10-K integration Project
Take- Two Interactive Software, Inc.
10-K report date: 5/23/2012

10-K Report Link: http://secfilings.nasdaq.com/edgar_conv_html%2f2012%2f05%2f23%2f0001047469-12-006226.html#FIS_BUSINESS Article:
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PESTLE Forces:

1. Political- Page 17- many foreign countries, particularly in those with developing economies, it may be common to engage in business practices that are prohibited by United States laws and regulations, such as the Foreign Corrupt Practices Act, and by local laws, such as laws prohibiting corrupt payments to government officials. Although we implement policies and procedures designed to ensure compliance with these laws, there can be no assurance that all of our employees, contractors and agents, as well as those companies to which we outsource certain of our business operations, including those based in or from countries where practices which violate such laws may be customary, will not take actions in violation of our policies. Any such violation, even if prohibited by our policies, could have a material adverse effect on our business.

Because of the growing international operations of Take-Two the risks of not complying to foreign laws and regulations could result in increased costs and decreased sales. Take-Two has policies and procedures that follow laws like the Foreign Corrupt Practices Act. But there is no guarantee that all employees or involved parties will follow these laws and regulations.

2. Economic- Page 8- We continue to monitor economic conditions that may unfavorably affect our businesses, such as deteriorating consumer demand, pricing pressure on our products, credit quality of our receivables, and foreign currency exchange rates. The economic environment has affected our customers in the past, and may do so in the future. Bankruptcies or consolidations of our large retail customers could seriously hurt our business, due to uncollectible accounts receivables and the concentration of purchasing power among the remaining large retailers. Certain of our large customers sell used copies of our games, which may negatively affect our business by reducing demand for new copies of our games. While the downloadable episodes that we now offer for certain of our titles may serve to reduce used game sales, we expect used game sales to continue to affect our business.

Take-Two relies on a limited number of customers that bring in the biggest potion of their revenue. If Take-Two would lose at least one of their 5 biggest customers, it would have a serious impact on the business.

3. Sociocultural- Page 17- Content policies adopted by retailers, consumer opposition and litigation could negatively affect sales of our products. Retailers may decline to sell interactive entertainment software containing what they judge to be graphic violence or sexually explicit material or other content that they deem inappropriate for their businesses. If retailers decline to sell our products based upon their opinion that they contain objectionable themes, graphic violence or sexually explicit material or other generally objectionable content, or if any of our previously "M" rated series products are rated "AO," we might be required to significantly change or discontinue particular titles or series, which in the case of our best-selling Grand Theft Auto titles could seriously affect our business.

Because of the increasing objectionable themes in some of the biggest games of Take-Two, there increasing numbers of lawsuits against them. These lawsuits are being asserted against them because of claims that these games have done damages and injuries to these third-parties. In the courts however, these third-parties have been unsuccessful.

4. Technological- Page 9- The interactive entertainment software industry is delivering a growing amount of content through digital online delivery methods. We provide a variety of online delivered products and services. A number of our titles that are available through retailers as packaged goods products are also available through direct digital download through the Internet (from websites we own and others owned by third-parties). We also offer downloadable add-on content to our packaged goods titles. In addition, in July 2011, we launched our first social gaming experience, Sid Meier's Civilization World, for Facebook, and we have several initiatives underway to develop online games primarily for Asian markets. We expect online delivery of games and game services to become an increasing part of our business over the long-term.

Take-Two is increasing their developments for digital game delivery. They are on top of the technological growth and are producing products that can be delivered through online delivery methods. Take-Two adapts to changing software technologies to stay competitive.
5. Legal- Page 20- Our involvement, and the involvement of some of our former executive officers, in a wide variety of lawsuits, investigations and proceedings has had, and may in the future have, a material adverse effect on us. We and some of our former officers, directors and employees have been the subject of three separate governmental investigations and a substantial amount of litigation and other proceedings relating to the subject matter of those investigations. While these matters have been resolved we may be subject to heightened scrutiny in the future as a result of our historical legal proceedings, including an increased likelihood of a government investigation occurring and an increased likelihood that any such investigation is more extensive than in the past. Furthermore, any future fines, restrictions or other penalties imposed as a result of any such investigation may be more severe than those which may be imposed on a company without our history.

