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Risks relating to our business and industry
−Removed: • Results of operations may be impacted by COVID-19
• Our industry is highly competitive
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• We face development risks and must adapt to changes in software technologies
+Added: • The development and use of artificial intelligence into our products may present operational and reputational risks
• Increased use of mobile devices for gaming will drive future growth of mobile gaming
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• We rely on software development arrangements with third parties
+Added: • The risk of distributors, development, and licensing partners or other third parties being unable to honor their commitments or otherwise putting our brand at risk
• Increasing importance of digital sales and free-to-play games exposes us to the risks of that business model
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• We may experience fluctuations in the recurring portion of our business
−Removed: • Uncertainty of expansion into new products and services
• We are dependent on the timing of our product releases
• We are dependent on the future success of our Grand Theft Auto products and other “hit” titles
−Removed: • Adverse effects of price protection, returns, and used game sales
+Added: • Adverse effects of price protection and returns
• A limited number of customers account for a significant portion of our sales
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• We are subject to risks related to corporate and social responsibility and reputation
−Removed: • Climate change may have a long-term impact on our business
+Added: • Catastrophic events and climate change may have a long-term impact on our business
• We may be adversely affected by the effects of inflation
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Risks relating to our business and industry
−Removed: Our results of operations may be materially adversely impacted by the coronavirus pandemic (COVID-19).
−Removed: Our results of operations may be materially adversely affected by COVID-19.
−Removed: The global spread of COVID-19 has created significant uncertainty, resulting in volatility and economic disruption.
−Removed: The extent to which COVID-19 has an impact on our business, operations, or financial results will depend on numerous evolving factors that we may not be able to accurately predict, including the duration and scope of the pandemic;
−Removed: governmental, business, and individuals’ actions that have been and continue to be taken in response to the pandemic;
−Removed: economic activity and related actions taken in response to the pandemic;
−Removed: 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;
−Removed: our ability to develop timely, market, and sell our products, including as a result of travel restrictions and people working from home;
−Removed: 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.
−Removed: to market or ship our products);
−Removed: any closures of our, our customers', and counterparties' offices and facilities;
−Removed: additional volatility in exchange rates;
−Removed: the impact of inflation;
−Removed: and the impact of changes in interest rates by the Federal Reserve and other central banks, including on our short-term investment portfolio.
−Removed: The global work-from-home operating environment caused some strain and fatigue within parts of our global workforce.
−Removed: In addition, certain of our development teams currently work in a distributed environment, whereas these teams historically collaborated in-person on the creative and technical process required to develop high-quality products and services at scale.
−Removed: These factors have affected, and may continue to affect, the way our teams conduct business and the creative process to which our teams are accustomed.
−Removed: Companies in our industry have experienced issues related to game and service quality during the work-from-home period.
−Removed: While we are reintroducing teams of employees to the workplace, this process could introduce operational risk, negatively impact productivity, and give rise to claims by employees or otherwise adversely affect our business.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
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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.
−Removed: 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.
+Added: Internationally, local competitors may have a greater brand recognition than us in their local country and a stronger understanding of local culture and commerce.
+Added: They may also offer their products and services in local languages we not offer.
+Added: Additionally, 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.
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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.
+Added: Moreover, current and future competitors may also make strategic acquisitions or establish cooperative relationships among themselves or with others, including our current or future business partners or third-party software providers.
+Added: By doing so, these competitors may increase their scale, their ability to meet the needs of existing or prospective players and compete for
+Added: similar human capital.
+Added: If we are unable to compete effectively, successfully and at a reasonable cost against our existing and future competitors, our results of operations, cash flows and financial condition would be adversely impacted.
Additionally, we compete with other forms of entertainment and leisure activities.
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We might not succeed in our efforts to increase monetization rates, particularly if we are unable to retain our paying players.
−Removed: If we fail to grow or sustain the number of our paying players, if the rates at which
−Removed: 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.
+Added: 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.
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Therefore, our development costs can be substantial.
−Removed: 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.
+Added: If we or our third-party developers experience unanticipated development delays, financial difficulties, or additional costs, for example, as a result of 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.
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We have invested, and in the future may invest, in new business and marketing strategies, technologies, distribution methods, products, and services.
+Added: However, forecasting the financial impact of any such strategic investment is inherently uncertain and volatile.
+Added: Supporting a new technology or business model, for example, may require partnering with a new platform, business, or technology partner, which may be on terms that are less favorable to us than those for traditional technologies or business models.
There can be no assurance that these strategic investments will achieve expected returns.
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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.
+Added: The development and use of artificial intelligence (“AI”) into our products may present operational and reputational risks.
+Added: The growth of AI technologies in our industry has influenced games production for developers and gaming experience for players.
+Added: The use of this new and emerging technology, which is in its early stages of commercial use, presents social and ethical issues that may result in legal and reputational harm and liability.
+Added: Further, intellectual property ownership surrounding AI technologies has not been fully addressed by U.S.
+Added: courts or other federal or state laws or regulations, and the use or adoption of third-party AI technologies into our products and services may result in exposure to claims of copyright infringement or other intellectual property misappropriation.
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.
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Our business is subject to our ability to develop commercially successful products for the current video game platforms.
−Removed: 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
−Removed: by product platform for the fiscal year ended March 31, 2023.
+Added: 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 40.5% of our net revenue by product platform for the fiscal year ended March 31, 2024.
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.
−Removed: 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.
−Removed: In 2020, Sony and Microsoft each launched their respective next generation consoles.
+Added: 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 and may further incur expense to adjust our products and development efforts in response to changing consumer preferences.
Historically, when next generation consoles are announced or introduced into the market, consumers have typically reduced their purchases of products for prior-generation consoles in anticipation of purchasing a next-generation console and products for that console.
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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.
−Removed: 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.
+Added: 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
+Added: these platform providers.
In the fiscal year ended March 31, 2024, we derived 95.0% of our mobile revenue on Apple and Google platforms.
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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.
−Removed: 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.
−Removed: 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.
−Removed: These requirements have been maintained in subsequent versions of Apple iOS.
+Added: For example, in April 2021, Apple began requiring 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.
