Greetings, and welcome to the Take 2 Interactive Software Q4 fiscal year 2016 earnings call. At this time, all participants are in a listen only mode. Question and answer session will follow the formal presentation As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Hank Dotman, Senior Vice President of Investor Relations And Corporate Communications for Take 2 Interactive Thank you, Mr. Diamond.
You may begin.
Good afternoon. Welcome, and thank you for joining Take 2's conference call to discuss its results the fourth quarter fiscal year 2016 ended March 31, 2016. Today's call will be led by Strauss Zelnick, Tektu's Chairman and Chief Executive Officer Carl Sladoff, our President and Lainie Goldstein, our Chief Financial Officer. We will be available 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.
We 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. Annual report on Form Ten 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 non GAAP Our press release provides site, we have provided additional details regarding the non GAAP components of our cost of goods sold and operating expenses. Our press release and filings with the SEC 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 fiscal 2016 marked the 3rd consecutive year in which Take 2 delivered revenues and earnings that significantly exceeded our original outlook driven principally by positive momentum in our core offerings. We generated record digitally delivered revenue, including our highest ever recurrent consumer spending and our strong earnings converted into significant cash flow. We finished the fiscal year with our balance sheet in its best shape ever, including cash and short term investments of nearly $1,300,000,000.
We believe our company has the best creative talent in the business The key to our success has been their consistent ability to deliver the highest quality entertainment experiences in our industry, as reflected both in the outstanding critical reviews and strong sales that our titles enjoy. Grand Theft Auto 5 and Grand Theft Auto Online exceeded our expectations in every quarter since their release and continue meaningfully to expand their audience more than two and a half years after their initial launch. Grant Theft Auto Five remains the highest rated title on PlayStation 4 and Xbox 1. Excuse me. And is the must have experience for gamers, especially as the installed base of the new generation of consoles continues to grow.
To date, Grand Theft Auto5 is sold in more than 65,000,000 units worldwide. Moreover, engagement with Grand Theft Auto Online continues to be fantastic with both fourth quarter fiscal 2016 revenues up year over year. Rockstar Games has driven sustained engagement with the Grand Theft Auto Online by delighting audiences with the regular release of free content updates, and they have many more on the way to keep this community thriving. Rockstar Games is of course also hard to work on some exciting future projects that will be revealed soon. NVA 2K16 has continued to build on our industry leading basketball series track record of annual growth.
The title has outperformed our expectations and remains poised to become our highest selling sports game ever, with selling of nearly 7,500,000 units, up double digit versus the same period for the prior consumer spending next to Grand Theft Auto Online. During fiscal 2016, recurrent consumer spending on NBA 2K grew 70% year over year, driven both by online play and the My NBA 2K companion app. The NBA 2K experience has become much more than a traditional sports simulation game, It's a true sports RPG that incorporates deep story lines, along with pop music and culture. This evolution has helped to broaden its appeal beyond sports fans with revenue from the series increasing at an extraordinary 31% compound annual growth rate over the past 7 fiscal years. We believe that we can continue to expand NBA 2k's loyal fan base, as well as drive increased engagement recurrent consumer spending, for years to come.
Our annual WWE 2K Series has also continued to grow with WWE 2K16 crossing 3,000,000 units sell and mark during the fourth quarter. And revenue from the title has been further enhanced by the success of its downloadable add on content, including the season pass. Since acquiring shirt. During its peak from 2007 through 2009, the WWE video game series sold 6 to 7,000,000 units per year. Today, the WWE brand remains as popular and vibrant as ever, and we believe we can continue to grow sales by further leveraging the development and marketing expertise.
Of 2K and visual concepts, which are responsible for the tremendous success of NBA 2K. During fiscal 2016, we extended our long term partnership with WWE, and we look forward to many more years of successful collaboration. COM2, which was developed by the strategy experts of Fraxis Games. XCOM2 received stellar reviews with IGN awarding of the 9.3 out of 10, PC gamer, a 94% out of 100% and game and former magazine, a 9.5 out of 10. Sales of the title have exceeded our expectations and are higher than the PC version of its predecessor, ex COM enemy unknown during the same period after launch.
XCOM2 is being supported with an array of add on content, including the anarchy's Children and Alien Hunter's packs that are available now, which should enable Xcon 2 to achieve the long tail success that Firaxis game strategy titles typically experience. During fiscal 2016, we continued to capitalize on our industry's ongoing transition towards digital distribution. We generated record digitally for 54% of our total net revenue. Recurrent consumer spending grew 33% year over year to its highest level ever and accounted for 26 percent of our total net revenue. In addition to virtual currency for Grand Theft Auto Online and NBA 2k, Recurring consumer spending was enhanced by other offerings, including downloadable add on content, led by border lands, WWE 2K, Sid Meier's Civilization and Evolve.
