Slide 1: Recommendation of the Board to Reject Electronic Arts Inc.'s Tender Offer
Take-Two Interactive Software, Inc. Recommendation of the Board of Directors to Reject Electronic Arts Inc.’s Tender Offer March 2008
Slide 2: Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
2 Take-Two Interactive Software Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 TAKE-TWO’S STOCKHOLDERS SHOULD READ THE COMPANY’S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9, WHICH WAS FILED WITH THE SEC ON MARCH 26, 2008, AND ANY AMENDMENTS OR SUPPLEMENT
Slide 3: Trailers
3 Take-Two Interactive Software Trailers
Slide 4: Introduction
4 Take-Two Interactive Software Introduction • On March 13, 2008, Electronic Arts Inc. (EA) commenced an unsolicited conditional tender offer to acquire all of the outstanding shares of common stock of Take-Two • Take-Two’s Board of Directors has carefully reviewed and considered the EA offer with i
Slide 5: Board's Rationale for EA Offer Rejection
5 Take-Two Interactive Software Board’s Rationale for EA Offer Rejection • EA’s offer is inadequate and substantially undervalues the Company and its assets, particularly its unique IP, proprietary and licensed brands, and creative talent • EA’s offer is opportunistically timed to capture the value
Slide 6: The Board Will Explore All Alternatives to Maximize Value for Stockholders
6 Take-Two Interactive Software The Board Will Explore All Alternatives to Maximize Value for Stockholders • Board and management have always been and remain keenly focused on maximizing value for stockholders – Current Board and management team installed by stockholders for stockholders in March 20
Slide 7: EA's Offer Undervalues Take-Two and its Unique Owned IP
7 Take-Two Interactive Software EA’s Offer Undervalues Take-Two and its Unique Owned IP • Unique owned IP – Grand Theft Auto is the industry’s #1 franchise – Proven track record of creating new IP: Midnight Club, BioShock, Bully, Rockstar Games presents Table Tennis, Carnival, Manhunt and others • I
Slide 8: Leading Publisher Well-Positioned to Benefit from Attractive Industry Dynamics
8 Take-Two Interactive Software Leading Publisher Well-Positioned to Benefit from Attractive Industry Dynamics 1. Per Wall Street research, DFC and PWC. 2. Category includes console, PC and handheld software sales in retail. 3. Includes revenue from subscriptions and digital distribution. $0 $10 $20
Slide 9: Industry-Leading IP Portfolio: Million Unit Plus Owned Franchises
9 Take-Two Interactive Software Industry-Leading IP Portfolio: 15 Million Unit Plus Owned Franchises 1. Franchises with sequels announced for release in 2008 - 2009. Franchise Properties with Near-Term Sequel Releases Provide Significant Revenue Visibility 2009 2 1 Mafia Summer 2008 8 4 Civilization
Slide 10: Consistent Product Diversification Strategy
10 Take-Two Interactive Software Consistent Product Diversification Strategy FY 04 FY 05 FY 06 FY 07 FY 08/FY09 Continued Expansion of “Core” Franchises – GTA, Midnight Club Consistent Launches of New 1+MM-Selling IP Growing Portfolio of Successful Sports Titles New Launches New Launches
Slide 11: Leading Internal Development Capabilities Driving Increasing Diversity of Portfolio
11 Take-Two Interactive Software Leading Internal Development Capabilities Driving Increasing Diversity of Portfolio • Rockstar – Primarily internally owned and developed titles – 6 internal studios / 600 developers – Growing successful proprietary brand franchises through sequels and extensions – S
Slide 12: Rockstar GTA – #1 Selling Franchise
12 Take-Two Interactive Software Rockstar GTA – #1 Selling Franchise 8 82% 2005 4.5 81% 2006 2001 2002 2004 2008 Avg. Review Score (2): 97% 94% 95% * Units Sold (millions): 14.5 17.5 21.5 * Grew the PS2 installed base and pioneered the open world action genre to become the best independent seller of
Slide 13: Rockstar GTA – #1 Selling Franchise
