Soul and Vibe Interactive, Take-Two Interactive Software, Activision Blizzard Full Reports


  • The Global games market has experienced rapid growth over the past few years and is forecast to almost double its revenue over the next 5 years.
  • Game publishers in the market have diversified their distribution channel and have entered the digital download market, which has allowed them to push sales and to increase sales by selling add-on products to existing customers.
  • The recent introduction of the newer generation games consoles such as Microsoft’s Xbox one, and Sony’s PlayStation 4, has created opportunities for publishers to increase their platform range and to gain revenue from the newer platform.

Overview of the Games Software Market

Key features of the Games Software Market

Amazon announced particularly strong sales of gaming consoles. Amazon claims that the new Microsoft Xbox One and Sony PlayStation 4 sold more than 1,000 units per minute during peak hours.

Amazon also announced that Activision’s Blizzard’s Call of Duty: Ghosts for the Xbox 360 console was the best selling video game for the 2013 holiday season, followed by Just Dance 2014 for Nintendo Wii and Grand Theft Auto V for Xbox 360.

Global online playing time by all users exceeded 4 billion hours in the September quarter.

According to Market Line, the global games software market grew by 10.5% in 2012 and reached a total value of $43.8 Billion.

According to Market Line, by 2017, the global games software market is forecast to have a value of $66.8 Billion, representing an increase of 52.5% over the 2012 value.

Within the Games Software market, Console games is the largest segment, representing nearly 87.8% of the market’s total value. The Americas represent 40.8% of the global games software market value.

The global games software market generated total revenues of $43.8 billion, representing a compound annual growth rate (CAGR) of 5.2% between 2008 and 2012. In comparison, the European and Asia-Pacific markets grew with CAGRs of 4% and 5.1% respectively, over the same period, to reach values of $15.6 billion and $10.1 Billion respectively in 2012.

The performance of the market is forecast to accelerate, with a forecasted CAGR of 8.8% for the five year period 2012-2017, which is expected to drive the market to $66.8 Billion by 2017. The European and Asia-Pacific markets will grow with CAGRs of 8% and 9.9% respectively, to reach values of $22.9 billion and $16.2 Billion by 2017.

Figure 1: Global games software market value (in $Billions)


Figure 2: Category Segment


Figure 3: Global games software market by geographical segment


Figure 4: Global games software market value forecast 2012-2017 (in $ Billion)


SOUL Business Description

Soul and Vibe Interactive Inc., a video and computer games company that develops, publishes, and digitally distributes games and games-related content for video game consoles, mobile devices, and personal computers. The company specializes in the creation of original intellectual properties and licensing brands from other companies. Its games in pre-production include The Wheaties Challenge, an adrenaline-charged arcade sports compilation; Bugaboo, an action-puzzle game; Grimwhiskers, a side scrolling, action game; a virtual-pet game; and The Dragon Wars, a character-driven battle game.

The company was formerly known as Victory LG Inc, and changed its name to Soul and Vibe Interactive Inc in October 2012. Soul and Vibe Interactive Inc was founded in 2011 and is based in St Louis Park, Minnesota.

In January 2014, SOUL announced that it had released a Beta version of its most recent game, Timeless Gems, on Facebook. During the Beta phase, players will help the company and the development team to prepare for the game’s formal launch. (Market Wired). The game is available via the following link

Agreement with Larva Game studio

In July 2013, SOUL announced that it had entered into an Agreement with Mexico-based Larva Game Studios to develop two new video game properties for the Soul and Vibe label. The games include Soul and Vibe’s original intellectual property (IP) Grimwhiskers, and Larva Game Studios’ original IP Last Day On Earth, both targeting teen and older audiences. Per the terms of the Agreement, Larva Game Studios is to develop the games and Soul and Vibe is to produce, publish, market, and manage distribution of the titles.

Founded in 2007, Larva Game Studios is one of the largest and fastest growing game developers in Mexico. The studio specializes in console and PC game development, mobile game and app development, and art outsourcing. Larva is currently working on two original IP games, Last Day On Earth and Night Vigilante.

Soul and Vibe Interactive Inc

Table 1: Income statement for Soul from Inception to September 2013 (in $’000)


Since inception in Jan 2011, the company has not yet realised any revenue.

The major expense for the company has been General and Administrative and Professional Fees. These are the fees incurred by the company as it develops, publishes, markets, and distributes new titles. The expense in the last three quarters ties in with the company’s agreement to enter into a partnering agreement with Larva Studios to partner and distribute the two products to the market. These two products are at the moment unreleased and no critical reviews exist to gauge the popularity of the title or portfolio.

Table 2: Working Capital


The company has increased the resources tied in its working capital, by increasing its level of current assets and liabilities. The primary driver is the increase in cash and in accounts payable.