WWE SuperCard, which has now been downloaded more than 10,000,000 times, and it's our most financially successful free to play mobile offering and MDA 2K Online in China, which delivered record revenues and now has over 31,000,000 registered users. Continuing to drive increased engagement with our titles remains a key strategic priority for our organization and is one of our most important long term growth and margin expansion opportunities. We now support virtually all of our new releases with innovative offerings designed to achieve this objective. Our results also benefited from strong for PC delivered digitally. In addition, if there is nothing that approximately half of our catalog sales for old gen consoles are being delivered through digital download.
Digital distribution is disproportionately benefiting our catalog as it gives consumers the opportunity to buy older titles that no longer receive physical shelf space. In particular, Rockstar Games has been having tremendous success with their hit PlayStation 2 titles, such as Grand Theft Auto San Andreas and Bully, which are now available for download on the PlayStation 4 via the console's emulation technology. Rockstar Games is the top publisher in the PlayStation 2 classics on PlayStation 4 program with 3 of the 5 highest selling games. Today, we believe Take 2 is better positioned than ever for long term success. Is poised to be another year of non GAAP earnings in excess $1 per share, and we currently expect to grow both revenues and earnings in fiscal 2018 based on our robust development pipeline.
The wins at our back with favorable industry trends, including a current installed base of over 60,000,000 NewGen consoles, which IDG expects to reach $115,000,000 by 2019, and a thriving digitally delivered market for PC games. The opportunities for interactive entertainment on emerging platforms such as tablets and smartphones and in developing markets such as China and Korea are expanding rapidly, and we're actively pursuing these sectors with a highly disciplined approach. We have what we believe is the best collection of owned intellectual property in the business and the extraordinary success of our products is breeding greater demand from consumers worldwide which in turn creates increased opportunities for our company. These are really exciting times for both Take 2 and our industry. While interactive entertainment has been enjoyed for decades, we're just beginning to see what can be achieved by combining technological innovation with the artistic passion of our creative talent.
We're committed to delivering the highest quality, most engaging entertainment experiences that captivate audiences wherever they are and that will continue to generate returns
I'd like to begin provide a sound foundation for the future. On April 26, 2K launched the physical release of tales from the Borderlands, the critically acclaimed award winning episodic from Telltale Games and Gearbox Software on PlayStation 4, PlayStation 3, Xbox 1, Xbox 360, and PC. Renowned for its humor and thrilling action, tales from the Borderlands is a terrific compliment to the immensely successful Borderlands series. On May 3rd, 2K added a promising new brand to our industry leading portfolio with the relaunch of Battle Born. We are encouraged by this title's potential will continue to expand the experience with a host of free and paid additional content offerings.
2K and gearbox software will be supporting Battleborne with 5 add on content packs to beat released post launch, which players may purchase individually or together at a substantial savings through the game season pass. Free content updates for Battleborne will include 5 new playable heroes, bringing the total roster to 30 as well as an additional competitive multiplayer modes, maps, balance updates and community features. In keeping with the success we've had supporting our AAA titles with free to play mobile games, 2K also released the Battle Born Tap companion app, which mirrors Battleboy's progression and loot system and enables players to earn new character skins that can be used in the full game. I'd like to congratulate 2K and gearbox software for once again delivering an entirely new groundbreaking entertainment experience. Excitement continues to build for 2 K's October 7th launch of mafia 3.
Currently in development at 2 K's Hanger13studio, Mafia 3 is the next installment in our successful organized crime series, set in new Bordeaux and re imagined New Orleans circa 1968, Mafia 3 places players in the role of gifted Antohiro, Lincoln Clay, a Vietnam vet determined to take revenge on the Italian mob, betraying and murdering his surrogate family. Mafia III will take the series in a bold new direction by combining its trademark, cinematic storytelling with a dynamic open world. Mafia 3 will be present at E3, highlighted by a stylized area at our booth that is not to be missed. 2K and Hanger13 will continue to reveal more details about this amazing new title in the coming months. Turning to our annual sports releases.
K is hard at work on this year's versions of NBA 2K and WWE 2K. In the coming weeks, we will reveal the cover athlete for NBA 2K17, which will continue the series proud tradition of working with the NBA's most elite athletes when the game launches in September. NBA 2K17 will also celebrate the basketball legacy of Kobe Bryant by featuring the recently retired 18 time NBA All Star the cover of the NBA 2k17 legend edition. This special edition will highlight Brian's career with themed memorabilia and exclusive digital content. In addition, WWE 2K17 is currently in development at Yuke's and Visual Concepts, and we are confident that They will continue to innovate this series and build on its positive momentum when the game launches in October.
