Greetings, and welcome to Take-Two Fourth Quarter and Full Year Earnings Conference Call. [Operator Instructions] Please note, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Hank Diamond, Senior Vice President of Investor Relations and Corporate Communications. Thank you. You may begin.

Good afternoon. Welcome, and thank you for joining Take-Two's conference call to discuss its results for the fourth quarter and fiscal year 2020, ended March 31, 2020. Today's call will be led by Strauss Zelnick, Take-Two's Chairman and Chief Executive Officer; Karl Slatoff, our President; and Lainie Goldstein, our Chief Financial Officer. We will be available to answer your questions during the Q&A session following our prepared remarks. Before we begin, I'd like to remind everyone that 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 are described in our filings with the SEC, including the company's most recent annual report on Form 10-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 GAAP and all comparisons are year-over-year. Additional details regarding our actual results and outlook are contained in our press release, including the items that our management uses internally to adjust our GAAP financial results in order to evaluate our operating performance. In addition, we have posted to our website a slide deck that visually presents our results and financial outlook. 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. Before I begin, on behalf of our entire management team and colleagues around the world, I'd like to express our deep condolences for those who've lost their lives or lost family members during this pandemic. In every corner of the world, heroes in the form of first responders and health care workers put their lives at risk to take care of the ill, preserve life and enable societies to return to normal, for which we're all incredibly grateful. I'm also proud of our entire organization for seamlessly and successfully shifting to a work-from-home environment to keep our company moving forward and to continue to deliver the best entertainment experiences to our audiences. Turning to our business. Our significantly better-than-expected fourth quarter results concluded another extraordinary year for Take-Two, during which we achieved numerous milestones, including record net bookings of nearly $3 billion as well as record digitally delivered net bookings, o recurrent consumer spending and earnings. Nearly all of our titles outperformed in the fourth quarter, including NBA 2K20, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2, Borderlands 3 and Social Point's mobile games, to name just a few. During the fourth quarter, both recurrent consumer spending on and full game sales of NBA 2K20 significantly outperformed our expectations. Consumer engagement with NBA 2K remained at record levels throughout fiscal 2020 with daily active users growing 13% and MyTeam users increasing nearly 50%. During the fourth quarter, over 9 million hours of NBA 2K gameplay were watched on Twitch across more than 1,100 channels, representing a 40% increase over the third quarter. This strong engagement began prior to people sheltering at home and resulted in recurrent consumer spending growth of 18% in the fourth quarter, reversing our expectation of a decline. This positive trend was driven primarily by the success of February content drops for MyTeam. For the full year, recurrent consumer spending on the NBA 2K franchise grew nearly 30% to a new record and remained the largest contributor to that part of our business. To date, NBA 2K20 is sold in over 12 million units, up 33% over NBA 2K19 in the same period. We now expect the lifetime units recurrent consumer spending and net bookings for NBA 2K20 will be the highest ever for a 2K sports title. I'd like to thank visual concepts in 2K for doing an incredible job addressing the prior issues with NBA 2K20 and delivering another year of record results. As part of our broader support of those in need during the COVID-19 pandemic, 2K partnered with the NBA, NBA players association and ESPN to create the NBA 2K players tournament comprised of 16 NBA stars that raised funds for the Arizona Food Bank network. We are incredibly proud to include this unique program among our worldwide COVID-19 response initiatives. The positive momentum for Grand Theft Auto Online continues with superlative performance in both players and net bookings. Since the July launch of the Diamond Casino & Resort update, Grand Theft Auto Online achieved its best-ever monthly active users in both July and August 2019 and then grew sequentially each month from December 2019 through March 2020. This exceptional engagement helped to drive recurrent consumer spending growth of 87% during the fourth quarter and 40% for the full fiscal year, new records in both periods. In addition, sales of Grand Theft Auto V surpassed our expectations, and the title is now sold in over 130 million units, further cementing its position as the must-have title of the current console generation. Red Dead Redemption 2 also exceeded our expectations in the fourth quarter and to date has sold in more than 31 million units worldwide. Both engagement and recurrent consumer spending on Red Dead Online continue to gain momentum. Net bookings grew 62% in the fourth quarter and more than tripled for the full year, excluding digital content bundled with the Red Dead Redemption 2 premium additions. Throughout the coming year Rockstar Games will continue to support both Red Dead Online and Grand Theft Auto Online with more content updates to keep new and returning players excited and engaged. Borderlands 3, the latest installment in our genre-defining shooter-looter series outperformed our expectations in the fourth quarter and the title is now sold in over 10 million units, up 50% over Borderlands 2 in the same period. On March 13, Borderlands 3 was released on an array of PC retailers, including Steam, where sales of the game exceeded our projections. During the fourth quarter, 2K and Gearbox launched Guns, Love, and Tentacles: The Marriage of Wainwright & Hammerlock, the second of 4 announced paid campaigns that are included in the Borderlands 3 Super Deluxe Edition and the Season Pass or it can be purchased separately upon release. The Season Pass attach rate for Borderlands 3 continues to be the highest in 2Ks in the franchise's history, and there's more content coming. Borderline 3s monthly active users have steadily climbed in each month during the fourth quarter. And in March, we had the largest influx of new players since the launch due to its release on Steam. We attribute this success in part to 2K's and Gearbox software's continued effort to support Borderlands 3 as a live service game with weekly events, free content drops and consistent communication with fans that should continue to benefit the title and the series over the long term. During fiscal 2020, Private Division launched their most successful release to date with The Outer Worlds. The title is an immense critical and commercial success and has significantly exceeded our expectations with more than 2.5 million units sold in to-date. The Outer Worlds is a perfect example of how Private Division can complement our core portfolio selectively and contribute meaningful results to our bottom line. Our fiscal 2020 results were also enhanced by a variety of other offerings led by NBA 2K19, Sid Meiers Civilization VI, Social Point's mobile games and the WWE 2K series. In fiscal 2020, recurring consumer spending grew 34% to a new record and accounted for 51% of our total net bookings. In addition to virtual currency for NBA 2K, Grand Theft Auto Online and Red Dead Online, recurring consumer spending was enhanced by a variety of other offerings. In the free-to-play category, Social Point outperformed our expectations in the fourth quarter and remains a significant contributor to our results through its 2 biggest games: Dragon City and Monster Legends as well as Word Life, Tasty Town and World Chef. Social Point continues to invest in its broad and innovate pipeline of more than 10 new games planned for launch in the coming years. WWE SuperCard also outperformed during the fourth quarter, growing 20%. The title has now been downloaded more than 20 million times and remains 2K's highest grossing mobile title. And NBA 2K Online in China significantly exceeded our expectations, growing 37% and 25% during the fourth quarter and full year, respectively. The title remains the #1 PC online sports game in China with more than 49 million registered users. Add-on content grew 85% in fiscal 2020, led by offerings for the Borderlands franchise, Sid Meiers Civilization VI and WWE 2K20. Finally, sales of Borderlands 3 premium additions, which include additional content that is allocated to recurrent consumer spending, also contributed positively to our results. Looking ahead, our company has the strongest development pipeline in its history, including sequels from our biggest franchises as well as exciting new IP. While fiscal 2021 will be a light year for new releases, we expect to deliver strong results, due to the diversity and strength of our catalog and live service offerings. Transition to a new console cycle is always a very exciting time for our industry, and our development teams are already taking their creative aspirations to a new level by finding ways to push the limits of this new technology; however, the speed of these transitions can be unpredictable, particularly in a year upended by COVID-19. And our fiscal 2021 release slate reflects our strategy to bring our creative achievements to the largest possible audience. Our commitment to deliver the highest quality titles and give them optimal conditions to achieve success remains resolute. We have an array of titles that we'll begin to launch in fiscal 2022, which we expect to drive sequential growth that year. Karl will discuss this in more detail shortly. There's no doubt that our recent results have benefited from people sheltering at home as players have sought interactive entertainment to stay connected and engaged with friends and family. The connections and communities built will remain in place once people resume their normal activities and should continue to benefit our industry's results. We're fortunate to work in an industry that can bring some positivity in a difficult time. As previously mentioned, all of Take-Two's labels have come together to deliver a portion of proceeds from April and May to COVID-19 charities worldwide. Looking ahead, Take-Two remains superbly positioned creatively, operationally and financially, to capitalize on the many positive trends in our industry and to deliver continued growth and returns for our shareholders over the long term. I'll now turn the call over to Karl.