+Added: These requirements are known as Apple's AppTracking Transparency framework and 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.
+Added: Also, beginning January 2024, Google began requiring publishers and developers using certain Google advertising products to serve ads in the U.K.
+Added: or European Union (E.U.) to use a Google certified consent management platform.
We are continuing to evaluate how these rules or changes may affect our business, operations and financial results.
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Any limit or discontinuation of our access to any platform could adversely affect our business, financial condition or results of operations.
+Added: Furthermore, obtaining and maintaining high ratings of our games on the third-party platforms on which we operate are important as they help drive players to find our games.
+Added: If the ratings of any of our games decline or if we receive significant negative reviews that result in a decrease in our ratings, our games could be more difficult for players to find or recommend.
+Added: In addition, we may be subject to negative review campaigns or defamation campaigns intended to harm our ratings.
+Added: Any such decline may lead to loss of players and revenues, additional advertising and marketing costs, and reputation harm.
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.
−Removed: If either of these events recurs on a prolonged, or even short-term, basis or other similar issues arise
−Removed: 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.
+Added: 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.
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Failure to enter into any such agreement could also seriously hurt our business.
+Added: In addition, because our products compete with
+Added: a vast array of other interactive entertainment software products that also are available on these hardware platforms, a hardware platform manufacturer may give priority to those competing products.
In addition, platform providers, such as Sony and Microsoft, control the networks over which consumers purchase digital products and services for their platforms and through which we provide online game capabilities for our products.
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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.
−Removed: If these platforms deny access to our games, modify their current discovery mechanisms, communication channels available to developers, operating systems, terms of service, or other policies (including fees), our business could be negatively impacted.
−Removed: 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.
+Added: Because of the significant use of our games on mobile devices, our application must remain interoperable with these and other popular mobile app stores and platforms, and related hardware.
+Added: We are subject to the standard policies and terms of service of these platforms.
+Added: These policies and terms of service govern the availability, promotion, distribution, content, and operation of applications and experiences on such platforms.
+Added: Each provider of these platforms has broad discretion to change and interpret its terms of service and policies with respect to our games and those changes may be unfavorable to us.
+Added: If these platforms deny access to our games, or modify their current discovery mechanisms, communication channels available to developers, operating systems, or other policies and terms of service (including fees), our business could be negatively impacted.
+Added: For example, at any time, the platform providers can change their policies on how we operate on their operating system or in their application stores by applying content moderation for applications and advertising or imposing technical or code requirements.
+Added: These actions by the platform providers may affect our ability to collect, process, and use data as desired and could negatively impact our ability to leverage data about the experiences our games provide to players, which in turn could impact our resource planning and feature development planning for our products.
+Added: These platform providers or their services may be unavailable, 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.
+Added: There is no guarantee that new devices, platforms, systems and software application stores will continue to support our games or that we will be able to maintain the same level of service on these new systems.
+Added: If it becomes more difficult for our players to access and engage with our games, our business and player retention, growth, and engagement could be significantly harmed.
We rely on complex information technology systems and networks to operate our business.
−Removed: Any significant system or network disruption or cyber attack could have a negative impact on our business.
+Added: Any significant system or network disruption or cyberattack 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.
−Removed: 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.
−Removed: 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.
+Added: The supply chain of hardware needed to maintain this technological infrastructure has been disrupted and geopolitical events, including the Russia-Ukraine war and the Israel-Hamas war and any indirect effects, may further complicate existing supply chain constraints.
+Added: All information technology systems and networks are potentially vulnerable to damage or interruption from a variety of sources, including but not limited to cyberattacks, 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.
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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.
−Removed: Further, the risk of such a breach may be heightened by world events, such as the current conflict between Russia and Ukraine.
−Removed: 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,
−Removed: financial condition, and operating results.
−Removed: 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.
+Added: Further, the risk of such a breach may be heightened by world events, such as the Russia-Ukraine war and the Israel-Hamas war.
+Added: 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.
+Added: 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,
+Added: 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.
−Removed: 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.
+Added: We have faced, and in the future could face, sophisticated attacks, including attacks referred to as advanced persistent threats, which are cyberattacks 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.
−Removed: The unauthorized party sent a communication to certain players containing a malicious link.
+Added: The unauthorized third 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.
−Removed: We have implemented and are in the process of implementing a variety of measures to enhance further our cybersecurity protections.
−Removed: See “ Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Cybersecurity Incident ” for further discussion.
−Removed: 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.
+Added: We have implemented and will continue to implement a variety of measures to enhance further our cybersecurity protections.
+Added: See “ Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Cybersecurity Incident ” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 for further discussion.
+Added: Our software supply chain may also be subject to attacks, which would result in future security incidents and breaches.
+Added: 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, financial results, and the reliability and stability of our products and services.
These risks extend to the networks and e-commerce sites of console platform providers and other partners who sell or host our content online.
−Removed: 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.
+Added: The risk of such threats is heightened by events outside of our control, such as the extended period of remote work arrangements due to COVID-19, the Russia-Ukraine war and the Israel-Hamas war.
+Added: The risk could also be affected by events within our control, such as the migration of data among data centers and to third-party hosted environments, and the performance of upgrades and maintenance on our systems.
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.
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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.
−Removed: In addition, the costs to respond to, mitigate, or notify affected parties of cyber-attacks and other security vulnerabilities are significant.
+Added: We do not have redundancy for all our systems and our disaster recovery planning may not account for all outcomes.
+Added: As our digital business grows, we will require an increasing amount of internal and external technical infrastructure, including network capacity and computing power to continue to satisfy the needs of our players.
+Added: It is possible that we may fail to scale effectively and grow this technical infrastructure to accommodate increased demands, which may adversely affect the reliable and stable performance of our games and services, therefore negatively impacting our business .
+Added: In addition, the costs to respond to, mitigate, or notify affected parties of cyberattacks 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.
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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.
−Removed: A resulting perception that our products or services
−Removed: do not adequately protect personal information could result in a loss of current or potential consumers and business partners.
+Added: 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.
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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.
−Removed: Further, the risk of such a breach may be heightened by world events, such as the current conflict between Russia and Ukraine.
