard policies and terms of service of third-party platforms, which govern the promotion, distribution, content and operation generally of games on the platform.

Each platform provider has broad discretion to change and interpret its terms of service and other policies with respect to us and other developers, and those changes may be unfavorable to us.

A platform provider may also change its fee structure, add fees associated with access to and use of its platform, alter how we are able to advertise on the platform, change how the personal information of its users is made available to application developers on the platform, limit the use of personal information for advertising purposes, or restrict how players can share information with their friends on the platform or across platforms.

For example, in December 2017, Apple revised its App Store Guidelines to require the disclosure of the odds of receiving certain types of virtual items from “loot boxes” (or similar mechanisms that offer a paid license to randomized virtual items) before customers purchase a license for the virtual items, and in May 2019 Google revised its Play Store policies to require similar disclosures.

As another example, in April 2021, Apple released iOS version 14.5 which required developers to get explicit permission from users, on an app-by-app basis, to use the identifier-for-advertisers, a device identifier assigned by Apple to each of its devices and used by advertisers to attribute app installs to advertising campaigns, target users through user acquisition, and deliver targeted ads.

These requirements have been maintained in subsequent versions of Apple iOS.

Additionally, in February 2022, Google announced plans to make privacy-focused changes to its Android advertising identifiers after a two-year process, taking into account feedback from developers, regulators and other interested parties.

We are continuing to evaluate how these rules or changes may affect our business, operations and financial results.

In addition, third-party platforms also impose certain file size limitations, which may limit the ability of players to download some of our larger games in over-the-air updates.

Aside from these over-the-air file size limitations, a larger game file size could cause players to delete our games once the file size grows beyond the capacity of their devices’ storage limitations or could reduce the number of downloads of these games.

Such changes of terms of use with third-party platforms may decrease the visibility or availability of our games, limit our distribution capabilities, prevent access to our existing games, reduce the amount of revenue and bookings we may recognize from in-game purchases, increase our costs to operate on these platforms or result in the exclusion or limitation of our games on such platforms.

Any such changes could adversely affect our business, financial condition or results of operations.

Moreover, if we violate, or a platform provider believes we have violated, its terms of service (or if there is any change or deterioration in our relationship with these platform providers), that platform provider could limit or discontinue our access to the platform.

A platform provider could also limit or discontinue our access to the platform if it establishes more favorable relationships with one or more of our competitors or it determines that we are a competitor.

Any limit or discontinuation of our access to any platform could adversely affect our business, financial condition or results of operations.

We also rely on the continued popularity, customer adoption, and functionality of third-party platforms.

In the past, some of these platform providers have been unavailable for short periods of time or experienced issues with their in-app purchasing functionality.

If either of these events recurs on a prolonged, or even short-term, basis or other similar issues arise

that impact players’ ability to access our games, access social features or purchase a license to virtual items, our business, financial condition, results of operations or reputation may be harmed.

We cannot publish our titles without the approval of hardware licensors that are also our competitors, and we rely on a limited number of channel partners, some of whom influence the fee structures for online distribution of our games on their platforms.

We are required to obtain licenses from certain of our competitors, including Sony and Microsoft, to develop and publish titles for their respective hardware platforms.

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If the platform provider establishes terms that restrict our offerings on its platform, significantly alters the financial terms on which these products or services are offered, or does not approve the inclusion of content on its platform, our business could be negatively impacted.

Increased competition for digital “shelf space” has put channel partners in more favorable bargaining positions in relation to such terms of distribution.

We also derive significant revenues from distribution on third‑party mobile and web platforms, such as the Apple App Store, the Google Play Store, and Facebook, which are also our direct competitors and, in some cases, the exclusive means through which our content reaches gamers on those platforms, and most of the virtual currency we sell is purchased using these platform providers’ payment processing systems.

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These platform providers or their services may be unavailable or may not function as intended or may experience issues with their in‑app purchasing functionality.

Some of these platforms have retained the right to change the fee structures for online distribution of both paid content and free content (including patches and corrections), and their ability to set or influence royalty rates may increase costs, which could negatively affect our operating margins.

Further, if we are unable to distribute our content in a cost-effective or profitable manner through such distribution channels, it could adversely affect our business, financial condition, and operating results.

We rely on complex information technology systems and networks to operate our business.

Any significant system or network disruption or cyber attack could have a negative impact on our business.

We rely on the efficient and uninterrupted operation of complex information technology systems and networks, some of which are within Take-Two and some of which are managed or hosted by third-party providers.

The supply chain of hardware needed to maintain this technological infrastructure has been disrupted and geopolitical events, including the Russian invasion of Ukraine and any indirect effects, may further complicate existing supply chain constraints.

All information technology systems and networks are potentially vulnerable to damage or interruption from a variety of sources, including but not limited to cyber-attacks, computer viruses, malicious software, security breaches, energy blackouts, natural disasters, terrorism, war, and telecommunication failures.

We securely store the source code for our interactive entertainment software products as it is created.

A breach, whether physical, electronic, or otherwise, of the systems on which such source code and other sensitive data are stored could lead to damage or piracy of our software.

In addition, certain parties with whom we do business are given access to our sensitive and proprietary information in order to provide services and support our team.

These third parties may misappropriate our information and engage in unauthorized use of it.

A data intrusion into a server for a game with online features or for our proprietary online gaming service could also disrupt the operation of such game or platform.

Further, the risk of such a breach may be heightened by world events, such as the current conflict between Russia and Ukraine.

If we or these third parties are subject to data security breaches, we may have a loss in sales or increased costs arising from the restoration or implementation of additional security measures which could materially and adversely affect our business,

financial condition, and operating results.

Any theft and/or unauthorized use or publication of our trade secrets and other confidential business information because of such an event could adversely affect our competitive position, reputation, brand, and future sales of our products.

Our business could be subject to significant disruption, and we could suffer monetary and other losses and reputational harm, in the event of such incidents and claims.

We have faced and in the future could face sophisticated attacks, including attacks referred to as advanced persistent threats, which are cyber-attacks aimed at compromising our intellectual property and other commercially sensitive information, such as the source code and game assets for our software or confidential customer or employee information, which remain undetected for prolonged periods of time.

In September 2022, we experienced a network intrusion in which an unauthorized third party illegally accessed and downloaded confidential information from Rockstar Games’ systems, including early development footage for the next Grand Theft Auto.

Subsequently, also in September 2022, an unauthorized third party illegally accessed credentials for a vendor platform that 2K Games uses to provide help desk support to its customers.

The unauthorized party sent a communication to certain players containing a malicious link.

2K Games immediately notified all affected users and took steps to restrict further unauthorized activity until service was restored.

In connection with this activity (the “Cybersecurity Incident”), we have incurred certain immaterial incremental one-time costs related to consultants, experts and data recovery efforts and expect to incur additional costs related to cybersecurity protections in the future.

We have implemented and are in the process of implementing a variety of measures to enhance further our cybersecurity protections.

See “ Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Cybersecurity Incident ” for further discussion.

Information technology system disruptions, network failures, or security breaches (including the Cybersecurity Incident and similar incidents) have negatively affected, and in the future could negatively affect our business continuity, operations, and financial results.

These risks extend to the networks and e-commerce sites of console platform providers and other partners who sell or host our content online.

The risk of such threats is heightened as a result of international conflicts such as the one between Russia and Ukraine and as a result of an extended period of remote work arrangements due to COVID-19.

Along with our partners, we have expended, and expect to continue to expend, financial and operational resources to implement certain systems, processes, and technologies to guard against cyber risks and to help protect our data and systems.

However, the techniques used to exploit, disable, damage, disrupt or gain access to our networks, our products and services, supporting technological infrastructure, intellectual property and other assets change frequently, continue to evolve in sophistication and volume, and may not be detected for long periods of time.

Our systems, processes and technologies, and the systems, processes and technologies of our business partners or our third-party service providers, have not been and in the future may not be adequate against all eventualities.

In addition, the costs to respond to, mitigate, or notify affected parties of cyber-attacks and other security vulnerabilities are significant.

