Greetings, and welcome to Take 2 Interactive Third Quarter Fiscal Year 2013 Earnings Call. At this time, all participants are in As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Hank Diamond, Senior Vice President of Investor Relations And Corporate Communications for Take 2 Interactive. Thank you, sir. You may begin.
Good afternoon. Welcome and thank you for joining Take 2's conference call to discuss its results for the third quarter of fiscal year 2013 ended December 31, 2012. Today's call will be led by Strauss Zelnick, Take2's Chairman and Chief Executive Officer call it Sladoff, our Chief Operating Officer and Lainie Goldstein, our Chief Financial Officer. We will be available to answer your questions during the 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 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. These important factors SEC, including the company's annual report on Form 10 K for the fiscal year ended March 31, 2012. These documents 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 delivered strong revenue growth, profits and cash flow in the third quarter. The key drivers of our results were the record breaking release of MDA 2K13, continued strong sales of Borderlands 2, the successful release of Excom and any unknown and robust holiday sales of our catalog and digitally delivered offerings. These results exceeded our outlook and demonstrates that the market for the highest quality interactive entertainment remains strong.
NBA 2K13 has quickly become the most profitable release in the history of 2K Sports. The title achieved record setting 1st week sales, and is already sold in nearly 4,500,000 units worldwide. Considered by many to be the best release of NBA 2K yet, The title received massive critical acclaim, including more than 37 awards for sports game of the year or best games of 2012. The success of NBA 2k13 has been enhanced by sales of virtual goods and the introduction of our multi platform NBA 2k Everywhere experience. These offerings allow consumers to immerse themselves further into the game's authentic basketball culture, both at home and on the go and helped enable the franchise to generate its highest ever digitally delivered revenues.
I'd like to thank the teams of visual concepts in 2K for their stellar work and ongoing commitment excellence. Building on its extraordinary launch in September, Borderlands 2 continues to expand its audience and remains on pace to become the highest selling title in 2 case history. It has also been the largest contributor to our digitally delivered revenue this year driven both by strong sales of full game downloads and high patch rates for the titles add on content, especially the Borderlands 2 season pass. With nearly Takes to continue to expand its audience and the main unpaid lands franchise to another level, enabling it to become 1 of Take 3's most important long term properties. Rounding out 2K slate of successful new titles is XCOM enemy unknown, Developed by the strategy experts at Firaxis Games, Xcom, NetEMEA, known reinvents 1 of the industry's most beloved franchises as a unique action strategy game.
The title was one of the highest rated releases of 2012, achieving a near 90 Metacritic score and winning an impressive 18 game of the year awards worldwide. As a result, Firaxis Games received the number one spot in game informer magazine's prestigious developer of the year rankings, Our commercial success, Xcom and EMEA unknown, has generated particularly strong digitally delivered sales and is being supported with a popular add on content campaign. With Borderlands 2, NBA 2K13 and Xcommenome unknown, 2K has delivered 3 of the 10 highest rated console releases of 2012 based on average metacritic score. I'd like to congratulate 2K on what's shaping up to be the label's best year ever both in terms of financial results and creative achievement. In addition, the new release is an important driver of our third quarter results with strong holiday demand for our popular catalog offerings.
Catalog sales continue to be led by Rockstar Games iconic titles, Grand Theft Auto 4 and Red Dead Redemption, which are still delighting consumers years after launch. Our diverse portfolio of catalog titles is a valuable asset that sets take to apart from the competition and provides the company with a meaningful and relatively stable revenue and profit stream in virtually every period. Revenue from digitally delivered content more than tripled year over year and accounted for 23% of non GAAP net revenue in the third quarter. The largest contributors full game downloads and add on content for our console and PC titles. We also benefited significantly from our growing portfolio of offerings for emerging platforms.
During the third quarter, we released several successful titles for tablets and smartphones, representing a range of genres, including Grand Theft Auto Vice City, borderlands, legends, NBA 2k13, and heard heard heard. We firmly believe that interactive entertainment for mobile platforms, especially tablets, represents an important growth opportunity for our company and we have a number of exciting projects in the pipeline. We'll have more to say about these in the coming months. We also continue to make significant progress in our online projects for Asia, highlighted by the commercial launch of NBA 2k online on the Tencent portal in China. While while still in their early stages, our Asian initiatives are already generating cash flow and represent meaningful, high margin organic growth opportunities without considerable risk.
