Greetings, and welcome to the Take 2 Interactive Software 4th Quarter Fiscal Year 2019 Earnings Call. At this time all participants are in a listen only mode. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Hank Diamond, Senior Vice President of Relations And Corporate Communications. Thank you, sir.
You may begin.
Good afternoon. Welcome and thank you for joining TakeTo's conference call. To discuss its results for the fourth quarter fiscal year 2019 ended March 31, 20 18. Today's call will be led by Strauss Zelnick, Take 2's Chairman and Chief Executive Officer. Carl Slater for our President and Lainie Goldstein, our Chief Financial Officer.
We will be available to answer to remind everyone that statements made during this call that are not historical facts are considered forward looking statements under federal securities laws. These forward looking statements are based on the beliefs of our management as well as assumptions made by and information currently available to us. Have no obligation to update these forward looking statements. Actual operating results may vary significantly from these forward looking statements based on a variety of factors. These important factors are described in our filings with the SEC, including the company's most recent annual report on Form 10 K and quarterly report on Form 10 Q, including the risks summarized in the section entitled Risk Factor I'd also like to note that unless otherwise stated, all numbers we will be discussing today are GAAP, all comparisons are year over year.
Additional details regarding including the items that our management uses internally to adjust our GAAP financial results in order to evaluate our operating performance. In addition, we have posted to our website a slide deck that visually presents results and financial outlook. Our press release and filings with the SEC may be obtained from our website at ww. Take2games.com. And now, I'll turn the call over to Strauss.
Thanks, Hank. Good afternoon, and thank you for joining us today. Take 2 finished a stellar year with strong 4th quarter operating results highlighted by the outperformance of Grand Theft Auto and NBA 2 K19 and significant ongoing sales of our blockbuster hit, Red Dead Redemption 2. For the full fiscal year, we generated record net bookings and adjusted operating cash flow, which exceeded our outlook at the start of the year, along with strong earnings growth driven by the record breaking launch of Red Dead Redemption 2 the outstanding performance of NBA 2K and better than expected results from Grand Theft Auto Online and Grand Theft Auto V. Our industry leading basketball series continues to expand its audience and underscores an NBA 2K has been the perennial favorite among both basketball and pop culture fans for more than a decade.
During the fourth quarter, net bookings growth from NBA 2k19 exceeded our expectations, driven primarily by strong recurrent consumer spending. To date, NBA 2k19 is sold in more than 9,000,000 units. During the fourth quarter, recurrent consumer spending on NBA 2k grew 79% and for the full fiscal year, grew 45%. In both periods, recurrent consumer spending on NBA 2k reached a new record and was the single largest contributor to that part of our business. Over the past year, we've seen a substantial increase in average games played with NBA 2k19 outperforming its predecessor by over 20%.
In addition, during robust content schedule. Record recurrent consumer spending. The NBA 2k brand continues to expand across a myriad of offerings, and we believe there remains a substantial worldwide growth opportunity for the series. Turning to Rockstar Games' phenomenal hit Red Dead Redemption 2 continues to generate significant sales and to date has sold in more than 24,000,000 units worldwide. The title remains tied with Grand Theft Auto Five as the highest rated game on PlayStation 4 and Xbox 1 with a 97 Metacritic score.
Furthermore, Red Dead Online is poised for success and net bookings grew sequentially in the fourth quarter. Rockstar Games continues to update the beta with a wide array content as well as gameplay balancing and bug fixes. We expect Red Dead Online to exit the beta period during the current quarter with significant new content to follow. We're as excited as ever about the long term opportunity for Red Dead Online. Nearly 6 years after their launch, both Grand Theft Auto Online and Grand Theft Auto 5 continue to be significant contributors to our results.
During the fourth quarter, net bookings from Grand Theft Auto Online grew sequentially and exceeded our expectations. Sales of Grand Theft Auto V also outperformed and the title is now in almost 110,000,000 units, cementing further its standing as the must have title of the current console generation. Throughout fiscal 2019, Rockstar Games supported Grand Theft Auto Online with an array of new content, highlighted by the after hours and arena award updates. It bears noting that Rockstar's flagship games continue to drive exceptional engagement and results. Grant Theft Auto5 and Red Dead Redemption 2, including their online games, had almost 90,000,000 unique player accounts in fiscal 2019 alone, Life to date, more than 200,000,000 unique players accounts have registered in Rockstar Games social club platform, as having to keep players engaged and drive player growth over time.
Our fiscal 2019 results were also enhanced by a variety of other offerings, led by WWE 2K and WWE SuperCard, Social Point's mobile games, NBA 2k18, and Sid Meier Civilization VI. In particular, Civilization VI significantly outperformed our expectations due to the popularity of the Nintendo Switch SKU and the titles expansion packs. Take 2's core tenets are to be the most creative, innovative and efficient enterprise in the entertainment industry, With respect to the first two, one of the key drivers of success is our proven ability to sustain long term engagement with our titles well after their initial launch. As a result, we've generated summer spending exceeded our expectations, growing 20% to a new record and accounting for 39% of total net bookings. In addition to virtual currency for MDA 2K, Grand Theft Auto Online And Red Dead Online, recurrent consumer spending was enhanced by a variety of other offerings.