Thanks, Strauss. I'd like to join Strauss in expressing our condolences to all those who have lost loved ones and are facing adversity during this global pandemic. We at Take-Two are very fortunate to have colleagues around the world who continue to dedicate themselves to our mission despite very difficult and uncertain times. I'll now discuss our recent and upcoming releases. On April 24, 2K and games released XCOM: Chimera Squad, an all-new standalone title in the award-winning, turn-based, XCOM tactical series. Set 5 years after the events of XCOM 2, Chimera Squad provides a dynamic and unique experience for fans and new players. The title has received strong reviews, including 4.5 out of 5 stars from Screen Rant, who said Chimera Squad is a worthy addition for any turn-based strategy fan collection. Comics & Gaming Magazine gave the title in 8.5 out of 10 and called it a whole new dimension of strategy. Yesterday, 2K launched the Mafia Trilogy for PlayStation 4, Xbox One and PC. The Trilogy combines all 3 previously released Mafia titles into a single package curated by 2K's Hangar 13 development studio. Mafia II and Mafia III are currently available with the purchase of the Trilogy, while Mafia I will be delivered on August 28, as the game is being completely remade from the ground up, including new technology, new voice acting, new game mechanics and more. Starting tomorrow and through March 2021, 2K and Firaxis Games will begin their bimonthly release of 6 downloadable content packs as part of the all-new Sid Meier's Civilization VI New Frontier Pass for PlayStation 4, Xbox One, Nintendo Switch and PC. Later this year, the new Frontier Pass will come to mobile platform and each pack will be available for individual purchase. The new Frontier Pass will provide 8 new civilizations, 9 new leaders and a variety of new gameplay modes and content. In addition, Firaxis Games will also provide free updates between packs that feature new maps, scenarios, balance updates and more. On May 29, 2K will continue to bolster our offerings for the Nintendo Switch with some of their most popular and successful franchises, including BioShock: The Collection, the Borderlands Legendary Collection and the XCOM 2 Collection. In addition, on June 5, Private Division will release the critically acclaimed player choice-driven RPG, the Outer Worlds for the Switch. On June 16, Private Division will launch Disintegration for PlayStation 4, Xbox One and PC. Developed by V1 Interactive, the independent studio founded by Halo co-creator, Marcus Lehto, disintegration is a Sci-Fi first person shooter that blends real-time tactical elements to create an entirely new experience featuring a thrilling single player campaign as well as frenetic multiplayer gameplay, Disintegration is currently available for preorder, including an array of bonus cosmetic digital content for use in multiplayer modes. Early this week, Private Division and Squad announced a partnership with the European Space Agency to launch a new Kerbal Space Program update entitled Shared Horizons, which is planned to launch on PC on July 1, 2020. The update will also be available later this year on consoles. Shared Horizons celebrates the European Space Agency's outstanding contribution to space exploration and will be a free update for all players of the critically acclaimed space simulation game. On August 21, 2K will release PGA Tour 2K21 for PlayStation 4, Xbox One, Nintendo Switch, PC and Stadia. Developed by HB Studios, PGA Tour 2K21 will feature PGA Tour professional, Justin Thomas, on the cover; officially licensed pro players, courses and gear; the most realistic course scanning to date; play-by-play commentary by Luke Elvy and Rich Beem; a new PGA TOUR Career Mode, online and local multiplayer; course and player customization; and online societies. In addition, throughout the coming months, 2K will release additional content offerings for NBA 2K20 and Borderlands 3. Additional details will be revealed shortly. And Rockstar Games will continue to provide an array of content and gameplay experiences for the vast open worlds of Grand Theft Auto Online and Red Dead Online, which continues to set engagement records. Selectively expanding our sports offerings remains an exciting growth opportunity for our company. In March, 2K announced a partnership with the NFL, encompassing multiple games. The partnership marks the return of football theme games to 2K's stable of renowned sports titles as well as an expansion of video game properties for the NFL. While specific game titles, developers and release dates will be revealed over time, we can confirm that these projects will be non-simulation football game experiences and will launch starting in calendar year 2021, during fiscal 2022. We're thrilled to be back in business with the NFL, which is one of the most successful sports brands in the world. We're confident that our forthcoming NFL offerings will be extremely fun, highly engaging and deeply social experiences. Last month, 2K announced that it would be extending the production time line for the next WWE 2K franchise simulation game to ensure that the development team at visual concepts has the opportunity to create the best experience possible. We also believe that there is a meaningful opportunity to expand our WWE offerings. To that end, 2K announced WWE 2K Battlegrounds, a completely new gaming experience that will feature arcade-style action and over-the-top superstar designs, environments and moves. WWE 2K Battlegrounds is being developed by Saber Interactive, the studio behind NBA 2K Playgrounds, and is scheduled to launch this fall. 2K will have more to share about the games in the coming months. The team at Private Division's new Seattle studio remains hard at work on Kerbal Space Program 2, the next-generation of the popular space simulation franchise. Due to delays from COVID-19, we are moving the release of the game for fall 2021 in order to provide the team with the time they need to create the best Kerbal Space Program experience possible. Turning to eSports. On May 5, the NBA 2K league began its 2020 season, planning at least 6 weeks of remote gameplay. All 23 NBA 2K league teams are participating in regular-season gameplay in their local markets from their homes with games simulcast live on the NBA 2K League's Twitch and YouTube channels. Details surrounding the remainder of the 2020 season schedule and structure will be shared as information becomes available. We are very excited about the continued progress and growth of the league, which has a long-term potential to enhance engagement and to be a driver of profits for our company. In order to build the scale of our organization, we continue to make significant investments to enhance our industry-leading portfolio of intellectual property. I'll now provide visibility into our long-term pipeline which is the strongest in our company's history. Note that we are only including full game releases and not add on content. Across our internally-owned labels and outside development studio partners, we currently have 93 titles planned for release over the next 5 years through fiscal 2025. Of the 93 titles, 63, are core gaming experiences, including 15 platform extensions of existing titles; 17 are mid-core or arcade-style experiences and 13 titles are casual experiences. 47 of these 93 titles are from existing franchises and 46 are from new intellectual properties. In terms of platforms, 72 of the 93 titles are planned for console, PC and/or streaming, including 7 that will also be available on mobile and 21 are planned specifically for mobile. With respect to business models, 67 of the 93 are games that are required to be purchased and 26 are free-to-play. Note that these figures reflect a snapshot of our current pipeline as it stands today. It is likely that some of these titles will not be developed through completion, and we will undoubtedly be adding new titles to our slate. As Strauss mentioned, fiscal 2021 will be a light new release year; however, given our strong pipeline and expectations for increasing recurring consumer spending, we expect sequential growth to resume in fiscal 2022. In closing, we are incredibly excited about the many long-term opportunities for our company to deliver the most captivating and engaging experiences in all of entertainment to audiences around the world. Whether capitalizing on new platforms, embracing new business models and distribution channels and expanding into emerging markets, 2K is exceedingly well positioned to generate value to consumers as well as growth and margin expansion for our shareholders. I'll now turn the call over to Lainie.