WWE 2K17 will also be a part WW summer slammed weekend this August in New York. 2K will have more to share about these titles and their exciting new features in the coming months. Last week, 2K and 4 Access Games announced that Sid Meier Civilization VI, the next installment in our award winning turn based strategy series that is sold in over 34,000,000 units worldwide, will launch for the PC on October 21st. The release of Civilization VI will mark the 25th anniversary of the series and provide the most detailed, vivid and beautiful experience ever featured in a civilization game. In this all new title, active research and technology and culture will unlock new potential ways to play, Cities will physically expand across the map and world leaders will pursue their own agendas based on the historical character traits as players race to achieve victory.
We're thrilled to introduce a new installment to this beloved series, which promises to once again captivate fans with every turn. In addition to these frontline releases, we will continue to deliver an array of digitally delivered offerings designed to drive engagement with and recurrent consumer spending on our recent releases and upcoming titles, including additional free content drops for Grand Theft Auto Online. Our NBA 2K16 Esports tournament on PlayStation 4 and Xbox 1 is quickly approaching the June 1st finals, where the 2 remaining teams will Kate Pete in Los Angeles to win a $250,000 grant prize and a trip to the NBA finals. Throughout the tournament, more than 92,000 teams competed in over 2,000,000 games, and the playoffs and championship rounds will be broadcast on Twitch for audiences to enjoy. We're very pleased with our initial foray into the emerging world of eSports, and we will continue to explore ways to leverage our properties and to engage and reward our loyal fans.
Next month, 2K will have a booth on the show floor at E3, where a selection of our upcoming titles will be on display. We welcome you to stop by or see how we will continue our trend of delivering the most innovative and immersive entertainment experiences in our industry. Looking beyond the current fiscal year, we have along with new intellectual properties that promises further diversify our industry leading portfolio. I'll now turn the call over to Lainie.
Thanks, Carl, and good afternoon, everyone. Zay will review our results for the fourth quarter fiscal year 2016 and then discuss our outlook for the first quarter fiscal year 2017. All of the numbers I'll be providing today are non GAAP and all comparisons are year over year unless otherwise stated. Our press release provides a reconciliation of our GAAP to non GAAP measurements. And on our website, we have provided additional details regarding the non GAAP components for our cost of goods sold and operating expenses.
Starting with our results for the fiscal 4th quarter, net revenue was $5,000,000 as compared to $427,700,000 in last year's fourth quarter, which had benefited from the release of Evolve and continued sales of a more extensive holiday release slate. This result exceeded our outlook range of $260,000,000 to $310,000,000, due primarily to stronger than expected revenues from Grand Theft Auto V and Grand Theft Auto Online. In addition, NBA to Page 16 exceeded our expectations. Digitally delivered revenue grew 12 percent to $226,600,000 and accounted for 66% of our total net revenue. 55% of digitally delivered revenue was derived from recurrent consumer spending, which grew 15%.
The largest contributor to digitally delivered revenue Grant Theft Auto, NBA 2K and XCOM 2. Cadillac sales accounted for $211,300,000 of net revenue, led by Grand Theft Auto And Borderlands. Gross margin was 46.4%. The decrease is due primarily to higher amortization of capitalized software development costs, partially offset by growth in digitally delivered revenue. Operating expenses was $109,600,000, down by $15,400,000 due primarily to higher marketing expense last year for the launch of Evolve.
Interest and other expense was $200,000 as we generated higher interest income than in last year's fourth quarter. We recorded a tax benefit of $2,500,000 which includes $5,400,000 in tax benefits related to video game development costs. These benefits were higher than our forecast and in addition, our tax rate excluding these benefits. Non GAAP net income was $51,700,000 or $0.46 per share, versus $54,300,000 or $0.49 per share in the prior year's 4th quarter. This result exceeded our outlook range of $0.15 to $0.25 per share due to our strong business performance and lower tax expense.
On a GAAP basis, net revenue grew 26 percent to $377,200,000 and net income increased to $46,400,000 or $0.48 per share. Turning now to our full year results. Net revenue was $1,560,000,000 versus $1,670,000,000 in fiscal 2015. Which had benefited from a more extensive release slate, including the launch of Grand Theft Auto V on PlayStation 4 and Xbox 1. The largest contributors of Grand Theft Auto5 and Grand Theft Auto Online, NBA 2K16 and WWE 2K16.
Digitally delivered revenue grew 36 percent to a record $835,200,000 and accounted for 54% of our total net revenue. 48% of digitally delivered revenue or 26% of total net revenue was derived from recurrent consumer spending, which grew 33% to its highest level ever. The largest contributors to digital sales were Grand Theft Auto, NBA 2K, Borderlands and XCOM 2. Gross margin decreased modestly to 46.2 percent due primarily to a lower margin title mix, partially offset by growth in digitally delivered revenue. Operating expenses were $483,500,000, down by $14,800,000 due to lower marketing expense, which was partially offset by increased personnel expense from a higher headcount, higher research and development expense and increased depreciation expense.