Karl will have more to share about these efforts shortly. Take2's balance sheet is very strong. At quarter end, we had nearly 4 $50,000,000 in cash and no borrowing on our $100,000,000 line of credit. We have ample capital to pursue a variety of investment opportunities and I'm pleased to report that our Board of Directors has authorized the company to return a portion of that capital to shareholders through the repurchase of our own stock. This reflects our confidence in the company's ability As a result of our strong recent results and positive outlook for the remainder of the year, highlighted that the upcoming release of BioShock Infinite on March 26, fiscal 2013 is poised to be a profitable year for Take 2 on a non GAAP basis.
Moreover, with Grand Theft Auto V launching on September 17th, fiscal 2014 should be one of our best years ever with substantial revenue and earnings growth. Looking ahead, We have an extensive pipeline of unannounced titles in development. We also benefit from what we believe are the strongest assets in our industry, including world class creative teams, a diverse portfolio of leading intellectual property, ample financial resources, and a sound focus on delivering the highest quality interactive entertainment. As a result, we're well positioned to capitalize on the full range of opportunities for our business, including the next generation of consoles when they come emerging mobile and online platforms and new business models. This is an extraordinarily exciting time for our industry and I've never been more optimistic about Tay2's long term outlook for success.
I will now turn the call over to Carl.
Thanks, Ralph. I'd like to begin by giving an update on the progress we've made with our online initiatives. Our strategies had been to focus on a select number high impact projects that have significant strategic and financial value to take too, while taking a balanced approach to managing risk. As with our core business, we believe that the strength of our IP and commitments equality can create compelling commercial opportunities that will differentiate us from other players in the market. Given their attractive scale and growth characteristics, we've initially focused our efforts on the online gaming markets in Asia, where we teamed up with the best in class partners whose expertise complements our own.
Through each of these projects, we continue to develop deep knowledge of this growing market segment and are building a clear vision of how we can best leverage this expertise on a global scale. On October 24th, NBA 2k online are free to play online basketball game launched on the Tencent portal in China co developed by visual concepts and 10 event, the game is generating significant buzz in the region and user metrics are building momentum. We continue to tailor gameplay based on consumer behavior and are very enthusiastic about the game's prospects to become a meaningful contributor to our profits. We plan to bring NBA Tuesday online to additional markets such as Taiwan and the Philippines. Pro Baseball 2K, our online baseball game is being developed by visual concepts and partner with Nexon Corporation in Seoul.
The game entered closed beta in November in Korea and is on track for an open beta release this spring. And 2Ks massively multiplayer online game civilization online continues to make progress. Currently in development with our Pro Access game studio and XL games, which is led by renowned industry veteran, Jake Song, Civilization online is one of the most exciting and ambitious online game development initiatives in the region. I'll now discuss our announced pipeline of upcoming releases. On February 26th, 2K will deliver a worldwide retail release of the Borderlands 2 add on content pack, which bundles all of the digital content previously released for Borderlands 2 onto a single disc.
The Borderlands 2 add on content pack is a must have for Borderlands fans who haven't already downloaded the content, adding hours of additional gameplay and exciting new features, the first two add on campaign, Captain Scarlet and her Pirate's Booty and Mr. Tort's campaign of Carnage. On March 5th, 2K Sports will release Major League Baseball 2K 13 for the Xbox 360 and PlayStation 3. The title of feature Tampa Bay Ray Cy Young Award winning pitcher David Price as cub Bradley and will once again be supported with a perfect game challenge 2K Sports groundbreaking $1,000,000 competition. We're pleased to enter into this new mutually beneficial agreement with various entities associated with Major League Baseball, and we expect Major League Baseball UK13 to contribute to the profitability of 2K Sports.