Failures to prevent or mitigate security breaches or cyber risks, or detect or respond adequately to a security breach or cyber risk, could result in a loss of anticipated revenue, interruptions to our products and services, our having to incur significant remediation and notification costs, a degradation of the user experience, causing consumers to lose confidence in our products and services, prompting regulatory inquiries and significant legal and financial costs.

Additionally, applicable insurance policies may be insufficient to reimburse us for all such losses, and it is uncertain whether we will be able to maintain the current level of insurance coverage in the future on reasonable terms or at all.

Successful exploitation of our systems can have other negative effects upon the products, services and user experience we offer.

In particular, the virtual economies that we have established in many of our games are subject to abuse, exploitation and other forms of fraudulent activity that can negatively affect our business.

Virtual economies involve the use of virtual currency or virtual assets that can be used or redeemed by a player within a particular game or service.

Although we have implemented and continue to develop programs reasonably designed to prevent such negative impacts, the abuse or exploitation of our virtual economies can include the illegitimate generation and sale of accounts and/or virtual items in black markets.

These kinds of activities and the steps that we take to address and prevent these issues may result in a loss of anticipated revenue, interfere with players’ enjoyment of a balanced game environment and cause reputational harm.

Our business could be adversely affected if our consumer data protection measures are not seen as adequate or there are breaches of our security measures or unintended disclosures of our consumer data.

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In addition, due to the high-profile nature of our products, we may draw a disproportionately higher amount of attention and attempts to breach our security controls than companies with lower profile products.

A security incident that leads to disclosure of consumer information (including personal information) could harm our reputation, compel us to comply with disparate breach notification laws in various jurisdictions and otherwise subject us to liability under laws that protect personal information, any of which could result in increased costs or loss of revenue.

A resulting perception that our products or services do not adequately protect the privacy of personal information could result in a loss of current or potential consumers and business partners.

A security incident, such as the Cybersecurity Incident, that leads to disclosure of consumer information (including personal information) could harm our reputation, compel us to comply with disparate breach notification laws in various jurisdictions and otherwise subject us to liability under laws that protect personal information, any of which could result in increased costs or loss of revenue.

A resulting perception that our products or services

do not adequately protect personal information could result in a loss of current or potential consumers and business partners.

In addition, if any of our business partners experience a security incident that leads to disclosure of consumer information, our reputation could be harmed, resulting in loss of revenue.

In addition, certain of our products are online enabled.

The ability of our products to offer online functionality, and our ability to offer content through a video game platform's digital distribution channel, is dependent upon the continued operation and security of such platform's online network.

customers' information or our data — including our intellectual property and other confidential business information — or our information technology systems.

In addition, certain of our products include online functionality.

The ability of our products to enable this functionality, and our ability to offer content through a video game platform's digital distribution channel, is dependent upon the continued operation and security of such platform's online network.

These third-party networks, as well as our own internal systems and websites, and the related security measures may be breached as a result of third-party action, including intentional misconduct by computer hackers, employee error, malfeasance or otherwise, and result in someone obtaining unauthorized access to our customers' information or our data, including our intellectual property and other confidential business information, or our information technology systems.

Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.

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If an actual or perceived breach of our safeguards occurs, we may lose business, suffer irreparable damage to our reputation, and/or incur significant costs and expenses relating to the investigation and possible litigation of claims relating to such event.

Security breaches involving the source code for our products or other sensitive and proprietary information could adversely affect our business.

We securely store the source code for our interactive entertainment software products as it is created.

A breach, whether physical, electronic or otherwise, of the systems on which such source code and other sensitive data are stored could lead to damage or piracy of our software.

In addition, certain parties with whom we do business are given access to our sensitive and proprietary information in order to provide services and support our team.

These third parties may misappropriate our information and engage in unauthorized use of it.

A data intrusion into a server for a game with online features or for our proprietary online gaming service could also disrupt the operation of such game or platform.

Further, the risk of such a breach may be heightened by world events, such as the current conflict between Russia and Ukraine.

Any theft and/or unauthorized use or publication of our trade secrets and other confidential business information as a result of such an event could adversely affect our competitive position, reputation, brand, and future sales of our products.

Our business could be subject to significant disruption, and we could suffer monetary and other losses and reputational harm, in the event of such incidents and claims.

We depend on our key management and product development personnel.

Our continued success will depend to a significant extent on our senior management team and our relationship with ZelnickMedia Corporation ("ZelnickMedia").

Our Executive Chairman/Chief Executive Officer and President are partners of ZelnickMedia.

We are also highly dependent on the expertise, skills and knowledge of our key creative personnel responsible for content creation and development of our Grand Theft Auto and other hit titles and titles based on other brands.

Our continued success will depend to a significant extent on our senior management team and our relationship with ZMC Advisors, L.P.

Our Executive Chairman/Chief Executive Officer and President are partners of ZMC.

We are also highly dependent on the expertise, skills and knowledge of our key creative personnel responsible for content creation and development, such as of our Grand Theft Auto and other hit titles.

We may not be able to continue to retain these personnel at current compensation levels, or at all.

Our industry is generally characterized by a high level of employee mobility, competitive compensation programs, and aggressive recruiting among competitors for employees with technical, marketing, sales, engineering, product development, creative, and/or management skills.

The loss of the services of our executive officers, ZelnickMedia, or certain key creative personnel could significantly harm our business.

The loss of the services of our executive officers, ZMC, or certain key creative personnel could significantly harm our business.

In addition, if one or more key employees were to join a competitor or form a competing company, we may lose additional personnel, experience material interruptions in product development, delays in bringing products to market and difficulties in our relationships with licensors, suppliers and customers, which would significantly harm our business.

Failure to continue to attract and retain qualified management and creative personnel could adversely affect our business and prospects.

Our results of operations or reputation may be harmed as a result of offensive consumer-created content.

Attracting, managing and retaining our talent is critical to our success.

Our business depends on our ability to attract, train, motivate, and retain executive, technical, creative, marketing, and other personnel that are essential to the development, marketing, and support of our products and services.

The market for highly-skilled workers and leaders in our industry is extremely competitive, particularly in the geographic locations in which many of our key personnel are located.

If we cannot successfully recruit, train, motivate, attract, and retain qualified employees, develop and maintain a healthy culture, or replace key employees following their departure, our reputation, brand, and culture may be negatively affected and our business will be impaired.

Our global workforce is primarily non-unionized, but we are aware of an increase in the industry of workers exercising their right to form or join a union.

If significant employee populations were to unionize, we could experience operational changes that may materially impact our business.

Our results of operations or reputation may be harmed as a result of offensive or potentially dangerous consumer-created content.

We are subject to risks associated with the collaborative online features in our games which allow consumers to post narrative comments, in real time, that are visible to other consumers.

From time to time, objectionable and offensive consumer content may be posted to a gaming or other site with online chat features or game forums which allow consumers to post comments.

We may be subject to lawsuits, governmental regulation or restrictions, and consumer backlash (including decreased sales and harmed reputation), as a result of consumers posting offensive content.

From time to time, objectionable and offensive or potentially dangerous consumer content may be posted to a gaming or other site with online chat features or game forums which allow consumers to post comments.

We have been and may be subject to lawsuits, governmental inquiries and regulation or restrictions, and consumer backlash (including decreased sales and harmed reputation), as a result of consumers posting offensive content.

We may also be subject to consumer backlash from comments made in response to postings we make on social media sites such as Facebook, YouTube and Twitter.

If we fail to appropriately respond to the dissemination of such content, we may be subject to lawsuits and governmental regulation, our players may not engage with our products and services and/or may lose confidence in our brands and our financial results may be adversely affected.

If we fail to appropriately respond to the dissemination of such content, our players may not engage with our products and services and/or may lose confidence in our brands, and our financial results may be adversely affected.

Our business is partly dependent on our ability to enter into successful software development arrangements with third parties.

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We rely on third-party software developers for the development of some of our titles.

Quality third-party developers are continually in high demand, and those who have developed titles for us in the past may not be available to develop software for us in the future.