+Added: Further, the risk of such a breach may be heightened by world events, such as the Russia-Ukraine war and the Israel-Hamas war.
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.
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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.
+Added: In addition, our leading position within the interactive entertainment industry makes us a prime target for recruiting our executives, as well as key creative and technical talent.
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.
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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.
−Removed: 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.
+Added: From time to time, objectionable and offensive or
+Added: 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.
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We rely on third-party software developers for the development of some of our titles.
−Removed: Quality third-party developers are continually in high demand,
−Removed: and those who have developed titles for us in the past may not be available to develop software for us in the future.
+Added: 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.
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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.
+Added: Our business may be harmed if our distributors, retailers, development, and licensing partners, or other third parties with whom we do business are unable to honor their commitments or act in ways that put our brand at risk.
+Added: In many cases, our business partners are given access to sensitive and proprietary information or control over our intellectual property to provide services and support to our team.
+Added: These third parties may misappropriate or misuse our information or intellectual property and engage in unauthorized use of it.
+Added: Further, the failure of these third parties to provide adequate services and technologies or to adequately maintain or update their services and technologies could result in a disruption to our business operations or an adverse effect on our reputation and may negatively impact our business.
+Added: At the same time, if the media, consumers, or employees raise any concerns about our actions with respect to third parties including consumers who play our games, this could also damage our reputation or our business.
+Added: Further, should we terminate our relationship with a third-party business partner for any reason, we may experience interruptions in our business and incur costs as we transition to a new partner.
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.
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Many large companies, such as Amazon, Facebook and Google, invest significantly in data analytics to make their websites and platforms more attractive to advertisers.
−Removed: 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.
+Added: For our advertising business to continue to succeed, we need to continue to demonstrate the reach of our player network and success of
+Added: 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.
+Added: Alternatively, if our advertising inventory is unavailable and demand exceeds supply, our ability to generate further revenues from advertising would be limited, particularly during peak hours and in key geographies.
+Added: This could have an adverse effect on our reputation and our business, financial condition, and results of operations.
+Added: In addition, if we include advertising in our games that players view as excessive, such advertising may materially detract from players’ gaming experiences, thereby creating player dissatisfaction, which may cause us to lose players and revenues and may negatively affect the in-game experience for players making purchases of virtual items in our games.
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.
−Removed: 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.
−Removed: 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.
−Removed: Those changes, known as Apple’s AppTracking Transparency framework, went into effect in late April 2021, with the release of iOS 14.5.
−Removed: 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.
−Removed: 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.
+Added: For example, Apple previously created a proprietary identifier-for-advertisers, which simplifies the process for Apple users to opt out of certain types of advertising.
+Added: In April 2021, Apple began requiring 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 and target users through user acquisition, and deliver targeted ads.
+Added: These requirements are known as Apple’s AppTracking Transparency framework and have been maintained in subsequent versions of Apple iOS.
+Added: Beginning January 2024, Google began requiring publishers and developers using certain Google advertising products to serve ads in the U.K.
+Added: to use a Google-certified consent management platform.
+Added: If users do not elect to 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.
+Added: 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 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.
−Removed: 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.
+Added: 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 and our pending acquisition of Gearbox.
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.
−Removed: Any of the foregoing factors could harm our financial condition or prevent us from achieving improvements in
−Removed: our financial condition and operating performance that could have otherwise been achieved by us on a stand-alone basis.
+Added: 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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If we do not correctly assess consumer preferences in the countries in which we sell our products, or respond to other risks related to our international operations, it could negatively affect our business.
−Removed: Our business may also be affected directly or indirectly by major world events, such as the conflict between Russia and Ukraine.
+Added: Our business may also be affected directly or indirectly by major world events, such as the Russia-Ukraine war and the Israel-Hamas war.
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.
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We are subject to a variety of laws in the U.S.
−Removed: and abroad that affect our business, including state and federal laws regarding consumer protection, electronic marketing, protection of minors, data protection and privacy, competition, taxation, intellectual property, export, and national security, which are continuously evolving and developing.
+Added: and abroad that affect our business, including state and federal laws regarding consumer protection, electronic marketing, protection of minors, data protection and privacy, competition, taxation,
+Added: intellectual property, export, and national security, which are continuously evolving and developing.
The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting, particularly laws outside 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.
+Added: Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies, their employees, agents, representatives, business partners, and third-party intermediaries from authorizing, offering or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector in order to influence official action, direct business to any person, gain any improper advantage, or obtain or retain business.
+Added: We can be held liable for the corrupt or other illegal activities of our employees, agents, representatives, business partners or third-party intermediaries, even if we do not authorize or have knowledge of such activities.
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.
−Removed: We are potentially subject to a number of foreign and domestic laws and regulations that affect the offering of certain types of content, such as that which depicts violence, many of which are ambiguous, still evolving and could be interpreted in ways that could harm our business or expose us to liability.
−Removed: 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.
+Added: We are potentially subject to a number of foreign and domestic laws and regulations that affect the offering of certain types of content, such as that which depicts violence or is generated by our users, many of which are ambiguous, still evolving and could be interpreted in ways that could harm our business or expose us to liability, or result in us incurring increased compliance costs.
In 2020, the U.K.
−Removed: left the European Union ("E.U.") ("Brexit").
+Added: left the E.U.
Subsequently, the U.K.
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Such a decline could also make our doing business in Europe more difficult, which could negatively affect sales to consumers of our products.
−Removed: Without access to the single E.U.
−Removed: market, it may be more challenging and costly to distribute our products in Europe.
+Added: Without access to a single market that includes the U.K.
+Added: and countries of the E.U., it may be more challenging and costly to distribute our products to those regions.
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.
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Legal protection of our rights may be ineffective in countries with weaker intellectual property enforcement mechanisms.
+Added: Competitors may use our technologies without authorization, in jurisdictions where we have not obtained protection, to develop their own games and, further, may export otherwise violating games to territories where we have protection but enforcement is not as strong as that in the U.S.
+Added: These games may compete with our games, and our intellectual property rights may not be effective or sufficient to prevent such competition.
In addition, certain third parties have registered our intellectual property rights without authorization in foreign countries.
