this week on key studies with the
business doc its take-two interactive by
popular demand you asked for it and I’m
doing it where’d they come from where
are they going and how did they double
their value to fifteen billion dollars
in two short years I’m gonna tell you
how take-two interactive the videogame
holding company that we know as rockstar
and 2k games we know about the sports on
the 2k side legendary and rockstar we
know about Grand Theft Auto and Red Dead
Redemption
and by the way Red Dead Redemption 2
coming out this year in October let’s
dive into the history take two was
founded 93 by Ryan Brant and after a few
short years they actually went public on
the stock market now two things happen
when you go public now you have to
report revenue and profits every quarter
along with the story what’s called
guidance you’re guiding people and
analysts by saying things that are legal
to explain where you’re headed basically
it’s as simple as that
then analysts say whether they would buy
hold or sell your stock and it can be a
vicious cycle the reason I bring that up
is very early on we’re gonna see
controversy but not before a defining
transaction takes place a year after the
IPO in 1998 BMG BMG was part of
Bertelsmann and BMG was purchased by
take-two interactive using 1.8 million
shares of stock as currency that
currency was about 16 percent of
take-two interactive in other words they
said we want to buy BMG and we’re gonna
give up 16 percent of the company to do
so well the deal was done
that would be legendary because inside
that deal was the first title for grand
theft auto and shortly after the
purchase grand theft auto 2 was released
so you can see the momentum that came
from that franchise by the way if you
want to dive deep into rockstar games
go look at the link below for my case
study just a couple weeks ago on
rockstar games I’m not going to dive as
deep here we’re gonna focus on take to
the holding company and how they were
built but that case
I’ll let you go really deep into
Rockstar in all those titles Grand Theft
Auto 2 comes out there 98 then Grand
Theft Auto 3 and a 1 now in this
timeframe 2000 2001 there were some
things happening that were not
noticeable to the naked eye they were
manipulating sales numbers because of
the pressure they were facing on the
stock market you go public you by BMG
give up 16 percent of your company and
then you start having to make those
quarterly reports and you get pressure
and the manipulation started this was
bad news
it wouldn’t be discovered for a few
years later let’s take a look how that
played out Grand Theft Auto 3 comes out
here and the stock is still trading in
this 10 to 20 range you can go look
historically and see that it would be
stuck in that range for a while partly
because there wasn’t a real sales growth
story a margin story or a profit story
and you got to have one of those three
stories to really drive confidence in
the stock and the subsequent stock price
o 2 o 3 o 4 or 5 by City and San Andreas
come out great games the Grand Theft
Auto franchise is established along with
all the controversy so let’s take a look
at revenue over this time real quick and
point out some of the very abilities
that you see as a video game holding
company revenue was 451 and o 21.0
billion and o four and eight hundred and
fifty nine million oh six now you might
think oh sales are going down well not
necessarily game releases have a lot of
units that ship and it’s a lot of
revenue or a new console comes out
playstation one playstation two huge
transition people go out and rebuy a lot
of their favorite games used on
playstation one for playstation 2 same
thing happens Xbox 360 Xbox one ps3
everything console transition can be a
pop in units because people are rebind
their beloved titles so not everything
necessarily is bad news
the way it would be for other companies
like a Starbucks if you suddenly saw
things going down people say well these
people not drinking coffee anymore you
got a problem
so in videogames interactive
entertainment these dips are somewhat
natural as this was happening though you
always want to take a look at the Mars
so what percent of the dollars of
revenue do you keep margin was thirty
eight forty four twenty four so there’s
some variability and margin there and
you can see the stock price was just
kind of floating along all of this is
happening to show that take two really
wasn’t off to the races even no Grand
Theft Auto was a great franchise
rockstar game is doing well about this
same time they established 2k sports now
you have Rockstar and 2k as part of that
they acquired from Sega the rights to
the ESPN title on sports games so things
are now forming for take two
you’ve got two K and a bunch of great
titles featuring ESPN branding and
you’ve got Rockstar doing very well with
Grand Theft Auto so we can look back and
see the seeds of greatness were formed
with Rockstar and 2k but here we are in
a 5 with the SEC showing up because of