From irrational games, the makers of the highest rated first person shooter ever. BioShock Infinite is set to release March 26th. Consumer enthusiasm and buzz for this launch continue to grow by the day and we expect the title to be a significant critical and commercial success. In addition to a series of special additions that are currently available for pre order, fans can purchase BioShock Infinite Mind In Revolt an ebook prequel to the title, which will be available for the Amazon Kindle beginning February 12, and is free for those who preorder the game through Amazon. Also available free of charge to those who pre order bioshock infinite is the industrial revolution pack, which includes exclusive access in game gear items that boost combat abilities, bonus in game currency, lost picks, and the industrial revolution puzzle game on Facebook.
For those fans who can't wait until March 26 to experience BioShock, 2K is currently offering the BioShock ultimate rapture edition. For only $29.99, consumers get both BioShock and BioShock 2. Add on content for both games, which is valued at more than $40, and additional never be forcing content. Rockstar Games is hard at work on the September 17th release of gamers around the world expecting to be the greatest GTA yet, Grant Theft Auto V. With a playable world bigger than Red Dead Redemption, GTA San Andreas, and Grand Theft Auto 4 combined, Grand Theft Auto 5 will offer an unprecedented level of immersion and exploration.
And finally, 2K Marin continues to make progress on XCOM, its tactical squad based shooter based on the beloved sci fi franchise which is planned for release during fiscal year 2014. In closing, I'd like to join Strauss in congratulating 2K on the phenomenal string critically and commercially successful releases. We have a robust pipeline of announced and unannounced titles in development, and we're very optimistic about our long term outlook for growth and profitability. Thanks, and I'd like to now turn the call over to Lanny.
Thanks, Carl, and good afternoon, everyone. Today, I'll review our results for the 3rd letter and then discuss our outlook for the fourth quarter full year fiscal 2013. All of the numbers I'll be providing today are non GAAP results from continuing operations and all comparisons are year over year, unless otherwise stated. Our press release provides a reconciliation of our GAAP to non GAAP measurements. Starting with our results for the third quarter of fiscal 2013, net revenue increased 71% to $405,000,000.
This result exceeded our outlook range of $325,000,000 to $375,000,000 due to the breakout success of NBA 2K13, along with better than expected holiday sales of catalog and digitally delivered offerings. Catalog sales accounted for 22% of net revenue, led by grant 4 and Red Dead Redemption. Revenue from digitally delivered content grew 244% year over year and accounted for 23% of net revenue. The largest contributors were offerings for the Borderlands franchise, in particular, digital sales of Borderlands 2 and its add on content. Exxon enemy unknown, the Grand Theft Auto franchise and NBA 2K13.
Gross margin increased 1.3 percentage points to 48.1% as this year's third quarter revenue mix was heavily weighted towards higher priced new releases versus lower priced catalog titles in last year's third quarter. Operating expenses were approximately $111,000,000 of about $32,000,000 versus the prior year's third quarter. The principal drivers were higher marketing expenses to support NBA 2K13, Eskom, enemy unknown, and borderlands 2. As well as the upcoming release in November 2011. And non GAAP net income was $78,800,000 or $0.67 per diluted share as compared to $29,000,000 or $0.27 per diluted share in fiscal third quarter 2012.
This result significantly beat our outlook range, which projected non GAAP net income of $0.45 to $0.60 per diluted share. On a GAAP basis, we reported net income from continuing operations of $70,900,000 or $0.66 per diluted share. Turning to some key items from our balance sheet, at December 31, 2012, as compared to September 30, 2012, cash balance increased to $448,700,000. Our accounts receivable balance decreased to $94,200,000 primarily reflect cash collected from receivables associated with the release of Borderlands II near the end of the second quarter and the releases of NBA TK13 and Xcom enemy unknown near the beginning of third quarter. Inventories decreased to $29,700,000, reflecting the shipment stock on hand for the releases of NBA 2K13 and Eskom enemy unknown and replenishment orders of Borderlands 2.