In the free to play category, Social Point remains a meaningful contributor to our results through its 2 biggest mobile titles: Dragon City and Monster Legends. During the fourth quarter, our Barcelona based studio launched Tasty Town, a new game within the popular restaurant category. And just last week, they launched Ward Life which Carl will discuss. Net bookings from Social Point grew sequentially in the fourth quarter. The studio is working hard on its exciting development pipeline, including more SuperCard grew 13% net of platform fees.
During the past fiscal year, 2K released the 5th season of its popular card battle game and several content updates. WWE SuperCard has now been downloaded more than 19,000,000 times and remains 2K's highest grossing mobile title. And recurrent consumer spending on NBA 2k Online in China exceeded our expectations, growing 74% driven by the launch of NBA 2k Online 2 last August. Total combined registered users for NBA 2k Online 2 and its predecessor currently stand at $45,000,000, and the franchise remains the number one PC online sports game in China. Asia and China, in particular, continues to be a significant long term growth opportunity for our business.
In fact, NBA 2k19 for PlayStation 4 was just approved for release in China. Lastly, add on content was a meaningful contributor led by offerings for Sid Meier's Civilization, EXCOM II and WWE 2K19. During the fourth quarter, Firaxis Games released Sid Meier Civilization VI Gathering Storm, which is the largest and most successful add on content in the history of the Sid Myers extremely proud that Take 2 remains the home for our industry's most creative and passionate talent. Their vision and ability to captivate and engage audience around the world across an array of platforms and offerings, both redefined the possibilities of interactive entertainment and forms the foundation for our continued success. This is an incredibly exciting time for our industry with new technologies that enable our teams advanced interactive entertainment, emerging distribution and business models that expand our audience, and the proliferation of communities that participate in or watch connected play.
Take 2 is exceedingly well positioned creatively, strategically and financially to capitalize on its fast decent to continue to deliver growth and returns for our shareholders over the long term. I'll now turn the call over to Carl.
Thanks, Strauss. I'd like to begin and superb financial results for our organization. Tire Organization to achieve these results. I'm immensely proud of and grateful for our thousands of colleagues around the world who each played a role in company's outstanding performance. Turning to our recent and upcoming releases.
On April 3, to celebrate the announcement of Borderlands 3, 2K and gearbox software released the Borderlands Game of the Year edition for PlayStation 4, Xbox 1, and PC. Boardlands game of the year edition features all new Ultra HD visuals, significant gameplay improvements, and all 4 originally released add on packs. Players who previously enjoyed Borderlands can import their safe progress and pick up exactly where they left off, all in stunning HD. Player should also keep an eye out for new loot drops that include rare weapons and Vault Hunter heads. In addition, gearbox and 2K released the Borderlands Ultra HD Texture pack, increases the visual fidelity of Borderlands at the Anthem Collection on consoles and provides a visual upgrade for Borderlands 2, Borderlands the pre sequel and all the add ons for both titles on PC.
On April 17, 2K and Cat Daddy Studios launched NBA 2K Mobile for Android devices. Downloadable for free, NBA 2K mobile was released for iOS last fall and delivers console quality graphics and lifelike NBA 2K action on the go. NBA 2K Mobile lets gamers experience their favorite NBA moments, collect player cards to build dream teams, and step onto the court in 5 on 5 matchups. On May 9, Social Point launched Wordlife, our free latest free to play mobile offering for iOS and Android devices. Wordlife is an easy to play game that is filled with thousands of levels and many innovative game modes.
Worldwide brings a new dimension to traditional word puzzle games, boasting a multiplayer mode through which players can battle with words in exciting matchups. On September 13th, 2K and gearbox software will launch Borderlands 3 globally for PlayStation 4, Xbox 1, and PC. Borderlands 3 is a hilarious story driven nonstop galactic thrill ride, filled with colorful characters, epic enemies, and literally billions of guns. Franchise, which combines the exhilarating action of a first person shooter with a rich progression in loot systems of a role playing game, has sold in more than its worldwide to date. Borderlands 2 has sold in 20,000,000 units to date, and more than 6 years after release still draws in over 1,000,000 unique monthly users.
The 2 day event in Los Angeles on April 30, and May 1st. 2k and Gearbox software hosted more than 600 global media and live streamers at the Borderlands 3 worldwide gameplay reveal. The event resulted in an overwhelmingly positive reception with media praising the game for its over the top action and gameplay amazing loop, stunning art style, compelling characters, and evolved approach to progression. IGM wrote, Borderlands 3 has not lost its unique sense of style or humor over the last 5 years since the pre sequel. It's funny and silly cartoonish sort of way, which is a breath of fresh air in a genre that typically takes itself, perhaps a little too seriously.
Additionally, destructoid wrote, gearbox amplifying what made Borderlands special a decade ago seems to have molded Borderlands 3 into a game that will be worth playing all these years later. During the live stream event of the presentation, Borderlands 3 was the number one game on Twitch, amassing nearly 12,000,000 unique views and over 1000000 hours watched in a single day. Next month, 3 in Los Angeles, Borderlands 3 will have a massive presence at our booth, including a 100 seat demo theater and 100 gameplay sations, showing new content and giving thousands of fans, media and live streamers the opportunity to experience the game firsthand. Also, this fall, 2K will launch new installments of our highly successful annual sports franchises with the releases of NBA 2k20 and WWE 2k20. As always, the development teams behind these games are hard at work to deliver our trademark array of exciting new features and innovations that keep players coming back year after year.