what you did when your company was young
well in oh six long about the end of oh
six fourth-quarter sometime Brandt says
oh I got a bad back well I must have
been the weight of the lawsuit from the
SEC and so he leaves the company and
then no7 he pleads guilty so he leaves
the company gets his house in order
decides how he’s going to plead pleads
guilty he was offered up to four years
in prison as part of the plea deal and
he said no no I’ll cooperate with you as
you’re prosecuting these other guys if
you’ll play it down and you never want
to be indicted by the SEC or have their
friends the FBI come after you because
they might offer you the prison shower
expansionpak which is a multiplayer game
you don’t want to be a part of so here
we have oh six oh seven and what happens
right there in early oh seven enter
Strauss Zelnick and Zelnick media with a
board action to come take over the
company
Strauss is Hellenic is this guy a gifted
management expert who had spent time
running a movie studio a music division
of Bertelsmann and now comes in to be
CEO of take-two interactive as I
indicated Strauss Zelnick was a gifted
leader and corporate manager he wasn’t
an expert in video games or music or
movies and he openly said so but he knew
how to have
you a talent and he knew how to drive
them and equip them to go to high
performance well he was tasked now with
turning around take-two interactive
turning around
well they closed the chapter and the SEC
investigation the founder of the company
left plead down a potential prison
sentence to performer CFO’s were also
indicted as part of this that whole
chapter is now behind them a new guy in
charge takes control of the company and
moves forward the video game industry is
a small world
people know each other and they know who
is a strong leader who is a great
developer who’s Greek creative they
understand these things and they
specifically keep their eye on producers
Electronic Arts and analyzes the playing
field and they see what’s going on with
Rockstar Games in the Grand Theft Auto
franchise
despite its controversies and they also
see the success of 2k sports well what
do they do about a year into this new
tenure with Strauss at the helm
Electronic Arts makes a takeover attempt
in February of o8 for about $25 a share
so give or take two billion dollars now
why is this significant if Electronic
Arts is successful in taking over
take-two interactive acquiring them it
effectively ends the competition in
sports because now Electronic Arts would
have Madden and the 2k franchises
leaving no real heavy hitter competitor
in the sports genre so in February of
2008 as I mentioned Electronic Arts
offers $25 per share all cash for all of
take-two interactive take 2 goes up it
pops up 25 26 dollars a share but
Electronic Arts dropped 5 percent so the
market was reacting saying whoa wait a
minute I’m not sure we want to spend 2
billion dollars on that take 2 is saying
we don’t think you’re fairly valuing the
assets and we think this is an
undervalued offer despite our history
recently with the SEC and everything
else because we have a new version of
grand theft auto coming out Grand Theft
Auto 4 on April 29th so here we are in
early 2008 with Electronic Arts saying I
want to buy it for 25 take to saying I
don’t think that’s a good enough price I
don’t think you’re valuing it and
besides GTA 4 is about to come out
nonetheless they ground through the
summer and eventually Electronic Arts
lets the offer expire in September so
let’s talk for a minute about the
competitive impact when you’re building
products you build product this year you
improve a little bit bring it out next
year wear their shoes or video games and
in the video game industry
you follow technology improvements and
new consoles to make your games better
and better and better that’s a natural
technology track where you’re just
following the technology available to
you and driving your people to do more
there’s a second driver and that is
competitive reference now competitive
reference is where you look over if
you’re Madden and you look at 2k and you
see what they’re doing with the same
platforms and engines and tricks that
those developers are doing polygon
rendering meaning making surfaces look
better making faces look more lifelike
making rain look more realistic all the
things that make Madden football and 2k
that much better every year you say wow
this keeps you looking better and better
and better on my big TV through my
console well with 2k as a competitor to
Madden yea that’s what helps Madden be
better for you and me when you get two
developers working for two publishers
driving each other to make better
features more lifelike etc etc etc you
get competition driving each other for
example Mercedes makes BMW better BMW
makes Mercedes better they’re always
looking at each other wanting to put the
better features in their cars and they
pay attention to what each other are