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We rely upon third-party digital delivery platforms, such as Microsoft's Xbox Live, PlayStation Network, Steam, Epic, and other third-party service providers, to provide connectivity from the consumer to our digital products and our online services.
−Removed: Connectivity issues could prevent customers from accessing this content and our ability to successfully market and sell our products could be adversely affected.
−Removed: Given the increasing global usage of online platforms, in part as a result of the COVID-19 pandemic, the risks of connectivity issues may be heightened.
+Added: Connectivity issues could prevent customers from accessing this content and our ability to successfully market and sell
+Added: our products could be adversely affected.
+Added: Given the increasing global usage of online platforms, the risks of connectivity issues may be heightened.
In addition, we could experience similar issues related to services we host on our internal servers.
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We use open-source software in connection with certain of our games and the services we offer.
+Added: The original developers of the open source code provide no warranties on such code and open-source software may have unknown bugs, malfunctions and other security vulnerabilities, which could impact the performance and information security of our technology.
Some open-source software licenses require users who distribute open-source software as part of their software to publicly disclose all or part of the source code to such software or make available any derivative works of the open-source code on unfavorable terms or at no cost.
+Added: From time to time, we may face claims from the copyright holders of open-source software alleging copyright infringement and breach of contract for failure to meet the open source license terms, such as the failure to publicly disclose our proprietary code that is a derivative work of the open-source software.
+Added: Additionally, the copyright holders of open-source software could demand release of the source code of any of our proprietary code that is a derivative work of the open-source software, or otherwise seek to enforce, have us specifically perform, or recover damages for the alleged infringement or breach of, the terms of the applicable open-source license.
+Added: These claims could also result in litigation, require us to purchase costly licenses or require us to devote additional research and development resources to change our games.
The terms of various open-source licenses have not been interpreted by courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our use of the open-source software.
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.
−Removed: 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.
+Added: Open-source compliance problems can also result in damage to reputation and challenges in recruitment or retention of engineering personnel.
+Added: Additionally, the shared nature of open-source software may increase the ability of cyberattackers to discover and exploit vulnerabilities, which may increase the likelihood of a data breach, ransomware, network interruption, or other type of cyberattack 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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In such an event, the technological reliability and stability of our products and services could be below our standards and the standards of our players and our reputation, brand and sales could be adversely affected.
−Removed: In addition, we could be required to, or may find it necessary to, offer a refund for the product or service, suspend the availability or sale of the product or service or expend significant resources to cure the defect, bug or error each of which could significantly harm our business and operating results.
+Added: In addition, we could be required to, or may find it necessary to, offer a refund for the product or service, suspend the availability
+Added: or sale of the product or service or expend significant resources to cure the defect, bug or error each of which could significantly harm our business and operating results.
Our ability to acquire and maintain licenses to intellectual property, especially for sports titles, affects our revenue and profitability.
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If such licensed products do not generate revenues in excess of such minimum guarantees, our profitability will be adversely affected.
+Added: Moreover, if we breach our obligations under existing or future licenses, we may be required to pay damages and our licensors might have the right to terminate the license or change an exclusive license to a nonexclusive license.
+Added: Termination by a licensor would cause us to lose valuable rights and could inhibit our ability to commercialize future games, which would harm our business, results of operations and financial condition.
+Added: In addition, certain intellectual property rights may be licensed to us on a nonexclusive basis.
+Added: The owners of nonexclusively licensed intellectual property rights are free to license such rights to third parties, including our competitors, on terms that may be superior to those offered to us, which could place us at a competitive disadvantage.
+Added: Our licensors may own or control intellectual property rights that have not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the licensor’s rights.
+Added: In addition, the agreements under which we license intellectual property rights or technology from third parties are generally complex, and certain provisions in such agreements may be susceptible to multiple interpretations.
+Added: The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology or increase what we believe to be our financial or other obligations under the relevant agreement.
+Added: Any of the foregoing could harm our competitive position, business, financial condition, results of operations and prospects.
We may experience declines or fluctuations in the recurring portion of our business.
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Any decline or fluctuation in this portion of our business may have a negative impact on our financial and operating results.
−Removed: Our efforts to expand into new products and services may subject us to additional risks.
−Removed: 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.
−Removed: 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.
−Removed: We are actively investing to capitalize on these trends in order to diversify our product mix, reduce our operating risks, and increase our revenue.
−Removed: There are risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Failure to successfully manage these risks in the development and implementation of new products or services could have a material adverse effect on our business, financial condition and operating results.
Our quarterly and annual operating results are dependent on the release of "hit" titles and therefore dependent on the timing of our product releases, which may cause our quarterly operating results to fluctuate significantly.
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Demand for and sales of titles in our NBA 2K series are also seasonal in that they are typically released just prior to the start of the NBA season.
−Removed: If a key event or sports season to which our product release schedule is tied were to be delayed or interrupted, as has happened as a result of COVID-19, our sales might also suffer disproportionately.
+Added: If a key event or sports season to which our product release schedule is tied were to be delayed or interrupted, our sales might also suffer disproportionately.
Our failure or inability to produce "hit" titles or introduce products on a timely basis to meet seasonal fluctuations in demand could adversely affect our business, financial condition and operating results.
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Due to this dependence on a limited number of franchises, the failure to achieve anticipated results by one or more products based on these franchises could negatively impact our business.
−Removed: Additionally, if the popularity of a franchise declines, as has happened in the past with other popular franchises, we may have to write off the unrecovered portion of the underlying intellectual property assets, which could negatively impact our business.
+Added: Additionally, if the popularity of a franchise declines, as has happened in the past with other
+Added: popular franchises, we may have to write off the unrecovered portion of the underlying intellectual property assets, which could negatively impact our business.
We are dependent on the future success of our Grand Theft Auto products, and we must continue to publish "hit" titles or sequels to such "hit" titles in order to compete successfully in our industry.
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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.
−Removed: 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.
+Added: Price protection granted to our customers and returns of our published titles by our customers may adversely affect our operating results.
We are exposed to the risk of price protection and product returns with respect to our customers.
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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.
−Removed: Certain of our larger customers sell used video games, which are generally priced lower than new video games.