Interest and other expense was $6,700,000. We recorded a tax expense of $13,200,000, which includes $37,600,000 or $0.33 per share and tax benefits related to video game development costs. Excluding these benefits, our effective tax rate was approximately 22% Non GAAP net income was $218,300,000 or $1.96 per share as compared to $219,200,000 or $1.98 per share in fiscal 2015. On a GAAP basis, net revenue grew 31% to $1,410,000,000 and net loss narrowed to $8,300,000 sheet in March 31, 2016, as compared to December 31, 2015. Our cash and short term investments balance increased to $1,270,000,000.
This equates to net cash of $11.12 per share, which includes a potential dilution from our convertible note. Our accounts receivable balance decreased to $168,500,000, primarily reflecting collection of receivable Inventory decreased to $15,900,000 and software development costs and licenses increased to $393,200,000 reflecting the development efforts around our pipeline of upcoming releases. Now I will review our financial outlook which is provided on a non GAAP basis. Starting with the first quarter, we expect net revenue to range from $225,000,000 to $260,000,000 and net loss to range from $0.40 to $0.30 per share. Revenues are expected to be Gran Theft Auto Online will start to moderate, partially offset by the launch of Battleborn.
The largest contributors to revenue are expected to be Grand Theft Auto5 and Grand Theft Auto Online MBA 2K16 and Battleborns. We expect gross margins to expand to the upper 40s. Total operating expenses are expected to increase by approximately 32% due primarily to higher marketing expense for the launches of Battleborn and mafia 3. Selling and marketing expense is expected to be about 30% of net revenue based on the midpoint of our outlook range. We project interest and other expense of $2,000,000 and weighted average fully diluted shares of 86,000,000 and our effective tax rate is expected to be approximately 23%.
Turning to the details of our full year outlook. We expect net revenue to range from $1,500,000,000 to $1,600,000,000 and net income to range from $1 to $1.25 per share. Our revenues are expected to be roughly unchanged as compared with last year, driven primarily by our assumption that our new launches and expected growth from NBA 2K and WWE 2K will be offset by moderating results from Grand Theft Auto5 and Grand Theft Auto Online. Our net income is expected to be lower versus fiscal 2016 due primarily to higher expected operating expenses and substantially lower tax benefits than recorded last year. The largest contributors to revenue are expected to be NBA 2K17 and NBA 2K16, Grand Theft Auto5 and Grand Theft Auto Online, Mafia 3, WWE 2K17, Sid Meier Civilization VI and Battleborn.
We expect the revenue breakdown from our labels to be roughly 75% 2K and 25% Rockstar gains. We expect our geographic revenue split to be about 62% United States and 40% international. We expect gross margins to expand to around 50%. Total operating expenses are expected to increase by approximately 27% driven primarily by higher marketing expense for our fiscal 2017 release slate, as well as our lineup for fiscal 2018. Higher research and development expense, increased personnel expense from a higher headcount at our development studios, and increased depreciation expense.
Selling and marketing expense is expected to be about 18 percent of net revenue based on the midpoint of our outlook range. You project interest and other expense of $4,000,000 and weighted average fully diluted shares of $117,000,000. And our effective tax rate is expected to be approximately 23% which include $60,000,000 in tax benefits related to video game development costs. Interest on the convertible notes net of tax is $4,400,000 which should be added back to net income to calculate net income per share. We expect our operations to generate a modest amount of cash in fiscal 2017.
In closing, the consistent execution of our strategy to deliver the highest quality and interactive entertainment experiences, coupled with disciplined financial management enable Take 2 to deliver another year of better than expected revenues, profits and cash flow. Fiscal 2017 promises to be another strong year for our company. Creatively, operationally and financially, we are well positioned to deliver growth and margin expansion over the long term. Thank you. Now, I'll turn the call back to Strauss.
Thanks, Carl and Lainie. On behalf of our entire management team, I'd like to thank our colleagues for delivering another strong year for our company. To our shareholders, I want to express our appreciation for your continued support. We'll now take your questions.
Thank you.
And our first question comes from the line of Mike Olson from Piper Jaffray. Please proceed with your question.
Hey, good afternoon. Congratulations on strong quarter. I was just curious there's some changes in the industry and wondering how you're thinking about take to being affected or not affected by some of those changes in the ecosystem. So that would be around the PlayStation 4.5, a Nintendo console, virtual reality. I guess you mentioned Esports.
Are those various things opportunities challenges or indifferent for Take 2? You.
I think in general, these are all opportunities, depending on how things pencil out. A successful new console gives us another opportunity to release titles, whomever it comes from Esports is a very exciting area that we talked about in today's call. We're just beginning to participate through our NBA 2K tournament. I think the fact that there were 92,000 teams that were involved, is pretty extraordinary. Right now, esports still tends to be a marketing vehicle for our games and create more engagement.