doing especially nowadays when there’s
so much electronics built into the
dashboard for music and other
connectivity and features to make the
car easier it’s the same thing in video
games
so if Electronic Arts had been able to
buy take 2 at this time it actually
would have reduced for a time the
competitive dynamics in video games and
sports and I believe that the future of
sports video games would have plateaued
slightly because competitive developers
is what makes games better as well as
your own developers following the
natural console transitions
and advanced technology that each new
platform offers so here’s an important
point for you and your company you can
focus on technology or focus on product
if it’s not a technology product to make
it better and better but also strong
competitors can be a gift it can be
something that helps make you better it
helps keep you honest it helps ensure
that you can’t just do the next version
and expect your customers to buy it
you’re being pushed because there’s
something you will be compared to in the
marketplace your competitor and you have
to keep yourself honest keep your
product team on us to drive hard to not
only follow natural trends in
manufacturing or technology or at ever
sector you’re in but also pay attention
to competitors to how they are building
marketing and delivering the new
products a great competitor can be a
gift so let’s go back to take two so now
you have the 2k games don’t become part
of Electronic Arts it expires in oh
eight and take two continues on its own
driven by Strauss’s Eleniak and the 2k
games keep getting better and they’re
kept honest by Electronic Arts and
titles like Madden now let’s go look at
the next transition that happened in
media around the world and what it did
to video games let’s go take a look at a
few numbers here to see how they’re
doing
from that Oh 708 time period and let’s
go forward say five years to twelve one
point two down to 359 then up to one
point one then to 825 again natural
herbs and flows of releases of new
products and console transitions where
people buy the next version for their
new console well but you can also see
right here a little bit of a peak in oh
nine take a look on 1.2 billion they had
a hundred and ninety eight million in a
beta and a forty two percent margin and
take a look at what they came up from
margin goes up a beta goes up stock
price goes up it’s a wonderful circle of
life well but they’re still in this
turnaround plan and over those next five
years you can see they were sitting in
the high 30s on margin and generating
some variable e beta one in 2013 2014
Grand Theft Auto online online and
digital downloads are now emerging and
what does that do that means that you
don’t have to manufacture all the finish
software product and that takes out raw
material costs and it takes out guessing
and forecasting how many games you’re
going to build because if you want to
sell a million at Christmas the first
thing you have to do is get a million
video games manufactured and get them on
the shelves or in the warehouses so that
Game Stop Best Buy and all stores around
the world have them available to sell
digital downloads mean when you’re ready
it’s out and you sell the expansion
packs and the add-ons via digital
download all of that came home to roost
along with the amazing success when
Rockstar releases grand theft auto 5
grand theft auto 5 is a groundbreaking
game there’s also a console transition
that helped them again go take a look at
the Rockstar case study and you’re gonna
see exactly what I mean but look at
what’s happening to take two after
spending all of this time in the 10 to
20 range with a couple little Peaks in
there suddenly from 16 to 18 they rock
it up to a hundred and thirty dollars a
share where they are as we do this in
the third quarter of 2018 and suddenly
have a valuation of fifteen billion so
this two years it all comes home
together Red Dead Redemption Rockstar 2k
hitting on all cylinders look at what
starts happening the margin twenty six
forty two forty two forty two forty nine
suddenly heard a fifty percent gross
margin the first time ever in their
history that they’ve cracked fifty
percent gross margin they’re also
suddenly in the 1.7 1.8 billion dollar
revenue range and turning in very strong
ebody trader ins twenty six million five
hundred and thirty million it’s all
coming together and what does that do to
market cap there’s only one word for
that that is damn it’s a fifteen billion
dollar company now doubling in a few
short years and with a forecast for 2019
that they will be at 2.8 billion and
they will be in excess of fifty percent
margin all of that comes home to see
that you have now got a company that is
fully turned around has been led by
Strauss’s Allen a
and is driving also this year there’s a
lot of hype and anticipation in the
stock price as well that’s called
speculative forward pricing because Red
Dead Redemption 2 is going to come out