2K will have more to share about these titles in the coming months. Later this calendar year, private division will launch 2 new IPs for PlayStation 4, Xbox 1, and PC. The Outer Worlds and Ancestors, the humankind and Odyssey. Developed by Obsidian Entertainment, the Outer Worlds marks the reunion of Tim Caine and Leonard Boiarski, the original creators of Fallout, who are introducing an entirely new single player sci fi RPG experience. Outer Worlds will be showcased behind closed doors at e3 for select media and influencers, and more details about the game will be revealed over time.
Last month, private division hosted press events for Ancestors, the humankind Odyssey, where attendees got to play the game and meet its creator at Panache Digital Games, including the studio's co founder, Patrice Desile, who was the original creative director of Assassin's Creed. The Press's initial reaction was extremely positive. According to IGN, Ancestors is an intriguing mixture of raw survival and community shaping that fascinating. And Germany's Game Star said, if Ancestors to humankind Odyssey is able to maintain this strong atmosphere in the final game over its entire duration a remarkable journey back to our origins awaits us. In addition, the Private Division recently announced that Kerbal Space Program breaking ground The second expansion pack for the PC version of Kerbal Space Program will launch on May 30.
We're pleased to expand our offerings for Kerbal Fran which to support our titles with innovative post launch content that drives engagement and recurrent consumer spending, including many more updates for Red Dead Online and Grand Theft Auto Online. Turning to Esports, the 2nd season of the NBA 2 K League, our joint venture with the NBA is currently underway with 21 teams participating, up from 17 in season 1. On March 5th, the 2019 draft was held at the Barclay Center of Brooklyn, New York. 75 players were selected by the 21 teams, including the first woman ever to be drafted into the league. The 198 players in the draft pool included 22 international players from 9 countries.
On April 2, Season 2 kicked off with a roster of new sponsors, such as AT and T, Champion Athletic Wear, Rain gaming and Stance, as well as returning brands, including Dell and Intel. In addition, the league announced that YouTube will join Twitch as a live stream partner for all of the games this season, including more than 2 30 regular season, tournament, playoff, and finals games combined. Last week, the league held its 2nd tournament of the season, the turn powered by AT and T at the Hyper X Esports arena in Las Vegas at the Luxor Hotel And Casino. Marking the first time games were held outside of New York. We are very excited about the continued progress and growth of the league, which has the long term potential to enhance engagement and to be a driver of profits for our company.
Take 2 will have an expanded presence at E3 next month. In addition to showing Borderlands we will hold business development, investor relations, media and sales meetings throughout the conference. Looking ahead, we are heavily in opportunities to expand our creative teams and grow our scale, increase our presence in mobile and exploring emerging distribution channels and business models, such as streaming and free to play. We will continue to focus on delivering the highest quality interactive entertainment and to seek new and innovative ways enhance players' experience with our games and drive long term engagement. The execution of this strategy will provide value to our customers and generate growth and profits over the
and then review release. Strauss mentioned we finished an outstanding year with strong 4th quarter operating results. For the full fiscal year, we generated record net bookings and adjusted operating cash which exceeded our outlook at the start of the year along with strong earnings growth. Starting with the 4th quarter, total net bookings grew 19% to $488,000,000 as compared to our outlook of $450,000,000 consumer spending grew 27% and accounted for 62% of total net bookings as compared to our outlook for 10% growth. Recurring consumer spending exceeded our outlook due primarily to the outperformance of Grand Theft Auto Online and NBA 2K.
Dichely delivered net bookings grew 26% and accounted for 86% of the total as compared to our outlook of 10% growth. This result exceeded our outlook due to the outperformance of recurrent consumer spending and a higher than expected mix of digitally delivered full game sales. During the fourth quarter, 57% of sales of current generation console games were delivered digitally, up from 44% last year. Turning to some details from our 4th quarter income statement. GAAP net revenue grew to $539,000,000 and cost of goods sold increased 259,000,000 dollars.
Operating expenses increased by 20 and stock based compensation and GAAP net income was $57,000,000 or $0.50 per share as compared to $91,000,000 or $0.77 per year in fourth quarter of fiscal 2018. Turning to our fiscal 2019 results. Total net bookings grew 47 percent to a new record of $2,930,000,000. Launch of Red Dead Redemption 2, coupled with strong growth from NBA 2K. Recurrent consumer spending grew 20% to a new record and accounted for 39 percent of total net bookings.
Digitally delivered net bookings grew 33 percent to a new record of $1,800,000,000 and countered for 62% of the total. During fiscal 2019, 38% of sales of current generation console games were delivered up from 34 $15,000,000. This metric fell short of our outlook by about $25,000,000 due to the timing of tax payments. During fiscal 2019, we spent $67,000,000 on capital expenditures and deployed $362,000,000 of our dollars balance was over $1,570,000,000. Turning to some details from our fiscal 2019 income statement.
GAAP net revenue grew to $2,670,000,000 and cost of goods sold increased to $1,500,000,000. Operating expenses increased by 24 percent to $938,000,000 due primarily to higher marketing, personnel and R and D costs. And GAAP net income increased to $334,000,000 or $2.90 per share. GAAP net income included $107,000,000 tax benefit resulting from the release of certain valuation allowances on the company's deferred tax assets. This had no effect on our management reporting tax rate, which was 20%.