But we are able to monetize that engagement with the recurrent consumer spending. So that's certainly a good thing. And I've talked a bit about VR in the past. And, there's a lot of excitement in the marketplace and a lot of our people are excited too. We're still an R and D motor enter because this is still not a consumer business.
We want to be really clear if if this is a consumer's platform of choice, we'll bring our intellectual property to it aggressively and ambitiously. We just tend not to vote when we don't have to. The vote that we cast is be wherever the consumer is, channel distribution vehicle platform product type geography, be there with the best intellectual property in the market, and where we don't have to vote yet, we don't. So The wins at our back, it's also our competitors back. We think the people who win most are those that are the most creative, the most innovative and the most efficient, and that's where we aspire to be.
Thank you.
And our next question comes from the line of Eric Handler from MKM Partners. Please proceed with your question.
Yes. Thanks for the question. Two questions for you here. On GTA Online, last year, fiscal 2016, you thought there'd be some moderation. You're expecting some moderation now in fiscal 2017.
Are you seeing anything to suggest right now in your monthly data that there is, in fact, a slowdown going on. And then secondly, for Lainie, how are you guys treating the convert that you have coming due in December in your guidance and what's weighing on the cash flow outlook for the year?
So in terms of GTA Online, I see it the way you do, Eric, which is In fact, it has performed better than all of our expectations and that's certainly gratifying. And I think that's a reflection of how amazing GTA5 is, how fantastic GTA Online is, and how great the additional content drops have been. And we have been, very pleased by the continuing results. It's more than 2.5 years after the initial release. And yet, results continue to be up quarter over quarter year over year.
So we can't quite say when results will moderate so far. The title continues to perform very well indeed. But at some point, one's expectation would be for moderating results.
For the convert, we're accounting for the convert as if they were to be settled in stock, which is what is included in our guidance right now. But that's our current intent, but we have the option to settle in either cash or stock. So when we get closer to the maturity date, we'll evaluate the best way to settle the convert we can look at where our cash balance is at that time. So right now, at the end of the year, we were at $1,270,000,000 to have a strong balance and we'll see what the potential uses for that cash are. And we'll determine what our best option is at that time.
And then the free cash flow, is there anything particular that's weighing on your view that it'd be modestly positive?
Yes. We're continuing to invest in, the game development for our pipeline and also, IT related fixed asset expenses.
Now our next question comes from the line of Ben Schachter from Macquarie. Please proceed with your question.
Hey guys, congratulations on another great year. A few questions. 1, I think I know the answer to this, but just to clarify, all the guidance there, all the figures you're giving us so far include only the announced title date. The first question. Second question, Strauss, I think you mentioned that you expect FY 2018 revenue and earnings to grow.
If you could just discuss why you have confidence to give that, give so much guidance today. And then finally, any update on just how you're thinking about the cash and how you're thinking about M and A in general? Thanks.
So, to your first question, just to clarify, we've announced the entire release schedule for the year, and that's what you should expect our release schedule to be. And, that sort of outlook is based on any changes would be performance based largely. In terms of, I'm going to skip to question 3, which is cash uses. And our Our view remains the same, which is there are 3 potential uses: support organic growth, which has been our story all along, has been a very good story, And we do think there are wonderful opportunities for organic growth, whether that's new types of products or expanding our focus in other geographies like Asia, which has been very fruitful for us. We're supporting new platforms as they develop or new other new opportunities like Esports.
There are opportunities for inorganic growth. Those tend to sort of come along when you least expect them. That's why we believe Cash is a strategic asset. We are very disciplined. We do believe in doing accretive deals that does distinguish us from some of our competitors historically.
And retro, respectively, that's been a very good call on our part. And then, of course, we're we believe in returning cash to the shareholders. And in the past several years, we've purchased about $300,000,000 worth of stock. And we certainly have an opportunity to do so in the future. We have an outstanding authorization for a buyback would you mind repeating your second question because I seem to miss it?
You mentioned that you expected growth, I think, on both revenue and earnings for FY 2018. So lucky do the confidence to say that now.
That was more a comment than a question or was there a question in there?
Gives you
confidence? No, it gives me confidence. Yes,
it's what we're working on at our Development Studios.
We have very good visibility into our pipeline and given what we see and also our ability to continue to grow recurrent customer spending in the context of great new releases, it gives us high that's in fiscal year 'eighteen growth.
Great. Thanks and good luck.
Our next question comes from the line of Brian Fitzgerald from Jefferies. Please proceed with your question.