in October of this year as I mentioned
take-two interactive is actually a
holding company that contains developers
and publishers the footprint around the
world is pretty impressive let’s take a
look on the publishers side we start
with 2k play 2k games and 2k sports all
are based in Novato California we have a
private division in New York City and
the legendary Rockstar Games publisher
additionally in Barcelona Spain they
have published her social point so who’s
making the games for these publishers
the developers let’s start with 2k games
two day games first truly global
footprint and Chengdu China to teach and
ooh then 2k Marin is up in the bottle
California 2k baguette scratch this game
since parts Merlyn go Story games
Westwood Massachusetts and hangar 13
also in a battle California cat daddy
games in Kirkland Washington visual
concepts up in Nevada California
rockstar games and rock stars around the
world whether it’s the rock star rage
engine first rockstar India in Bangalore
India Rockstar Leeds in England Rockstar
Lincoln in England Rockstar London
anyone Rockstar New England and Ballard
Vale Massachusetts then we go back to
Rockstar North in Edinburgh Scotland
Rockstar San Diego in Carlsbad
California and Rockstar Toronto in
Oakville Ontario that’s the global
footprint underneath take-two
interactive the holding company Rockstar
2k as publishers located around the
world and an amazing global footprint of
developers building everything from the
game engines to the title themselves so
as you can see it all comes together
Strauss zelich’s turnaround is complete
he’s got a fantastic team he’s got
rockstar and 2k hitting on cylinders and
they’re the beneficiary of a macro trend
the transition to digital downloads
eliminating the forecasting and
manufacturing that has to happen in
packaged goods software let’s take a
look at Strauss a little bit and see
what he says about management and what
he does because it’s remarkably simple
and there’s great application for you
and me and our companies you don’t have
to be a turnaround specialist and you
don’t have to be a 2.9 billion dollar
revenue company to apply these things
very simply he says show up early work
hard
listen emphatically and we
so talks about here he talks about
working smart and he talks about being a
careful judge of talent to put the right
people around you and he says along the
way
never compromise integrity he walks into
the boardroom in oh seven and says hey
these guys lost their integrity but I
still think there’s a company here and I
want to drive it and we want to do it
and that would be the rebirth a tenure
turnaround for take two so he’s also a
patient guy probably impatient if you
work for him but he was patient to let
the turnaround do its work and very
steadily you can see it’s been
successful I know what I’m good at you
need to understand who you are if you
know you’re the product vision guy then
you know you’re going to need a good
finance partner if you know you’re a
great sales guy that understands a
market you may need a fantastic product
person it MIT what you’re good at know
what you’re good at and do that and only
that to drive the value of your company
jealously do that and only that and say
this is what I do if you’re my number
two or my number three you need to do
these things in these things and keep
this other stuff off my desk and resist
the temptation to meddle in it that’s
really what Strauss did he said I know
what I’m good at
I’m gonna hire creative geniuses
Rockstar Games has got a few of them to
case got a few of them and those
publishers and developer two visions I
don’t step in and try to run the
creative force but I do know how to put
the right people in power right people
in authority and drive the company as
evidenced here as a matter of fact take
two is actually in the Nasdaq 100 and
the S&P 500 a video game company
counting in the great indexes of the
American economy and not only being
present in those indexes take two is the
number three video game company in the
world by market cap in other words total
value this 15 billion dollar number I
mentioned who’s number one Activision
Blizzard because the leader once upon a
time Electronic Arts has dropped to
number two so here you have take to
number three and driving with great
franchises and I believe Red Dead
Redemption two by what we’ve seen on the
market and some early glimpses at the
art is a beautiful game with fantastic
game played
Amyx that I believe is going to be
another hit in the chapter for rock star
in the holding company that is take two
so that’s what I think about take two
but what do you think leave some
comments down below and share your
thoughts on the video game industry and
take two also let me know which
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studies on in the future you can also
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business doc its take-two interactive by
popular demand you asked for it and I’m