Today, we gave a strong initial outlook for fiscal 2020, with operating results currently expected to be lower than redemption 2 and growing as compared to fiscal 2018. Importantly, fiscal 2020 will be a year of significant investment in R&D in should enable us to scale further our long term release slate. Starting with this fiscal first quarter, we predict net bookings to range from $310,000,000 to 3 $60,000,000, up from $288,000,000 in the first quarter last year. This increase is being driven primarily by and ongoing south of Red Dead Redemption 2. The largest contributors to net bookings are expected to be NBA 2k19 Grand Theft Auto Online Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, the Borderlands franchise and Social Point's mobile offerings.
We project recurrent consumer spending to grow by more than 20%. This growth is expected to be driven by NBA 2k and Red Dead Online, partially offset by lower results, Grand Theft Auto Online. We also expect digitally delivered net bookings to increase by more than 20%. Our forecast assumes that 70% of our generation console game sales will be delivered digitally, up from 53% in the same period last year. We expect GAAP net revenue to range from $485,000,000 to $535,000,000 and cost of goods sold to range from $165 to $191,000,000.
Operating expense are expected to range from $246,000,000 to $256,000,000. At the midpoint, this represents a 35% increase over last year. Driven primarily by higher marketing expense and R and D costs. And GAAP net income is expected to range from 74 to 80 $1,000,000 or $0.65 to $0.75 per share. For management reporting purposes, we expect our tax rate to be 17% throughout fiscal 2020.
This is lower than our prior management reporting tax rate of 20% as result of completing our analysis of the Tax Cuts and Jobs Act of 2017, as well as incremental R and D tax credits. Turning to our outlook for the full fiscal year. We project net bookings to range from $2,500,000,000 to $2,600,000,000. We expect Red Dead Online, NBA 2k, and WWE 2k to grow, offset by lower results from Red Dead Redemption 2 and Grand Theft Auto Online and Grand Theft Auto 5. The largest contributors to net bookings are expected to be NBA 2K, Red Dead Redemption 2, Red Dead Online, Borderlands 3, Grand Theft Auto Online and Grand Theft Auto 5, the Outer Worlds and WWE 2K.
We expect the net bookings breakdown from our labels to be roughly 60% 2k, 30% Rockstar Games, and 10% private division, Social Point, and other. And we forecast our geographic net booking split to be about 65% United States and 35% international. Expect recurrent consumer spending to increase in the low single digits, driven primarily by growth from NBA 2K, Borderlands 3 and Red Dead Online, par actually offset by lower expected results from Grand Theft Auto Online. We project digitally delivered net bookings to grow in the low double digits. Our forecast assumes 49% of current generation console game sales will be delivered digitally, up from 38% last year.
To generate more than $450,000,000 in adjusted operating cash flow, and we plan to deploy approximately $90,000,000 for capital expenditures. This increase is primarily due to spending on new studio and office build outs, network security and IT. Expect GAAP net revenue to range from $2,700,000,000 to $2,800,000,000 and cost of goods sold to range from 1.24 $1,290,000,000 at the midpoint, this represents a 14% increase over the prior year, driven primarily by higher marketing expense and R and D costs. And we expect GAAP net income to range from $389,000,000 to $418,000,000 or $3.39 to $3.65 per share. In closing, fiscal 2019 was an incredible year for Take 2.
Our ability to deliver consistently the highest quality entertainment experiences that drive mass consumer engaged was reflected in our achievement of a record operating results. We have the strongest development pipeline in our history, including sequels from our biggest franchises, along with exciting new IP. In addition, we are actively investing in emerging opportunities, such as private division, mobile games, esports, and geographic expansion. That have the potential to be enormous drivers of growth. We are extremely well positioned to generate significant growth and margin expansion over the long term.
Thank you. I'll now turn the call back to Strauss.
Thanks Lainie and Carl. On behalf of our entire management team, I'd like to thank our colleagues for their hard work and for delivering an outstanding year. To our shareholders, I
Thank Our first question comes from the line of Tim O'Shea with Jefferies. Please proceed with your question.
Yes. So thank you for taking my question. My question is about how you think about the free to play model. You've obviously had great success selling gains for full price. I mean, think Strauss mentioned 110,000,000 units of GTA 5, 24,000,000 units of Red Dead, but But for services like Red Dead Online, it seems like a large audience is key.
I'm curious that there's a point where these services could be decoupled from the full price version of the game. So player still purchase Red Dead for 60 bucks but could play Red Dead online for free. Just love to hear any thoughts on free to play. Thank you.
Well, I think it's a great question. And clearly, when you have the right title like a Fortnite or Apex Legends, free to play can be a powerful model. We also have some great free play games, NBA 2K Online in China with 45,000,000 registered users and recurrent consumer spending was up over 70 in the fiscal year. So we've and WWE SuperCard has been downloaded over 19,000,000 times, and that's up net of platform fees. I think they're 18% in the fiscal year.
So we have numerous games here that are free to play. Social Point's entire business is a free to play business. That said, I don't really see the business transitioning to a free to play model, primarily because the hit ratios are so very low. And the hit ratios for our core business are exceedingly high because of our attention to quality or at least that's what we attribute it to, something like 80 plus percent hit ratios. Pretty unheard of in the entertainment business, broadly.
In terms of your, your broader question, which is you imagine a situation where in maturity, you decouple one experience from another. I think the answer is we tend to be very flexible business models over time. And we want to be where the consumer is. Those business model decisions when they with regard to a particular title are driven by our labels, although So we all have pretty tight knit groups consult with one another, but you'd want to look to our labels for any updates on how business models might shift. I think the answer is we're open minded.