Quality third-party developers are continually in high demand,

and those who have developed titles for us in the past may not be available to develop software for us in the future.

Due to the limited availability of third-party software developers and the limited control that we exercise over them, these developers may not be able to complete titles for us on a timely basis or within acceptable quality standards, if at all.

We have entered into agreements with third parties to acquire the rights to publish and distribute interactive entertainment software as well as to use licensed intellectual properties in our titles.

These agreements typically require us to make development payments, pay

royalties, and satisfy other conditions.

These agreements typically require us to make development payments, pay royalties, and satisfy other conditions.

Our development payments may not be sufficient to permit developers to develop new software successfully, which could result in material delays and significant increases in our costs to bring particular products to market.

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If we have disputes with external developers or they cannot meet product development schedules, acquire certain approvals or are otherwise unable or unwilling to honor their obligations to us, we may delay or cancel previously announced games, alter our launch schedule or experience increased costs and expenses, which could result in a delay or significant shortfall in anticipated revenue, harm our profitability and reputation, and cause our financial results to be materially affected.

We rely on a limited number of channel partners some of whom influence the fee structures for online distribution of our games on their platforms.

We rely on a limited number of channel partners, some of whom have retained the right to change the fee structures for online distribution of both paid content and free content (including patches and corrections) that we license to them for distribution on their platforms.

Such channel partners' ability to set or influence royalty rates may increase costs, which could negatively affect our operating margins.

We may be unable to distribute our content in a cost-effective or profitable manner through such distribution channel, which could adversely affect our business, financial condition and operating results.

Outside of fee arrangements, our agreements with our channel partners sometimes give them significant control over other aspects of the distribution of our products and services that we develop for their platform.

If our channel partners establish terms that restrict our offerings through their channels, or significantly affect the financial terms on which these products or services are offered to our customers, we may be unable to distribute our product offerings through them or be forced to do so on materially worse financial or business terms in negotiating such various aspects of distribution.

Increased competition for digital “shelf space” has put channel partners in more favorable bargaining positions in relation to such terms of distribution.

The increasing importance of free-to-play games to our business exposes us to the risks of that business model, including the dependence on a relatively small number of consumers for a significant portion of revenues and profits from any given game.

We are increasingly dependent on our ability to develop, enhance, and monetize free‑to‑play games .

The increasing importance of digital sales and free-to-play games to our business exposes us to the risks of that business model, including greater competition.

The proportion of our revenues derived from digital content delivery, as compared to traditional retail sales, has increased significantly in recent years.

This shift also requires us to dedicate capital to developing and implementing alternative marketing strategies, which may not be successful.

If either occurs, we may be unable to effectively market and distribute our products, which could materially adversely affect our business, financial condition, and operating results.

In addition, a continuing shift to digital delivery could result in a deprioritization of our products by traditional retailers.

We are also increasingly dependent on our ability to develop, enhance, and monetize free‑to‑play games .

As such, we are increasingly exposed to the risks of the free‑to‑play business model.

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Further, our business may be negatively impacted if:

(1) we are unable to encourage new and existing consumers to purchase our virtual items;

(2) we fail to offer monetization features that appeal to these consumers;

(3) our platform providers make it more difficult or expensive for players to purchase our virtual items;

(4) we cannot encourage significant additional consumers to purchase virtual items in our game and/or (5) our free-to-play releases reduce sales of our other games.

(i) we are unable to encourage new and existing consumers to purchase our virtual items, (ii) we fail to offer monetization features that appeal to these consumers, (iii) our platform providers make it more difficult or expensive for players to purchase our virtual items, (iv) we cannot encourage significant additional consumers to purchase virtual items in our game, or (v) our free-to-play releases reduce sales of our other games.

Successfully monetizing free-to-play games is difficult and requires that we deliver valuable and entertaining player experiences that a sufficient number of players will pay for or that we are able to otherwise sufficiently monetize our games (for example, by serving in-game advertising).

The success of our games depends, in part, on unpredictable and volatile factors beyond our control including consumer preferences, competing games, new mobile platforms and the availability of other entertainment experiences.

If our games do not meet consumer expectations, or if they are not brought to market in a timely and effective manner, our revenue and financial performance will be negatively affected.

In addition to the market factors noted above, our ability to successfully develop games for mobile platforms and their ability to achieve commercial success will depend on our ability to:

• effectively market our games to existing and new players;

• achieve benefits from our player acquisition costs;

• achieve viral organic growth and gain customer interest in our games through free or more efficient channels;

• adapt to changing player preferences;

• adapt to new technologies and feature sets for mobile and other devices;

• expand and enhance games after their initial release;

• attract, retain and motivate talented and experienced game designers, product managers and engineers;

• partner with mobile platforms and obtain featuring opportunities;

• continue to adapt game feature sets for an increasingly diverse set of mobile devices, including various operating systems and specifications, limited bandwidth and varying processing power and screen sizes;

• minimize launch delays and cost overruns on the development of new games and features;

• achieve and maintain successful customer engagement and effectively monetize our games;

• maintain a quality social game experience and retain our players;

• develop games that can build upon or become franchise games;

• compete successfully against a large and growing number of existing market participants;

• accurately forecast the timing and expense of our operations, including game and feature development, marketing and customer acquisition, customer adoption and success of bookings growth;

• minimize and quickly resolve bugs or outages;

• acquire and successfully integrate high quality mobile game assets, personnel or companies.

These and other uncertainties make it difficult to know whether we will succeed in continuing to develop successful live service games and launch new games and features in accordance with our operating plan.

If we do not succeed in doing so, our business, financial condition, results of operations and reputation will suffer.

We derive revenues from advertisements and offers that are incorporated into our free-to-play games through relationships with third parties.

If we are unable to continue to compete for these advertisements and offers, or if any events occur that negatively impact our relationships with advertisers, our advertising revenues and operating results would be negatively impacted.

We derive revenue from advertisements and offers we serve to players.

We need to maintain good relationships with advertisers to provide us with a sufficient inventory of advertisements and offers.

Online advertising, including through mobile games and other mobile applications, is an intensely competitive industry.

Many large companies, such as Amazon, Facebook and Google, invest significantly in data analytics to make their websites and platforms more attractive to advertisers.

In order for our advertising business to continue to succeed, we need to continue to demonstrate the reach of our player network and success of our advertising partners.

If our relationship with any advertising partners terminates for any reason, or if the commercial terms of our relationships are changed or do not continue to be renewed on favorable terms, we would need to qualify new advertising partners, which could negatively impact our revenues, at least in the short term.

In addition, internet-connected devices and operating systems controlled by third parties increasingly contain features that allow device users to disable functionality that allows for the delivery of targeted advertising on their devices.

Device and browser manufacturers may include or expand these features as part of their standard device specifications.

For example, when Apple announced that UDID, a standard device identifier used in some applications, was being superseded and would no longer be supported, application developers were required to update their apps to utilize alternative device identifiers such as universally unique identifier, or, more recently, identifier-for-advertisers, which simplifies the process for Apple users to opt out of certain types of advertising.

In June 2020, Apple announced further changes, requiring its users with iOS 14 (and presumably future iOS versions) to request a user’s permission to track them or to access their mobile device’s identifier for advertising.

Those changes, known as Apple’s AppTracking Transparency framework, went into effect in late April 2021, with the release of iOS 14.5.

If users do not elect participate in functionality that supports the delivery of targeted advertising on their devices, our ability to deliver effective advertising campaigns on behalf of our advertisers could suffer, which could cause our business, financial condition, or results of operations to suffer.

Finally, the revenues that we derive from advertisements and offers is subject both to seasonality, as companies’ advertising budgets are generally highest during the fourth calendar quarter and decline significantly in the first calendar quarter of the following year, which negatively impacts our revenues in such first calendar quarter, and to the financial health of advertisers, who, as they experience downturns or uncertainty in their own business operations for various reasons, such as the economic effects resulting from the COVID-19 pandemic or other world events, may decrease their advertising spending.

If we acquire or invest in other businesses, intellectual properties, or other assets, we may be unable to integrate them with our business, our financial performance may be impaired and/or we may not realize the anticipated financial and strategic goals for such transactions.

