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GTA 6 Diverts Attention From Problem - Take-Two Bet $12 Bn on Zynga, Just as Mobile Games Fell
22.12.2023 - 01:43 / tech.hindustantimes.com / Strauss Zelnick
Excitement over the upcoming release of Grand Theft Auto 6 (GTA 6) is letting publisher Take-Two Interactive Software Inc. deflect investor attention from a big problem: its $12 billion foray into the shrinking mobile-games business.
With just a small presence in the fastest-growing segment of video games — titles played on smartphones — Take-Two splurged last year on Zynga, known originally for Facebook games like FarmVille and Words With Friends. It was the biggest deal ever in video games and boosted revenue from mobile titles to half of Take-Two's $5.3 billion in annual sales.
Unfortunately for Take-Two and longtime Chief Executive Officer Strauss Zelnick, the deal closed just as the mobile-games business was heading into a downturn. With the end of Covid-19 restrictions, consumers who had embraced casual games during the pandemic turned to other diversions. At the same time, Apple Inc. built new privacy features into its software that made it harder for Zynga to attract new players.
“They closed the deal, and the mobile industry spent the next 18 months correcting,” said Doug Creutz, an analyst at Cowen Group who nonetheless recommends buying Take-Two shares because of its other titles, including prospects for GTA VI.
Since the spring of 2022, sales from Zynga's five highest-grossing games have fallen 23%, according to researcher SensorTower. It's part of a broad decline in the $90.4 billion mobile games market that began in 2021 and is expected to let up starting next year, according to researcher NewZoo. Based on Take-Two's own estimates, Zynga will finish this fiscal year with sales down about 5% from 2021.
Zynga's pipeline offers little encouragement. After putting out an average of seven games a year over the last decade, the company released just three titles in 2023. And just two new releases are on the calendar for the next 12 months, according to Take-Two's latest earnings report. That includes a Star Wars smartphone game that's been delayed at least three times.
“Our vision for mobile is to be the largest mobile gaming company in the world, based on market share,” Alan Lewis, a company spokesman, said in an email. Take-Two is investing in new intellectual property and has a growing mobile ad business that, he said, “enables us to monetize nearly all of our players, which is a distinguishing characteristic vs. other mobile companies.”
Take-Two was among the last of the major publishers to scoop up a mobile-games company. The Zynga purchase, financed with cash and stock, provided a stable of proven titles. The goal was to prepare the company for the coming hegemony of mobile gaming.
But after soaring to new highs during the pandemic, mobile-gaming revenue fell by 7% industrywide in 2022,
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