We want to deliver to the consumer on an ongoing basis.
Thanks.
Thank you. Our next question comes from the line of Mike Olson with Piper Jaffray. Please proceed with your question.
Hey, good afternoon. I realize you let Rockstar speak for itself related to new content, but just conceptually, can you say if it would make sense to see a content drop of some sort that's coincident with the timing of Red Dead Online coming out of beta? Or should we, I guess, not assume that that's the case? And then second, industry chatter suggests that next gen consoles are coming late next year. Do you think about timing of release of titles at least the non annual lease release titles at all related to the timing of console releases or is that just not a consideration relative to your new release schedule?
Yes, thanks for your questions. Roxar has said that Red Dead Online will be coming out of beta in the current quarter and there's content to come on an ongoing basis, including when it comes out of, beta. So I think we have very high expectations for that title forward. And I would observe that if you compare how Red Dead Online is doing at this stage of the game in terms of the initial release and the movement into beta, Red Dead Online is performing better than Grand Theft Auto Online did at the same stage of the game. So we have terrific expectations as as does, everyone in the company.
And of course, the folks at Rockstar feel great about the upcoming content drops. In terms of next gen consoles, offerings are coming and that would inform our decision making around releases. We don't really see, the next generation is being particularly disruptive because technology is pretty, fluent, or we're pretty fluent with technology at this point. So the last time we had a cycle that was challenging, I think, for us, for the industry was not this past one. It was a one before where a couple of companies really landed in trouble.
And that historically had been case for the interactive entertainment business. That didn't happen in this past, console shift, and I don't expect it'll happen here. So the answer is, of course, we'll be mindful of the change. It wouldn't be determinative of what we would do.
Thank you.
Thank you. Our next question is from the line of Evan Wingren with KeyBanc. Please proceed with your question.
Thank you. Just wondering if you could provide context on your Borderlands expectations that you've initially embedded within guidance and perhaps versus the prior game or however you'd like And second, if you could just remind us, how the margins of of of a licensed title like that might compare to some of your internally developed titles, that would be helpful.
We're not providing sales estimates with Borderlands 3, but it's always our goal to grow sales with each new release from our fees. Borderlands 2 launched in September of 2012. And by the end of October of 2012, we announced that we had sold in more than 5,000,000 units. And then on our 29, 2013, a year later, we announced we had sold in more than 7,500,000 units. And to date, Borderlands 2 is sold in the early 20,000,000 So for Borderlands 3, we have really high expectations and we're really excited about the title.
In terms of the margins on Borderlands rate compared to our other titles, it's in line with our internally developed titles.
And just to clarify, is that on an EBIT base or is that a gross margin basis or how would you characterize it?
It's on both. It's on both basis.
Great. Thank you.
Thank you. Our next question is from the line of Mike Ng with Goldman Sachs.
Thanks. I have a few. Strauss, could you just talk about your view and willingness to participate in a third party video game subscription product And then separately, what's your philosophy for developing for issuing products like Google Sadia? It seems like there's a long term opportunity there to create larger and more powerful gains, but it seems like it could still be early days. And I have a quick follow-up.
Yes. On subscription services, we're open minded. We want to be where the consumer is. We also have to be in a place where it makes sense for our creative folks and for our share holders. So you need to find that intersection in business models that serve the customer successfully and also serve everyone else who's participates in the value chain.
And that may prove to be a little, challenging for subscriptions in this space because I think people will consume people do consume video games differently than than they consume linear entertainment. Just put in context, American households consume on about 5 hours a day of linear programming, about 150 hours a month. And about an hour a half a day of interactive entertainment, so 45 hours a month. And if you watch, a half hour show or an hour show or 2 hour movie, you tend to watch it once unless you're a kid who may watch things multiple times. Which implies a whole lot of products consumed in a month.
So you could imagine, and all you could eat offering or offerings would be appealing to consumers. The case of video games, it's possible that an average user in those 45 hours might be playing 1, 2, maybe 3 titles, certainly not seventy titles. And so in that event, if you play 1, 2 or 3 titles and you play them for months in a row, which often happens in our world, then a subscription model may not be such a great deal for the customer. So this all remains to be seen. And again, we're open minded.
We want to be where the customer is. But I don't think it's foregone conclusion that subscription will be, will be as entertainment. It just has proven to be for music and motion pictures and television. But we'll see. With regard to streaming, technology and what it could mean for us.
We're very optimistic about the notion of, of streaming technology, bringing our titles to consumers who currently don't have access to them. The promise of being able to sign on to a service, you know, with virtually no barriers without a box in between and to be able to play our games on any device whatsoever around the world and to do with low latency. Well, that's that's very compelling if that can be delivered. And, and, the folks at Google minimally have said it will be delivered and will be delivered in relatively short order. Conceptually, we, we want to be where the consumerism will support new entrants.
And we are a believer in streaming services. Again, need to have business models that make sense for us. So far, we're pretty optimistic.
Great. Thank you. And I just had a housekeeping question around RCS. So a 20% growth outlook for the first quarter, low single digits for the year. What can you tell us about the comps in there in the rest of the year that gets us to low single digits?
What's flowing? Thank you.
Yes. So as we mentioned on Grand Theft Auto Online, is going to be lower, throughout the year. And we have growth for NBA 2K and for Red Dead Online. And then we'll also have recurrent consumer spending for Borderlands towards the end of the year.