Yes, hi. Just, this is Tim O'Shea first for Brian. Thank you for taking question. So just another one on the outlook. I know that Lainie mentioned the higher OpEx and a tax in taxes next year, but I was just hoping you might help us understand the specific situation that might be driving the disconnect between top line growth and EPS growth outlook for fiscal 2017.
Is there a game that's going to be less profitable than expected? Or maybe I noticed that large deferred revenue outlook, just how should we interpret this? And then I had a quick follow-up
Well, for next year, when we're looking at, the disconnect in terms of the bottom line, what you said is to our We don't have as big of a tax benefit. We have $0.33 per share this year and next year where we can only have $0.14 per share. And then also our operating expenses are going to increase about 29%, primarily due to higher marketing expense. Our margins are higher. So It doesn't so the pipeline is set and it's strong and it's just a big difference because of the marketing expense as well as the taxes.
Okay, got it. Thank you. And then, just broadly speaking, it's a higher level question, but we've seen some consolidation across the space with the biggest gains in each category taking more market share. I'm just curious, first of all, if you would agree with that sentiment? And if so, how that trend towards consolidation impact your planning decisions around both your larger franchises like GTA and MBA and maybe alter your smaller ones, which may not be category leaders.
Thank you.
Yes. I mean, in this instance, we would agree with what you're observing, which is that the bigger and better are getting stronger and that's consistent with the nature of the entertainment which is, as entertainment businesses mature, a greater proportion of consumer attention and therefore, revenue goes to the highest quality releases. Essentially, When entertainment businesses are nascent, people are willing to experiment among another a number of brands. And as they mature, All consumers taste tend to narrow and focus on the biggest titles in the business. This has been true from time immemorial since the beginning of the electronic entertainment business across every different type.
And it's why we've had the strategy that we've had at this company, which is put out create and put out a high the highest quality releases and do a limited number so you can really focus and focus not just on your existing IP, but try to launch new successful IP every year. And we've been able to do that most years since we took over the company. And that's why we have eleven titles that have each sold over 5,000,000 units in an individual release and something like 45 that have each sold 2,000,000 units or more in an which we think is the standard bearer of the industry. So yes, the strong gets stronger and that was true in motion pictures and television and the music, it's going to be true in interactive entertainment and that puts pressure on us and on our key competitors to continue to deliver the highest quality titles. And focus on doing so.
So we see it as a, as an opportunity as much as a challenge. And certainly for the haves, it's a much better place to be than the have nots.
Thank you.
And our next question comes from the line of Arvind Bhatia from CRT Capital.
Okay. Thank you. And I'd like to add my congratulations guys. This is for Strauss Carloolini. As you go back to this time last year, you started with guidance of $0.75 to a dollar.
Obviously, you delivered earnings that were significantly higher than that. As you look back, would you say that most of the upside was from GTA5 and online, perhaps you could review the top 3 reasons you were able to deliver that much upside? And then my second question is, specifically on mafia III. If you could maybe provide a framework for us to be able to kind of think about the scale of this to be able to model it, maybe talk about the marketing support, other things that you're doing, and how you're modeling it perhaps as of this point? Thank you.
So in terms of our guidance from this past year, when we set our original guidance, it was our best estimate at the time when we gave out those numbers. We had a very light release schedule. And as you mentioned, some of our titles performed stronger than we had expected GTA5 and GTL9. And that coupled with our tax credit is what helped us to have these fantastic results for this year.
And Arvind, in terms of mafia 3, Obviously, this is a title that we're very, very excited about here from a creative perspective, from an all but also from a commercial perspective. Think this title has the perfect combination of what people are looking for in an open world story based ribbon title with a lot a lot of things that a lot of games don't have. A lot of time and money has gone into us. We've got a great creative team being led by Hayden Blackman. So We are very excited about this title and the prospects of this title.
And when you get this right, in this particular genre, you can obviously achieve significant success. In terms of and we've done that before, in general. So in terms of providing you with a specific model that you can go by, I don't have anything specific for you, to go there, but I can tell you that, our expectation is that we should be exceeding anything we've ever done on the Matias side before, again, from a credit perspective and a commercial perspective. So you can always look at the previous mafia titles as a benchmark. But again, I wouldn't stick too much on that because we think this title vastly vastly exceed, what the previous mafia been able to accomplish over the past.
Next question comes from the line of Doug Kretz from Cowen And Company. Please proceed with your question.
Thanks. You mentioned that you've had success with some of your older grand theft auto titles and the PS 2 are on the PS 4 with the ability to play older titles. Just wondering if there's any appetite there for actually doing remasters or some of those older titles into HD. Is that something sort of conceptually that you think would be a worthwhile use of your talent time?
That's something that the labels will decide and talk about in due course. Certainly, we wouldn't rule it out. It will be largely an economic decision. I don't, we wouldn't do anything that's not going to look great creatively. So the starting point is, is this going to delight consumers?