doing it where’d they come from where
are they going and how did they double
their value to fifteen billion dollars
in two short years I’m gonna tell you
how take-two interactive the videogame
holding company that we know as rockstar
and 2k games we know about the sports on
the 2k side legendary and rockstar we
know about Grand Theft Auto and Red Dead
Redemption
and by the way Red Dead Redemption 2
coming out this year in October let’s
dive into the history take two was
founded 93 by Ryan Brant and after a few
short years they actually went public on
the stock market now two things happen
when you go public now you have to
report revenue and profits every quarter
along with the story what’s called
guidance you’re guiding people and
analysts by saying things that are legal
to explain where you’re headed basically
it’s as simple as that
then analysts say whether they would buy
hold or sell your stock and it can be a
vicious cycle the reason I bring that up
is very early on we’re gonna see
controversy but not before a defining
transaction takes place a year after the
IPO in 1998 BMG BMG was part of
Bertelsmann and BMG was purchased by
take-two interactive using 1.8 million
shares of stock as currency that
currency was about 16 percent of
take-two interactive in other words they
said we want to buy BMG and we’re gonna
give up 16 percent of the company to do
so well the deal was done
that would be legendary because inside
that deal was the first title for grand
theft auto and shortly after the
purchase grand theft auto 2 was released
so you can see the momentum that came
from that franchise by the way if you
want to dive deep into rockstar games
go look at the link below for my case
study just a couple weeks ago on
rockstar games I’m not going to dive as
deep here we’re gonna focus on take to
the holding company and how they were
built but that case
I’ll let you go really deep into
Rockstar in all those titles Grand Theft
Auto 2 comes out there 98 then Grand
Theft Auto 3 and a 1 now in this
timeframe 2000 2001 there were some
things happening that were not
noticeable to the naked eye they were
manipulating sales numbers because of
the pressure they were facing on the
stock market you go public you by BMG
give up 16 percent of your company and
then you start having to make those
quarterly reports and you get pressure
and the manipulation started this was
bad news
it wouldn’t be discovered for a few
years later let’s take a look how that
played out Grand Theft Auto 3 comes out
here and the stock is still trading in
this 10 to 20 range you can go look
historically and see that it would be
stuck in that range for a while partly
because there wasn’t a real sales growth
story a margin story or a profit story
and you got to have one of those three
stories to really drive confidence in
the stock and the subsequent stock price
o 2 o 3 o 4 or 5 by City and San Andreas
come out great games the Grand Theft
Auto franchise is established along with
all the controversy so let’s take a look
at revenue over this time real quick and
point out some of the very abilities
that you see as a video game holding
company revenue was 451 and o 21.0
billion and o four and eight hundred and
fifty nine million oh six now you might
think oh sales are going down well not
necessarily game releases have a lot of
units that ship and it’s a lot of
revenue or a new console comes out
playstation one playstation two huge
transition people go out and rebuy a lot
of their favorite games used on
playstation one for playstation 2 same
thing happens Xbox 360 Xbox one ps3
everything console transition can be a
pop in units because people are rebind
their beloved titles so not everything
necessarily is bad news
the way it would be for other companies
like a Starbucks if you suddenly saw
things going down people say well these
people not drinking coffee anymore you
got a problem
so in videogames interactive
entertainment these dips are somewhat
natural as this was happening though you
always want to take a look at the Mars
so what percent of the dollars of
revenue do you keep margin was thirty
eight forty four twenty four so there’s
some variability and margin there and
you can see the stock price was just
kind of floating along all of this is
happening to show that take two really
wasn’t off to the races even no Grand
Theft Auto was a great franchise
rockstar game is doing well about this
same time they established 2k sports now
you have Rockstar and 2k as part of that
they acquired from Sega the rights to
the ESPN title on sports games so things
are now forming for take two
you’ve got two K and a bunch of great
titles featuring ESPN branding and
you’ve got Rockstar doing very well with
Grand Theft Auto so we can look back and
see the seeds of greatness were formed
with Rockstar and 2k but here we are in
a 5 with the SEC showing up because of
what you did when your company was young
well in oh six long about the end of oh