Thank you. Our next question is from the line of Eric Handler with MKM Partners. Please proceed with your question.
So you talked about a significant increase in R And D costs as you continue to invest in your pipeline. I wondered if you could maybe talk directionally about releases in terms of, are we at point where we might be seeing 2, 2 K releases a year, a couple private label or private business releases a year and, you know, a rock star release once every other year, but maybe you can give a little bit of color around that?
Hi, it's Carl. So yeah, our R and D expense spending is definitely And we said it many times before, one of our biggest priorities is building scale in the organization. And we specifically want to do that through our organic initiatives. And all of that is reflected on higher R and D. In terms of what you're going to see in the pipeline, it really is all over the entire company.
We've got new investments at that social point. We've got new investments private division. You're already seeing, 2 new titles coming out in this coming fiscal year in private division. So obviously, the pace is starting to pick up, in there. There is also a lot of investment at the 2 K level.
Michael Condrey is coming on board. We haven't said much about that game yet because it's very early, but it stands to reason that we're not just investing to invest for years years years without actually getting the releases coming out. You will expect to see. These investments coming to fruition over the next few years. So I think you will in fact see the velocity pick up on this.
Exactly what that means. I can't tell you right now, but tell you that there's certainly a lot of titles in the pipeline.
Okay, great. Thank you very much.
Thank you. Our next question comes from the line of Drew Crum with Stifel. Please proceed with your question.
Okay, thanks. Good afternoon guys. Maybe you could start by talking about me's decision to do a timed exclusive on Epic's game store with Borderlands 3 in addition to the private division games. And then separately, Lenny, I just want to make sure I'm interpreting your commentary on guidance correctly. You're suggesting that recurrent consumer spending will be up low single digits GTA online will be down.
Can we assume then that Rockstar Online will be down for the fiscal year versus 2019? Thanks.
So Rockstar Online, the two games together, will be will be slightly down over this year, but the plan is for the 2 together to be growing over the long term.
Okay, got it.
And in terms of supporting the Epic Game store, look, we think, as I said earlier, more distribution is a good thing. And, while it's rare that we'll do exclusive for any period of time. We'll continue to support Steam with our title, with catalog, and these titles will be going to Steam relatively quickly after their initial availability exclusively on the Epic Game store.
Okay. Thanks guys.
Thank you. Our next question comes from the line of Ben Shacker with Macquarie Group. Please proceed with your question.
Hey guys, a few if I could. First, I noticed in the prepared comments, when you're talking about investing in mobile, you're using the word mobile and not just social point. So beyond the usual non social point stuff like WWE, are you broadening investment in mobile at Rockstar and 2K? And then separately, Strauss, any thoughts on what's going forms for Google, from Google or for others. And then just to clarify, when you talk about ramping the R and D spend, I'm a little confused on how that works relative to R and D spend being capitalized versus flowing through.
Can you help me understand that? Thanks.
Hey, Carl. In terms of mobile strategy, yes, obviously, we are investing in Social Point new IP and social point and also around their existing games. So that is one component of our mobile strategy. We continue to outside of Social Point. Obviously, Social Point is a significant part of our strategy going forward.
But we have been investing in parts of the company at Rockstar and at 2 K, all along. Certainly with a, with 2 K, with with the, with WWE SuperCard, the idea bring our current franchises into mobile environments. And we really do that by coming up with new games. SuperCard is one example of that, bringing our existing titles onto platforms, for the, for those titles that can actually be played on those platforms from a technological perspective and also companion apps. We've had a number of titles that have at that have companion offerings that can be played alongside of our, our main games.
So we've been doing that all along, and I think you can expect us to continue to do that and invest towards that but a huge part of our strategy, obviously, is social point.
Yes. And turning to your question about China, you know, without regard to the most recent news about tariffs, we remain very optimistic about the opportunities in China. We obviously have a big title there with NBA 2K Online 2 in China with 45,000,000 registered users. We just received approval for the NBA title, Piana, and PS4 is great news. So the approvals have restarted.
We've partner in Tencent. We have other partners there as well, and we think it's a big and growing market. I think like everyone else, we feel it's important to have an appropriate resolution on trade with China. I think it's right that government is taking it seriously. But I do think it is a serious matter.
And for the entertainment business, broadly, a very serious matter, entertainment is America, 2nd largest export after aerospace. So we do think it's important that we have appropriate, reciprocal trade policies around the world. And we do believe that those the issues that we're currently facing will be sorted out. Can't call the timing.
So in terms of Google stadia, as Strauss mentioned, it presents some new and exciting opportunities. And as with all platforms, our development a hard at work to maximize our product performance, take advantage of USB's deliver world class IP and create unique engagement through each platform offering. But with that said, we have not formally announced any titles for the platform at this time. And in terms of R and expense and capitalization. Since we have a lot more titles, projects that we're starting up in our early stages, there'll be more going to the R and D expense versus star be capitalized at this time, for this year.
Thank you. Our next question is from the line of Todd Juenger with Sanford Bernstein. Please proceed with your question.
Oh, hi, thanks. If I could just focus my attention if you don't mind on NBA 2K. Clearly, having a very strong year this year, you've talked about it growing in your guidance for next year. You also mentioned the big opportunity globally for that franchise and talked a little bit about China. I guess I just looked at relative to the global population of basketball and the NBA in particular, relative to the size of that gain for you, how should we think about your pursuit of what seems like a lot of people interested in basketball, not just in Asia, in Europe and other places around the world.