And software development costs and licenses decreased slightly to $274,100,000, reflecting the amortization of development costs for our third quarter releases. Now, I will review our financial outlook for the full year and fourth quarter fiscal 2013, which is provided on a non GAAP basis. We are increasing the low end of our outlook range for fiscal 2013 to reflect our strong recent business trends. We now expect non GAAP from $1,150,000,000 to $1,200,000,000 and non GAAP net income to range from $0.05 to $0.20 per diluted share. Turning to the details of our full year outlook.
Our expected revenue range assumes the on time release of the titles we have announced to date. We expect the revenue breakdown from our labels to be roughly 25% from Oxnard and 75% from 2K. We expect our geographic revenue split to be about 60% United States and 40% international. We expect gross margins in the low 40 Total operating expenses are expected to increase by approximately 32% from fiscal 2012, primarily driven by higher marketing expense support our new releases and the $15,000,000 one time contractual obligation recognized in the first quarter. Selling and marketing expense is expected to be about 21 percent of net revenue using the midpoint of our outlook range.
And we project interest and other expense of approximately $13,000,000, tax expense of about $5,000,000 and a share count of approximately 92,000,000 which includes $6,000,000 of participating shares for our unvested stock based compensation awards. Turning to our outlook for the fourth quarter of fiscal 2013. Expect to deliver non GAAP revenue ranging from $235,000,000 to $285,000,000 and non GAAP net income ranging from $0.10 to $0.25 per diluted share. The majority of our revenue in the fourth quarter is expected to come from the release of BioShock Infinite continued styles of NBA 2K13 and borderlands 2 and the release of Major League Baseball 2K13. We expect 4th quarter gross margin in the mid to upper 40s.
Total operating expenses are expected to increase by approximately 23% from the prior year's 4th quarter, driven primarily by higher sales and marketing expense to support our recent and upcoming releases. Selling and marketing expense is expected to be about 19% of net revenue based on the midpoint of our outlook range. Our 4th quarter outlook also reflects interest and other expense of approximately $3,000,000 tax expense of about $1,000,000 and a share count of approximately $120,000,000, which includes $7,000,000 of participating shares for our unvested stock based compensation awards and 26,000,000 shares, representing the potential dilution from our convertible notes under the if converted method of accounting. In closing, we are very pleased with our recent business performance. Our better than expected results in the past two quarters strong sales outlook and enable us to overcome our first quarter loss of the profits for the full year on a non GAAP basis.
We expect to deliver significant revenue and earnings growth in fiscal 2014 and return to our shareholders over the long term. Thank you. Now, I'll turn the call back to John.
Thanks, Carl and Lainie.
Our strategy of delivering a select portfolio of the highest quality entertainment experiences continues to serve us well and remains one of the core values of our organization. We strive diligently for excellence with each release And while that's not a guarantee for success, it has proven to be the predictable outcome. We continue to balance our creative passion with the rigor and discipline to deliver profits and value to our shareholders over time. I'd like to take a moment to thank our colleagues for their dedication and hard work and our shareholders for their continued support. And we'll now
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from the line of James Hardiman with Longbow Research. Please proceed with your question.
Hi, good afternoon and thanks for taking my call and congrats on another great quarter. A couple of quick questions here. Talk a little bit about the move of Grand Theft Auto out of the spring window that you had previously talked about and into September maybe give us a little bit of a puts and takes. I guess, a, from a competitive window standpoint, and, b, just given the fact that There's likely to be some next generation console that are going to be coming out shortly after the September Reece and Ultimate. How we should think about the strategy as you're trying to straddle sort of the current generation and the next generation?
Yes, thanks, James. Look, Grand Theft Auto stand alone. It's a unique property. And I think we're all extraordinarily excited about this title and we think it's just going to blow people away frankly. At a level, I don't think anyone properly anticipates yet.
And the reason that the title is coming out in September is because that's the time required to make sure it's everything everyone expects and then some. As it happens, I think September is a great window. The fact is it's a very open field that early in the fall. And as between late spring heading into the summer doldrums or early fall in an open field, you know, that wasn't the reason that the title moved, but I think it happens to be a terrific time to launch it. And, in terms of next gen, look, as we all know, First of all, nothing's been announced yet, but assuming, the consoles are coming when some of us at least think they are, you know, that's obviously a very light install base initially.