six fourth-quarter sometime Brandt says
oh I got a bad back well I must have
been the weight of the lawsuit from the
SEC and so he leaves the company and
then no7 he pleads guilty so he leaves
the company gets his house in order
decides how he’s going to plead pleads
guilty he was offered up to four years
in prison as part of the plea deal and
he said no no I’ll cooperate with you as
you’re prosecuting these other guys if
you’ll play it down and you never want
to be indicted by the SEC or have their
friends the FBI come after you because
they might offer you the prison shower
expansionpak which is a multiplayer game
you don’t want to be a part of so here
we have oh six oh seven and what happens
right there in early oh seven enter
Strauss Zelnick and Zelnick media with a
board action to come take over the
company
Strauss is Hellenic is this guy a gifted
management expert who had spent time
running a movie studio a music division
of Bertelsmann and now comes in to be
CEO of take-two interactive as I
indicated Strauss Zelnick was a gifted
leader and corporate manager he wasn’t
an expert in video games or music or
movies and he openly said so but he knew
how to have
you a talent and he knew how to drive
them and equip them to go to high
performance well he was tasked now with
turning around take-two interactive
turning around
well they closed the chapter and the SEC
investigation the founder of the company
left plead down a potential prison
sentence to performer CFO’s were also
indicted as part of this that whole
chapter is now behind them a new guy in
charge takes control of the company and
moves forward the video game industry is
a small world
people know each other and they know who
is a strong leader who is a great
developer who’s Greek creative they
understand these things and they
specifically keep their eye on producers
Electronic Arts and analyzes the playing
field and they see what’s going on with
Rockstar Games in the Grand Theft Auto
franchise
despite its controversies and they also
see the success of 2k sports well what
do they do about a year into this new
tenure with Strauss at the helm
Electronic Arts makes a takeover attempt
in February of o8 for about $25 a share
so give or take two billion dollars now
why is this significant if Electronic
Arts is successful in taking over
take-two interactive acquiring them it
effectively ends the competition in
sports because now Electronic Arts would
have Madden and the 2k franchises
leaving no real heavy hitter competitor
in the sports genre so in February of
2008 as I mentioned Electronic Arts
offers $25 per share all cash for all of
take-two interactive take 2 goes up it
pops up 25 26 dollars a share but
Electronic Arts dropped 5 percent so the
market was reacting saying whoa wait a
minute I’m not sure we want to spend 2
billion dollars on that take 2 is saying
we don’t think you’re fairly valuing the
assets and we think this is an
undervalued offer despite our history
recently with the SEC and everything
else because we have a new version of
grand theft auto coming out Grand Theft
Auto 4 on April 29th so here we are in
early 2008 with Electronic Arts saying I
want to buy it for 25 take to saying I
don’t think that’s a good enough price I
don’t think you’re valuing it and
besides GTA 4 is about to come out
nonetheless they ground through the
summer and eventually Electronic Arts
lets the offer expire in September so
let’s talk for a minute about the
competitive impact when you’re building
products you build product this year you
improve a little bit bring it out next
year wear their shoes or video games and
in the video game industry
you follow technology improvements and
new consoles to make your games better
and better and better that’s a natural
technology track where you’re just
following the technology available to
you and driving your people to do more
there’s a second driver and that is
competitive reference now competitive
reference is where you look over if
you’re Madden and you look at 2k and you
see what they’re doing with the same
platforms and engines and tricks that
those developers are doing polygon
rendering meaning making surfaces look
better making faces look more lifelike
making rain look more realistic all the
things that make Madden football and 2k
that much better every year you say wow
this keeps you looking better and better
and better on my big TV through my
console well with 2k as a competitor to
Madden yea that’s what helps Madden be
better for you and me when you get two
developers working for two publishers
driving each other to make better
features more lifelike etc etc etc you
get competition driving each other for
example Mercedes makes BMW better BMW
makes Mercedes better they’re always
looking at each other wanting to put the
better features in their cars and they
pay attention to what each other are
doing especially nowadays when there’s
so much electronics built into the
dashboard for music and other