Is this going to look good? You know that we're a company that is not driven 1st and foremost by can we create revenue this way? We would start by saying, will this be exciting to consumers? Will they be happy with it? Will it reflect well on our brands?
Will it reflect will it reflect well on our company? And if the answer is yes, then it may well be a compelling opportunity. But if the answer is indifferent or no, Then even if we have an opportunity to make a few bucks, we probably would decline. So I think that's the lens through which we look. The actual decisions are made by the labels.
Okay. Thanks.
Our next question comes from the line of Neil Doshi from Mizuho. Please proceed with your question.
Yes, hi. This is Hassane in for Neil. You mentioned the release late pretty is confirmed for the year, but does that include any content drops in DOC? In other words, could we possibly see, content that might not otherwise be baked in at the moment? Then second question is regarding NBA 2K.
There's been really strong growth in registered users. Just wondering if you can share any maybe additional metrics like active users or paying users? And is the strategy there to drive, a greater number players to pay or is it just to drive higher ARPU per paying user? And if we can see maybe potential other revenue streams like ad based streams for the flows that aren't paying? Thank you.
So in terms of our outlook, we have contemplated recurrent consumer spending in the outlook. We've contemplated product drops. There could be changes there and perhaps there's some opportunity, but this is the outlook as we see it now. And contemplated all aspects of our business, but things can change. In terms of metrics, we haven't really shared a great deal of metrics on, our in game spending, we give the broad, certainly give broad numbers around recurrent consumer spending and it's been great.
Our nearly more than a quarter of our non GAAP net revenue last fiscal year was recurrent consumer spending. So certainly, the numbers are meaningful. And we have mentioned that we've 31,000,000 users signed up users of Grant Theft Auto on sorry, of NBA 2K Online in China. So we have mentioned that metric. We have talked about usage of Grand Theft Auto Online in the 4th quarter.
So we've given some metrics We don't tend to give a broad array of metrics because this is still a work in progress and still developing activity here and because we don't want people to extrapolate even though the results have been excellent, we don't want one to extrapolate that they're perpetually a nice gentle upward sloping curve. Because it's just too early in our experience set to see that. In terms of our strategy, our strategy, and I know it sounds like motherhood and Amplify, but it genuinely is our We're trying to delight consumers as they engage in our products. And when we make a content drop, we want that to be something exciting to consumers And we know if we do that, then we will increase engagement and therefore, we will increase spending and therefore, we'll increase revenue and profits And of course, we are a profit seeking enterprise. We are focused squarely in the real world, and we're a for profit company.
But the way entertainment businesses survive and thrive with the backdrop, as Lainie mentioned, of being exceedingly efficient, well organized professionally managed and fiscally highly disciplined, but with that backdrop, our focus turns entirely to creativity. And that creativity surrounds what's going to make consumers most excited about our titles and most excited about our brands and most engaged with our titles and repeatedly engage doesn't detract from it that we don't put up toll boots. We don't annoy our consumers. We simply get paid along the way. And that's what we aim to do, and that has had a great results around here.
But many of our competitors, are actually proud of the fact that they're primarily data driven that they're focused on the content supporting the data that supports the purchases that supports the revenue that supports the profitability. We do not do it that way. We are creative. We make an incredible entertainment experience, and then we seek to monetize it.
Okay. Thanks.
Our next question comes from the line of Mike Hickey from the Benchmark Company. Please proceed with your question.
Hey guys, congratulations, awesome quarter. Thanks for taking my question. 2, I'm curious when you release new content or GTA online, if you see a corresponding impact or sales impact to the base game GTA5, thinking about sort of a marketing vehicle to maybe new installs or maybe prior gen players crossing over to the current gen experience where obviously there's new content coming out. And then, I guess the part of that question is, I guess, the sort of nebulous thinking about the pipeline for TTA online content, but would you sort of characterize it as about the same amount of content coming out this year or more or less that would be helpful? I have a quick follow-up.
Yes, it's a good question, Mike. I don't you know, GTA5 has continued sell. As you know, when we've talked about the unit sales, certainly there's been great news there, because we've sold so many units We have not tracked what happens to the GTA5 sales when new content is dropped into GTA Online. So we'd be speculating about what influencer would be. But I think anything that makes GTA Online exciting is good for PA5.
And I do expect that it's going to continue to be a very strong title going forward and a great catalog title over time. If history is any guide, that will be the case. In terms of the pipeline for online content on an ongoing basis, that's something for Rockstar to talk about in due time. But there is content coming.
Okay, cool. The last question, gearbox had sort of some encouraging, I guess, commentary on the initial sales of Battleborn. It sort of reflected on a border land. And I think it was maybe outpacing that a bit. And my impression was it sort of suggested maybe it was the slowest start, but had the potential to build into something meaningful.