And how do you unlock that? And what are your is it a marketing effort Is it a distribution effort? I'm sure you're on it. We'd love to hear your thoughts on how you're trying to capture what seems like a big interest in the sport and opportunity for that franchise.
Hi, it's Carl. I agree. I mean, the MBA generally speaking is just growing leaps and bounds. I guess intended in that regard. And it's really exciting for us.
And we'd like to think that we're part of that because what we do at what 2K does with the NBA game is they really are part of the and the culture of that organization and of the fan base. And it's been a very symbiotic relationship between our two organizations. And I think we feed off each other and it's been a terrific partnership. And it is exciting. When you've got expansion and interest in Europe and in Asia, we try to of that expansion.
And there's from a marketing perspective, a distribution perspective and also at times in the development perspective, if we think that there's a certain category or certain area or certain player that resonates in a specific area, then we will try to market towards that player, or towards that organ, that particular organization the European leagues, etcetera. So there's a lot that we can do, not to mention all the localization work that we do as well. So it is really exciting. It's is a predominantly American, a North American business for us as you would expect, but our international component is growing. And to over index Internationally.
Thank you. Our next question is from the line of Justin Post with Merrill Lynch.
Thank you. Strauss, first on the 24,000,000 units of Red Dead sold, can you tell us anything about how, those are converting to online players, anything on MAUs or how you're seeing the activity levels for those buyers? And then secondly, when you said, your in development for sequels for some of your biggest franchises, just wondering if that includes Rockstar. Thank you.
So we haven't given out statistics, particularly on conversion from people who purchase Red Dead Redemption 2 into Red debt online. But we did say that more than 90,000,000 people were engaged with Rockstar Games titles in the last fiscal year. Which is nothing short of extraordinary. And the progress looks terrific. So our expectations are high and we feel really good about how things are And in terms of, you know, our labels being hard at work on ongoing titles, including new IP and sequels, we were talking about everyone who works around here.
Yes.
Thank you.
Thank you. Our next question is from the line of Ray Stochel with Consumer Edge. Please proceed with your question. Great.
Thanks for taking my question. Can you discuss how players have engaged with the role play mod within Grand Theft Auto Online? And how that may have impacted results if that's something that's monetizable for you all? And then my second question would be, is it fair to say the Outer Worlds has higher booking expectations within fiscal 2020 than WWE since you mentioned it first in your prepared remarks. Thanks.
Could you your first question just one more time to make sure that we're going to answer it correctly?
Sure. So we've noticed some buzz specifically within Twitch viewership around sort of a role playing mod within Grand Theft Auto Online. And I was wondering if that in any way impacted results in GTA online during the quarter.
So we don't monetize that. What was your sorry, your second question?
Sure. And the second question was whether or not the Outer Worlds had higher booking expectations than WWA since it was mentioned first in prepared remarks?
Yes. In my prepared remarks, the titers are listed in order of great.
Thanks again.
Thank you. The next question is from the line of Ryan Gi with Barclays. Please proceed with your question. Yes.
Hi, good afternoon. Thanks for taking the questions. A quick one on NBA and then on Red Dead. So a soccer game from one of your peers is seeing online revenue per payer north of $100 and in game payer conversion kind of in this 30% to 40% range. And so I'm not sure if you agree that a good proxy for your NBA business.
But assuming that it is, could you comment maybe on how close you guys are to seeing similar levels of monetization and conversion because I think it's a really good gauge of how much runway that franchise has left to grow for you guys. And then real quick on Red Dead, Rockstar, for the last three games, they've had a PC version out of each one of them, albeit at a later date. So are you guys reserving the right to launch Red Dead 2 on PC maybe later in fiscal 2020? Thanks.
So in terms of comparing ourselves to other games in the sport business, specifically soccer. We don't really give out those kind of, of that kind of data, that kind of comparison. But I can you this is that we believe that we have a lot of room there, to go in terms of our specific opportunity around NBA 2K and our recurrent consumer spending model. And it's important to note that our recurrent consumer spending model is also pretty broad. It's not just, it's not just one specific thing.
It's not card battle, for example, it's other things as well. And we do believe that that broad monetization strategy gives us a lot of upside in the future But in terms of comparing ourselves to FIFA, for example, we just haven't done that.
And in terms of upcoming releases, we do let our labels talk about what's coming next. We leave those announcements to them. Thank
you. Our next question comes from the line of Brian Nowak with Morgan Stanley. Please proceed with your question.
Thanks for taking my questions. Just 2, first one, NBA 2K, you've had a lot of success driving the in game monetization. I was wondering, could you just give us a couple of examples of different types of content drops or different types of experiences that the team has found that have been up particularly helpful in driving that business. Where is the team really succeeding? And then the second one, I think you mentioned, Carl, I think you said 10 new games in development on the on the mobile side or maybe, maybe from just one of the mobile businesses versus the mobile side.
Just talk to us a little bit about how you think about the types of mobile genres that you think are sort of best in the portfolio? Thank you.
Yes, the reference of the 10 games was to social point specifically. So that's what that was referring to. So there is a broad pipeline there. And a lot of games that we that are coming out in the release. In terms of the recurrent consumer spending model around NBA, it does monetize.
