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Grand Theft Auto V, with nearly 52 million units sold, is one of the most successful games ever made, helping game maker Take-Two Interactive wrap up another strong fiscal year.
The company reported fourth-quarter earnings Monday that handily beat Wall Street estimates fueled in part by sales of the crime game that lets players perform a dizzying array of criminal and noncriminal activities in a photorealistic recreation of Los Angeles.
The game, known as GTA V, has an online component that allows players to spend real money on in-game currency, which helped drive Take Two's sales last quarter. The company says Internet sales of items like in-game currency, additional storylines and other add-ons grew 66 percent to $202.5 million compared with the same period last year, representing 47 percent of its quarterly revenue.
GTA V was a historic release in the games industry. Take-Two subsidiary Rockstar Games, which develops Grand Theft Auto, was able to release it not just once, but three different times on three different platforms. That helped the title rack up record sales over the course of the last two years. GTA V was the fastest-selling game ever when it first came out in November 2013, earning $1 billion in its first three days of release.
Yet Take-Two's short-term future now rests on what it can produce in the years until the next GTA release. Like other large games makers such as Electronic Arts and Activision Blizzard, Take Two's business is shifting to software sold over the Internet instead of titles burned to discs and sold at retailers. Video games, instead of becoming one-time purchases, are being treated more as online services that persist for months and even years while gamers make incremental purchases for add-ons that keep the experience fresh.
But Take-Two lags behind its competitors in making that digital shift. Internet sales accounted for only 37 percent of last year's annual revenue. A significant portion of its retail sales came from GTA V. In comparison, EA's online sales were 51 percent of total revenue, while Activision's sales online were 76 percent of its annual total.
Without a broad variety of annual sports franchises like EA or a blockbuster shooter game like Activision's Call of Duty, Take-Two must rely on updates to its current roster of games. That is inherently less profitable than a new game release every year.
The company does have new games on the horizon. Take-Two is prepping two annual sports releases to its NBA 2K basketball and WWE wrestling franchises for the fall. More weight, however, is being thrown behind Battleborn, a new first-person shooter game set to release before the end of next year. The company also has an unannounced title it may unveil at the Electronic Entertainment Expo, the year's biggest video game confab in Los Angeles next month.
The company's last original release, monster-hunting shooter Evolve, has sold 2.5 million copies to date and is expected to see updates in the future. Take-Two has yet to specify future updates to Grand Theft Auto V.
For the fourth fiscal quarter, Take-Two reported sales of $427.7 million, up almost 83 percent from the year-ago period, after adjustments for deferred revenue and other items. The company said profit was 49 cents a share, up from 21 cents a share a year ago.
Analysts had expected 27 cents a share on sales of $459 million, according to surveys by Thomson Reuters.
For the fiscal first quarter of 2016, Take-Two anticipates profit between 25 to 35 cents a share on sales of between $325 million to $350 million, after adjustments. Analysts on average estimate a loss of 2 cents a share on sales of $197 million.
For the full year, Take-Two forecasts sales of between $1.3 billion and $1.4 billion and annual earnings of 75 cents to $1 per share.
Despite the drop in sales, investors were pleased with Take-Two's performance and forecast, sending shares up nearly 6 percent in after-hours trading. The company's stock has fallen 13.7 percent this year after hitting an all-time high of $29.86 in January.
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