Greetings,
and welcome to the Take 2 Interactive Software Third Quarter Fiscal Year 20 17 Earnings Conference Call. At this time all participants are in a listen only mode. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Hank Diamond, Senior Vice President of Investor Relations And Corporate Communications.
Thank you, Mr. Dimon. You may begin.
Good afternoon.
Welcome, and thank you for joining K2's conference call to discuss its results for the third quarter of fiscal year 2017. Ended December 31, 2016. Today's call will be led by Strauss Zelnick, TakeTOO's Chairman and Chief Executive Officer Carl Slatoff, our President and Lainie Goldstein, our Chief Financial Officer. We will be available to answer your questions during the Q and A session following our prepared remarks. Before we begin, I'd like to remind everyone that the statements made during this call that are not historical facts are considered forward looking statements under federal securities law.
These forward looking statements are based on the beliefs of our management, as well as assumptions made by and information currently available to us. We have no obligation to update these forward looking statements. Actual offering was supposed to be vary significantly from these forward looking statements based on a variety of factors. These important factors 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 Factors. I'd also like to note that, unless otherwise stated, all numbers we will be discussing today are GAAP.
And unless otherwise stated, all comparisons are year over year. Our press release and filings with the may be obtained from our website at www.take2games.com. And now, I'll turn the call over to Strauss,
Thanks, Hank. Good afternoon, and thank you for joining us today. I'm pleased to report that Take 2 had a highly successful holiday quarter, Consumer demand for our new releases and catalog was strong for that period, and players continued to engage significantly with our games after purchase. As a result, we delivered better than cash provided by operating activities. As of December 31, 2016, we had over $1,400,000,000 in cash and short term investments on our balance sheet.
Grand Theft Auto5 and Grand Theft Auto Online continue to outperform our expectations as they have in every quarter since their release, Grant Theft Auto Five remains the highest rated game of the current console generation and the must have title for game members on both console and PC. With sell in now surpassing 75,000,000 units. According to data from the NPD group that combines physical sales and full game downloads, Grant Theft Auto5 was the number 6 selling game across all platforms in 2016. In addition, Grant Theft Auto Online continues to deliver growth in both engagement and bookings with a record number of players in December, driven by the ongoing release of new content. During the third quarter, Rockstar Games supported Grand Theft Auto Online with 4 significant updates: Bikers, deadline, import export and festive surprise 2016, and has many more planned going forward.
The sustained performance of Grand Theft Auto5 and Grand Theft Auto Online is a remarkable achievement and a testimony to Rockstar Games' tireless commitment to excellence, especially since these titles initially launched more than 3 years ago. On October 7th, 2 K Launch mafia III developed by 2 K newest studio, Hanger13, Matfya III received critical praise for its deep storytelling and authentic period setting. The title achieved the highest 1st week sell in of any game in 2 case history and was a popular choice for consumers during the holiday season. To date, mafia 3 is sold in approximately 5,000,000 units. 2K and Hanger13 have continued to support mafia 3 with numerous free content offerings, including character clothing, vehicle customization, racing challenges and more.
The team is currently working on 3 exciting downloadable story expansions that will be released this year, which can be purchased individually or as part of the mafia 3 season pass. NDA 2K17 delivered growth during the holiday season and continues to delight both new and long time fans of our industry leading basketball series. Launched in September, NBA 2k17 is the highest rated sports title of the current console generation and the highest rated title in the history of the series, based on average Metacritic score. Today, NBA 2K17 is sold in nearly 7,000,000 units, up approximately 10% over last year's release and is poised to become our highest selling sports title ever. Engagement with the brand continues to grow, with consumers already playing more than 1,000,000,000 games of NBA 2k17, up 27% over last year.
More than half of these were multiplayer, which increased 61%. This strong engagement with both NBA 2K17 and the My NBA 2K companion drove record bookings from recurrent consumer spending for the series, which grew 56% in the 3rd quarter. In addition, 2K and visual concepts continue to expand the brand's reach through emerging platforms and business models. In November, 2K released the NBA 2K VR experience, which provides the first virtual reality basketball game that emerges players in the new NBA environment filled with many games and challenges. And in December, TUK commenced its 2nd NBA 2K Esports Esports tournament that will culminate this weekend during the NBA All Star 2017 with the final teams competing for the championship prize of $250,000 plus tickets to the MDA All Star Game in New Orleans.