Thanks, Karl, and good afternoon, everyone. Today, I'll discuss our fourth quarter and fiscal 2020 results and then review our financial outlook for the first quarter and fiscal year 2021. Please note that additional details regarding our actual results and outlook are contained in our press release. I would also like to express my deepest condolences to those who have been affected by the COVID-19 pandemic. I'm also immensely proud of my colleagues around the world, who continue to support our organization with the utmost level of professionalism and dedication to both our business and consumers. As Strauss mentioned, our significantly better-than-expected fourth quarter results finished a terrific year for Take-Two, during which we achieved record results. Starting with the fourth quarter, total net bookings grew 49% to $729 million, as compared to our outlook of $540 million to $590 million. This outstanding result was driven by the exceptional performance of our titles in the fourth quarter. Recurrent consumer spending grew 47% and accounted for 61% of total net bookings as compared to our outlook of over 10% growth. Recurrent consumer spending exceeded our outlook due primarily to the record performance of NBA 2K and Grand Theft Auto Online. Digitally delivered net bookings grew 60% and accounted for 92% of the total as compared to our outlook of over 20% growth. This result exceeded our outlook due to the outperformance of recurrent consumer spending and digitally delivered full game sales. During the fourth quarter, 65% of sales of current generation console games were delivered digitally, up from 57% last year. GAAP net revenue grew 41% to $761 million and cost of goods sold increased to $396 million. Operating expenses increased by 9% to $243 million, due primarily to higher R&D expense and GAAP net income grew to $123 million or $1.07 per share as compared to $57 million or $0.50 per share in the fourth quarter of fiscal 2019. Turning to our fiscal 2020 results. Total net bookings grew to a new record of $2.99 billion. This extraordinary result was driven by growth from NBA 2K, Grand Theft Auto Online and Grand Theft Auto V and the record-breaking launch of Borderlands 3. Recurrent consumer spending grew 34% to a new record and accounted for 51% of total net bookings. This exceeded our outlook of 25% growth. Digitally delivered net bookings grew 35% to a new record of $2.4 billion and accounted for 82% of the total. This too exceeded our outlook of 25% growth due to better-than-expected recurring concur spending and digitally delivered full game sales. During fiscal 2020, 55% of sales of current generation console games were delivered digitally, up from 38% last year. Non-GAAP adjusted unrestricted operating cash flow was $615 million as compared to our outlook of over $500 million. During fiscal 2020, we spent $53 million in capital expenditures. At fiscal year-end, our cash and short-term investments balance was over $2 billion. GAAP net revenue grew 16% to $3.09 billion and cost of goods sold increased to $1.5 billion. Operating expenses increased by 20% to $1.1 billion due primarily to higher R&D and marketing expenses. And GAAP net income grew to $404 million or $3.54 per share. Today, we gave a strong initial outlook for fiscal 2021. Our operating results are currently expected to be lower than fiscal 2020 due to the likely reschedule, coupled with continued investments in our future pipeline that should enable us to scale further and improve margins over time. When people began the shelter-at-home, we saw an increase in consumer engagement with our titles due to the online accessibility and the social nature of our products. We're continuing to experience this positive trend, which is reflected in our first quarter outlook. We have not included any additional benefit from this trend in our outlook for the back half of the year nor we assumed a deep recession or further delays in releases, which could affect our results. Now to our guidance. Starting with the fiscal first quarter. We project net bookings to range from $800 million to $850 million, up 93% from $422 million in the first quarter last year. This increase is being driven primarily by expected growth from Grand Theft Auto Online and Grand Theft Auto V, NBA 2K, Red Dead Redemption 2 and Red Dead Online and the Borderlands franchise. The largest contributor to net bookings are expected to be Grand Theft Auto Online and Grand Theft Auto V, NBA 2K20, Red Dead Redemption 2 and Red Dead Online and Borderlands 3. We project recurrent consumer spending to grow by approximately 75%. This growth is expected to be driven primarily by Grand Theft Auto Online and NBA 2K20. We also expect digitally delivered net bookings to double. Our forecast assumes that 81% of our current generation console game sales will be delivered digitally, up from 75% in the same period last year. We expect GAAP net revenue to range from $775 million to $825 million and cost of goods sold to range from $392 million to $480 million. Operating expenses are expected to range from $267 million to $277 million. At the midpoint, this represents a 10% increase over last year, driven primarily by higher R&D expense and charitable contribution. And GAAP net income is expected to range from $103 million to $116 million or $0.90 to $1 per share. For management reporting purposes, we expect our tax rate to be 16% throughout fiscal 2021. Turning to our outlook for the full fiscal year. We project net bookings to range from $2.55 billion to $2.65 billion. We expect growth from NBA 2K to be offset by lower results from Borderlands 3, Red Dead Redemption 2 and Grand Theft Auto V. Grand Theft Auto Online and Red Dead Online, excluding digital content bundles with the premium addition, are projected to be approximately in line with fiscal 2020. The largest contributor to net bookings are expected to be NBA 2K, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Social Point's mobile games, Borderlands 3, Civilization VI and The Outer Worlds. We expect the net bookings breakdown from our label to be roughly 55% 2K, 35% Rockstar Games and 10% Private Division and Social Point. And we forecast our geographic net booking split to be about 60% United States and 40% international. We expect recurrent consumer spending to be roughly flat as compared to fiscal 2020, driven primarily by growth from NBA 2K, offset by lower allocated recurrent consumer spending from the Borderlands 3 and Red Dead Redemption 2 premium edition. The current consumer spending as a percentage of our business is expected to grow to approximately 60% versus 51% last year. We project digitally-delivered net bookings to decline by about 8%. As a percent of our business, digital is projected to represent 86%, up from 82% last year. Our forecast assumes that 68% of current generation console game sales will be delivered digitally, up from 55% last year. We expect to generate more than $350 million in non-GAAP adjusted unrestricted operating cash flow, and we plan to deploy approximately $75 million for capital expenditures. The increase in capital expenditures over the prior year was primarily due to spending on studio and office build-outs and IT expense. We expect GAAP net revenue to range from $2.63 to $2.73 billion and cost of goods sold to range from $1.19 to $1.24 billion. Total operating expenses are expected to range from $1.10 to $1.12 billion. At the midpoint, this represents a 1% decrease over the prior year, driven by lower marketing and stock compensation expenses, partially offset by higher R&D expense and charitable contribution. And we expect GAAP net income to range from $299 million to $329 million or $2.60 to $2.85 per share. In closing, fiscal 2020 was a record year for Take-Two, whether delivering incredible stand-alone entertainment experiences or providing engaging live services that captivate and connect communities around the world, our ability to serve our audiences has never been better. Fiscal 2021 promises to be another great year for our organization, and we are well positioned to both capitalize on the many opportunities within our industry and to navigate the uncertainties of these times. We have the strongest development pipeline in our company's history, and we expect sequential growth to resume in fiscal 2022. With our world-class creative assets, focus on operational excellence and disciplined approach to capital allocation, Take-Two is positioned to generate significant growth and margin expansion over the long term. Thank you. I'll now turn the call back to Strauss.