Because of unethical practices by Take-Two’s previous executive officers, the company has gone through lawsuits that put Take-Two in the spotlight that will stay lit through the rest of the companies’ existence. This legal issue that the company has faced will have to make them take a

6. Environmental- Page

Porters 5 Forces:
7. Current Competition- Page 7- High- In our publishing business, we compete with: Companies that range in size and cost structure from very small with limited resources to very large companies with greater financial, marketing and technical personnel and other resources than ours, including Activision Blizzard, Electronic Arts and THQ, and international companies, such as Capcom, Konami, Namco-Bandai, SEGA, Square Enix and Ubisoft. Sony, Microsoft and Nintendo are competitors for licenses to properties and the sale of interactive entertainment software, each of which is a large developer and marketer of software for its own platforms. Each of these competitors has the financial resources to withstand significant price competition and to implement extensive advertising campaigns. Other software, hardware, entertainment and media are competing for limited retail shelf space and promotional resources. The competition is intense among an increasing number of newly introduced entertainment software titles and hardware for adequate levels of shelf space and promotional support.
The competitors for Take-Two are not only the other interactive game producing companies but also their licensing company that controls if their games get licenses. Some other competing groups in the entertainment market are television and audio as well as other forms that can provide consumers with other advantages.
8. Threat of new entrants- Page 7- Moderate- In our publishing business, we compete with: Companies that range in size and cost structure from very small with limited resources to very large companies with greater financial, marketing and technical personnel and other resources than ours, including Activision Blizzard, Electronic Arts and THQ, and international companies, such as Capcom, Konami, Namco-Bandai, SEGA, Square Enix and Ubisoft. Competition in the entertainment software industry is based on innovation, features, playability, and product quality; brand name recognition; compatibility with popular platforms; access to distribution channels; price; marketing; and customer service. Our business is driven by hit titles, which require increasing budgets for development and marketing. Competition for our titles is influenced by the timing of competitive product releases and the similarity of such products to our titles and may result in loss of shelf space or a reduction in sell-through of our titles at retail stores.
Take-Two competes with large companies with lots of resources that give them an advantage. But even though these big companies are involved, there are also small sized companies competing with little resources. The main area that gives a company in this industry the ability to compete are innovative games with quality and a fair price. But due to the size of the smaller companies they are less able to compete on prices.
9. Suppliers- Page 6- High- Sony, Microsoft and Nintendo either manufacture or control selection of approved manufacturers of software products sold for use on their respective hardware platforms. We place a purchase order for the manufacture of our products with Sony, Microsoft or Nintendo and then send software code and a prototype of the product to the manufacturer, together with related artwork, user instructions, warranty information, brochures and packaging designs for approval, defect testing and manufacture. Games are generally shipped within two to three weeks of receipt of our purchase order and all materials.
Because the games that Take-Two creates can only be played on popular platforms made by Sony, Microsoft and Nintendo, these companies control who manufactures the games. These companies have a high amount of bargaining power because they can control all aspects of the future performance of Take-Two. These companies can decline licenses for games to their platforms and they can control who manufactures these games. On the other side, As long as Take-Two develops games that create value to both the game developer as well as the platform they are played on, these companies are pleased with their combined work.
10. Buyers- Page 6- Moderate- We sell software titles to retail outlets in North America, Europe and Asia through direct relationships with large retail customers and third-party distributors. Our customers in North America include leading mass merchandisers such as Wal-Mart; specialty retailers such as GameStop; electronics stores such as Best Buy; toy stores such as Toys "R" Us; national and regional drug stores; rental outlets; and supermarket and discount store chains. Our European customers include Game, GameStop, GEM Distribution and Media Markt. We have sales operations in Asia, Australia, Austria, Canada, France, Germany, the Netherlands, New Zealand, Spain, Switzerland, the United Kingdom and the United States.
Take-Two has many buyers around the world. The demand for their products is high and therefore the bargaining power for the buyers is less than it would be if there was only 1 buyer. Because of the growth of the digital distribution of their titles, the bargaining power of Take-Two is even greater.
11. Threat of substitute products/services- Page 15- High- Increased competition for limited shelf space and promotional support from retailers could affect the success of our business and require us to incur greater expenses to market our titles. Retailers have limited shelf space and promotional resources and competition is intense among newly introduced interactive entertainment software titles for adequate levels of shelf space and promotional support. Competition for retail shelf space is expected to continue to increase, which may require us to increase our marketing expenditures to maintain desirable sales levels of our titles. Competitors with more extensive lines and more popular titles may have greater bargaining power with retailers.
Competition in the interactive entertainment industry is intense because the main way to sell a product is by having it on the self in stores. All Companies that compete have to create innovative products or else they have no chance for shelf space at all. But the biggest reason a company might have a hard time to compete to get a product on the shelf is because they have to invest in it an pay more for promotional support or shelf space.
SWOT Analysis:
12. Strengths- Page 3- Focus on Core Strength of Producing Select, High Quality Titles. We focus on publishing a select number of high-quality titles based on internally-owned and developed intellectual property, which typically provide higher margins than licensed products. We currently own the intellectual property rights of 19 proprietary brands. In addition, we will selectively develop titles based on licensed properties, including sports, and also publish externally developed titles. We use a product investment review process to evaluate potential titles for investment, to review existing titles in development, and to assess titles after release to measure their performance in the market and the return on our investment. We apply this process to all of our products, whether internally or externally developed.
Take-Two’s strength is that they develop quality products. Take-Two takes research and development to a whole new level. They review a product a multiple stages and assess the success of these products so that they are able to make sequels. If Take-Two has to work with external resources, they make sure that their records are in great condition. If they work with a developer they have to make sure that they have expertise because they will have to make the same game for different platforms as well as their sequels.
13. Weaknesses- Page 15- We cannot publish our titles without the approval of hardware licensors that are also our competitors. We are required to obtain licenses from Sony, Microsoft and Nintendo, which are also our competitors, to develop and publish titles for their respective hardware platforms. Our existing platform licenses require that we obtain approval for the publication of new titles on a title-by-title basis. As a result, the number of titles we are able to publish for these hardware platforms, our ability to manage the timing of the release of these titles and, accordingly, our net revenue from titles for these hardware platforms, may be limited.
The one biggest weakness that could make Take-Two completely helpless is the ability for their licensors to terminate the license. The reason such things are more likely to happen are because the licensors such as Microsoft could disapprove their games and take advantage of this because they are also developers of these products and thus competitors. The world’s leading platforms are the X-box, the Play Station and the Nintendo. Most games have to be developed for these platforms and therefore are on top of the food chain.
14. Opportunities- Page 3- Leverage Emerging Technologies, Platforms and Distribution Channels, Including Digitally Delivered Content. Interactive entertainment played on mobile platforms, including tablets and smartphones, and online platforms, including social networks, represent exciting opportunities to enhance our growth and profitability. In addition, the interactive entertainment industry is increasingly delivering content through digital download. We are actively investing to capitalize on these trends in order to diversify our product mix, reduce our operating risks, and increase our revenue.
Take-Two’s increasing technological improvements has given them the ability to expand their products to other forms. With the increasing popularity of smart phones, the demand for these types of games has risen. Take-Two is also developing such products for Asian markets and markets around the world.
15. Threats- Page 20- Our business and products are subject to potential legislation. The adoption of such proposed legislation could limit the retail market for our products. Several proposals have been made for federal legislation to regulate our industry. Such proposals seek to prohibit the sale of products containing content included in some of our games. If any such proposals are enacted into law, it may limit the potential market for some of our games in the United States, and adversely affect our operating results. Other countries, such as Germany, have adopted laws regulating content both in packaged games and those transmitted over the Internet that are stricter than current United States laws. In the United States, proposals have also been made by numerous state legislators to regulate and prohibit the sale of interactive entertainment software products containing certain types of violent or sexual content to under 17 or 18 audiences.
Some of Take-Two’s major revenue products are sought to be prohibited for sale due to their content by federal legislation. If the sale of these games to people under the age that is appropriate, it will have a big impact on their sales world-wide.
Overall Strategy- page 2:

We endeavor to be the most creative, innovative and efficient company in our industry. Our core strategy is to capitalize on the popularity of video games by developing and publishing high-quality interactive entertainment experiences across a range of genres. We focus on building compelling entertainment franchises by publishing a select number of titles for which we can create sequels and add-on content. Most of our intellectual property is internally owned and developed, which we believe best positions us financially and competitively. We have established a portfolio of proprietary software content for the major hardware platforms in a wide range of genres, including action, adventure, racing, role-playing, sports and strategy, which we distribute worldwide. We believe that our commitment to creativity and innovation is a distinguishing strength, enabling us to differentiate our products in the marketplace by combining advanced technology with compelling storylines and characters that provide unique gameplay experiences for consumers. We have created, acquired or licensed a group of highly recognizable brands to match the broad consumer demographics we serve, ranging from adults to children and game enthusiasts to casual gamers. Another cornerstone of our strategy is to support the success of our products in the marketplace through innovative marketing programs and global distribution on all platforms and through all channels that are relevant to our target audience.
Take-Two’s strategy is to create to most innovative games that create a tremendous amount of demand. Their games will most likely be a series like Grand Theft Auto. Take-Two has multiple brands like 2K Games, 2K Sports and 2K Play. All of these brands focus on different genres. Take-Two’s success also depends on their strategy that wants to compete through all channels like digital gaming, mobile phone gaming, computer gaming, and platform gaming. They strive to dominate all sections of the industry that they are able to. Take-Two’s intellectual property is created from within their company and is owned by them. This gives them a greater financial value.