−Removed: If our customers increase their sales of used video games, it could negatively affect our sales of new video games.
A limited number of customers account for a significant portion of our sales.
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A substantial portion of our product sales are made to a limited number of customers.
−Removed: 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%.
+Added: Sales to our five largest customers during the fiscal year ended March 31, 2024 accounted for 79.8% of our net revenue, with Sony, Apple, Google, 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.
−Removed: Certain of our customers may decline to
−Removed: carry products containing mature content.
+Added: 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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Accordingly, console manufacturers like Sony or Microsoft could cause unanticipated delays in the release of our products, as well as increases to projected development, manufacturing, marketing, or distribution costs, any of which could negatively impact our business.
−Removed: Furthermore, our customers may also be placed into bankruptcy, become insolvent, or be liquidated due to economic downturns, global credit contractions, or other factors, for example, as a result of COVID-19.
+Added: Furthermore, our customers may also be placed into bankruptcy, become insolvent, or be liquidated due to economic downturns, global credit contractions, or other factors.
Bankruptcies or consolidations of certain large retail customers could seriously hurt our business, including as a result of uncollectible accounts receivable from such customers and the concentration of purchasing power among large retailers.
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An increase in the number of lawsuits filed by the families of victims of violence may trigger supplemental governmental scrutiny, damage our reputation, and negatively affect the sale of our products.
−Removed: 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 addressing this issue.
+Added: 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 addressing this issue, and, more recently prompting lawsuits against many in the industry, including us.
In addition, public dialogue concerning interactive entertainment may have an adverse impact on our reputation and our customers' willingness to purchase our products.
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Nonetheless, these processes are subject to human error, circumvention, overriding, and reasonable resource constraints.
−Removed: If a video game we publish were found to contain undisclosed pertinent content, the ESRB could re-rate a game, retailers could refuse to sell it and demand that we accept the return of any unsold copies or returns from customers, and consumers could refuse to buy it or demand that we refund their money.
+Added: If a video game we publish were found to contain undisclosed pertinent content, the ESRB could re-rate that game and change the associated content descriptors originally assigned, require us to recall the game and/or change the game or game packaging, and/or impose a fine on us.
+Added: In addition, retailers could refuse to sell the game and demand that we accept the return of any unsold copies or returns from customers, and consumers could refuse to buy such game, or demand that we refund their money and/or refrain from buying other games published by us.
This could have a material negative effect on our operating results and financial condition.
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In some instances, we may be required to modify our products to meet the requirements of the rating systems, which could delay or disrupt the release of any given product or may prevent its sale altogether in certain territories.
−Removed: Further, if one of our games is “re‑rated” for any reason, a ratings organization could require corrective actions, which could include a recall, retailers could refuse to sell it and demand that we accept the return of any unsold or returned copies or consumers could demand a refund for copies previously purchased.
+Added: Further, if one of our games is re‑rated for any reason, a ratings
+Added: organization could require corrective actions, which could include a recall, retailers could refuse to sell it and demand that we accept the return of any unsold or returned copies or consumers could demand a refund for copies previously purchased.
Additionally, retailers may decline to sell interactive entertainment software containing what they judge to be graphic violence or sexually explicit material or other content that they deem inappropriate for their businesses, whether because a product received a certain rating by the ESRB or other content rating system, or otherwise.
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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.
−Removed: 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.
−Removed: (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
−Removed: fiscal 2024” and together with the “Senior Notes issued in fiscal 2023” the “Senior Notes”).
−Removed: We utilized a portion of the proceeds from the Senior Notes issued in fiscal 2024 to fully repay the $350.0 Term Loan.
−Removed: 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.
−Removed: (Refer to Note 21 – Subsequent Events to our Consolidated Financial Statements, herein.)
+Added: As of March 31, 2024, we had $3,050.0 aggregate principal amount of outstanding senior notes ("Senior Notes") and a $500.0 revolving credit facility under the 2022 Credit Agreement with no outstanding borrowings.
+Added: (Refer to Note 11 – Debt 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.
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• limiting our flexibility in planning for, or reacting to, changes in our business and our industry.
−Removed: 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.
−Removed: Our ability to comply with these covenants may be affected by events beyond our control.
−Removed: 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.
+Added: We are required to comply with the covenants set forth in the indentures governing our outstanding indebtedness, including our Senior Notes, Convertible Notes, and 2022 Credit Agreement.
+Added: Our ability to comply with these covenants may be
+Added: affected by events beyond our control.
+Added: If we breach any of the covenants and do not obtain a waiver from the holders of our indebtedness 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.
−Removed: Accordingly, we may be restricted from taking actions that management believes would be desirable and in the best interest of us and our stockholders.
+Added: Accordingly, we may be restricted from taking actions that we believe 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.
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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.
−Removed: Virtual items in our games have no monetary value outside of our games.
−Removed: 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.
+Added: Game accounts and virtual items in our games have no monetary value outside of our games.
+Added: Nonetheless, some of our players may make sales and/or purchases of game accounts or virtual items, such as virtual currency, 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.
−Removed: We do not generate any revenue from these transactions.
+Added: We do not in any way facilitate these transactions and do not generate any revenue from them.
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:
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• 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;
−Removed: • increasing costs we incur to develop technological measures to curtail unauthorized transactions;
+Added: • increasing costs we incur to develop technological measures to detect, prevent, and curtail unauthorized transactions;
+Added: • increasing costs we incur in pursuing enforcement action against the individuals and websites responsible for facilitating such unauthorized transactions;
+Added: • increasing risk of certain monetization practices in our games being erroneously deemed a form of gambling in certain jurisdictions by virtue of the existence of such authorized marketplaces;
• resulting in negative publicity or harm our reputation with players and partners;
• increasing customer support costs to respond to dissatisfied players.
−Removed: 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.
+Added: To discourage unauthorized purchases and sales of game accounts and virtual items, we state in our terms of service that the buying or selling of game accounts and 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.
−Removed: We have also filed lawsuits against third parties attempting to “sell” virtual items from our games outside of our games.
+Added: We have also issued DMCA notices and filed lawsuits against third parties attempting to “sell” game accounts and 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.
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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.