Thanks, Lainie and Karl. On behalf of our entire management team, I'd like to thank our colleagues for their hard work, their commitment to excellence and for delivering another outstanding year, particularly under these circumstances. For our shareholders, I want to express our appreciation for your continued support. We'll now take your questions. Operator?

[Operator Instructions] Our first question comes from Colin Sebastian with Robert W. Baird.

Congrats on the strong quarter and hope you all are doing well. And also, thanks for the visibility on the pipeline, that's very helpful. I was wondering if you could add any color on the linearity of planned releases over that 3- or 4-year time period. And then, Strauss, maybe a bigger picture question, as the publisher of the world's most successful open world franchise, I wonder if you think there's a real business opportunity for a metaverse type environment. I know this is one of the more topical discussion points in certain industry circles right now, but with the next-gen on the horizon and given what we've just been going through, I wonder if you see any potential for that.

By linearity, I think what you're asking, Colin, is, should we expect a gentle constant upward sloping curve of our releases, net bookings and cash flow? And the answer is, we really are aiming to have a handful or greater of new significant releases every year from existing franchises and new intellectual property. And as you could tell from Karl's description, we have plenty of great content coming that reflects that desire. But it doesn't mean that in any given year, there'll be linearity as you put it. And this year, fiscal '21 reflects that. The good news is that with our strong catalog, with our live service offerings and with our annual releases, we can have great strength even in a light year, even though it's not our goal to have a light year and then do even better in the year where we have -- we're able to launch a number of titles, which is our strategy and even better than that, if we're fortunate enough to have a blockbuster title, and we have some of those as well. So the variability in our results, I don't think will ever go away, not when you have some of the biggest entertainment properties on earth that don't come out every year, that can't come out every year, if they are to remain the biggest titles. So that's my view on linearity. Definitely, our goal is to be smoother and to grow. There will still be some variability. And while I'd love to answer your question more broadly, I really think that's more a label question than anything else. As soon as we get into the nature of the content and what we're doing in the future, those questions are better answered by our labels. We aim to give as much visibility as we can on these calls. But when we get into specific core creative matters, we'll announce that at the label level in due time.

Our next question comes from Mike Ng with Goldman Sachs.

I just had a question about the pipeline visibility. Could you just give us a sense of what the completion rate for games in development have been in the past? And could you just help us think about exactly what a core gaming experience is? I think you guys said 72 games for PC console streaming over the next 5 years, so it's 14 games a year on average. Is this just a significant increase in output relative to what you've done in the past? Or is there add-on content or something else in those numbers?

Just to answer the last part of your question first, we did not include add on content in those numbers. So those are all full game releases. And how we define is a bit of hard to, but how we define what our core experience is, what we really -- this is not necessarily to say to reflect that means the largest investments that we make. They tend to be bigger investments because core games tend to be bigger games and more engaging, targeting more core gamers, but it doesn't necessarily mean that. And as we said before, there is a lot of new IP. And generally speaking, you can really expect on the new IP front is much more risky. And generally speaking, our development budgets are going to be lower for new IP. So there'll be a wide range of investments across all of our types of releases we're doing, including core games. But the core games are really those looking for engaging experiences where you could play anywhere from 5 minutes to 5 hours at a time, right? So it's really things that set the -- AAA is probably the wrong way to commentate it because that does condensate investment. And that's not specifically what we're talking about here. Then the first part of the question, I forgot it was?

It was about the percentage of games in development that typically go through completion in the past?

Yes. I don't have a specific number there for you. Obviously, though, games that are coming out that are part of existing franchises, the rate of completion on that is obviously much, much higher. For new IPs, in various stages of development, I mean, for something that might be in a prototype stage, maybe you could be anywhere from -- it could be half the time or it could be 75% of the time, it really just depends. And we've got titles that are in various different stages of development in that pipeline that I suggested. And look, the more new projects that we have with new IP, you could probably expect that completion rate to be lower than if it was just all existing franchises. And we do have a lot of IP in there. And just to stress again, those numbers assume that all those things come out, which we know is not going to be the case, but it also assumes that nothing gets added to the release slate, which also is not going to be the case. So this is a larger pipeline than we've had before. We've been talking about this for quite some time. And our expectation is we'd like to keep up this velocity. It's really important for us to build scale, and this is one way that we're doing it. We need more to add that.