Table 3: Cash flow statement


Cash flow from operating activities was significant and negative. The result is due to the expenditure incurred by the company in the previous three quarters to bring new titles to market.

The financing activities include the $175,000 raised in October 2013 by the sale of a 10% Convertible Debenture.

The diluted earnings per share were a loss of $0.04.

The total cash in the business is $84,900 and the total debt currently is at $79,920.

Pro-Forma Earnings

Figure 5: Pro Forma revenues and Profit (in $ Millions)


The Company currently has several proprietary games at various stages of development, each of which can generate copyrighted intellectual property (IP) assets and additional revenue streams beyond games sales. Franchise opportunities exist in creating characters and story lines that be leveraged into merchandising and licensing opportunities.

According to the Shareholder letter issued by SOUL on 3rd December 2013, management expect the company to report revenues and profits for 2014 and 2015, as the products in development are put on the market.

Soul and Vibe releases cross-platform compatible games and games-related content on consoles, mobile devices, and computers. The Company’s mobile games drive micro transactions and are revenue generating marketing vehicles for its console and computer releases. Soul and Vibe increases its revenue opportunities, broadens awareness for each game franchise across an expanded consumer base, amortizes development and marketing expenses, and reduces risk by releasing games across multiple platforms. The Company’s diverse product mix includes broad-appeal genres: sports, action, puzzle, virtual pet, hunting, and battle.

The Company’s product portfolio contains proprietary games. Each proprietary game can generate copyrightable IP assets and additional revenue streams beyond game sales. This includes the licensing of IP for merchandising and cross-platform media outlets such as television and film.

Soul and Vibe’s business model calls for numerous revenue streams to be generated from each game release. Revenue is generated, via digital download, from the sale of experience-expanding “add-on” packs (Premium Downloadable Content), virtual apparel and costumes for Avatars, and monetized “Consumables” (in-game items purchased with real-world money and used, or “consumed” inside the game.) Individual units of virtual apparel and costumes for Avatars are currently sold in an average price range of $.50 to $5. Soul’s business model relies on its games to be digitally distributed. This lowers the cost of bringing products to market.

Table 4: Games developed and launched by SOUL’s CEO in the past four years.


The above sample of case studies show that the CEO has a track record of bringing very profitable products to the market and the record provides confidence in the pro-forma revenue figures provided by the management.


Soul and Vibe Interactive Inc., a video and computer games company, develops, publishes, and digitally distributes games and games-related content for video game consoles, mobile devices, and personal computers. SOUL entered into an agreement with Larva Games Studios to publish and distribute two new games. The company also has development and publishing agreements for the X Box 360, Windows operating system, Playstation 3 and the PS Vita. The CEO of SOUL has a track record of being able to bring profitable products to the market and this past performance is expected to benefit SOUL in the coming years as it is able to publish and distribute products from its development pipeline.

TTWO Business Description

Take-Two Interactive Software Inc.  (TTWO), develops, publishes, and markets interactive entertainment for consumers worldwide. Take-Two Interactive Software, Inc. was founded in 1993 and is headquartered in New York, New York. TTWO currently has 2,240 full time employees.

The company offers its products under the labels, including Rockstar Games and 2K. It develops and publishes action/adventure products under the Grand Theft Auto brand, as well as other franchises, including L.A. Noire, Max Payne, Midnight Club, and Red Dead under the Rockstar Games label.

The company also publishes BioShock, Borderlands, Mafia, and Sid Meier’s Civilization franchises in the shooter, action, role-playing, and strategy categories; NBA 2K, a NBA basketball video game, as well as other sports titles, such as Major League Baseball 2K and Top Spin series; and casual and family-friendly games comprising Carnival Games and Let’s Cheer, as well as has an agreement with Nickelodeon to publish video games. Its portfolio of brands also comprise Bully, The Darkness, Manhunt, Rockstar Games Presents Table Tennis, Sid Meier’s Pirates!, Spec Ops, Top Spin, and XCOM.

The company’s products are designed for console gaming systems, such as PlayStation 3 and PlayStation 2, Xbox 360, Wii U, and Wii; handheld gaming systems that consist of DS, 3DS, and PlayStation Portable; and personal computers, including smartphones and tablets. Take-Two Interactive Software, Inc. delivers its products through physical retail, digital download, online platforms, and cloud streaming services. The company sells its software titles to retail outlets in United States, Europe, Canada, Latin America, and the Asia Pacific through direct relationships with retail customers and third-party distributors.

In January 2014, 2K and Rock Studios announced Evolve, a new multiplayer shooter experience. Evolve will be available in the coming fall for Xbox One, Playstation 4, and Windows PC. The game is available for pre-order from January 2014, with pre-orders qualifying for free Expansion Packs. (Business Wire).