connectivity and features to make the
car easier it’s the same thing in video
games
so if Electronic Arts had been able to
buy take 2 at this time it actually
would have reduced for a time the
competitive dynamics in video games and
sports and I believe that the future of
sports video games would have plateaued
slightly because competitive developers
is what makes games better as well as
your own developers following the
natural console transitions
and advanced technology that each new
platform offers so here’s an important
point for you and your company you can
focus on technology or focus on product
if it’s not a technology product to make
it better and better but also strong
competitors can be a gift it can be
something that helps make you better it
helps keep you honest it helps ensure
that you can’t just do the next version
and expect your customers to buy it
you’re being pushed because there’s
something you will be compared to in the
marketplace your competitor and you have
to keep yourself honest keep your
product team on us to drive hard to not
only follow natural trends in
manufacturing or technology or at ever
sector you’re in but also pay attention
to competitors to how they are building
marketing and delivering the new
products a great competitor can be a
gift so let’s go back to take two so now
you have the 2k games don’t become part
of Electronic Arts it expires in oh
eight and take two continues on its own
driven by Strauss’s Eleniak and the 2k
games keep getting better and they’re
kept honest by Electronic Arts and
titles like Madden now let’s go look at
the next transition that happened in
media around the world and what it did
to video games let’s go take a look at a
few numbers here to see how they’re
doing
from that Oh 708 time period and let’s
go forward say five years to twelve one
point two down to 359 then up to one
point one then to 825 again natural
herbs and flows of releases of new
products and console transitions where
people buy the next version for their
new console well but you can also see
right here a little bit of a peak in oh
nine take a look on 1.2 billion they had
a hundred and ninety eight million in a
beta and a forty two percent margin and
take a look at what they came up from
margin goes up a beta goes up stock
price goes up it’s a wonderful circle of
life well but they’re still in this
turnaround plan and over those next five
years you can see they were sitting in
the high 30s on margin and generating
some variable e beta one in 2013 2014
Grand Theft Auto online online and
digital downloads are now emerging and
what does that do that means that you
don’t have to manufacture all the finish
software product and that takes out raw
material costs and it takes out guessing
and forecasting how many games you’re
going to build because if you want to
sell a million at Christmas the first
thing you have to do is get a million
video games manufactured and get them on
the shelves or in the warehouses so that
Game Stop Best Buy and all stores around
the world have them available to sell
digital downloads mean when you’re ready
it’s out and you sell the expansion
packs and the add-ons via digital
download all of that came home to roost
along with the amazing success when
Rockstar releases grand theft auto 5
grand theft auto 5 is a groundbreaking
game there’s also a console transition
that helped them again go take a look at
the Rockstar case study and you’re gonna
see exactly what I mean but look at
what’s happening to take two after
spending all of this time in the 10 to
20 range with a couple little Peaks in
there suddenly from 16 to 18 they rock
it up to a hundred and thirty dollars a
share where they are as we do this in
the third quarter of 2018 and suddenly
have a valuation of fifteen billion so
this two years it all comes home
together Red Dead Redemption Rockstar 2k
hitting on all cylinders look at what
starts happening the margin twenty six
forty two forty two forty two forty nine
suddenly heard a fifty percent gross
margin the first time ever in their
history that they’ve cracked fifty
percent gross margin they’re also
suddenly in the 1.7 1.8 billion dollar
revenue range and turning in very strong
ebody trader ins twenty six million five
hundred and thirty million it’s all
coming together and what does that do to
market cap there’s only one word for
that that is damn it’s a fifteen billion
dollar company now doubling in a few
short years and with a forecast for 2019
that they will be at 2.8 billion and
they will be in excess of fifty percent
margin all of that comes home to see
that you have now got a company that is
fully turned around has been led by
Strauss’s Allen a
and is driving also this year there’s a
lot of hype and anticipation in the
stock price as well that’s called
speculative forward pricing because Red
Dead Redemption 2 is going to come out
in October of this year as I mentioned
take-two interactive is actually a
holding company that contains developers