We're thrilled to expand our footprint in the evolving world of eSports and look forward to continuing to blaze the trail in competitive sports gaming with MDA 2K. On October 11, 2K successfully released WWE 2K17, the latest and annual installment in our popular sports entertainment series that is developed collaboratively by YOOX and Visual Concepts. And today, 2K further expanded the audience for the title with its release for PC. WWE 2K17 is being supported with a variety of downloadable add on content including the season pass. We believe there remains a substantial long term growth opportunity through the WWE 2K Series by further leveraging the development and marketing expertise of 2K visual concepts, which are responsible for the tremendous success of NBA 2K.
On October 21, 2K launched Sid Meier's Civilization VI, the latest offering from our award winning turn based strategy series that is sold in nearly 40,000,000 units worldwide. Civilization VI receives stellar reviews and is the fastest selling title in the history of the series, with selling already surpassing 1,500,000 units. 2K is supporting civilization 6 with a rich array of additional content, and already has released 2 paid downloadable add on content packs as well as a variety of free content for the title. Later this month, Sid Meier will be honored at the Entertainment Software Association's annual gala in San Francisco, celebrating his legendary career and contributions to our industry and art form. During the third quarter, we delivered record of digitally delivered bookings, driven by growth in both both full game downloads and recurrent consumer spending.
We continue to benefit seeing more than 25% of our current generation console titles purchased digitally. More importantly, recurrent consumer spending grew 55% to its highest level ever and accounted for 50 percent of digitally delivered bookings or 23 percent of total bookings in the third quarter. In addition to virtual currency for Grand Theft Auto Online And NBA 2K, recurrent consumer spending was enhanced by a variety of other offerings. In the free to play category, WWE SuperCard delivered its best quarter ever, with bookings nearly double and total downloads for the title now exceeding $13,000,000. During the third quarter, we released a season 3 update that significantly enhanced its popular card game.
In addition, NBA 2k Online grew bookings and remains the number one PC online sports game in China with 34,000,000 registered users. And bookings from downloadable add on content also grew led by offerings for Sid Meier's Civilization, WWE 2K17, Xcom II, and Battleborne. Last week, we announced a key strategic acquisition for our organization reflecting our strategy to deploy our capital resources prudently and to take measured risks that provide immediately accretive opportunities for our business, and that's essential for long term growth. We acquired Social Point, a highly successful free to play mobile game developer based in Barcelona. With this acquisition, we further diversified our business, expanded our portfolio of owned intellectual property and significantly enhanced our position in the fast growing free to play mobile gaming space, which is the world's highest grossing gaming segment with revenues in excess of $40,000,000,000 in 2016 according to IDG estimates.
The experienced team at Social Point shares our commitment to delighting consumers with high quality entertainment, and we believe that Social Point's deeply engaging mobile offerings will be a perfect complement to our business. Moreover, Social Point is one of the few mobile game developers that has proven track record of growing revenues and developing multiple hits. Since 2014, Social Point has been one of only 6 mobile publishers to have at least two games consistently in the top 100 grossing mobile games in the U. S. We're thrilled to have this team at Social Point join our organization.
Looking ahead, fiscal 2018 promises to be another growth year for both bookings and cash flow, driven by our release slate led by Rockstar Games' eagerly anticipated launch Red Dead Redemption 2. While interactive entertainment is captivated audiences for more than 40 years, we're only Jeff beginning to see the vast potential of today's most immersive and dynamic art form. Our ability to engage audiences around the world across a myriad of experiences and platforms has never been greater and continues to evolve and shape the way that we create and deliver our entertainment offerings. Take 2 is exceedingly well positioned to capitalize on these synergies, strategically, creatively and financially, and to deliver returns for our shareholders over the long term. I'll now turn the call over to Carl.
Thanks, Charles. I'd like to begin by congratulating our teams on delivering a strong holiday quarter. Our consistent ability to reuse high quality, engaging entertainment experiences across multiple platforms and distribution channels is both a distinguishing characteristic of our organization and a key driver of our success. Creativity and innovation are among Take 2's core tenants, and those principles inform and inspire our work on a daily basis. As we continue to diversify our business, we aim to broaden our portfolio with offerings to captivate and engage players in new and exciting ways.