Our next question is from Mario Lu with Barclays. X. Lu: I have one on NBA and one high-level question. So the one on NBA, I noticed that NBA 2K21 is still slated for fall 2020. Any thoughts you can provide on what will happen to that title in its release date if the NBA season continues to be suspended through the rest of the calendar year? And then, Strauss, you mentioned in the past that consumers on average watch 150 hours of linear TV and 45 hours of video games. How has that -- those hours increase or shifted during the current COVID environment? And what is your vision on what a post-COVID world will look like in terms of time spent on entertainment and video games?

Sure. This is Karl for NBA. Look, obviously, we're hoping that we're going to have an NBA season, and we have actually been through -- we've had history with NBA seasons not starting on time in the past. We've had a strike situation in the past. So we have familiarity with that. We don't want to say that it wouldn't impact the game at all, but we tend to be able to continue our business in a robust way even in the light of delays in season starting or in different kinds of season starting. So obviously, all of us, around the world, hope that we've got an NBA season. If we don't for some reason, I think the game as a standalone basis is a compelling experience, and we'll be fine.

And this is Strauss. Regarding engagement, Activate, which is a leading media consultancy, just provided us with some research. All groups, all age groups, all demographics during this COVID shelter-in-place time period, time spent with gaming has increased about 39%, while time spent with video, linear entertainment, has increased about 43%. So they're in the same ballpark, but linear entertainment did increase more. But what's interesting is their research shows that post-COVID, once people return to their normal routines, they expect time spent with gaming to grow at a greater rate, about 14%, a sustained increase of about 14% versus about an 8% sustained increase in time spent with linear entertainment with video compared to pre-COVID-19 levels. So I think it represents a sea change, a shift, and we're going to begin to see meaningful growth in interactive entertainment that meaningfully outstrips the growth in linear entertainment, a trend that we've seen of late, of course. But I think that the lines are going to begin to diverge in the favor of interactive entertainment. And why do I think that? I think that sheltering at home, tragic as it is, sad as it is, has caused people to look for entertainment. And people have returned to interactive entertainment, new people have come to it, and they realize not only is it beautiful, not only is it engaging, not only is it fun and potentially competitive depending on the game, not only are there great stories and characters, but you can also be engaged with friends and communities all around the world. You can create new friends and communities all around the world while you're playing those games, and you can play with those people because you can connect with them. You can talk to them while you're playing over chat clients. So this is not a moment for celebration. We're deeply saddened by what's going on in the world, but the view -- I think the smart view is that all pre-existing trends have been accelerated by this crisis. And the shift to interactive entertainment and the growth in the sector is one of those trends. Now with all that said, we still have to execute every day. The growth in the sector is not going to help us if we don't make great games, if we don't deliver hits.

Our next question is from Brian Fitzgerald with Wells Fargo.

I wanted to ask about what you see on a regional basis, if there's any differentiating engagement dynamics as we kind of meter through areas getting hard hit and then responding a bit, China, and then as places around the world return to some of the normal on the development side. How was your shift to work from home? Was that kind of lockstep, no real problems? And then what are you seeing as regions start to get back to work in Asia Pac?

Thanks, Brian. I'm sorry for the delay. We're all working remotely. We don't see meaningful differences regionally. And so far, we have not seen meaningful changes as regions have gone back to work. For example, NBA 2K Online in China now has 49 million registered users, remains the #1 PC sports title in China, and it was up 25% year-over-year. I think it was up about 40% in the quarter. So we are not seeing meaningful differences. We are not seeing significant changes as people head back to work, but I think it is fully our expectation that -- and I just -- I reflected that in the research I just quoted, that this level of engagement will not stay the same as things return to normal, but we do think it will be higher than it was before. And in terms of working from home, look, we're very fortunate. We got a real wake-up call during Hurricane Sandy when we were not really particularly prepared and ever since then, which was quite some time ago. We've been a company, in addition to being a highly compliant company but a company that's on disaster recovery and we have state-of-the-art systems. In fact, we had planned, completely apart from this crisis, to have a work-from-home test day on March 12, and then it turns out -- we had to go live right about then. Anyhow, a week after that, we had 5,000 people effectively working from home, completely set up with all the equipment they needed. And because we know when people are connected online, of course, we could see that their productivity, if anything, had increased over working in the office and as people got used to sitting in one place with not much else to do in front of their desktops. We're fortunate. We have an incredibly talented, hardworking group of colleagues who really believe in this company's mission and who largely, I hope, mostly love working together. And we saw it as our mission to uplift people during this very difficult time. And we're very connected with our teams. We're talking to them all the time. I'm doing 3 town hall meetings next week on Zoom, 3 different time zones. I hope to connect with almost everyone who works at the company. So it's gone incredibly well and we really haven't missed a beat. Over time, I think it gets harder, but I still don't expect that we will miss a beat. But it does get harder. I'm not of the view that you start shutting down your real estate and everyone works from home and it's just as effective. I think it's pretty close to as effective in a pinch, in a crisis like this where you have no choice and people see it's their obligation to pull together and do great work, but there's no substitute for in-person collaboration and connection.

Our next question is from Eric Sheridan with UBS.

Maybe I can ask another sort of longer-term question on the back of some of the answers you've given on the current environment and what it means for engagement long term. What you've seen so far -- and I know it's a short period of time over the last couple of months and against pretty horrible backdrop, but has that changed at all your view with the way in which games should be distributed or maybe thinking about game development or even more thinking about game monetization over the long term as you see that type of increased engagement levels maybe playing out for interactive payment over the medium to long term, moving beyond just the quality of the content, also the form and manner of monetization to make sure they're capturing that surge in engagement?

I'm sure there are many things that we have learned already and can learn. We haven't seen a massive change in our approach. And remember, when we talk about monetization, our goal is always to deliver a phenomenal entertainment experience, first and foremost. And we figure that if we do that, monetization takes care of itself. Our goal is not to constantly build monetization. Naturally, we need to get paid appropriately so we can share the proceeds with our talented colleagues and create a return for our investors and it's our job to do both. And we care about all of our constituents. So we're not a charitable organization. We're a for-profit organization. Obviously, we wouldn't be on the call if we weren't. But monetization isn't a problem for this organization. When we put out the best entertainment on earth, people show up for it. If we give them something that's incredibly valuable, they pay for it. We take it as axiomatic that the nature of an experience is the intersection of the quality of the experience and whether you feel you receive value for that experience. If you go to a phenomenal restaurant and have an incredible meal but the bill [Audio Gap] it should have cost, you're not going back. Even if you can afford it, even if you're price-inelastic, you're not going back. It just doesn't feel good. So we need to make sure that we always deliver more than what we charge, and that's the goal of our company and that's the goal of all of our labels. With all that said, with increased engagement comes increased monetization. You're seeing the effects of that in these results and in this initial guidance.