In January 2014, Rockstar games also announced that Grand Theft Auto: San Andreas would become available for select Android and Amazon Kindle devices. The game will retail for $6.99 and will be available on the Google Play store, Amazon Appstore and the IOS App store. The game is also expected to be released on Windows mobile devices in the near future. (Business Wire).

Take Two Interactive Software Operating History

Table 5: Key variables for TTWO for 2011-2013 (in $ million)


Revenues, operating expenses and Net income are influenced by the product offering of the company, the popularity of recent titles and the popularity of the media system for which the title has been published. Future revenue growth, and the resulting net income is heavily determined by the title pipeline, the title pipeline of competitors, and the popularity of the media system.

Table 6: Revenue for the last four reported quarters (in $ millions)


The company released Grand Theft Auto V in September 2013 and in just 3 days after the release of the game, the company announced that sales had surpassed $1 billion, grossing more revenue than any other game/movie in history. (Reuters).

The company also reported that the game had sold 29 million titles to customers since launch. The company expects the sales of the game to continue well into the future. The consensus revenue for the December-2013 quarter is $704 million, which is almost 385% greater than the preceding quarter revenue. The consensus revenue for 2014 is $2,340 million, which is almost double the revenue for 2013.

These forecasted revenue figures indicate that the performance of the company is largely determined by the product pipeline being offered and the reception of these titles by critics and customers alike. Table 7 below shows the titles that have been released by the company since July 2013. While Table 8 shows the titles that are to be released in the near future.

Table 7: Titles released since July 1, 2013.


Table 8: Title pipeline and expected release dates.


TTWO has several other franchises besides the Grand Theft Auto game, which are able to generate potentially large amount of revenue.

The company’s titles such as NBA 2K14 and WWE 2K14 were strong performers for the 3rd quarter.

Bioshock Infinite, which was released earlier in the year, also performed very well.

All of the recent titles released by TTWO have been well received by critics and therefore provide a good base to generate review by introducing follow on titles in the future.

Figure 6: Revenue for September Quarter for 2013 and 2012 by Geography region (in $ million)


As can be seen from figure 6 above, the company’s primary market is the US, followed by Europe, and then Asia Pacific and the Americas (excluding the US).

Figure 7: Revenue for September Quarter for 2013 and 2012 by Product platform (in $ million)


Figure 7 above shows the revenue breakdown by platform. The majority of income is derived from Console sales, and the company has products in the pipeline that cater to older generation consoles (PS3, X Box etc), as well as titles for the newer generation of consoles (PS4, X Box One). The company has also attempted to increase its foothold in the handheld market by pushing sales via the App store market for Android and Iphone devise as mentioned before.

Figure 8: Revenue for September Quarter for 2013 and 2012 by distribution channel.


Figure 8 above shows that the company has attempted to change its distribution channel in the recent past, and that future revenue may be driven more by the online channel rather than the physical distribution model.

Potential risks associated with TTWO

Historically, with previous Grand Theft Auto releases, TTWO usually experiences a large spike in revenue when the title is released. However, revenue usually exhibits a large drop in the following quarters. There may be a possibility that TTWO may experience a similar result following the release of Grand Theft Auto V.

In November 2013, TTWP announced that it had bought out all the shares held by Icahn Group at the prevailing market price. The agreement with Icahn Group and TTWO stated that if Icahn sold its position, the Icahn Group’s nominees would have to resign from the company’s board. The Icahn Group has a history of making profitable bets on companies. The departure of Icahn could be seen as a negative sign by investors and could imply that investors such as the Icahn Group may feel that the stock price has become overpriced.


Take-Two Interactive Software (TTWO), Inc. develops, publishes, and markets interactive entertainment for consumers worldwide. The company offers its products under the labels, including Rockstar Games and 2K. It develops and publishes action/adventure products under the Grand Theft Auto brand, as well as other franchises, including L.A. Noire, Max Payne, Midnight Club, and Red Dead under the Rockstar Games label.

The company recently launched Grand Theft Auto V, and the title was able to gross more than $1 billion in sales in the first three days. The company also has a large and exciting pipeline of titles that is expected to reach the market in the near future. The company has also entered its most successful titles into the Android and Iphone App store market and the products are available for download on most smart phone devices.

ATVI Business Description

Activision Blizzard, Inc. (ATVI) publishes online, personal computer (PC), console, handheld, and mobile interactive entertainment products worldwide. The company is headquartered in Santa Monica, California and was a subsidiary of Vivendi Société Anonyme. The company currently has 6,700 full time employees.