To that end, I'm extremely pleased to welcome Social Point to Take 2. Social Point's 3 co founders, Andres Bo, Horacio Marcos and Mark canaltta, have worked together for over 6 years, and its senior leadership team has an edge of nearly 100 years of experience in the mobile games business. Like Take 2, Social Point produces high quality entertainment that can attract and retain their loyal, highly engaged player base and deliver sustainable results. Fosul Point focuses on Midcore games that have greater gameplay depth than casual games, and the company's titles typically monetize and retain players at higher rates than its competitors in this segment. Social Point currently has multiple profitable games in the market.
It's 2 most successful games: Dragon City and Monster Legends have been downloaded more than 180,000,000 times. Dragon City launched on mobile in 2013 and is a simulation game in in which players create and expand their city and can collect more than 500 unique dragons. The title consistently has been among the top 100 gross new mobile games and top 20 grossing simulation games in the United States. Monster Legends also launched in 2013 and is an RPG involving breeding, building and battling with nearly 400 monsters. The title consistently has been among the top 75 grossing in mobile games and top 15 grossing RPG in the U.
S. Social Point also has strong growth prospects. The company has a number of exciting games planned for launch over the next 2 years. Furthermore, its current titles have not yet been released in Asia, which is the world's largest mobile games market and represents an additional growth opportunity. In addition to strong mobile IP, Social Point brings an experienced data analytics team and a cutting edge proprietary data analytics platform that it built in internally.
This custom platform enables Social Point to optimize revenues and profits by predicting user actions future monetization and lifetime customer value based on historical data and the behavior patterns within hours of acquiring a user. Total Point will operate as a new division within Take 2 and will continue to be based in Barcelona, Spain. We look forward to working with a team at Social Point and to expanding our presence in the free to play mobile market. Turning to Take 2's frontline releases, 2K today launched WWE 2K17 for PC, and we will have additional add on content offerings for our recent releases, including mafia 3 during fourth quarter. Last month, 2K announced that it will release NBA 2K18 for the Nintendo Switch when the title launches this fall on console and PC.
NBA 2K18 will be our first offering for the switch, and we are pleased to support Nintendo's new platform and to expand the audience for industry leading brands. Looking ahead, we have a robust long term development pipeline and our creative teams across both of our labels. We continue to explore new and innovative ways to drive engagement with our titles and growth in recurrent consumer spending. I'll now turn the call over to Laney.
Thanks, Carl, and good afternoon, everyone. Today, I'll discuss fiscal third quarter results, share some details regarding our acquisition of Social Point, and then review our financial outlook for the remainder of the year. As mentioned by South and Carl, KC had a strong holiday quarter. Sales of our offerings significantly exceeded our expectations. With total bookings growing 51 percent to $719,000,000.
Of this amount, 47% were digitally delivered bookings, which grew 66% $336,300,000, a new record. The upside to total bookings was driven primarily by the better than expected performance of Grand Theft Auto Five as well as recurrent consumer spending on Grand Theft Auto Online and NBA 2K17. Our better than expected bookings converted into strong net provided by operating activities, which grew 72 percent to $291,000,000. We've deployed $6,100,000 on capital expenditures And as of December 31, our cash and short term investments balance was $1,440,000,000. While the performance of our business exceeded our expectations as reflected in our strong bookings and cash flow growth.
This outperformance was not reflected in our GAAP net revenue and net loss, primarily for 3 reasons. First, our bookings outperformance is driven by titles that we are required to defer, and therefore, our revenues and profits won't benefit from these bookings until future periods. 2nd, because of the better than expected performance of Grand Theft Auto V and Grand Theft Auto Online, we recorded higher than forecasted internal royalties which are calculated using results that are adjusted to exclude the impact of deferral, and unlike certain other costs of goods sold are not deferred. And third, during the third quarter, we recognized higher development costs from mafia 3 and then forecasted due to timing. These costs will be offset by lower development costs in the 4th quarter.