−Removed: Changes in laws or regulations that adversely affect the growth, popularity, or use of the Internet, including laws affecting "net neutrality" or measures enacted in certain jurisdictions as a result of the COVID-19 pandemic, could decrease the demand for our products and services or increase our cost of doing business.
+Added: Changes in laws or regulations that adversely affect the growth, popularity, or use of the Internet, including laws affecting "net neutrality" or measures enacted in certain jurisdictions, for example as a result of the COVID-19 pandemic, could decrease the demand for our products and services or increase our cost of doing business.
Although certain jurisdictions have implemented laws and regulations intended to prevent Internet service providers from discriminating against particular types of legal traffic on their networks, other jurisdictions may lack such laws and regulations or repeal existing laws or regulations.
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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.
−Removed: 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.
+Added: Companies and governmental agencies could block access to, impose restrictions on or require a license for any platform, our website or mobile applications for a number of reasons such as security or confidentiality concerns or regulatory reasons which may include, among other things, governmental restrictions on certain content in a particular country, requirements to establish a local presence in a particular jurisdiction, and a requirement that player information be stored on servers in a country within which we operate.
+Added: Companies may also 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.
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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.
+Added: As a global company, we are subject to a variety of regulations and laws in the U.S.
+Added: and abroad, including regarding consumer protection (including the use of prepaid cards, online safety, and the protection of minors), subscriptions, advertising, electronic marketing, privacy (including verified parental consent and age assurance), biometrics, cybersecurity, data protection and data localization requirements, AI, online services, online gaming, anti-competition, freedom of speech, labor, real estate, taxation, escheatment, intellectual property ownership and infringement, tax, export and national security, tariffs, anti-corruption and telecommunications, all of which are continuously evolving and developing.
+Added: The scope and interpretation of the laws that are or may be applicable to us, which in some cases can be enforced by private parties in addition to government entities and regulatory bodies, are often uncertain and may be conflicting, particularly laws outside the U.S., and compliance with laws, regulations, codes of practice, and similar requirements may be burdensome and expensive.
+Added: Laws and regulations may be inconsistent from jurisdiction to jurisdiction, which may increase the cost of compliance and doing business and expose us to possible litigation, penalties or fines, which in ascertain circumstances can be linked to a percentage of our global turnover.
+Added: Any changes which we may introduce to our games in order to comply with these laws, regulations, codes of practice, and similar requirements, could make our games less attractive to our players, or cause us to change or limit our ability to sell our products in certain jurisdictions.
+Added: We have policies and procedures designed to ensure compliance with applicable laws and regulations, but we cannot assure you that we will not be deemed to have violated any such laws and regulations.
Several proposals have been made for federal legislation to regulate our industry.
−Removed: Such proposals seek to prohibit the sale of products containing certain content included in some of our games.
+Added: Such proposals seek to prohibit the sale of products containing certain content and functionality included in some of our games.
If any such proposals are enacted into law, it may limit the potential market for some of our games in the U.S., and adversely affect our business, financial condition and operating results.
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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.
−Removed: 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.
−Removed: 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.
−Removed: violated a specific anti-gambling law in Washington State.
−Removed: Subsequent to this ruling,
−Removed: 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.
−Removed: In Australia, the Federal Government has proposed rules requiring, among other things, an 18+ age rating for any games containing simulated gambling.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: In some of our games, such as CSR Racing 2 , Empires & Puzzles , FarmVille 3 , Golf Rival , Harry Potter:
+Added: In addition, there are ongoing academic, political and regulatory discussions in the U.S., Europe, Middle East, Asia, 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 vulnerable adults, and, if so, what such regulation should include.
+Added: new regulations are imposed, or other regulations are interpreted to apply to our social casino games or certain game mechanics, certain, or all, of our casino-themed games and games that include such game mechanics may become subject to such rules and regulations and expose us to civil and criminal penalties if we do not comply.
+Added: Additionally, in July 2023, the trade body, the U.K.
+Added: Interactive Entertainment Association, published industry guidance on loot boxes which is designed to address the concerns raised by the government in its response to a 2020 call for evidence into loot boxes and gambling like behavior.
+Added: The guidance provides for a twelve-month implementation period.
+Added: In addition, in Australia, the Guidelines for the Classification of Computer Games 2023 which are set to go into effect late 2024 would limit games containing “simulated gambling” features to adults aged 18 and over, and require games that do not contain simulated gambling, but which contain loot boxes, to be rated M (Mature), meaning they would only be recommended as being suitable for players aged 15 and over.
+Added: Furthermore, in June 2023, the Dutch Minister of Economic Affairs sent a letter to Parliament, outlining her Consumer Agenda, which included a ban on loot boxes in the E.U.
+Added: and in the Netherlands and the amendment of legislation to characterize loot boxes as an unfair commercial practice.
+Added: While details of this proposed ban remain unclear, the European Commission has confirmed that loot boxes are being considered as part of its current Fitness Check of E.U.
+Added: consumer law on digital fairness which it is expected to complete later this year.
+Added: In February 2023, an Austrian court ruled that loot boxes in one of our competitor’s video games constitute illegal gambling due, principally, to the existence of a secondary market for certain of the game's virtual items.
+Added: Lastly, in April 2024, the Spanish Minister of Social Rights and Consumer Affairs referred to plans to promote the regulation of loot boxes in connection with a review of Spain's gambling laws.
+Added: It is possible that other courts or regulatory agencies could adopt similar regulations or similarly broad interpretations of existing gambling laws to effectively regulate loot boxes in their jurisdiction as a form of gambling or otherwise as a prohibited commercial practice .
+Added: In some of our games, such as CSR Racing 2 , Dragon City, Empires & Puzzles , FarmVille 3 , Golf Rival , Harry Potter:
Puzzles & Spells , Merge Dragons!
, Merge Magic!
−Removed: , NBA 2K , WWE 2K , and Zynga Poker , certain mechanics may be deemed as “loot boxes.” New regulation by the FTC, U.S.
+Added: , Monster Legends, NBA 2K , Top Eleven, Top Troops, WWE 2K , and Zynga Poker , certain mechanics may be deemed as “loot boxes.”
+Added: 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.