And I think Borderlands land's live to date has done maybe 8,000,000 units. And so curious if you share that enthusiasm for the future sales potential of Saddleborn? And then also, if I remember, floor land had done pretty well in terms of attaching digital content. But I'm sort of curious on more forward sales curve if you've seen sort of outside success in terms of full game downloads of that game? Thanks guys.
Yes. I mean, the initial results are very encouraging, which is I think we should properly took away from those comments. But it is early yet. The scores are good. Consumers like it.
A lot of people playing it and really loving the gameplay. But I wouldn't want you to draw a conclusion that the Battle Born curve is necessarily, the borderlands curve because we just don't have any of that information yet. So we're encouraged and we feel good about it, remains to be seen how it performs. And in terms of ongoing digital content, we've said there's more content coming. Again, we'll leave the specifics to the label.
Yes. I guess I was meaning to ask, I'll see the percentage of sales, full game download versus physical.
Yes, I don't think we've talked about it yet, Mike.
Okay. Thanks guys. Best of luck.
And our final question comes from the line of Drew Crum from Stifel. Please proceed with your question.
So as far as the fiscal 2017 revenue guidance is concerned, does it assume digital growth and more specifically growth for recurrent consumer spending. And then separately, one of your competitors yesterday talked very bullishly about the opportunity in Asia. Maybe you can, kind of reset or talk about what the company's strategy is in that market as you enter fiscal 2017?
For digital, our financial outlook assumes that we're going to generate modestly lower digitally delivered revenue into 2017, like a percent decline in the mid single digit. This is driven by our assumption that recurrent spending will be moderately lower around 10% and booking downloads will be roughly flat. For recurrent consumer spending, we expect it to be lower based on our assumption that in virtual currency for NBA 2K and higher revenues from downloadable add on content for a variety of our titles will be more than offset the moderating revenues from Grand Theft Auto Online. And we expect our full game downloads to be roughly flat as last year benefited from the launch of Grand Theft Auto five for PC. But over the long term, we expect digitally delivered revenue to grow.
And as we continue to execute our strategy to drive greater engagement and recurrent consumer spending, as our industry transitions more towards full game downloads, we expect it to grow over the long term.
Yes. And in terms of, this is Strauss. In terms of Asia, our Asia strategy was set in motion a number of years ago when we opened the headquarters Singapore became a publisher in Japan and entered a number of other markets. And then we also, tried new kinds of products that we felt would be quite challenging to launch in Europe or in the U. S, but could be opportune to launch in Asia, largely free to play massive multiplayer games.
We've had strong results with NBA 2 can line in China. We've mentioned those as part of today's call. We've launched Civilization Online in Korea and that will also launch in a number of other Asian markets. And we're working on a number of other really interesting opportunities. So that business has already been very fruitful for us, has grown from a very small part of our business to a meaningful part of our business.
And it's a very exciting part of the world and people's appetite for games is somewhat different than here than here in the U. S. Or in Europe. With a significant focus on massive multiplayer games and a significant focus on the free to play model. So we don't believe that all models work in all markets.
We think you have to tailor what we bring to a particular market with the needs and desires of consumers in that market. So we're incredibly excited about Asia. And I would just like to make the comment that we, as an industry, are just scratching the surface in China. Of what's possible. And I do believe, and maybe a contrarian point of view, but I think that, an area of China that's remained very challenging, which has been the distribution of Western products I think that I think the Chinese government, realize more and more that it is actually not challenging that it's actually beneficial that it's what consumers want, that will not cause consumers to have a view of Chinese society that is in any way unfortunate for the government.
And I think restrictions will probably be loosened. My guess is not within the next 12 months. But I do believe in the coming years, and that's going to be incredible news for us because, of course, the middle class alone in China is bigger than all U. S. Households.
So we think that there's an amazing opportunity there. We're poised for the opportunity. Naturally, we comply with government regulations wherever we are in the world. And China is no exception, but I am of the view that it's time for restrictions to be softened and that it will be beneficial for Chinese society as they see it, not just as I see it. And I do believe that creates a massive opportunity for us to not reflect in this year's numbers, next year's numbers or anyone's outlook for the industry.
There are no further questions at this time. I'll turn the call back over to management for any closing remarks.
Well, thank you so much for joining us today. We're very pleased with our results. We're proud of our outlook, but what we're really proud of is, our colleagues all around the world, almost 3000 of them who are engaged every day in trying to make the very best interactive entertainment properties on earth to bring them to market and to run a really solid serious and responsible business in making sure that we delight consumers as they experience our products. So we feel, very grateful to have an opportunity to work in this business about which we're so passionate. Grateful to our colleagues and we're really pleased with the results.
Thanks
for your time and participation. May disconnect your lines at this time and have a wonderful rest of your