Turning to some details from our 3rd quarter income statement. Net revenue grew by 15% to $476,500,000. Growth was driven primarily by the launch of Sid Meier Civilization VI and the recognition of previously deferred revenues from Grand Theft Auto Online and NBA 2K. Net revenue was reduced by $268,300,000 change in deferred net revenue. This change was driven primarily by mafia 3, which is being deferred into the 4th quarter as a result of announced free additional content that was not released until the 4th quarter.
The change in deferred net revenue was higher than our forecast due to the better than expected performance of Grand Theft Auto5 and Grand Theft Auto Online. Digital delivered net revenue grew 54 percent to $240,200,000 was reduced by $117,200,000 change and deferred net revenue. Cost of goods sold increased by 21 percent to $311,100,000, driven primarily by development costs related to our 3rd deferred cost of goods sold and included $6,000,000 in stock based compensation. Operating expenses decreased by 10% to $193,800,000 due primarily to the absence of business reorganization costs recorded last year. Partially offset by higher marketing expense to support our extensive holiday release slate.
Operating expenses included $16,100,000 in stock based compensation, $300,000 in acquisition related expense. And net loss was $29,800,000 or $0.33 per share, which included the following pretax items that we use internally, along with our management reporting tax rate of 22 percent to adjust our GAAP financial results in order to evaluate our operating performance, a $150,200,000 reduction from the net effect from deferral of net revenue and related costs of goods sold, $22,100,000 of stock based compensation, $300,000 in acquisition related expense and $4,900,000 and amortization of convertible notes. Note that since we reported a GAAP loss, our net loss per share was calculated using our basic share count of 90,400,000 For management reporting purposes, we calculate diluted net income per share using our fully diluted share count of 115,300,000 and we add back to net income interest expense on our convertible notes, net of tax of $1,200,000. On January 31, Takes to further diversify this business through the acquisition of Social Point. We acquired the company for $250,000,000 comprised of $175,000,000 in cash and approximately 1,480,000 shares of our common stock.
The cash portion was paid using our offshore cash on hand following the and following the transaction, approximately 90% of our cash and short term investments is now housed in the U. S. The 3 founders of Social Point are also eligible to receive earn out consideration of up to an aggregate of $25,900,000, contingent on the business, delivering substantial EBITDA growth over the next 2 years. The transaction is expected to be immediately accretive to net revenue and net cash provided by operating activities. And to be accretive to net income per share, excluding transaction costs and amortization of intangible assets in fiscal 2018.
Social Point's high quality, deeply engaging mobile offerings offerings are expected to provide consistent revenue from recurrent consumer spending throughout the year. Which will meaningfully enhance and further diversify our existing revenues from recurrent consumer spending and help to continue to mitigate the variability of our results. During the past 3 calendar years, Social Point's net revenue has experienced minimal seasonality and exceeded $20,000,000 in all four quarters of calendar 2016. The company has been consistently profitable since 2013, with EBITDA margins of approximately 20% and grew net revenue at a 29% CAGR from 2013 to 2016. For the trailing 12 months ended December 31, Social Point generated net revenue of $90,800,000 and EBITDA of $19,900,000.
Given its exciting development pipeline, we expect Social Point's business to continue to grow in fiscal 2018 and beyond. I'd like to join Strauss and Carl welcoming the team at Social Point to our organization and also thank the team to take 2 for all of their hard work in successfully completing this transaction. And I will review the highlights of our financial outlook. Further details are contained in our press release. Starting with the fiscal fourth quarter, We expect total bookings to range from $295,000,000 to $345,000,000.
The largest contributors are expected to be NDA 2k17, Grand Theft Auto V, in Grand Theft Auto Online, WWE 2K17, Civilization VI and Mafia III. We expect GAAP net revenue to range from $542,000,000 to $592,000,000. Net revenue is expected to be increased by $225,000,000 change in deferred net revenue due primarily to the recognition of previously deferred revenues from Mafia III. We expect cost of goods sold to range from 2.48 to $278,000,000, which is expected to be increased by $120,000,000 change in deferred costs of goods sold and includes $3,000,000 of amortization of intangible assets and $1,000,000 of stock based compensation. Operating expenses are expected to range from $140,000,000 to $150,000,000.