Our next question is from Ryan Gee with Bank of America.

A couple of quick ones for you here, one for Lainie then maybe for Karl. Lainie, if we rewind back to fiscal '18, that's probably the last year you didn't really have any big new AAA titles beyond sports. I noticed that the profit margin, earnings per share was higher than what you're guiding to for fiscal '21, even at the high end. I know there are share count and tax rate differences going on, but maybe what's the 1 or 2 differences you would call us to as to why fiscal '21 maybe doesn't look as robust as compared to fiscal '18? And then, Karl, just on Mafia real quick. Can you remind us how material that franchise has been for Take-Two in the past? It sounds like this Trilogy is a quasi-new game with some ports and remasters along with it. So what's the opportunity we should really think about this type of game, the Trilogy, in '21?

Ryan, I don't have the numbers in front of me, but I can tell you off the top of my head, for sure. It's going to be higher R&D expense is going to definitely be one of those numbers that are much higher right now. As Karl talked about our release sched, our pipeline of titles has grown significantly over the last couple of years. And you've seen the detail about our titles and what we have coming out in the next 5 years. That has been something that we've worked on growing significantly. And as we look at the development, a lot of that is going to R&D expense, which has grown our operating expense line. And since that's going through the OpEx, that has affected our bottom line margin for the business and that -- as well as our overall G&A expense, which has grown for higher personnel and IT expense for cybersecurity as well as just overall IT expense for the business and our online games. I think that's probably where you're seeing the biggest increase for the overall business.

And in terms of the Mafia opportunity, Mafia has been an incredibly successful franchise for us over a long period of time between Mafia I, Mafia II and Mafia III. And just to give you an idea, Mafia III has already sold in -- about 7 million units or so. Mafia II is also incredibly successful and Mafia I as well. So it's been a significant contributor for us. We're really excited about the Trilogy. It is the same 3 games but it is -- there's obviously much more improvements that are occurring with the game. The Mafia I is going to be basically completely remade -- I mean it's not fully really remade but there's going to be new tech, there's going to be new voice acting, new game mechanics and a lot more than that. So there is quite a bit of work that's going into bringing out the Trilogy. And we've had great success with bringing out these collections. And again, even though they're not brand-new experiences, there's always a new audience to catch and then there's always a new experience depending on the generation that each of those individual titles came out where even existing fans can enjoy it in a different way. So it's been meaningful for us as a franchise, and we're really excited about the Trilogy coming out.

Next question is from Brian Nowak with Morgan Stanley.

Two on GTA. So recently, there's been an offering on the Epic Games store where people have been able to get GTA for free on PC. Can you update us on your thinking about lowering barriers to entry to some of these big RCS-driven games, whether it's NBA 2K or obviously this recent thing with GTA? Presumably, getting people into the ecosystem, driving the network effects and engaging them and ultimately monetizing that engagement is such a big part of the business. How do you think about the risk/reward of bringing people in for free versus charging them for upfront access? And has that changed at all recently? And then just following up on something came up earlier in the call. You mentioned 15 platform extensions. Is GTA V one of those 15?

Thanks, Brian, for your question. I think your question was also pretty good answer. It's sort of all of the above. Grand Theft Auto V is a 7-year old title. Obviously, it's been offered at lower price points than its initial release price point. And we do have a -- obviously an online offering, and there are monetization opportunities within that offering. So specific promotions with specific outlets with specific deals behind them can make sense to us. And we do believe that it's a great idea, in general, to grow the audience, grow engagement, grow users. And with that will come more net bookings and will come more profits. So that was the thesis behind it. We're very, very selective in those kinds of promotions, and they typically are only available for limited periods of time when they make sense for catalog titles. And we haven't yet made any announcements that we -- that are reflected in today's release. And as you know, we don't talk about specific new titles at these calls. We leave those discussions to the labels.

Our next question is from Todd Juenger with Sanford Bernstein.

For either Karl or Strauss, whoever feels like it. I hope you don't mind me going back to the engagement question yet one more time, but I'd love to explore it this way. When you think about the increased engagement recently, can you help us understand how much of that you think is proportionately driven by existing gamers who are playing more versus perhaps lapsed gamers who have come back versus perhaps new people to gaming? And any differences in that answer based on either platform, PC versus console versus mobile, or by your major franchises.

It's Karl. In terms of engagement, I'm probably going to give you an answer that's not overly satisfying, but the answer to your question is it's really both. It's all of those things. It's new gamers. It's existing gamers. It's people coming back to the franchises. And we track all of that. We don't publicize it but we track all of that. And really, what keeps people coming -- if they're coming back -- and even keeps new people coming in, is a constant release of new content. I mean because every time we come out with new content, there is ultimately some publicity around that and it brings people back in the franchise. It keeps people engaged who are currently engaged with the franchise, and it also brings new folks in. So it really is all of the above. And I really haven't seen that change so much specifically as it relates to anything going on during the pandemic, but obviously, there are other avenues open to us to bring new folks in. I mean we're always playing with pricing models. We mentioned we're doing things like putting things into subscription-oriented services or getting things away for a certain time. All of that generates new excitement and engagement for our franchises and for our games. That is -- hopefully continues well into the future. It isn't just a temporary thing, and we've seen that time over time. And I'd like to point out we're still really in experimental mode. We're getting better and better and our investment in data analytics really allows us to show -- to see in real-time what these things do for us. Where do we get the most engagement? How does a new player coming in, in a free context or subscription service context or in a low price context compare to someone who came in paying full price? What does that cohort look like? And we're getting better and better at analyzing that so that we optimize all of our promotional activity to maximize our economic opportunities.

Our next question is from Eric Handler with MKM Partners.

Strauss, when you look at -- given all of the games that you have in your pipeline now, I'm just wondering if you could talk a little bit about scale and infrastructure. And if even half of those games come to fruition, do you have everything you need in place in terms of personnel to effectively distribute these games and market these games?

I thought you were going to ask do we have everything in place to develop, and we still will be building up our development teams. In terms of marketing and distribution, yes, I mean one of the reasons that we've talked about the need for scale in order to have competitive operating margins. We already have competitive gross margins, highly competitive gross margins. To have competitive operating margins, you need scale with the same level of success of your games, and that's our goal here. But the reason you get those higher operating margins with more net bookings is because you don't build up your fixed overhead and your fixed overhead would typically include marketing and distribution expenses. I fully expect that our distribution will become more efficient as the world moves more to digital distribution. We already have a highly efficient distribution mechanism. And yes, with volume, you might increase your marketing head count modestly but not all that significantly. Naturally, our development head count is part of the cost of making a game. And you should expect with volume that our development expense goes up, and you're already seeing that.