and publishers the footprint around the
world is pretty impressive let’s take a
look on the publishers side we start
with 2k play 2k games and 2k sports all
are based in Novato California we have a
private division in New York City and
the legendary Rockstar Games publisher
additionally in Barcelona Spain they
have published her social point so who’s
making the games for these publishers
the developers let’s start with 2k games
two day games first truly global
footprint and Chengdu China to teach and
ooh then 2k Marin is up in the bottle
California 2k baguette scratch this game
since parts Merlyn go Story games
Westwood Massachusetts and hangar 13
also in a battle California cat daddy
games in Kirkland Washington visual
concepts up in Nevada California
rockstar games and rock stars around the
world whether it’s the rock star rage
engine first rockstar India in Bangalore
India Rockstar Leeds in England Rockstar
Lincoln in England Rockstar London
anyone Rockstar New England and Ballard
Vale Massachusetts then we go back to
Rockstar North in Edinburgh Scotland
Rockstar San Diego in Carlsbad
California and Rockstar Toronto in
Oakville Ontario that’s the global
footprint underneath take-two
interactive the holding company Rockstar
2k as publishers located around the
world and an amazing global footprint of
developers building everything from the
game engines to the title themselves so
as you can see it all comes together
Strauss zelich’s turnaround is complete
he’s got a fantastic team he’s got
rockstar and 2k hitting on cylinders and
they’re the beneficiary of a macro trend
the transition to digital downloads
eliminating the forecasting and
manufacturing that has to happen in
packaged goods software let’s take a
look at Strauss a little bit and see
what he says about management and what
he does because it’s remarkably simple
and there’s great application for you
and me and our companies you don’t have
to be a turnaround specialist and you
don’t have to be a 2.9 billion dollar
revenue company to apply these things
very simply he says show up early work
hard
listen emphatically and we
so talks about here he talks about
working smart and he talks about being a
careful judge of talent to put the right
people around you and he says along the
way
never compromise integrity he walks into
the boardroom in oh seven and says hey
these guys lost their integrity but I
still think there’s a company here and I
want to drive it and we want to do it
and that would be the rebirth a tenure
turnaround for take two so he’s also a
patient guy probably impatient if you
work for him but he was patient to let
the turnaround do its work and very
steadily you can see it’s been
successful I know what I’m good at you
need to understand who you are if you
know you’re the product vision guy then
you know you’re going to need a good
finance partner if you know you’re a
great sales guy that understands a
market you may need a fantastic product
person it MIT what you’re good at know
what you’re good at and do that and only
that to drive the value of your company
jealously do that and only that and say
this is what I do if you’re my number
two or my number three you need to do
these things in these things and keep
this other stuff off my desk and resist
the temptation to meddle in it that’s
really what Strauss did he said I know
what I’m good at
I’m gonna hire creative geniuses
Rockstar Games has got a few of them to
case got a few of them and those
publishers and developer two visions I
don’t step in and try to run the
creative force but I do know how to put
the right people in power right people
in authority and drive the company as
evidenced here as a matter of fact take
two is actually in the Nasdaq 100 and
the S&P 500 a video game company
counting in the great indexes of the
American economy and not only being
present in those indexes take two is the
number three video game company in the
world by market cap in other words total
value this 15 billion dollar number I
mentioned who’s number one Activision
Blizzard because the leader once upon a
time Electronic Arts has dropped to
number two so here you have take to
number three and driving with great
franchises and I believe Red Dead
Redemption two by what we’ve seen on the
market and some early glimpses at the
art is a beautiful game with fantastic
game played
Amyx that I believe is going to be
another hit in the chapter for rock star
in the holding company that is take two
so that’s what I think about take two
but what do you think leave some
comments down below and share your
thoughts on the video game industry and
take two also let me know which
companies you’d like to see me do case
studies on in the future you can also
find me on social media I am simply Tom
Ellsworth at Facebook or Twitter and I
am elsewhere Thomas at Instagram and
just Thomas Ellsworth over on LinkedIn
so connect with me I want to hear from
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