If appropriate opportunities present themselves, we may acquire or make investments in businesses, intellectual properties and other assets that we believe are strategic.

If appropriate opportunities present themselves, we may acquire or make investments in businesses, intellectual properties and other assets that we believe are strategic, such as our acquisition of Zynga.

We may not be able to identify, negotiate or finance any future acquisition or investment successfully.

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Future acquisitions and investments could also involve the issuance of our equity and equity-linked securities (potentially diluting our existing stockholders), the incurrence of debt, contingent liabilities or amortization expenses, write-offs of goodwill, intangibles, or acquired in-process technology, or other increased cash and non-cash expenses such as stock-based compensation.

Any of the foregoing factors could harm our financial condition or prevent us from achieving improvements in our financial condition and operating performance that could have otherwise been achieved by us on a stand-alone basis.

Any of the foregoing factors could harm our financial condition or prevent us from achieving improvements in

our financial condition and operating performance that could have otherwise been achieved by us on a stand-alone basis.

Our stockholders may not have the opportunity to review, vote on or evaluate future acquisitions or investments.

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Our business may also be affected directly or indirectly by major world events, such as the conflict between Russia and Ukraine.

Such events could decrease the demand for our products and services, make it difficult or impossible for us to

deliver products and services to certain of our customers, or result in restrictions in trade, all of which could negatively affect our business.

Such events could decrease the demand for our products and services, make it difficult or impossible for us to deliver products and services to certain of our customers, or result in restrictions in trade, all of which could negatively affect our business.

Further, the enforcement of regulations relating to mobile and other games with an online element in China remains uncertain, and further changes, either in the regulation or their enforcement could have a negative impact on our business in China.

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A decision by the Chinese government to revoke its approval for any of our games or to decline to approve any products we desire to sell in China in the future could have a negative impact on our business.

China has also enacted a new privacy law that may affect how we structure our business and process of personal information.

We are subject to a variety of laws in the U.S.

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laws and regulations, such as the Foreign Corrupt Practices Act, and by local laws, such as laws prohibiting corrupt payments to government officials.

Although we implement policies and procedures designed to ensure compliance with these laws, there can be no assurance that all of our employees, contractors and agents, as well as those companies to which we outsource certain of our business operations, including those based in countries where practices which violate such laws may be customary, will not take actions in violation of our policies.

Although we implement policies and procedures designed to ensure compliance with these laws, there can be no assurance that all our employees, contractors and agents, as well as those companies to which we outsource certain of our business operations, including those based in countries where practices which violate such laws may be customary, will not take actions in violation of our policies.

Any such violation, even if prohibited by our policies, could have a material adverse effect on our business.

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and E.U., which will continue to be developed and defined.

We are preparing to mitigate those risks with operational and commercial changes to the extent possible and warranted.

However, the legal and regulatory landscape remains uncertain, and we have no assurance that such preparations will enable us to avoid a material adverse impact on our business from Brexit.

We are seeking to mitigate those risks with operational and commercial changes to the extent possible and warranted.

However, the legal and regulatory landscape remains uncertain, and we have no assurance that such actions will enable us to avoid a material adverse impact on our business from Brexit.

Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K.

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laws to replace and replicate.

For example, if there are changes to U.K.

immigration policy as a result of Brexit, our employees and their ability to move freely between the E.U.

member states for work-related matters could be affected.

The effects of the U.K.'s future trade agreements with the E.U.

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market, it may be more challenging and costly to distribute our products in Europe.

The laws of some countries either do not protect our products, brands, and intellectual property to the same extent as the laws of the U.S.

or are inconsistently enforced.

Legal protection of our rights may be ineffective in countries with weaker intellectual property enforcement mechanisms.

In addition, certain third parties have registered our intellectual property rights without authorization in foreign countries.

Successfully registering such intellectual property rights could limit or restrict our ability to offer products and services based on such rights in those countries.

Although we take steps to enforce and police our rights, our practices and methodologies may not be effective against all eventualities.

We depend on servers and Internet bandwidth to operate our games and digital services with online features.

If we were to lose server capacity or lack sufficient Internet bandwidth for any reason, our business could suffer.

Connectivity issues could affect our profitability and our ability to sell and provide online services for our products.

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Such issues also could affect our ability to provide game-related services and could have a material adverse effect on our business, financial condition, and operating results.

We rely on complex information technology systems and networks to operate our business.

Any significant system or network disruption could have a negative impact on our business.

We may also face sophisticated attacks, referred to as advanced persistent threats, which are cyber-attacks aimed at compromising our intellectual property and other commercially sensitive information, such as the source code and game assets for our software or confidential customer or employee information, which remain undetected for prolonged periods of time.

Information technology system disruptions, network failures, or security breaches could negatively affect our business continuity, operations and financial results.

These risks extend to the networks and e-commerce sites of console platform providers and other partners who sell or host our content online.

The risk of such threats may be heightened as a result of international conflicts such as the one between Russia and Ukraine or as a result of an extended period of remote work arrangements due to COVID-19.

Along with our partners, we have expended, and expect to continue to expend, financial and operational resources to implement certain systems, processes and technologies to guard against cyber risks and to help protect our data and systems.

Our systems, processes and technologies, and the systems, processes and technologies of our business partners or our third-party service providers, may not be adequate against all eventualities.

In addition, the costs to respond to, mitigate, or notify affected parties of cyber-attacks and other security vulnerabilities are significant.

Any failure to prevent or mitigate security breaches or cyber risks, or detect or respond adequately to a security breach or cyber risk, could result in a loss of anticipated revenue, interruptions to our products and services, our having to incur significant remediation and notification costs, degrade the user experience, cause consumers to lose confidence in our products and services, and significant legal and financial costs.

Successful exploitation of our systems can have other negative effects upon the products, services and user experience we offer.

In particular, the virtual economies that we have established in many of our games are subject to abuse, exploitation and other forms of fraudulent activity that can negatively affect our business.

Virtual economies involve the use of virtual currency or virtual assets that can be used or redeemed by a player within a particular game or service.

We depend on servers and Internet bandwidth to operate our games and digital services with online features.

If we were to lose server capacity or lack sufficient Internet bandwidth for any reason, our business could suffer.

We rely on data servers, including those owned or controlled by third parties, to enable our customers to download our games and other downloadable content, and to operate our online games and other products with online functionality.

Events such as limited hardware failure, any broad-based catastrophic server malfunction, a significant intrusion by hackers that circumvents security measures, or a failure of disaster recovery services would likely interrupt the functionality of our games with online services and could result in a loss of sales for games and related services.

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We expect a significant portion of our games to be online enabled in the future, and therefore we must project our future server needs and make advance purchases of servers or server capacity to accommodate expected business demands.

If we underestimate the amount of server capacity our business requires or if our business were to grow more quickly than expected or if Internet bandwidth becomes limited, for example as a result of COVID-19-related increased worldwide demand, our consumers may experience service problems, such as slow or interrupted gaming access.

If we underestimate the amount of server capacity our business requires, if our business were to grow more quickly than expected, or if Internet bandwidth becomes limited, our consumers may experience service problems, such as slow or interrupted gaming access.

Insufficient server capacity may result in decreased sales, a loss of our consumer base and adverse consequences to our reputation.

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If it were determined that our use was not in compliance with a particular license, we may be required to release our proprietary source code, pay damages for breach of contract, re-engineer our games, discontinue distribution in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that may divert resources away from our game development efforts, any of which could harm our business.

Additionally, the shared nature of open-source software may increase the ability of cyber-attackers to discover and exploit vulnerabilities, which may increase the likelihood of a data breach, ransomware, network interruption, or other type of cyber-attack against us or against third parties who may use open source software, such as our platform partners or key vendors, any of which could negatively impact our business.

Our software is susceptible to errors, which can harm our financial results and reputation.

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For example, certain of our 2K products include rights licensed from major sports leagues and players' associations.

Similarly, some of our other titles are based on licenses of popular entertainment products.