It operates in three segments: Activision, Blizzard, and Distribution. The Activision segment develops and publishes interactive software products and content. The Blizzard segment develops, markets, and sells role-playing action and strategy PC-based computer games, as well as online subscription-based games in the massively multiplayer online role-playing game category. This segment also maintains a proprietary online-game related service,

The Distribution segment provides warehousing, logistical, and sales distribution services to third-party publishers of interactive entertainment software and hardware products. Activision Blizzard, Inc. sells its products to direct mass-market retailers, consumer electronics stores, discount warehouses, and game specialty stores through direct-to-retail basis, third-party distribution, and licensing arrangements, as well as digital online delivery methods.

Activision Blizzard Inc

Table 9: Key variables for ATVI for 2010-2012 (in $ million)


The call of duty franchise has been very successful for ATVI, and accounts for nearly 70% of the units sold by the company in 2012. The annual editions of the franchise have made the top ten best selling game across the world for the past five years. ATVI currently has a market share of nearly 20% in the US video games market last year, with Call of Duty: Black Ops II accounting for nearly 14% of the Xbox games sold and 18% of the PS3 games.

Table 10: Revenue for the last four reported quarters (in $ Million).


First person shooters (FPS) like Call of Duty, Battlefield and Halo, accounted for nearly 20% of the total video game sales market last year. Black Ops 2 accounted for more than half of the sales. Electronic Art’s (EA) Battlefield 4 title could have provided intense competition for the Call of Duty 2 title, but faced technical difficulties at its launch.

Strong sales of Call of Duty: Ghosts on the Xbox 360 console have also done well for Activision, which announced that it would allow players who purchase the game for their current console, to be able to download the next generation version within the same console family for only $10. The game also includes a downloadable content pack, micro DLC and Season passes, which allow the company to generate greater digital revenues from additional downloads.

The last edition of the Call of Duty franchise, Call of Duty: Black Ops II, generated more revenue in a single year than any of the other console games did in the past.

The consensus forecast for 2014 revenue is nearly $4.66 billion, which represents an 8.3% increase over the 2013 revenue estimate. Analysts also believe that the 2014 Earnings per share are going to be close to $1.29, which represents a 45% increase over the 2013 estimate.

Figure 9: Revenue for September Quarter for 2013 and 2012 by Operating Segment. (in $ million)


Figure 10: Revenue for September Quarter for 2013 and 2012 by Geographical region. (in $ million)


The majority of revenue is derived from the North America market, followed by Europe and Asia-Pacific.

Figure 11: Revenue for September Quarter for 2012 and 2012 by Platform. (in $ million)


Table 11: Key ratios for 2010-2012


ATVI has reported very significant profit margins for the last three years. Reported revenue has also grown steadily year on year. Both of these variables are quite significant, given that other similar companies in the industry, tend to exhibit more volatile earnings and revenue growth.

ATVI has also reported very significant return on assets year on year, which have been reported in excess of 30% for the last three years.

Table 12: Cash flow statement for 2010-2012 (in $ million)


ATVI has reported significant positive operating cash flow for the past three years. This is largely driven by the large net income generated during the period and again, is quite different from the operating cash flows of other companies in the sector, which tend to report more volatile operating cash flow year on year.

The cash flow from financing activities shows that the company has been using the cash generated from operations to pay out dividends and to engage in share repurchase. The company has paid out nearly $1.8 billion in the last three years in order to buyback shares.

The company had nearly $4.55 billion in cash in the September quarter end and had no debt on its capital structure.

Vivendi Exit

In 2012, ATVI’s largest owner Vivendi (OTCPK: VIVHY), which owned a majority number of shares at that time, decided that it wanted to liquidate its ownership in order to raise funds.

Vivendi had become over leveraged and was looking to convert its holding in ATVI into cash in order to repay its debts back in France. The share buyback shown in Table 12 above reflects this sale by Vivendi.

After the reducing of the Vivendi stake, the management team have ended up with nearly 25% of the stock in a transformed ownership structure. Vivendi still has nearly 12% of the outstanding shares after the buyback transaction was completed in October 2013.


Activision Blizzard, Inc (ATVI) publishes online, personal computer (PC), console, handheld, and mobile interactive entertainment products worldwide. It operates in three segments: Activision, Blizzard, and Distribution. The Activision segment develops and publishes interactive software products and content. The Blizzard segment develops, markets, and sells role-playing action and strategy PC-based computer games, as well as online subscription-based games in the massively multiplayer online role-playing game category. This segment also maintains a proprietary online-game related service,

The company recently launched newer editions of its very popular Call of Duty franchise. The release has met with significant revenue and earnings growth. The company is expected to grow revenue and earnings significantly in the coming year.


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