Great. And just as a follow-up, when you think about capital allocation and given all the cash that you have on hand, it doesn't seem like there's much going on from an industry M&A standpoint at this time. But given all the games you have in the pipeline, do you think it lessens the need for you to be thinking about M&A? Or how are you thinking about balancing what you're currently developing versus external opportunities?

We still feel that our capital is used best in 3 different ways: First, to support organic growth. It has been an incredibly successful story for this company. This year is no exception. We've really only done one meaningful acquisition, which is Social Point. The second is to support a return of capital to shareholders, and we've done a great deal of that selectively and we've done it through buybacks. They've been opportunistic, and I think the highest price we ever paid was around $99, if I'm not mistaken. So obviously, so far, we've called that reasonably well. And then we've reserved capital and incredibly strong balance sheet for the possibility of very selective inorganic growth driven by acquisition. We're very disciplined. We're looking only for accretive deals. And you're right, there aren't a lot of opportunities. We're hopeful that there will be some opportunity that would move our company forward, potentially diversify its operations a bit and bring in intellectual property and talent. Those have been our rubrics. We expect to stay squarely within interactive entertainment. You shouldn't expect us to diversify outside of it. And those opportunities are few and far between but they do exist. And done right, the benefit of that would be to have highly competitive operating margins. So we don't need scale for scale's sake. But if we want to be the best in the business, and we do, then our financial results have to reflect that. And that means we have to have highly competitive operating margins, and the only thing standing in the way of that for us is scale. But again, if you buy scale in a foolish way, it won't help you. And if you buy scale and then can't maintain the success of that organization, thereby ruining your gross margins, you obviously would not benefit your operating margin. Said another way, if you're going to do an acquisition, it has to be smart, it has to be accretive relatively quickly, if not immediately. And then post closing, you've got to integrate the business soundly and run the business successfully in order for it to make sense. That's a tall order. That's why most corporate acquisitions fail. That's why we're so incredibly disciplined. But we are of the view that there will be opportunities and, certainly coming out of this crisis, there may be more opportunities than we otherwise would have expected.

Our next question is from Matthew Thornton with SunTrust.

So maybe first question, just coming back to the pipeline title count that you discussed earlier. I'm wondering if you have a label breakdown. I don't think you talked about it in terms of breakdown by label but wondering if you have one. Secondly, recurring-type titles, I guess when we think about that, that total count, would -- something that's recurring like an NBA 2K, which will come out obviously 5 times over the next 5 years, is that counted 5 times? Or is that -- is it counted 1 time? And then third question, Strauss, just curious how you think about growth bogeys over a multiyear time frame. Do you kind of look at the growth rate, maybe blockbuster launch -- a blockbuster launch? Or is it over a 5- year frame or -- just curious how you think about growth milestones when you look at the business over a multiyear lens.

It's Karl. The -- yes, you're right, we did not break it down by label but there are releases obviously from all of the labels. We don't really have anything to share in that regard, but there are quite a few releases from all of our labels, including Private Division, 2K, Rockstar and Social Point as well. And in terms of the breakdown, how that works, so if there is a sequel that comes out, if there's a franchise that -- something that comes out every year, this is our -- a view of our entire pipeline. So yes, that would be counted.

And in terms of how we look at growth, good news is we're operators. We're also investors. We also are big shareholders. We look at it exactly the way you would. We're looking for growth in net bookings. We're looking for growth in EBITDA. We're looking for growth in recurrent consumer spending because it reflects solidity in the business. It's much less volatile than initial releases could be. And finally, we're looking for growth in our stock price. And that's how we're judged. So we're judged from an economic point of view, largely on total shareholder return, as we should be. We're not judged at all on EPS, which I think is a terrible way to judge a management team for obvious reasons because you can fiddle around with it. Total shareholder return, there's no place to hide and that's how we're judged. So I think in exactly the way you would look at it, scale, because it's correlated with operating margins in the way that I said earlier, the scale of your operating profit or your EBITDA or your operating cash flow and, of course, your stock price. And on those metrics, we've done very well indeed for quite some time.

Our next question comes from Mike Hickey with The Benchmark Company.

I was curious to your view on the economy over your fiscal year '21, '22. I think you said you didn't see a deep recession, but I'm curious what sort of recovery you expect and how unemployment or other factors you look at could impact online game sales or live service as it relates to your guidance.

Thanks, Mike. We're -- our expectations for fiscal '21 have not been adjusted for the recent success that we've had in this tragic period in the back half of the year. So we're not counting on this level of engagement and spending to continue. Equally though, we are not planning for a deep, prolonged consumer recession. So I would say if you had to peg it, we're right there in the middle, where -- which is where we probably should be since we can't call it. My own personal view, which does not influence our numbers, is that we're going to see a relatively rapid consumer-driven recovery when the dust clears. And my own view is that dust is probably going to clear sooner than many people think. But I'm an optimist and we don't plan based on my opinions. So I would say we're right down the middle that we assume relatively stable economic conditions that if we were surprised and there were deep, ongoing consumer recession, we would not be [ influenced from it ] and our results could be negatively influenced by. And equally, if there was a massive unexpected expansion, that could benefit our results. So I think we're assuming relative stability. We are not assuming continued enhanced engagement and monetization, the likes of which we have seen recently.

That's helpful. The last one from me. On fiscal year '22, you noted your expectation for sequential growth. And of course, you guys tend to be very conservative, which is a good thing. Maybe I missed it, but broadly speaking, can you sort of talk to the drivers of growth for fiscal year '22? And obviously, it looks like half the year is in your first quarter guidance for '21. So we think there's probably upside there. Do you expect to grow over fiscal year '20 in '22?

Yes. Sorry. I think probably not much to add. We expect sequential growth year-over-year in fiscal '22, and that is driven by the release schedule that Karl described in the pipeline that we're investing in. So we expect some releases coming out of that pipeline in fiscal '22, and we expect them to generate sequential growth, so as simple as that.

The next question is from Doug Creutz with Cowen and Company.

I went back 10 to 15 years ago. There were a lot of successful sports franchises out there. Most of the major leagues supported multiple simulation and arcade titles. You had an MLB title. There was golf, tennis, extreme sports, so on and so on. You go to today and there's basically 3 enormous titles in sports in the market, including NBA 2K, but few others that are kind of hanging on by the skin of their teeth and that's it, presumably the other ones on the way because it became uneconomical to make them at diminishing unit numbers. You've got a PGA title. You're working on some NFL titles. You're continuing to invest in WWE. Is it simply a function of getting the cost structure down to a level where they can be profitable at relatively low unit numbers? Or do you see something in the market where you think there are opportunities opening up that maybe didn't exist 2, 3, 4 years ago?