Similarly, some of our other titles are based on licenses of popular products and entertainment brands.

Competition for these licenses is intense.

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Furthermore, we may cease to offer games and services that we previously had deemed to be recurring in nature.

Consumer purchases of our games and services may decline or fluctuate as a result of a number of factors, including their level of satisfaction with our games and services, our ability to improve and innovate our annualized titles, our ability to adapt our games and services to new platforms, outages and disruptions of online services, the games and services offered by our competitors, our marketing and advertising efforts or declines in consumer activity generally as a result of economic downturns, for example, as a result of COVID-19, among others.

Any decline or fluctuation in this portion of our business may have a negative impact on our financial and operating results.

Our efforts to expand into new products and services may subject us to additional risks.

In recent years, we have continued to invest in emerging opportunities in interactive entertainment played on mobile platforms, including tablets and smartphones, and online platforms, including social networks.

In recent years, we have continued to invest in emerging opportunities in interactive entertainment played on mobile platforms, including tablets and smartphones, and online platforms.

We have also grown our product offerings that are available through digital download, including virtual currency, through our existing franchises such as Grand Theft Auto and NBA 2K, as well as through our mobile product offerings.

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There are risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed.

While we anticipate growth in this area of our business, consumer demand is difficult to predict as a result of a number of factors,

including satisfaction with our products and services, our ability to provide engaging products and services, third parties offering their products and services within our subscription, partners that provide, or don’t provide, access to our subscription, products and services offered by our competitors, reliability of our infrastructure and the infrastructure of our partners, pricing, the actual or perceived security of our and our partners information technology systems and reductions in consumer spending levels.

While we anticipate growth in this area of our business, consumer demand is difficult to predict as a result of a number of factors, including satisfaction with our products and services, our ability to provide engaging products and services, third parties offering their products and services within our subscription, partners that provide, or don’t provide, access to our subscription, products and services offered by our competitors, reliability of our infrastructure and the infrastructure of our partners, pricing, the actual or perceived security of our and our partners information technology systems and reductions in consumer spending levels.

There is no assurance that we will be able to attract a sufficiently large number of customers or recover costs incurred for developing and marketing any of these new products or services.

For example, we may offer games that do not attract sufficient purchases of virtual currency, which may cause our investments into this product space, such as through our acquisitions of Social Point and Playdots or our pending acquisition of Zynga, to fail to realize the expected benefits.

For example, we may offer games that do not attract sufficient purchases of virtual currency, which may cause our investments into this product space, such as through our acquisitions of Zynga, Social Point, Playdots, Nordeus, and Popcore, to fail to realize the expected benefits.

External factors, such as competitive alternatives and shifting market preferences, may also have an impact on the successful implementation of any new products or services.

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In addition, both the online and mobile games marketplaces are characterized by frequent product introductions, relatively low barriers to entry, and new and evolving business methods, technologies and platforms for development.

Widespread consumer adoption of these new platforms for games and other technological advances in and/or new business or payment models in online or mobile game offerings could negatively affect our sales of console and traditional PC products before we have an opportunity to develop profitable businesses in such markets.

Price protection granted to our customers and returns of our published titles by our customers, or sales of used video games, may adversely affect our operating results.

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We grant price protection and accept returns in connection with our publishing arrangements, and revenue is recognized after deducting estimated price protection and reserves for returns.

While we believe that we can reliably estimate price protection and returns,

if price protection and return rates for our products exceed our reserves, our revenue could decline, which could have a material adverse effect on our business, financial condition, and operating results.

While we believe that we can reliably estimate price protection and returns, if price protection and return rates for our products exceed our reserves, our revenue could decline, which could have a material adverse effect on our business, financial condition, and operating results.

Certain of our larger customers sell used video games, which are generally priced lower than new video games.

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A substantial portion of our product sales are made to a limited number of customers.

Sales to our five largest customers during the fiscal year ended March 31, 2022 accounted for 79.0% of our net revenue, with Sony and Microsoft each accounting for more than 10.0%.

Sales to our five largest customers during the fiscal year ended March 31, 2023 accounted for 79.6% of our net revenue, with Sony, Google, Apple, and Microsoft each accounting for more than 10.0%.

Our sales are made primarily without long-term agreements or other commitments, and our customers may terminate their relationship with us at any time.

Certain of our customers may decline to carry products containing mature content.

Certain of our customers may decline to

carry products containing mature content.

The loss of our relationships with principal customers or a decline in sales to principal customers, including as a result of a product being rated "AO" (age 18 and over), could materially adversely affect our business, financial condition, and operating results.

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Other countries require voluntary or government backed ratings as prerequisites for product sales.

In some instances, we may have to modify our products in order to market them under the target

rating, which could delay or disrupt the release of our products.

In some instances, we may have to modify our products in order to market them under the target rating, which could delay or disrupt the release of our products.

In addition, some of our titles may not be sold at all or without extensive edits in certain countries.

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Although we attempt to incorporate protective measures into our software, piracy of our products could negatively affect our future profitability.

In addition, "cheating" programs or other unauthorized software tools and modifications that enable consumers to cheat in games harm the experience of players who play fairly and could negatively impact the volume of microtransactions or purchases of downloadable content which may disrupt the virtual economies of our games and reduce the demand for virtual items, disrupting our in-game economy.

In addition, unrelated third parties have attempted to scam our players with fake offers for virtual items or other game benefits.

We devote significant resources to discovering, discouraging, and disabling these cheating and scam programs and activities, including by "taking down" offending content and by initiating litigation where appropriate.

Despite our efforts, if we are unable to do so quickly, our operations may be disrupted, our reputation may be damaged, players may stop playing our games and our ability to reliably validate our audience metrics may be negatively affected.

These cheating programs and scam offers result in lost revenue from paying players, disrupt our in-game economies, divert time from our personnel, increase costs of developing technological measures to combat these programs and activities, increase our customer service costs needed to respond to dissatisfied players, and may lead to legal claims.

Also, vulnerabilities in the design of our applications and of the platforms upon which they run could be discovered after their release.

This may lead to lost revenues from paying consumers or increased cost of developing technological measures to respond to these, either of which could negatively affect our business.

We are or may be subject to contractual covenants which place certain limitations on how we manage our business .

Our credit agreement (the "Credit Agreement") may limit our ability to take various actions, including incurring additional debt, paying dividends, repurchasing shares, and acquiring or disposing of assets or businesses.

Accordingly, we may be restricted from taking actions that management believes would be desirable and in the best interests of us and our stockholders.

Our Credit Agreement also requires us to satisfy specified financial covenants and comply with other affirmative

and negative covenants.

A breach of any of the covenants contained in our Credit Agreement could result in an event of default, which would allow our lenders to pursue various remedies, including accelerating the repayment of any outstanding indebtedness under our Credit Agreement.

We have a significant amount of outstanding indebtedness, and may incur other indebtedness in the future, all of which may adversely affect our financial condition and future financial results.

As of March 31, 2023, we had $2.700 aggregate principal amount of outstanding senior notes (the "Senior Notes issued in fiscal 2023"), a $350.0 Term Loan, and a $500.0 revolving credit facility under the 2022 Credit Agreement with no outstanding borrowings.

(Refer to Note 11 – Debt to our Consolidated Financial Statements, herein.) In April 2023, we completed our offering and sale of $1,000.0 aggregate principal amount of additional senior notes (the “Senior Notes issued in

fiscal 2024” and together with the “Senior Notes issued in fiscal 2023” the “Senior Notes”).

We utilized a portion of the proceeds from the Senior Notes issued in fiscal 2024 to fully repay the $350.0 Term Loan.

In addition, we commenced a tender offer to repurchase up to $500.0 aggregate principal amount of our outstanding 3.300% Senior Notes due March 2024.

(Refer to Note 21 – Subsequent Events to our Consolidated Financial Statements, herein.)

As our outstanding Senior Notes mature, we will have to expend significant resources to either repay or refinance such notes.

If we decide to refinance our Senior Notes, we may be required to do so on different or less favorable terms or we may be unable to refinance such notes at all, either of which may adversely affect our financial condition.