At the midpoint, this represents an 18% increase over the next year. Due primarily to higher professional fees and stock based compensation. Operating expenses were $17,000,000 of stock based compensation, $2,000,000 of amortization of intangible assets, and $1,000,000 of acquisition related costs. And we expect GAAP net income to range from $139,000,000 to $148,000,000, or $1.23 to $1.31 per share. Which includes the following pretax items that we use internally, along with our management reporting tax rate of 22% to adjust our GAAP financial results in order to evaluate our operating performance.
A $105,000,000 increase from the net effect from deferral of net revenue of future cost of goods sold. $18,000,000 of stock based compensation, $5,000,000 of amortization of intangible assets. $1,000,000 in acquisition related expense and $3,000,000 in amortization of convertible notes. Turning to our outlook for the full fiscal year. As a result of our better than expected third quarter bookings and strong outlook for the remainder of the year, we are raising the midpoint of our bookings outlook by $100,000,000.
We now expect total bookings to grow by 16% as a midpoint of our outlook and to range from $1,720,000,000 to $1,770,000,000. In addition, we now expect digitally delivered bookings to grow by around 20% driven by growth in both the current consumer spending and full game downloads, as we now accept Grand Theft Auto Online to be up for the full fiscal year. The largest contributors are expected to be NBA 2K17 and NBA 2K16, Grand Theft Auto5 and Grand Theft Auto Online, mafia 3, WW 2K17 and Sid Meier's Civilization VI. We expect the bookings breakdown from our labels to be roughly 65 our game. And we expect our geographic bookings to be about 60% in United States and 40% international.
We expect to generate net cash provided by operating activities of approximately $350,000,000, up about 34% over last year. We plan to deploy approximately $35,000,000 for capital expenditures. Our increased outlook for bookings does not translate into a higher forecast for GAAP net revenues because most of the increase is being driven by styles of titles that we are required to defer. In addition, GAAP net income is impacted by higher internal royalties resulting from the continued outperformance which is expected to be reduced by $65,000,000 change in deferred net revenue. We expect cost of goods sold to range from 9.56 to $96,000,000, which includes no change in deferred cost of goods sold, $17,000,000 in stock based compensation, and $3,000,000 of amortization of intangible assets.
Total operating expenses are expected to range from $660,000,000 to $670,000,000. At the midpoint, this represents a 9% increase over the prior year, driven primarily by marketing expenses for our fiscal 20172018 with slate, as well as higher R and D expense and professional fees, partially offset by the absence of a business reorganization charge recorded last year. Operating expenses include $57,000,000 of stock based compensation, $2,000,000 of amortization of intangible assets, $1,500,000 of acquisition related expenses. And we expect net income to range from $108,000,000 to $170,000,000 or $1.15 to $1.25 per share, which includes the following pretax items that we use internally, along with our management reporting tax rate, 22% to adjust our GAAP financial results in order to evaluate our operating performance, a $65,000,000 reduction from the net effect of deferral of net revenue and related cost of goods sold, $74,000,000 of stock based compensation, $5,000,000 of amortization of intangible assets. $1,500,000 in acquisition related expense, a $2,000,000 gain on long term investments and $21,000,000 in amortization of convertible notes.
As we enter the final months of fiscal 2017, Take 2 is more diversified and better positioned for long term success than at any time in our company's history. Our results to date have been achieved through our creative leadership, innovation, and disciplined focus on operational excellence. Going forward, we will strive to further broaden the way we entertain and engage with our audiences and to generate growth and margin expansion for our shareholders. Thank you. Now I'll turn the call back to Shah.
Thanks, Carl Alimini. On behalf of our entire management team, I'd like to thank our colleagues for delivering another strong quarter. And to our shareholders, I want to express our appreciation for your continued
Our first question comes from the line of Ben Schachter of Macquarie. Please proceed with your question, Ben.
On continued execution. Few questions. 1, can you remind us what the unit sales were for the previous Red Dead in its 1st year and how you're thinking about the potential for the next generation in FY 2018? And then, Lainie, in the past, you had said that, OpEx should increase this year, this fiscal year for some promotional activity for next year. Have we seen that or should we expect anything, in the next couple of months?