And I'm confident that this company is going to have, an extraordinary array of offerings for next gen when the time comes.
Great. And then just in terms of MLP 2K, although not recently, you, you've quantified sort of the losses there in the past. Can you just I mean, it sounds like for the first time in a while, this is going to be a profitable release for you guys in terms of baseball. Can you help us with the comparison versus last year? How much money did you lose on that?
We previously announced the range of losses based on a legacy deal that we inherited. I think we said it was typically around $30,000,000 a year. We also announced that entered a sunset period and ultimately expired, on its own terms. And the expectations about a new MLB release obviously reflect a new deal. And we've we're very, optimistic and enthusiastic about, both the creative elements of that and the financial elements of that.
And as we said in our statements, we expect that title to contribute to the profitability of 2K Sports.
Our next question comes from the line of Ben Schachter with Macquarie. Please proceed with your question.
Hey guys, congratulations on a good quarter. A couple of questions and then a quick follow-up. For GTA5, how should we think about the post sale revenue opportunities versus previous GTAs? And then separately on full game downloads, obviously you're having some sets there? Is that primarily from steam and how do the economics differ for that versus physical retail distribution?
Thanks.
In terms of, post sale revenue opportunities to answer that, I'd have to sort of outline what the expectations are. And I'm going to leave it to start to talk about the game and what comes after. But just as I said, we couldn't be more enthusiastic. Our full game downloads come from an array of places, including Steam. And in terms of our margins, we've said many times before, they're slightly higher for digitally distributed products, but not meaningfully so.
And Strauss, if I could just follow-up with one quick one. Just a high level, when you think about the next generation consoles, most likely they're going to be a lot more focused on media convergence at higher level beyond just games. How does that impact you and the other publishers?
If that happens, and look, the current consoles allow for all kinds of different media consumption. But if you're talking about the consoles becoming a set top box, first of all, I'd be happy to debate that endlessly and I could probably take both sides of the debate, as you know, Ben. But I think the answer is it doesn't really influence people have access to full array of media choices as it is and we're thrilled by that because the launch of new platforms is great for a company position the way positioned. And tablets have been great for us so far and mobile devices are great for us. Our job is to make the highest quality of interactive highest quality interactive entertainment.
And meet consumers where they are, wherever they are in the world, whatever the device they want to consume our products on and be flexible about the business models as well. So I do I think that, a broad based offering from an exchange console affects us? Only to the benefit if people are more engaged with something that they can watch high quality entertainment on from us, it's probably a good thing.
All right. And then it's Carl. And the other piece is it also creates potential opportunity to put the Console to demonstrate deeper than they are right now. If it's attractive as a broad media device, then there may be folks out there that pick it up, not as a gaming, as a gaming machine, but in fact, now they have access to a gaming machine, and it may encourage them to to enter the gaming market as a consumer.
Great. Thanks. Good luck.
Our next question comes from the line with Stern AG. Please proceed with your question.
Thank you very much. I'd like to add my congratulations as well. A couple of questions for you guys. First one on your basketball franchises continues to do better every year. And I heard you guys talk about, your digital revenue there.
Is there any way for you guys to help us understand what kind of attachment you're getting, whether it's in dollars or other ways to think about, you know, so we can understand the opportunity beyond just the biz sale. And then similarly on Borderlands too, I think you said that it was your largest, digital just generally trying to get a sense of the attach rate, beyond the disc?
So we don't, Arvind, thank you. We don't actually talk about attach rates and, ARPUs and the like. Our focus here, on a creative basis is what drives the organization. And every year, the folks of visual concepts try to make basketball better. And this year is the most highly rated basketball game we've ever had with a 90 Metacritic score and the sold in 6,000,000 units 4,500,000 units, sorry.
And, the unit sales reflect the fact that we're delighting consumers. We've offered the opportunity to have to make in game purchases. All those things make consumers happy, happy consumers spend more money. We make more money. It's a virtuous circle.