There are a lot things that you can do, to drive content, the most important to drive engagement, and the most important thing is that you want the players engaged. If people are and they're engaged with the game, then the modernization takes care of itself. And whether that's, buying cosmetics or training mode for the road to 99, or something around mononone matchups, it's pretty, it's well diverse or the card battles. All of these things monetize well. And monetize differently, but that's not really the point.
I think the point is as long as people are playing the games and our philosophy is we want them to play the entire game, not just one mode, specifically that may happen to monetize better than another mode. That's our focus, though, is to have people play as much of the game as they possibly can. And we worry about the monetization piece later.
Our next question comes from the line of Brandon Ross with BTIG. Please proceed with your question.
Hi, thanks for taking the questions. First, how do you think the lag between the release of RDR2 and Red Dead online coming out of beta will affect the success of the online mode. In the world, we're in now your titles need to have a strong backlog of new content, ready to go before they launch? And then I think you spoke to growth in marketing expenditure. Curious why this would be the case when you're comping against RDR to in a fiscal from fiscal 2019?
Thanks.
Yeah, I think your question was, regarding the initial launch of Red Dead Redemption 2 and then the beta red dead online and then ultimately coming out of beta and how that's timing looks. And the answer is we think it looks just fine. There'll be marketing, around the coming out of beta. There'll be marketing around the new content. And as I said earlier, if you compare it to how Grand Theft Auto Online developed, we're head of where we were with that title turned out to be a great success.
So we feel really good about it. Your second question was, are we putting together a backlog of content, to release later after an initial release and the answer is sometimes we do. Often we don't, you know, it depends on the title and the content, and, which label it's coming from. So it all depends. But generally speaking, when we put out a title initially, we are putting out the full release.
That is a well thought out complete entire start to finish title. We're not holding something back in hopes of monetizing it later in a different way. We're driven by delivering the best experiences known to man. And Carl said this earlier, we believe is we focus on engaging the consumer and giving them way, way, way more than they expected and way more value than they paid for then good things will follow including monetization.
In terms of the marketing expense, We have a greater number of titles releasing this year, which is why the marketing expense is higher. So even with red dead redemption, marketing coming down from last year, we have marketing for borderlands 3, Outer Worlds, Ancestors, ongoing marketing for Red Dead Online, NBA and WWE. So that's why marketing expense is higher this year.
Thank you.
Thank you. Our next question comes from the line of Mike Hickey with The Benchmark Company. Please proceed with your questions.
Thanks, John. It's Lenny. Carl Hank. Congrats on the quarter, guys. Thanks for taking my questions.
Just, I guess, first, Josh, you made, some comments that RDR online is performing better than GT online on a similar time period is hopefully you could maybe expand on that tidbit for us. And I was also curious if you played the, planned content for, already are online any impressions maybe that you had and how you expect it'll monetize out of beta versus GT online. Obviously, you have a lower player base that appears to have monetized the same level. I have a follow-up.
Yes. I was referring to the nature of the engagement, and where we are technically in the process. Obviously, we have vastly more experience today than we did when we launched Grand Theft Auto Online and a much more sophisticated infrastructure. So, that's what I was really referring to. And on the rest, we don't have any specific information to give.
You know, we're very enthusiastic and optimistic And the next thing we'll be talking about is how it's doing.
All right. Last question from me on your announced fiscal 20 pipeline. Is this your full slate as it relates to your guidance, or should we, or could we expect another major release or platform expansion coming over the coming quarters. And then on RDR Online, should we expect a similar cadence of content as what we've seen for Grand Theft Auto Online. And then for Grand Theft Auto Online in fiscal 'twenty, should we kind of expect the same, again, cadence of content that we seeing from that online experience historically?
So just on the content side, there is more to come for, obviously, for Red Dead Online and for Grand Theft Auto Online. And Rockstar will make those announcements in the fullness of time. But there is more to come for both, and we feel very good about it. We do have titles, coming the fiscal year that have not been announced yet. They are part of our guidance, however.
Thank you. Our next question comes from the line of Matthew Harrison with Buckingham Research Group. Please proceed with your question.
Thank you. Down to a couple, I guess, abstruced questions. People over in Europe are concerned about the implications for Twitch off article 13, I guess, Recris in 2017, on, on copyright for the internet. Do you see any second order effects for the video game industry that would affect you over there And then secondly, would you have any further comment on Senator Josh Harley's proposal, him, particularly being a Republican that would seem to race of risk. I know you're much less dependent on loot boxes than some of your peers, but just, I guess, interlacing those two questions into your general posture on regulatory developments both states side and overseas?
Thanks.
Hello?
Sorry. We just in terms of Article 17, we haven't heard in that it reflects on the video game space at all. So as far as we know, there's no impact whatsoever. On the loop boxes question, just to put it in context, that mechanic responsible for less than 3 So it is something we've, we've seen, and we think it's just fine. There has been some noise around it, particularly Internationally.
As I said, we think it's a perfectly reasonable mechanic. However, it forms a very small part of our business.
Thank you. We have reached the end of our question and answer session. So I would like to turn the floor back over to management for any additional concluding comments.
Well, I just want to say thank you very much for joining us today. We're proud of the year that just finished. We are incredibly optimistic about the year to come. We have a great lineup and wonderful titles in development, and all that's driven by a phenomenal and business team, nearly 5000 people strong all around the world. And those are the people that we want to thank.
We're grateful to our colleagues for these terrific results. Thank you so much for joining us today.
Ladies and gentlemen, this does conclude today's conference. Again, we thank you for your participation and you may disconnect your lines at this time.