Well, look, there are certain sports obviously that are not going to drive the audiences that you're going to get with, for example, NBA or FIFA or with football. Obviously, we're very excited about moving back into football. The NFL is one of the most powerful brands in the world. We've been in the NFL business before. We've excelled in the NFL business before. Although we're not going into the simulation space, we're very excited about what we can bring -- that we can bring to that market. So we think there's significant opportunity for us to expand within that market, just where we are now. But you're right, some of the other smaller sports, you're not going to be able to spend the kind of money that you can on the bigger sports to drive your economics. You need to balance it out. So by definition, smaller audiences, smaller sports, you're going to need to balance it with smaller development budgets. But that doesn't mean there's not a lot of opportunity to be -- to make -- to generate significant economics because once you actually get people into -- there -- obviously, there's correlation between the popularity of the sport and the game itself, but it's not necessarily limited to that. So people who aren't golf fans can play golf games. That -- we've seen that over and over again. And we think that there's an opportunity for us to go into some of these sports and do very, very well, of course, with a reasonable budget, but to bring best content we can to the consumer, engage them and then the economics will come.

Our next question comes from Ray Stochel with Consumer Edge Research.

A high-level question on this topic of scale and I guess how you guys are thinking about investments in your forward pipeline. I'd love to know more about your green-light process. And I guess if you look at the last 10 or so years plus of video gaming, there's been a lot of focus on really growing in that head content. Even you yourself have seen a lot of success with GTA and NBA. And it does seem like you have a lot of smaller titles or tuck-in titles or AA titles that are in your pipeline. So how do we think about you green-lighting those titles in addition to what you just talked about with things like NBA and PGA? And what do the unit economics look like for those titles relative to some of the big AAA releases? And I guess is that something that could eventually lead to a lower margin structure on a per unit basis, which would sort of limit the upside of what you're talking about with scale?

Yes. Well, I think what you're really talking about is how -- our approach to new IP because for the most part, we have leaned in the industry, generally speaking, and obviously at Take-Two as well because we've got such huge, powerful franchises. We've leaned into those franchises and generated significant economic results driven by the consumer engagement with them. But we still think it's critical to invest in new IP to keep that fresh pipeline going because you never know where your next hit is going to come from. But you can't -- but you're right, you can't invest in the same way that you do in your franchise. So you do have to take a different approach to it. We're always continuing to seek new, innovative ways to enhance our product portfolio, including bringing out new IP that has a chance to be successful. And it doesn't necessarily have to happen in the first iteration. I always like to use the example of Bruce Springsteen. It took him a long time to even hit a gold album. It took him a few releases to get there. You need to curate these front titles. So the idea is take as many shots as you can to do so in such a way that if it doesn't work out, you don't lose your shirt but then you create some kind of reaction. There's something great about something that you did. And maybe the first one isn't economically powerful, but the idea for us is always to grow iteration after iteration. So on the second one, when we know we've got an audience, we can invest a lot more and expand that marketing budget, expand that development budget and push that franchise forward. That's what franchise development is all about. You don't have to come out off the bat and be successful at the same level as a Grand Theft Auto or an NBA day 1. If you take that approach, you'll never launch anything new. I mean that's just shortsighted. And it's tempting. There's no doubt about it to do that because it's very, very efficient and the margin structures are enormous, but I think we're limiting ourselves creatively and economically if we take that path. And that's not what we're doing. But we have to be mindful about our investment levels and be patient and look at franchise development over the long term. I mean our franchise has -- almost in every single case, iteration -- release after release, have grown. They don't go the other way, and there's a reason for that because we take the long view.

Got it. And then as you have success with some of these new IPs that you'll be putting out there, I mean how do you think about -- let's say you do have a blockbuster hit off the jump. Can you reposition some of your resources towards recurrent spending and rebuilding that model immediately? Or do you expect to sort of keep these studio paths separate, meaning -- let's say you do have something that all of a sudden is in the tier of maybe not Grand Theft Auto but maybe of Borderlands, do you reposition other studios to sort of attack the recurrent spending opportunity? Or do you remain on this pipeline path that you've laid out?

Well, to the extent that you've got a title that takes off unexpectedly, the -- you certainly can pivot resources on the go. And if there is a significant opportunity to do so through recurrent consumer spending, then you can absolutely do that and you can extend the life of a franchise. I mean Borderlands is actually a great example because when Borderlands 2 took off -- Borderlands 1 was successful. Borderlands 2 took off like crazy. Our DLC plan expanded on a daily basis. I mean I don't remember what our original DLC plan, but it wasn't 10 to 12 releases, which is where we ended up. So you can always invest more over time and you can obviously do that in a game where you've got a robust micro-transaction model. But what you can't do is you can't change the nature of the game. That would be suicide because the reason you have a hit is because people like the way it is. So if you get the audience going and you change the nature of the game surely with the motivation of creating -- of extracting economic value from the consumer, you run the risk of screwing up the franchise. And again, that's not something that we would do.

Our next question is from Alex Giaimo with Jefferies.

Just for Lainie, circling back to the earlier question on margins and how it relates to the full year guide, I understand the color around R&D expenses being up, but it also looks like the guidance is implying gross margins that are a bit lighter than we expected. Curious if that's just conservatism or something specific to call out. We would think that you would see some gross margin improvement especially with the accelerated shift we're seeing in digital right now. Any color there would be helpful.

Sure. So the gross margin is slightly down, but basically it's flat from last year. So we do have -- we are seeing it come up a little bit from the digital and the recurrent consumer spending mix because recurrent consumer spending is a higher-margin business for us, but that's being offset by having less new releases this year. So that's why we're seeing it flat. But it's early in the year. So we'll see how we go towards the latter part of the year and the recurrent consumer spending continues to stay strong for us. We should hopefully see that lift up a little bit towards the latter part of the year.

We have reached the end of the question-and-answer session. I would now like to turn the call over to management for closing comments.

Well, we just want to thank everyone for attending the call. Once again, we want to extend our best wishes to everyone who's listening today for your health, for your loved ones' health and our condolences for any losses that you or your loved ones have suffered. We know this is an incredibly challenging time. We feel blessed to be able to be of some small consolation by bringing light entertainment to people. We're proud of what we do. We're grateful to be able to do it. And once again, I want to express my gratitude to our colleagues for their dedication for showing up with smile on their face for doing such amazing work. The reason we're able to have these extraordinary results is solely a function of that work. So thank you so much for joining us, and our very best wishes.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.