We tend to think of it that way. We tend to think of it less as a specific numeric attach rate, although, of course, we could back into that figure. It doesn't really tell us very much about what we're trying to do around here. Same thing with borderlands. We're putting out add on digital add on content because that's what consumers want.
We try to price it fairly. We want everyone's experience of one of our games to be one where they thought they got more value than the value they paid for. Since they're always happy, And that's why Metacritic says for the past 4 years, we've had the number one quality rating among any third party publisher. And that's why we have results we have and that's why we have $450,000,000 of cash on our balance sheet.
One quick follow-up. This kind of ties into where we are in the cycle, etcetera. You've got a great property coming up in March in BioShock. Wondering, as you review the retail landscape in the next 3 to 6 months and what you expect there, has your expectation for BioShock changed at all what are you seeing in terms of the pre order activity and how reliable that may or may not be at this point in the cycle? Just for planning and modeling purposes, how are you thinking about BioShock?
That would be helpful.
Look, the retail landscape is interesting. If you go back to just 9 months of things we're looking pretty bleak. And there were a lot of people just saying the industry is in decline. And we denied, that that was the case. Certainly not our view.
Our view was industry had had some disappointments. And frankly, we've had some disappointments. This is an industry that, like all entertainment businesses, relies upon hits for its health and well-being. And it's further complicated by the nature of the hardware console cycle. And we are heading into the late stages of that cycle.
All that said, there's a huge installed base, and you give people what they want that come out for it. This quarter's living proof of that. Bioshock Infiniti is shaping up really well. The buzz is extraordinary. Titles already won a lot of awards.
We have the highest expectations for it.
Appreciate it guys. Thank you.
Our next question comes from the line of Daniel Ernst with Hudson Square Research. Please proceed with your question.
Yes. Good evening. Thanks for taking my call. A couple of questions about digital. One is in the past, you've said that it really is the margins aren't all that different.
I'm wondering given the margin progression you've had lately in the success you've had in digital overall is looking for the business
versus packaged
today? And then, 2, as it relates to Borderlands and more to be more broadly in digital, what opportunities you have in creating more of an ongoing relationship with your customers certainly fans of GTA or fans of Borderlands have affinity to that game, but do you have an opportunity in there with things like season pass or other and having more of an ongoing either relationship or billing
relationship versus just kind of
one off downloads. Thanks.
I'm just going to ask you
your first question, about digital and the margins. So we have said before that we see that the margins are pretty much in line with what we see at retail margins. But from time to time, depending on the title, if the titles are hit and there's tremendous amount of volume for the title, depending on what the cap software was, to develop the download, or the marketing costs, we can see a bit of a better margin than the retail, but overall in the grand scheme, it's pretty much in line. As a percentage of revenue, it seems to be a bit stronger, because of some of the deals that we have with third parties. How we're, capturing the revenue on the top line.
Yeah. And on your point about an ongoing relationship with consumers is a good one because just a few short years ago, you know, you put out a big release and, and that was pretty much it. Then you'd put out your catalog offerings. This company had a say strategy to build up its catalog offerings based on the quality of what we do. And I think pound for pound, we have the best selling, titles per SKU in the industry which reflects our quality.
And then we were also a standard bearer in delivering add on content for our titles with the launch of Grand Theft Auto Four and the downloadable content packs that came along with that. And you're wise to point out borderlands because borderlands itself has been a standard bear for, add on content delivered digitally well done. Does that mean that, you know, these games will transition into a situation where you're constantly putting out new So the lifecycle is extended greatly. And will continue to experiment with what this means creatively for consumers. I also think as you see tablets roll out and become a more and more important game platform, that episodic treatment of games may become much more relevant for tablets given the perceived price point limitations for a tablet.
But we'll see if that we'll see if it it turns out that way. What you're hearing though is we're not rule based. We're flexible. We'll try anything that delights consumers as long as it fits within the rubric of the various high the very highest quality releases in the industry.
Great. Thanks for the color. And just one other follow-up on next gen. What you're thinking about development budgets having to Well, for both the current gen and the next gen on some key titles, some of this sports titles that would are annual type events, is that going to strain development budgets heading into next fiscal year? Thanks.