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are conducted by our U.K.-based data controller or our local entities in the E.U.
−Removed: Children's Online Privacy Protection Act also regulates the collection, use, and disclosure of personal information from children under 13 years of age.
+Added: Children's Online Privacy Protection Act also regulates the collection, use, and disclosure of personal information from children under 13 years of age, and age-based privacy laws can apply to how we collect and use personal information or provide certain game features to players up to 18 years of age.
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.
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GDPR and DPA 2018 contain significant penalties for non-compliance, which have been imposed by regulators.
+Added: In addition, the E.U.
+Added: Digital Services Act (“DSA”) became fully applicable on February 17, 2024.
+Added: The DSA imposes new content moderation obligations, notice and transparency obligations, advertising restrictions and other requirements on digital platforms to protect consumers and their rights online.
+Added: Noncompliance with the DSA could result in fines of up to 6% of annual global revenues, which are in addition to the ability of civil society organizations and non-governmental organizations to lodge class action lawsuits .
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.
−Removed: California also enacted the California
−Removed: Privacy Rights Act ("CPRA"), which updates the CCPA.
−Removed: Several other U.S.
−Removed: states have enacted comprehensive privacy laws, including Colorado, Connecticut, Indiana, Iowa, Utah, and Virginia.
−Removed: Other states are considering similar privacy or data protection laws that may apply to us.
−Removed: 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.
−Removed: Congress is considering a number of legislative proposals to regulate in this area.
+Added: California also enacted the California Privacy Rights Act ("CPRA"), which updates the CCPA.
+Added: Fifteen other U.S.
+Added: states have enacted comprehensive privacy laws, and other states are considering similar privacy or data protection laws that may apply to us.
+Added: government, including the FTC 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.
+Added: Congress is considering a number of legislative proposals to regulate in this area, including a draft Federal comprehensive privacy law, updates to existing children's privacy laws that may expand the scope of coverage, and online safety laws.
Various government and consumer agencies worldwide have also called for new regulation and changes in industry practices.
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.
−Removed: Player use of our games is subject to our privacy policy, end user license agreements ("EULA"), and terms of service ("TOS").
−Removed: 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.
+Added: Player use of our games is subject to our privacy policy and terms of service ("TOS").
+Added: If we fail to comply with our posted privacy policy 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.
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Further, random digital item mechanics may become subject to further regulations in various jurisdictions.
−Removed: 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.
+Added: If this were to occur, we might be required to alter some of our
+Added: 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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If we infringe on or are alleged to infringe on the intellectual property rights of third parties, our business could be adversely affected.
−Removed: 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.
−Removed: In addition, we
−Removed: 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.
+Added: As our industry grows, we have been, and 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.
+Added: 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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and in various other jurisdictions.
−Removed: Significant judgment is required in determining our worldwide provision for income taxes, and, in the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain.
+Added: Significant judgment is required in determining our worldwide provision for income taxes, and, in the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain.
We are required to estimate future taxes.
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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.
−Removed: Should the ultimate tax liability exceed estimates, our income tax provision and net (loss) income or loss could be materially affected.
−Removed: We have recorded a valuation allowance against a portion of our deferred tax assets due to uncertainty with respect to their realization.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The requirement was effective for us beginning April 1, 2022.
−Removed: 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.
−Removed: In addition, the U.S.
−Removed: enacted the American Rescue Plan Act of 2021 (“ARPA”) which provided numerous tax and other stimulus measures.
−Removed: 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.
−Removed: This will be effective for us beginning April 1, 2027.
−Removed: In 2022, the U.S.
−Removed: 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
−Removed: corporations with an average AFSI exceeding $1.0 billion over a consecutive three-year period.
−Removed: The CAMT is effective for the fiscal year ending March 31, 2024.
+Added: Should our ultimate tax liability exceed estimates, our income tax provision and net income or loss could be materially affected.
+Added: We have recorded a valuation allowance against the majority of our deferred tax assets due to uncertainty with respect to their realization.
+Added: We expect to provide for 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.
+Added: The Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the ability to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them pursuant to IRC Section 174.
+Added: Although Congress is considering legislation that would modify the capitalization and amortization requirement, we have no assurance that the requirement will be deferred, repealed, or otherwise modified.
+Added: It is possible that a change in the requirement could have a significant adverse impact on our effective tax rate, tax payments, and financial condition in future periods.
+Added: In addition, the American Rescue Plan Act of 2021 (“ARPA”) provides for numerous tax and other stimulus measures, one of which will expand the limitation of compensation deductions for certain covered employees of publicly held corporations to also include the next five highly compensated employees.
+Added: This limitation will be effective for us beginning April 1, 2027.
+Added: The Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) includes a 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.
+Added: The CAMT became effective for the fiscal year ended 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.
+Added: We estimate no tax liability relating to the CAMT for the current fiscal year.
+Added: We will continue to evaluate the potential impact the Inflation Reduction Act may have on our operations and Consolidated Financial Statements in future periods.
It is possible that these changes could have an adverse impact on our effective tax rate, tax payments, and financial condition in future periods.
−Removed: 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.
−Removed: Countries may enact Pillar 2 slightly differently than the OECD model rules and on different timelines.
+Added: 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 Two, intended to conform to the new and evolving Organisation for Economic Cooperation and Development ("OECD") guidelines.
+Added: Countries may enact Pillar Two differently than the OECD model rules and on different timelines.
+Added: For instance, on December 15, 2022, the E.U.
+Added: Member States formally adopted the E.U.'s Pillar Two Directive requiring E.U.
+Added: members to implement legislation.
+Added: On July 11, 2023, the U.K.
+Added: similarly enacted legislation.
+Added: Pillar Two is generally effective for years beginning on or after January 1, 2024 in the E.U.
+Added: Although the U.S.
+Added: has not yet enacted Pillar Two legislation, it is expected that many other countries will also implement similar legislation with varying effective dates in the future.
+Added: Many aspects of Pillar Two are effective for the fiscal year ended March 31, 2025.
+Added: It is possible that Pillar Two could result in additional tax liability over the regular corporate tax liability in a particular jurisdiction to the extent tax expense is less than the 15% minimum rate and could have an adverse impact on our effective tax rate, tax payments, and financial condition in future periods.