And then finally, on Social Point, how should we be thinking about that? How that may impact Rockstar or 2Ks mobile offerings over time? Thanks.
Hey, Ben, thank you. The 1st year for Red Dead's last release was 8,500,000 units and lifetime to date is around 15,000,000 units. We're not talking about our expectations, except obviously we're incredibly excited about the title, not just Red Dead, also the online offering to come. So Rockstar will talk more about the title, but obviously, we're there's great anticipation both on the part of ourselves and consumers. Lane, you didn't talk about your second question.
Sure. For marketing expense for the year, we did talk at the beginning of the year that it would be up for the whole year. To support our fiscal 2017 titles and also some of our fiscal 2018 titles. So we've seen that throughout the year, and we'll continue to see that through Q4.
And then with regards to Social Point, look, we acquired Social Point because we see it as a strong standalone company that's expert in the mobile and free to play market. And they have owned intellectual property and a multiplicity of hits and then how do we engage consumers and then to monetize that engagement. We want them to keep doing what they're doing and keep growing the business. We obviously have high expectations We love the fact that the deal is accretive to bookings and to cash flow from operations immediately and, expect it to be accretive to net income in fiscal 'eighteen without regard to amortization, and transaction costs. In terms of potential engagement with the other labels, it's too early to say.
One of the things that we pride ourselves on is that our enterprise is comprised of creatively independent entities where people can pursue their not only can, but are encouraged to pursue their passion. We all work together collectively, but the cooperation spend that occurs will be organic. It won't be driven by the center.
Next question comes from the line of Eric Handler of MKM Partners. Please proceed with your question.
Two questions for you. First, with regards to fiscal 2018, I think at the beginning of the year, you talked about the release slate for fiscal 2018 being one that's, more normalized than what we've seen in fiscal 2017 or fiscal 2016, which would seem to suggest we'll get a couple 2 K studio titles to still be announced Is that still the case of that it'll be a normalized release type of year? And then secondly, with the Social Point acquisition, you did include some stock in there. Is there any particular reason why you didn't do an all cash deal and why you included some stock?
Hey, thanks, Eric. So in terms of our comments, which have been limited about fiscal 2018, I think the only thing that we've said or at least for call saying is that we expect to see growth in bookings and cash flow. And all we've said about the release schedule so far is, of course, reflecting Rockstar's announcement about Red Dead Redemption 2 and the fact that we expect to have our normal annual releases and then of course you would expect to see our recurrent consumer spending opportunities in catalog sales, but we haven't talked about anything else yet. And in terms of social point, the idea of making sure some of the consideration was in stock is to align to make sure that the principles of social point have a stake in our enterprise. And as the enterprise continues to perform, they benefit from that.
And to make sure that all of our interests are aligned.
Our next question comes from the line of Mike Hickey of The Benchmark Company.
Hey, guys. Great quarter. Congratulations. The, I'm curious about GT Online. It continues to grow and looks like a big piece of that is the content that continues to come into the game.
And so as much as you can, Strauss, I was sort of curious if we can expect a similar level of content moving forward. And it looks like there's also a fair amount of player created content. I'm curious how how that's contributing to the growth overall of that digital piece of your business? And the second question, wondering as I sort of ramp into the release of Red Dead, if you feel that GTA and red deck can sort of coexist or find a harmony or if anything does a net positive, I guess? Sort of intuitive that perhaps Red Dead might disrupt a little bit the GTR online player base given that there's probably some overlapping players.
Hey, Mike. Thanks. So, we obviously continue to engagement with GTA Online is driven at least partially by the ongoing content creation, which people love. And Rockstar said they'll continue to support GT online with more content to come. And anything more specific, of course, they'll come in due time from Rockstar.
I don't really have a point of view on player created content to share. And on Red Dead, you know, I'm fond of saying entertainment is an unusual animal in that, entertainment properties don't really compete with other entertainment properties in that you never need entertainment. Entertainment is something that you want to have, but it's not a need to have. If nothing in the market appeals to you at some time, there's no reason to go and get it. And if multiple things appeal to you, avid consumers will consume all of those things.