We don't have any reason to believe our development budgets will change significantly. And if anything, I would say we've become group wide, much tighter in terms of how we spend our money. It has been a challenge, it's stated challenge for us, and we're very, very focused on it. So, it's we can't say specifically, but no, we don't expect to see a meaningful change in what it costs us to release these top quality products.
Great. Thank you.
Our next question comes from the line of Mike Olson Junior with Piper Jaffray. Please proceed with your question.
Hi, guys. Great quarter. This is Andrew Connor on for Mike. Had a high level question. The installed base today is obviously very large.
And it appears that the 360 and the PS3 are going to continue to be major influencers in the space, similar to the prior cycle transition. I'm sure there will be lots of cross generational software for the next couple of years post launch. But my question is really how do you go about developing for both current and next generation consoles, when clearly the development teams want to be innovating and yet there's a trade off, where we'll have to be accommodating to the current installed base. Thanks.
Well, you're right. Navigating this part of the cycle is a challenge. I'm actually really pleased with the way we've done it. Obviously, we've released our major release schedule for the coming periods, and we're excited about that. We really can't talk much about NextGen because we're not the ones to talk about it first.
But rest assured that, you know, we, around here, we think, as far ahead as we possibly can as do our creative teams and everyone's really excited about the possibilities and we're working diligently on them. And I'm very confident that we'll navigate the transition when it does occur successfully. I've said before and I'll repeat it that there are 4 elements that you need to succeed in these transition periods and that these transition periods present enormous challenges for companies that don't have them and enormous benefits for those who do. They are strong owned intellectual property, strong creative teams in house, strong technology, and a strong balance sheet. We have all 4.
Thank you.
Our next question comes from the line of Mike Hickey with National Alliance Securities. Please proceed with your question.
Hey, guys. Thank you for taking my question and congrats on a great quarter. So, as historically, you've kind of been, enough to put words in your mouth, but hesitant to believe in the Facebook market. And now that it looks like Facebook is kind of resetting towards an interest in developing something for the poor gamers, And given that that's your development expertise, I was curious if you kind of reset how you think about that. And if you're developing games, core games for Facebook,
No, I wasn't skeptical about Facebook. I was skeptical about Zynga to be exact. And I remain highly skeptical about Zynga. Facebook's an incredible platform serving 100 of millions of people, a great promotional platform and potentially a great game platform. We've happily done business with Facebook.
I assume we'll keep doing so.
And then on the, for next gen consoles, I'm hearing that portability of current gen is going to be a lot easier. And so I think this question has been kind of dragged into the dirt here. But just philosophically, may you see Bungie looking to do a dual generation launch given, you know, how close they are to NextGen machines? And it's pretty obvious that once the next gen is announced from Sony, which is likely February 20th and Microsoft, hopefully in April, that all things being equal, even as great as GTA is, is going to be a kind of a natural demand kickback, on current gen software as people save up dollars and excitement for next gen. So, not to get any specific on data necessarily on a particular game, but all things being equal if you have the opportunity to do a dual generation launch.
Do you would you see that as a net benefit, or is the 2 arbitrary to even know?
Mike, you know, we let's have a little gentleman's bet, but, there is not one gamer who's going to sit it out of Grand Theft Auto Five hoping that something down the road is going to come along that's better. Grand Theft Auto V is going to blow everyone away, and it will be in the market in September. In terms of strategy around, current gen and next gen, you know, we have to wait for the announcements And, as I said, look, we're always looking over our shoulder. I'm a big believer that arrogance is the enemy of continued success. But we're planning as well as we can, and we think we're extremely well positioned.
And our creative teams have a burning desire to bring consumers what they want when they want it. And I'm convinced we're going to keep doing that.
Okay. And the last question, if you would, the, there's kind of some non traditional approaches to kind of control in the living room from a games perspective and maybe outside of that. But you have Oya, that is looking kind of through the free to play droid model that's expected to drop in June. You have valve that's looking to kind of bridge the PC to TV market. You have a lot of people, intelligent people trying to create effective mainstream solutions from the tablet market to the TV.