+Added: Additionally, certain jurisdictions have modified or are seeking to modify their tax incentives to align with the Pillar Two criteria.
+Added: Changes, or the failure to change tax incentive provisions could have an adverse impact.
We will continue to monitor legislative and regulatory developments to assess potential impact.
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For the fiscal year ended March 31, 2024, 38.7% of our net revenue was earned outside the U.S.
−Removed: We are continuing to execute on our growth initiatives in Asia, where our strategy is to broaden the distribution of our existing products and expand our online gaming presence, especially in China and South Korea.
−Removed: We are subject to risks inherent in foreign trade, including increased credit risks, tariffs, and duties, fluctuations in foreign currency exchange rates, shipping delays, and international political, regulatory and economic developments, such as those relating to the conflict between Russia and Ukraine, all of which can have a significant influence on our operating results.
+Added: We are continuing to execute on our growth initiatives in Asia, where our strategy is to broaden the distribution of our existing products and expand our online gaming presence, especially in China.
+Added: We are subject to risks inherent in foreign trade, including increased credit risks, tariffs, and duties, fluctuations in foreign currency exchange rates, shipping delays, and international political, regulatory and economic developments, such as the Russia-Ukraine war and the Israel-Hamas war, all of which can have a significant influence on our operating results.
Many of our international sales are made in local currencies, which could fluctuate against the dollar.
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We expect that an increasing number of our games will be supported with material post-release activities, such as content updates and online-enabled features, and we could therefore be required to recognize more of the related revenues for those games over a period of time rather than at the time of sale.
−Removed: Further, as we increase our downloadable content and add new features to our online services, user playing patterns can affect our estimate of the service period, and we could be required to recognize revenues, and defer related costs, over a shorter or longer period of time than we initially allocated.
+Added: Further, as we increase our downloadable content and add new features to our online services, user playing patterns can affect our estimate of the service period, and we
+Added: could be required to recognize revenues, and defer related costs, over a shorter or longer period of time than we initially allocated.
As we enhance, expand and diversify our business and product offerings, the application of existing or future financial accounting standards, particularly those relating to the way we account for revenue, could have a significant adverse effect on our reported results although not necessarily on our cash flows.
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Adverse economic conditions, such as a prolonged U.S.
−Removed: or international general economic downturn, such as those caused by COVID-19, including periods of increased inflation, unemployment levels, tax rates, interest rates, energy prices, or declining consumer confidence, could also reduce consumer spending.
+Added: or international general economic downturn, including periods of increased inflation, unemployment levels, tax rates, interest rates, energy prices, or declining consumer confidence, could reduce consumer spending.
+Added: Natural disasters, acts of war, pandemics, terrorism, transportation disruptions, climate change, adverse weather conditions, and other reasons beyond our control could further reduce discretionary spending on entertainment activities and products.
Reduced consumer spending has and may in the future continue to result in reduced demand for our products and may also require increased selling and promotional expenses, which has had and may continue to have an adverse effect on our business, financial condition and operating results.
+Added: Moreover, we maintain cash balances at third-party financial institutions in excess of the Federal Deposit Insurance Corporation insurance limit.
+Added: If the financial conditions affecting the banking industry and financial markets cause additional banks and financial institutions to enter receivership or become insolvent, our ability to access our existing cash, cash equivalents and investments, or to draw on our existing lines of credit, may be threatened and could have a material adverse effect on our business and financial condition.
In addition, during periods of relative economic weakness, our consolidated credit risk, reflecting our counterparty dealings with distributors, customers, capital providers and others may increase, perhaps materially so.
−Removed: 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.
−Removed: 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
−Removed: effect on our business, financial condition and operating results.
+Added: As a result of geopolitical conditions, 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.
+Added: 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.
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.
−Removed: 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.
+Added: 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 and as we intend to do in connection with our pending acquisition of Gearbox, 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.
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We expect to continue to expend resources to address concerns with our products and services.
−Removed: 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.
−Removed: Climate change may have a long-term impact on our business.
−Removed: Climate change could result in an increase in the frequency or severity of natural disasters, such as earthquakes, fires, floods, or significant power outages and other catastrophic events.
+Added: Negative perceptions could arise despite our efforts, though, and may result in loss of engagement with our products
+Added: and services, increased scrutiny from government bodies and consumer groups, and/or litigation, any of which could negatively impact our business.
+Added: Catastrophic events and climate change may have a long-term impact on our business.
+Added: Natural disasters, cyber incidents, weather events, wildfires, power disruptions, telecommunications failures, pandemics, health crises and other public health events, failed upgrades of existing systems or migrations to new systems, acts of terrorism, geopolitical conflict (such as the Russia-Ukraine war and the Israel-Hamas war), or other events could cause outages, disruptions and/or degradations of our infrastructure (including our or our partners’ information technology and network systems), a failure in our ability to conduct normal business operations, or the closure of public spaces in which players engage with our games and services all of which could materially impact our reputation and brand, financial condition and operating result.
+Added: Furthermore, climate change could result in an increase in the frequency or severity of natural disasters, such as earthquakes, fires, floods, or significant power outages and other catastrophic events.
Such events may adversely impact critical infrastructure, have the potential to disrupt our business, our third-party suppliers, or the business of our customers, and may cause us to experience higher attrition, losses and additional costs to maintain or resume operations.
+Added: In addition, rapidly changing customer and regulatory requirements, along with stakeholder expectations, to reduce carbon emissions and otherwise to reduce our environmental footprint could increase our costs of operations to comply or present a risk of loss of business, if we are not able to meet those requirements.
We may be adversely affected by the effects of inflation.
1 unchanged sentence
The existence of inflation in the economy has the potential to result in higher interest rates and capital costs, supply shortages, increased costs of labor and other similar effects.
−Removed: Further, world events such as the conflict between Russia and Ukraine could affect inflationary trends.
+Added: Further, world events, such as the Russia-Ukraine war and the Israel-Hamas war , could affect inflationary trends.
As a result of inflation, we have experienced and may continue to experience, increases in our costs associated with operating our business including labor, equipment and other inputs.
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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.
−Removed: 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.