Our current or future levels of indebtedness may adversely affect our financial condition and future financial results by, among other things:

• increasing our vulnerability to adverse changes in general economic, industry and competitive conditions;

• requiring the dedication of a greater than expected portion of our expected cash from operations to service our indebtedness, thereby reducing the amount of expected cash flow available for general corporate purposes, including capital expenditures and acquisitions;

• limiting our flexibility in planning for, or reacting to, changes in our business and our industry.

We are required to comply with the covenants set forth in the indenture governing our Senior Notes, the Convertible Notes, and the 2022 Credit Agreement.

Our ability to comply with these covenants may be affected by events beyond our control.

If we breach any of the covenants and do not obtain a waiver from the holders of the Senior Notes, the Convertible Notes, or the lenders under the 2022 Credit Agreement, then, subject to applicable cure periods, any outstanding indebtedness may be declared immediately due and payable.

Further, these covenants may limit our ability to take various actions, including incurring additional debt, paying dividends, repurchasing shares, and acquiring or disposing of assets or businesses.

Accordingly, we may be restricted from taking actions that management believes would be desirable and in the best interest of us and our stockholders.

In addition, changes by any rating agency to our credit rating may negatively impact the value and liquidity of our securities.

Downgrades in our credit ratings could also restrict our ability to obtain additional financing in the future and could affect the terms of any such financing.

The value of our virtual items is highly dependent on how we manage the economies in our games.

If we fail to manage our game economies properly, our business may suffer.

Paying players make purchases in our games because of the perceived value of these virtual items, which is dependent on the relative ease of obtaining an equivalent good by playing our game.

The perceived value of these virtual items can be impacted by various actions that we take in the games including offering discounts for virtual items, giving away virtual items in promotions or providing easier non-paid means to secure these goods.

Managing game economies is difficult and relies on our assumptions and judgement.

If we fail to manage our virtual economies properly or fail to promptly and successfully respond to any such disruption, our reputation may suffer and our players may be less likely to play our games and to purchase virtual items from us in the future, which would cause our business, financial condition and results of operations to suffer.

Some of our players may make sales or purchases of virtual items used in our games through unauthorized or fraudulent third-party websites, which may reduce our revenue.

Virtual items in our games have no monetary value outside of our games.

Nonetheless, some of our players may make sales and/or purchases of their accounts or of our virtual items, such as virtual coins for our Social Slots games or Zynga Poker virtual poker chips, through unauthorized third-party sellers in exchange for real currency.

These unauthorized or fraudulent transactions are usually arranged on third-party websites and the virtual items offered may have been obtained through unauthorized means such as exploiting vulnerabilities in our games, from scamming our players with fake offers for virtual items or other game benefits, or from credit card fraud.

We do not generate any revenue from these transactions.

These unauthorized purchases and sales from third-party sellers have in the past and could in the future impede our revenue and profit growth by, among other things:

• decreasing revenue from authorized transactions;

• creating downward pressure on the prices we charge players for our virtual items;

• increasing chargebacks from unauthorized credit card transactions;

• causing us to lose revenue from dissatisfied players who stop playing a particular game;

• causing us to lose revenue from players who we take disciplinary action against, including banning certain players who may have previously made purchases within our games;

• increasing costs we incur to develop technological measures to curtail unauthorized transactions;

• resulting in negative publicity or harm our reputation with players and partners;

• increasing customer support costs to respond to dissatisfied players.

To discourage unauthorized purchases and sales of our virtual items, we state in our terms of service that the buying or selling of virtual items from unauthorized third-party sellers may result in bans from our games or legal action.

We periodically encounter such issues and expect to continue to do so.

We have banned players as a result of such activities.

We have also filed lawsuits against third parties attempting to “sell” virtual items from our games outside of our games.

We have also employed technological measures to help detect unauthorized transactions and continue to develop additional methods and processes by which we can identify unauthorized transactions and block such transactions.

However, there can be no assurance that our efforts to detect, prevent or minimize these unauthorized or fraudulent transactions will be successful and that these actions will not increase over time.

Risks related to legal or regulatory compliance

Change in government regulations relating to the Internet could have a negative impact on our business.

Companies and governmental agencies may restrict access to platforms, our website, mobile applications or the Internet generally, which could have a negative impact on our business.

We rely on our consumers' access to significant levels of Internet bandwidth for the sale and digital delivery of our content and the functionality of our games with online features.

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Given uncertainty around these rules, including changing interpretations, amendments, or repeal, coupled with the potentially significant political and economic power of local Internet service providers and the relatively significant level of Internet bandwidth access our products and services require, we could experience discriminatory or anti-competitive practices that could impede our growth, cause us to incur additional expenses, or otherwise negatively affect our business.

Our business and products are subject to potential legislation.

The adoption of such proposed legislation could limit the retail market for our products.

Additionally, our players generally need to access the Internet and in particular platforms such as the Apple App Store, the Google Play Store, Facebook, Snapchat or our website to play our mobile games.

Companies and governmental agencies could block access to any platform, our website or mobile applications for a number of reasons such as security or confidentiality concerns or regulatory reasons, or they may adopt policies that prohibit employees from accessing Apple, Google, Facebook and our website or any social platform.

If companies or governmental entities block or limit such or otherwise adopt policies restricting players from playing our games, our business could be negatively impacted and could lead to the loss or slower growth of our player base.

Our business and products are subject to a variety of existing U.S.

and foreign laws and regulations, many of which are unsettled and still developing, as well as potential new legislation, all of which could subject us to claims or otherwise harm our business.

Several proposals have been made for federal legislation to regulate our industry.

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While such legislation to date has been enjoined by industry and retail groups or been found unconstitutional, the adoption into law of such legislation in federal and/or in state jurisdictions in which we do significant business could severely limit the retail market for some of our games.

In addition, there are ongoing academic, political and regulatory discussions in the U.S., Europe, Australia, Brazil and other jurisdictions regarding whether certain game genres, such as social casino, or certain game mechanics, such as “loot boxes,” should be subject to a higher level or different type of regulation than other game genres or mechanics to protect consumers, in particular minors and persons susceptible to addiction, and, if so, what such regulation should include.

For example, in 2018 a court determined that a class-action plaintiff was able to state a claim that an online social casino game operated by Big Fish Games, Inc.

violated a specific anti-gambling law in Washington State.

Subsequent to this ruling,

additional purported class-action suits were filed against other social casino gaming companies for alleged violations of Washington State’s gambling and consumer protection laws, and some of the defendant companies, including Zynga, have entered into settlement agreements to settle their respective lawsuits.

In Australia, the Federal Government has proposed rules requiring, among other things, an 18+ age rating for any games containing simulated gambling.

If new social casino regulations are imposed, or other regulations are interpreted to apply to our social casino games, certain, or all, of our casino-themed games may become subject to such rules and regulations and expose us to civil and criminal penalties if we do not comply.

Additionally, loot box game mechanics have been the subject of increased public discussion - for example, Belgium and the Netherlands have recommended and brought enforcement actions against certain companies, the U.S.

Federal Trade Commission (“FTC”) held a public workshop on loot boxes in August 2019, at least one bill has been introduced in the U.S.

Senate that would regulate loot boxes in games marketed toward players under the age of 18, and the United Kingdom’s Department for Digital, Culture, Media and Sport in September 2020 launched a call for evidence into the impact of loot boxes on in-game spending and gambling-like behavior, which ended in July 2022 with the U.K.

government calling for companies within the industry to engage in self-regulation, including taking actions to protect children and their ability to access and purchase loot boxes.

In addition, in Australia, there is a proposed classification bill focused on banning loot boxes for minors and preventing access to loot boxes by minors through classification guidelines, and politicians have cited loot boxes as an example of recent technology innovation where government regulation is needed.

In some of our games, such as CSR Racing 2 , Empires & Puzzles , FarmVille 3 , Golf Rival , Harry Potter:

Puzzles & Spells , Merge Dragons!

, Merge Magic!