I'm just curious when you look at these different, you know, trends emerging technology trends, relative to your development expertise, where you see the best opportunity?
All of the above are opportunities. We obviously go where the audience are. So in certain instances, we're not going to spend resources unless there's a demonstrated audience. When you have the top intellectual property in the can afford to be a little reticent. The one thing we wouldn't do would be support everything at enormous expense to our P and L and our balance sheet without knowing where the audience is going.
But we've always been willing to support, meaningful initiatives very early on even when there wasn't a big installed base. And I imagine that selectively we'll do that. What typically happens is our creative teams look at the opportunity and they weigh the cost the complexity of supporting the platform with the potential audience and the economic opportunity, as well as the creative opportunity and whether it turns them on or not. Our stated strategy though is not to be rule based to be flexible and to be wherever the consumers are.
Our next question comes from the line of Brian Fitzgerald with Jefferies. Please proceed with your question.
Thanks. Curious if you've seen any differentiation around engage or purchase prevalence across kind of iOS or Android or smartphones or tablets. And then second question in terms of timing on NBA expansion into Taiwan and Philippines, how should we think about that maybe a little color. Is it a meaningful coding experience or is it more market timing? Thanks.
Just to clarify, you're asking a question about whether we see different demographics across these different tablets?
Yeah. May maybe indirectly or I guess, do you find a tablet guy purchasing more than somebody else or Android guy purchasing less than an iOS guy?
We haven't seen a meaningful differences yet, but it's kind of swamped by the various growth factors in different territories of the different devices. And also, swamp by the fact that we don't put out everything for every platform simultaneously. So I'm not sure we can read it that well. We're still really in early stage experimentation mode. And I'm sorry, your second question?
Talk about how we're rolling out in other territories. We do have the rights and the ability to roll out in other territories. And we're always balancing the opportunity with the risk It's still early days, but we're exceedingly encouraged by what we're seeing in Asia. And we're now generating revenue and cash flow from Asia.
Great thanks.
Our next question comes from the line of Edward Williams with BMO Capital Markets. Please proceed with your question.
Hi. This is Sanfran in for Edward Williams. I was just wondering, can you provide some more color on how MVATK online is doing in, Asia, perhaps how it's tracking or, you know, what time frame we're considering it to be to come meaningful to profit. To how the economics differ in other regions?
Hi, it's Carl. As we said in our comments, we're very pleased with how the metrics tracking MVA to in China right now on the Tencent platform. In terms of how fast we're going to be rolling it out to other territories etcetera. We really don't have anything else to say about it at this point. But like we said before, we're very pleased with how the progress we've made together with BC, and Tencent.
Okay. And then just how do the economics differ just between the, like, the various regions? Is it just
I'm sorry. On on MBA on the NBA game?
Yeah. The the the online.
Okay. Well, we are only in China right now. So I would say there's no differentiation because we're only in one market.
Okay. And then just final question on digital. Can you just remind me is do you recognize the gross amount or the net amount?
We recognize the net amount.
Okay, great. Thank you.
Our next question comes from the line of Phil Boyer with Credit Suisse. Please proceed with your question.
Hi guys. I just had a quick question, on the digitally delivered, you guys mentioned 23% of net revenue. I was wondering if you can give me any color on where most of that is coming from?
Most of it is coming from Borderlands too, in this quarter and then also from our catalog.
Okay.
An MBA. Oh, sorry. And also an MBA CK13.
Okay. Alright. Thank you.
Mr. Zelnick, we have no further questions at this time. I would now like to turn the floor back over to you for closing comments.
I just want to thank everyone for attending today's call. Obviously, we're very encouraged by the results we have, a release we're excited about in BioShock Infinite. We're very focused on that. And on keeping the momentum going on our digital lead delivered offerings and our catalog offerings, And of course, we're all immensely excited about next year's releases, including, but not limited to Grand Theft Auto V. So It's a good time for us.
We're very encouraged, very optimistic. And, and again, thank you for joining us.
Ladies and gentlemen, this does conclude today's teleconference. You may connect your lines at this time. Thank you for your participation and have a wonderful day.