Re:

Take-Two Interactive Software, Inc.

 

 

Form 10-K for Fiscal Year Ended March 31, 2014

 

 

Filed May 14, 2014

 

 

 

1.

We note your disclosure that “customers that individually accounted for more than 10% of [y]our gross accounts receivable balance comprised 59.8% and 30.5%” of accounts receivable as of

 

 

 

 

Response:

 

 

 

In preparing our disclosure of concentration of credit risk regarding our largest accounts receivable balances we considered the disclosure requirements of ASC 275-10-50-18 (a) and disclosed the following factors in our Form 10-K for the fiscal year ended March 31, 2014:

 

 

 

We believe that due to the nature of our business there is a high volume of business among our top five customers with our remaining business spread among many small customers that would individually not have a significant impact in the event of a partial or total loss of the customer.  Accordingly, based on the nature of our business and the disclosures made as noted above, we believe we have complied with ASC 275-10-50-18 (a).  However in view of your question and to further enhance our disclosure, we have separately disclosed the percentage of all individual customer balances that are greater than 10% of gross accounts receivable in our June 30, 2014 filing of Form 10-Q filed on August 6, 2014 and will continue to do so in our future filings.

 

2.

We note your disclosure indicating that “when software products provide online functionality that has a more-than-inconsequential separate service deliverable, [you] recognize the software-related revenues and the related cost of sales ratably over the estimated service period of the title.” Please tell us what titles you consider to have a more-than-inconsequential online functionality and tell us the estimated service periods over which you recognize revenues related to each title. In this regard, we note in your most recent earnings call on May 13, 2014 that more than 70% of those who played Grand Theft Auto V while connected to the Internet played Grand Theft Auto online and that online play by fans of your basketball franchise grew significantly with the release of NBA 2K14.

 

 

 

 

 

 

 

 

Response:

 

 

During the fiscal year ended March 31, 2014, the Company had three products that provided online functionality related to in-game purchases of virtual goods that we deemed to be more than an inconsequential separate service deliverable.  The three products were GTA Online, NBA 2K14 and NBA 2K13.

 

 

 

Except for online functionality related to in-game purchases of virtual goods,  game play functionality is hosted by Sony’s or Microsoft’s existing online environments and not the Company. We do not provide, nor are we required to provide, on-going support to Sony or Microsoft.  The software products referred to in our disclosure noted above relate specifically to in-game purchases of virtual goods.

 

 

 

As disclosed in our footnotes, we recognize revenue on the sales of our software products upon the transfer of title and risk of loss to our customers and all of the other recognition criteria are met.  Accordingly, for all purchases of virtual goods, we recognize revenue over the expected life of the game (versus the expected player life or the expected life of the virtual good itself) as that is the level of data currently analyzed by management.  Below is a summary of the estimated lives of the games over which we recognize revenues from in-game purchases of virtual goods:

 

 

 

 

As revenue from in-game purchases of virtual goods becomes material we will provide additional disclosures in future filings related to our revenue recognition policy.

 

3.

With regard to the 1.75% convertible notes due 2016 and the 1% convertible notes due 2018, please tell us what consideration was given to disclosing the amounts by which the instruments’ if-converted values exceed the principal amounts. Refer to ASC 470-20-50-5(c).

 

 

 

 

 

 

Response:

 

 

We reviewed the requirements of ASC 470-20-50-5(c) and concluded that we did not explicitly address this disclosure requirement.  We disclosed all key terms for each of our convertible notes which included the principal amount of our notes, conversion rates, the conversion prices, the number of underlying shares and conversion conditions.  Accordingly, the reader could derive, from the disclosures provided, the amount by which the instrument’s “if converted value” exceeded its principal amount.

 

 

 

In future filings, for periods in which the if-converted value exceeds the principal amount we will explicitly include this amount in our disclosure.

 

 

4.

We note your disclosure that Sony, Microsoft, and Nintendo accounted for 91.4% of revenue by product platform and your disclosure in the risk factor beginning on page 16 that termination of any licensing agreements with Sony, Microsoft, or Nintendo could seriously hurt your business and prospects. While you have filed the agreements related to your relationships with Sony and Microsoft, you have not filed any of your agreements with Nintendo to which you may be substantially dependent. Please file such agreements, or provide us with your analysis of why you are not required to do so. We refer you to Item 601(b)(10) of Regulation S-K.

 

 

 

 

 

 

Response:

 

 

 

The Company only derived 0.2% of its total net revenue for the fiscal year end 2014 from the sale of products made for video game platforms manufactured by Nintendo.  As a result, we do not believe that the Company is substantially dependent on revenues derived from Nintendo, and therefore, we do not believe that it is necessary to file any agreements with Nintendo at this time pursuant to Item 601(b)(10) of Regulation S-K.  To the extent the Company’s relationship with Nintendo continues to be immaterial to its total net revenue, we will consider removing the reference to Nintendo in this disclosure in the Company’s future filings.

 

5.

Your exhibit index is marked to indicate that portions of exhibit 10.30 have been omitted pursuant to a grant of confidential treatment. It appears, however, that the order granting confidential treatment to this exhibit expired on December 31, 2011. Please advise.

 

 

 

 

 

 

Response:

 

 

 

The Company will file an updated confidentiality request for exhibit 10.30 as soon as possible to request continuation of the confidential treatment of this exhibit.

 

 

 

In addition, the Company acknowledges that:

 

cc:

David Edgar

 

Luna Bloom

 

Strauss Zelnick (Take-Two Interactive Software, Inc.)

 

Dan Emerson, Esq. (Take-Two Interactive Software, Inc.)

 

Linda Zabriskie, Esq. (Take-Two Interactive Software, Inc.)

 

Adam M. Turteltaub, Esq. (Willkie Farr & Gallagher LLP)