, NBA 2K , WWE 2K , and Zynga Poker , certain mechanics may be deemed as “loot boxes.” New regulation by the FTC, U.S.

states or other international jurisdictions, which may vary significantly across jurisdictions and which we may be required to comply with, could require that these game mechanics be modified or removed from games, increase the costs of operating our games, impact player engagement and monetization or otherwise harm our business performance.

It is difficult to predict how existing or new laws may be applied to these or similar game mechanics.

If we become liable under these laws or regulations, we could be directly harmed, and we may be forced to implement new measures to reduce our exposure to this liability.

This may require us to expend substantial resources or to modify our games, which would harm our business, financial condition and results of operations.

In addition, the increased attention focused upon liability issues as a result of lawsuits and legislative proposals could harm our reputation or otherwise impact the growth of our business.

Any costs incurred as a result of this potential liability could harm our business, financial condition or results of operations.

Certain of our business models and features within our games and services are subject to new laws or regulations or evolving interpretations and application of existing laws and regulations, including those related to gambling.

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We are subject to certain privacy and data protection laws, including those in the U.S.

Certain activities related to processing the personal data of individuals in the E.U.

Certain activities related to processing the personal data of individuals in the U.K.

are conducted by our U.K.-based data controller or our local entities in the E.U.

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Failure to comply with privacy and data protection laws or age restrictions may increase our costs, subject us to expensive and distracting government investigations, and result in substantial fines, or result in lawsuits and claims against us to the extent these laws include a private right of action.

Privacy and data protection laws and industry terms are rapidly changing and likely will continue to do so for the foreseeable future, which could have an impact on our approach to operating and marketing our games and which may harm the sales of our products or decrease the size of our potential audience.

Privacy and data protection laws and industry terms are rapidly changing and likely will continue to do so for the foreseeable future, which may be difficult to comply with and which could have a negative impact on or materially change our approach to the sale and marketing of our products.

For example, the E.U.

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responsible for processing personal information.

GDPR and DPA 2018 contain

significant penalties for non-compliance.

GDPR and DPA 2018 contain significant penalties for non-compliance, which have been imposed by regulators.

Countries in the E.U.

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In the U.S., the California Consumer Privacy Act ("CCPA") became effective on January 1, 2020 and applies to processing of personal information of California residents.

California also enacted the California Privacy Rights Act ("CPRA"), which updates the CCPA, and Virginia enacted the Consumer Data Protection Act, both effective January 1, 2023.

Other states, including Nevada, have enacted or are considering similar privacy or data protection laws that may apply to us.

California also enacted the California

Privacy Rights Act ("CPRA"), which updates the CCPA.

Several other U.S.

states have enacted comprehensive privacy laws, including Colorado, Connecticut, Indiana, Iowa, Utah, and Virginia.

Other states are considering similar privacy or data protection laws that may apply to us.

government, including the Federal Trade Commission and the Department of Commerce, also continue to review the need for greater or different regulation over the collection of personal information and information about consumer behavior on the Internet and on mobile devices, and the U.S.

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Further, and most notably in the mobile ecosystem, companies that provide the platforms on which our games are played are changing the terms on how publishers can collect and use personal data obtained from users on those platforms.

Player use of our games is subject to our privacy policy, end user license agreements ("EULA"), and terms of service.

If we fail to comply with our posted privacy policy, EULA, or terms of service, or if we fail to comply with existing privacy or data protection laws and regulations, it could result in proceedings or litigation against us by governmental authorities or others, which could result in fines or judgments against us, damage our reputation, affect our financial condition, and harm our business.

Player use of our games is subject to our privacy policy, end user license agreements ("EULA"), and terms of service ("TOS").

If we fail to comply with our posted privacy policy, EULA, or TOS, or if we fail to comply with existing privacy or data protection laws and regulations, it could result in proceedings or litigation against us by governmental authorities or others, which could result in fines or judgments against us, damage our reputation, affect our financial condition, and harm our business.

If regulators, the media, or consumers raise any concerns about our privacy and data protection or consumer protection practices, even if unfounded, this could also result in fines or judgments against us, damage our reputation, negatively affect our financial condition, and damage our business.

It is possible that a number of laws and regulations may be adopted or construed to apply to us in the U.S.

and elsewhere that could restrict the interactive entertainment industry, including player privacy, advertising, taxation, content suitability, copyright, distribution, and antitrust.

and elsewhere that could restrict the interactive entertainment industry, including player privacy, advertising, taxation, content suitability, and moderation, online safety, copyright, distribution, and antitrust.

Furthermore, the growth and development of electronic commerce and virtual goods may prompt calls for more stringent consumer protection laws that may impose additional burdens on companies such as ours conducting business through digital sales.

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or elsewhere regarding these activities may lessen the growth of the interactive entertainment industry and impair our business, financial condition, and operating results.

Further, in 2019, the World Health Organization included "gaming disorder" in the 11th revision of the International Classification of Diseases, leading some to consider legislation and policies aimed at mitigating the overuse of, and overspending within, video games.

Similarly, new regulatory developments internationally aimed at better protecting consumers online from illegal or harmful content and interactions may introduce additional compliance and reporting obligations for our business which may increase operating costs.

If we were to fail to comply with such new regulations, it could result in proceedings or litigation against us by governmental authorities or regulators, which could result in substantial fines or judgments against us, damage our reputation, affect our financial condition, and harm our business.

Although we have structured and operate our skill tournaments and game mechanics, including random digital item mechanics, with applicable laws in mind, including any applicable laws relating to gambling, and believe that playing these games does not constitute gambling, our skill tournaments or game mechanics could become subject to gambling-related rules and regulations, or be deemed violative of current rules and regulations, and expose us to civil and criminal penalties.

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We are subject to laws in a number of jurisdictions concerning the operation and offering of such activities and games, many of which are still evolving and could be interpreted in ways that could harm our business.

Further, random digital item mechanics may become subject to regulations in various jurisdictions.

If these were to occur, we might be required to seek licenses, authorizations, or approvals from relevant regulators, the granting of which may be dependent on us meeting certain capital and other requirements, and we may be subject to additional regulation and oversight, such as reporting to regulators, all of which could significantly increase our operating costs.

Further, random digital item mechanics may become subject to further regulations in various jurisdictions.

If this were to occur, we might be required to alter some of our games to address these additional requirements or seek licenses, authorizations, or approvals from relevant regulators, the granting of which may be dependent on us meeting certain capital and other requirements, and we may be subject to additional regulation and oversight, such as reporting to regulators, all of which could significantly increase our operating costs.

Moreover, the inclusion of random digital item mechanics has attracted the attention of the interactive gaming community, and if the future implementation of these features creates a negative perception of gameplay fairness or other negative perceptions, our reputation and brand could be harmed and revenue could be negatively impacted.

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As our industry grows, we may be subject to an increasing amount of litigation that is common in the software industry based on allegations of infringement or other alleged violations of patent, copyright, or trademarks.

In addition, we believe that interactive entertainment software will increasingly become the subject of claims that such software infringes on

the intellectual property rights of others with both the growth of online functionality and advances in technology, game content and software graphics as games become more realistic.

In addition, we

believe that interactive entertainment software will increasingly become the subject of claims that such software infringes on the intellectual property rights of others with both the growth of online functionality and advances in technology, game content and software graphics as games become more realistic.

From time to time, we receive notices from third parties or are named in lawsuits by third parties alleging infringement of their proprietary rights.

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Additionally, tax determinations are regularly subject to audit by tax authorities, and developments in those audits could adversely affect our income tax provision.

Should the ultimate tax liability exceed estimates, our income tax provision and net income or loss could be materially affected.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminates the option to deduct research and development expenditures currently and requires taxpayers to amortize them pursuant to IRC Section 174.

Should the ultimate tax liability exceed estimates, our income tax provision and net (loss) income or loss could be materially affected.

We have recorded a valuation allowance against a portion of our deferred tax assets due to uncertainty with respect to their realization.

We expect to provide a valuation allowance until other significant positive evidence arises that suggests that the benefits associated with the deferred tax assets are more likely than not to be realized.