So I don't, I don't think there is any competitive dynamic with any of our upcoming releases, apart from the fact that our success is driven by quality. So I think that success of Red Dead, which is highly anticipated, will be driven by its quality. And I think the ongoing success of Grand Theft Auto Online is driven by its
Our next question comes from the line of Doug Crudes of Cowen And Company. Please proceed with your question.
Thank you. On what you said and what one of your competitors who's already reported said, it does feel like the consumer adoption of digital full game downloads is moving along at a pretty rapid pace. Is that creating any pressure in the retail channel? Are you getting any are you seeing any pushback does it cause any concerns on your part that that disruption may be coming? Thank you.
The channel remains healthy. Our primary source of distribution remains physical distribution at 75% of our new generation console sales, but you're right, it is digital distribution is growing. That's a benefit to consumers. And we actually do derive a gross margin from it. And we can't deny that.
But, retail remains a very important partner. That hasn't changed, and we don't expect that to change anytime soon.
Our next question is from Tim O'Shea of Jefferies. Please proceed with your question.
Yes. Hi. Thank you for taking my questions. Strauss, you touched on the brand new online multiplayer experience for Red Dead 2. I was just hoping you might expand on that, what it might entail.
And should we think about this as being analogous to GTA online or maybe something else? And then quickly second. What kind of marketing support should we expect for Red Dead 2? The reason I ask is because looking back when you announced Red Dead back in October, it kind of seems like you set the gaming world on fire and all it took was basically one tweet and one image added to Rockstar's web sites. So just curious if you think you can drive any leverage using various online tools and social platforms.
Thank you.
So in terms of the online experience, Rockstar will announce more in due time. And that's not something we typically talk about on these calls, except to say that we're really excited about what is to come. In terms of marketing support, look, we support all of our releases very significantly. We're incredibly proud of our marketing teams throughout the company. And, we our support is quite significant for all of our releases.
Social media, is a big part of our marketing plans today. You know, digital media is a big part of all of our marketing plans today. Outdoor remains a big part of our plan. So I think you should expect to see with regard to all of our releases, very significant marketing support.
Our next question comes from the line of Van Pan of Mizuho. Please proceed with your question.
Based on your previous comments regarding mobile, was there anything in particular that basically maybe help evolve your perspective on the mobile opportunity for Take 2, when you decided to acquire a social point? And then second question was just hoping to get your latest thoughts on Nintendo Switch and whether we could expect to see exclusive titles in the platform or just ports of planned releases like NBA Live for now?
Thanks. So our perspective on mobile hasn't changed at all. We're aware of the size of the business to $40,000,000,000 market, and we found it exciting. And we are relatively significant participants in mobile and I'm free to play now through titles like the NBA 2k companion app, WWE SuperCard, and other, forms of supporting our titles that are reflected in recurrent consumer spending. We had a record quarter for bookings related to recurrent consumer spending.
So obviously, it's an important part of our strategy. What we love about Social Point is it addressed the exact criteria we were looking for and an acquisition in the space in that they own their intellectual property, in that they have a track record of creating a multiple hits, not just one hit, in that they have real scale in that they're profitable. And in that, their team has a great culture and a culture that fits well with ours. We believe We were also looking for an acquisition that would be immediately accretive to bookings and to cash flow from operations, and this one will be. So our thinking hasn't changed.
What changed with the announcement of social point was an opportunity to bring the company into our enterprise that meets all of the criteria we were seeking, and that's what makes it so exciting. With regard to Switch, we're excited about Switch. We're supporting Switch with NBA 2K18, We've said we're supporting the platform. I've said over and over again that when Nintendo comes to market, you never want to count them out. So we're excited about it.
The only thing we've announced so far is Qual title.
Okay, great. Thank you.
There are no further questions at this time. Over the audio portion of the conference, would now like to turn the conference back over to management for closing remarks.
On behalf of all of our colleagues and our entire management team, we want to thank you joining us today. Thanks to our shareholders, mostly, thanks to the people at this company all over the world, many of whom are listening now. For their incredible contributions. Their great creative work, the passion, which with which they pursue their jobs, the great job they do at marketing distribution, accounting, cash management, investor relations. We all work together here in every part of our business to achieve these results.
It's a shared victory, and we couldn't be more pleased. So thank you, everyone.
This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful rest of your day.