Such evidence relies on forecasted data, which, as discussed in these "Risk Factors," is subject to change based on a number of factors, some of which we do not control.

Therefore, while the valuation allowance recorded represents our best estimation of the realizability of the tax benefits, such realizability could continue to change before we are able to benefit from it or may ultimately fall short or exceed our expectations, any of which could impact our results.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminates the ability to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them pursuant to IRC Section 174.

Although Congress is considering legislation that would defer the capitalization and amortization requirement to later years, we have no assurance that the requirement will be deferred, repealed or otherwise modified.

The requirement was effective for the Company for fiscal year 2023, beginning April 1, 2022.

The requirement was effective for us beginning April 1, 2022.

It is possible that this change could have a significant adverse impact on our effective tax rate, tax payments, and financial condition in future periods.

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enacted the American Rescue Plan Act of 2021 (“ARPA”) which provided numerous tax and other stimulus measures.

One such measure will expand limitation of compensation deductions for certain covered employees of publicly held corporations, beginning in 2027, to also include our next five highly compensated employees.

One such measure will expand the limitation of compensation deductions for certain covered employees of publicly held corporations to also include our next five highly compensated employees.

This will be effective for us beginning April 1, 2027.

In 2022, the U.S.

enacted The Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) which includes a new corporate alternative minimum tax (CAMT) of 15% on the adjusted financial statement income (AFSI) of

corporations with an average AFSI exceeding $1.0 billion over a consecutive three-year period.

The CAMT is effective for the fiscal year ending March 31, 2024.

It is possible that the CAMT could result in an additional tax liability over the regular federal corporate tax liability in a particular year based on differences between book and taxable income.

It is possible that these changes could have an adverse impact on our effective tax rate, tax payments, and financial condition in future periods.

Additionally, a number of countries are actively pursuing fundamental changes to the tax laws applicable to multinational companies like us, including an increasing number that have enacted, or are considering enacting, revenue-based taxes on digital services.

Additionally, a number of countries are actively pursuing fundamental changes to the tax laws applicable to multinational companies like us and agreed to implement a global minimum tax regime, referred to as Pillar 2, intended to conform to new and evolving OECD guidelines.

Countries may enact Pillar 2 slightly differently than the OECD model rules and on different timelines.

We will continue to monitor legislative and regulatory developments to assess potential impact.

In addition, an increasing number of countries have enacted, or are considering enacting, revenue-based taxes on digital services.

These digital services taxes target various business activities, including online advertising and, in some cases, video game sales.

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As a result of COVID-19, our counterparty credit risk may be particularly exacerbated, as certain of our counterparties may face financial difficulties in paying owed amounts on a timely basis or at all.

Furthermore, uncertainty and adverse changes in the economy could also increase the risk of material losses on our investments, increase costs associated with developing and publishing our products, increase the cost and availability of sources of financing, and increase our exposure to material losses from bad debts, any of which could have a material adverse effect on our business, financial condition and operating results.

effect on our business, financial condition and operating results.

If economic conditions worsen, our business, financial condition and operating results could be adversely affected.

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Additional issuances or sales of equity securities by us would dilute the ownership of our existing stockholders and could adversely affect the market price of our common stock.

We may issue equity or equity-based securities in the future to facilitate acquisitions or strategic transactions, to adjust our ratio of debt to equity, to fund expansion of our operations or for other purposes.

We may issue equity or equity-based securities in the future to facilitate acquisitions or strategic transactions, as we did in connection with our acquisition of Zynga, to adjust our ratio of debt to equity, to fund expansion of our operations or for other purposes.

To the extent we issue additional equity securities, the percentage ownership of our existing stockholders would be reduced.

The sale of substantial amounts of our

common stock could adversely affect its price.

The sale of substantial amounts of our common stock could adversely affect its price.

The sale or the availability for sale of a large number of shares of our common stock in the public market could cause the price of our common stock to decline.

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Any harm to our reputation could impact employee engagement and retention and the willingness of customers and our partners to do business with us, which could have a material adverse effect on our business, results of operations and cash flows.

Negative reactions to our products and services may not be foreseeable.

We also may not effectively manage or respond to these negative perceptions for reasons within or outside of our control.

We expect to continue to expend resources to address concerns with our products and services.

Negative perceptions could arise despite our efforts, though, and may result in loss of engagement with our products and services, increased scrutiny from government bodies and consumer groups, and/or litigation, any of which could negatively impact our business.

Climate change may have a long-term impact on our business.

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Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost of inflation is incurred.

Risks Related to our Pending Acquisition of Zynga

The Zynga acquisition may not be completed and the merger agreement may be terminated in accordance with its terms.

The Zynga acquisition remains subject to the approval by Take-Two stockholders of the Take-Two share issuance proposal, the Take-Two charter amendment proposal, and approval by Zynga stockholders of the Zynga merger proposal, and other customary closing conditions that must be satisfied or waived (to the extent permitted), in each case prior to the completion of the transaction.

These conditions to the completion of the transaction, some of which are beyond the control of Take-Two and Zynga, may not be satisfied or waived in a timely manner or at all, and, accordingly, the Zynga acquisition may be delayed or not completed.

Additionally, either Take-Two or Zynga may terminate the merger agreement under certain circumstances, subject to the payment of a “termination fee” in certain cases, including if the merger agreement is terminated by either Take-Two or Zynga as a result of an adverse change in the recommendation of the other party’s board of directors.

In such circumstances, Take-Two is required to pay to Zynga (in the case of a termination by Zynga), or Zynga is required to pay to Take-Two (in the case of a termination by Take-Two), a termination fee of $550 million.

In addition, Zynga is required to pay to Take-Two a termination fee of $550 million if Zynga terminates the merger agreement to enter into a definitive agreement for an alternative business combination transaction that constitutes a “superior proposal.”

The Zynga acquisition may present certain risks to our business and operations prior to the closing and, if consummated, after the closing.

Our business and operations are subject to various risks related to the Zynga acquisition prior to closing, including:

our operations will be restricted by the terms of the merger agreement, which may cause us to forgo otherwise beneficial business opportunities;

the proposed transaction may disrupt our current business plans and operations;

our management’s attention may be directed toward the completion of the Zynga acquisition and diverted away from our day-to-day business operations;

legal proceedings may be instituted against Take-Two, Zynga or others following announcement of the proposed transaction;

we may incur significantly higher transaction costs than we currently anticipate, such as legal, financing and accounting fees, and other costs, fees, expenses and charges related to the Zynga acquisition, whether or not the transaction is completed;

the Zynga acquisition may not be completed, which may have an adverse effect on our stock price and future business and financial results.

In addition, in the event the Zynga acquisition is consummated, certain risks may continue to exist after the closing of the Zynga acquisition, including, among other things, risks that:

the future results of the combined company will suffer if the combined company does not effectively manage its operations following the closing of the transaction;

the parties may fail to successfully combine the businesses in a manner that permits the combined company to realize the benefits of the proposed transaction, including net bookings opportunities and cost synergies ;

Take-Two, Zynga, or the combined company may be unable to retain key personnel;

the parties may not be able to successfully integrate Zynga’s business with Take-Two’s business or to integrate the businesses within the anticipated timeframe.

Should the Zynga acquisition be consummated, following which Zynga’s business is expected to constitute a significant portion of our business, additional significant risks may apply to the combined business as detailed in the joint proxy statement/prospectus previously filed on April 7, 2022, and incorporated by reference herein (File No.

333-263511), including the risks relating to Zynga’s business as detailed in Exhibit 99.2 of the Form 8-K previously filed on April 6, 2022, and incorporated by reference herein.

We are and may become involved in legal proceedings that may result in adverse outcomes.

We are currently, and from time to time in the future may become, subject to legal proceedings, claims, litigation and government investigations or inquiries, which could be expensive, lengthy, disruptive to normal business operations and occupy a significant amount of our employees’ time and attention.

In addition, the outcome of any legal proceedings, claims, litigation, investigations or inquiries may be difficult to predict and could have a material adverse effect on our business, reputation, operating results, or financial condition.

Unresolved Staff Comments

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 1A. Risk Factors