13 Take-Two Interactive Software Rockstar GTA – #1 Selling Franchise • One of the most valuable and durable industry brands • GTA IV expected to be a top-selling game during sweet spot of console cycle – Retail pre-orders ahead of expectations • Future high-margin monetization opportunities from epi
Slide 14: Rockstar Take-Two Franchises – Beyond GTA
14 Take-Two Interactive Software Rockstar Take-Two Franchises – Beyond GTA • Midnight Club “street racing” series – Last release sold more than 7 million units – Franchise has sold over 12 million units – Next release scheduled for Fall 2008 • Bully was one of the best received games of 2006 – IGN a
Slide 15: Rockstar Take-Two Franchises – Beyond GTA
15 Take-Two Interactive Software Rockstar Take-Two Franchises – Beyond GTA • Max Payne – Franchise has sold over 7 million units • Manhunt – Franchise has sold 1.7 million units • Red Dead Revolver – First title sold 1.5 million units
Slide 16: 2K Take-Two Franchises – Beyond GTA
16 Take-Two Interactive Software • Internally owned and developed IP • BioShock has earned some of the highest ratings in history of video game industry – Highest rated title for Xbox 360 with rating of 96 by MetaCritic – PC title rated 95 – Received BAFTA Best Game of the Year Award – Received nume
Slide 17: 2K Sports
17 Take-Two Interactive Software 2K Sports • High-quality sports games – Generally receive higher quality ratings than competing games – “There's no question that NBA 2K8 is the No. 1 basketball game on store shelves.” – 1UP.com/EGM – Proprietary brands in tennis, boxing, football 76% 73% 78% 72% 71
Slide 18: 2K Sports Provides Significant Revenue Visibility
18 Take-Two Interactive Software 2K Sports Provides Significant Revenue Visibility 1. Franchises with sequels planned for release in 2008 - 2009. Strong Licenses and Expanding Portfolio New Product Launches • Recurring annual revenue streams • Profit opportunity in FY 2008 2.5 4 NHL 2K 5.5 6 MLB 2K
Slide 19: Value of 2K Sports
19 Take-Two Interactive Software $1,149 $1,318 $1,260 FY'07A FY'08E Midpoint $72 $134 $186 $300.00 FY'05A FY'06A FY'07A Source: 2K Sports revenue from Take-Two, for fiscal years ending October 31, 2005-2007; EA Sports revenue from 2008 EA Analyst Day presentation, for fiscal years ending March 31, 2
Slide 20: 2K Play
20 Take-Two Interactive Software 2K Play • New label leverages growing casual game market • Carnival Games: internally owned and developed – sold over 1.2 million units on Wii only • Brand being extended to DS this summer; Carnival Games: Mini-Golf coming to Wii this fall • Licensing agreement with
Slide 21: Focused Revitalization Plan
21 Take-Two Interactive Software Focused Revitalization Plan Implemented restructuring to reduce costs by $25 million annually - Savings will be derived 60% from OpEx and 40% from COGS - Savings expected to be fully realized by FYE 2008 Continue to focus on core publishing labels – Rockstar, 2K Game
Slide 22: Robust Release Schedule
22 Take-Two Interactive Software Robust Release Schedule Title Platform Release Studio Bully: Scholarship Edition Grand Theft Auto: IV GTA IV Episodic Content Midnight Club: Los Angeles Xbox 360 and Wii Xbox 360 and PS3 Xbox 360 Xbox 360 and PS3 Released Q2 2008 Q4 2008 Q4 2008 Rockstar Toronto Rock
Slide 23: Further Growth From Emerging Businesses
23 Take-Two Interactive Software Further Growth From Emerging Businesses Episodic Content Micro-Transactions Sports Example • Updated player and game stats • Customizable characters, clothing, equipment In-Game Ads Networked Gameplay Take-Two Intellectual Property
Slide 24: Potential Untapped Opportunities
24 Take-Two Interactive Software Potential Untapped Opportunities Mobile Gaming MMOG / Online Gaming Traditional Media (Film, DVD) • BioShock • Carnival Games • ~$4.3bn global mobile gaming market, 22% CAGR ’07-’11(3) • Top seller(4): Tetris (EA) grossed ~$158mm in ’07(4) Potential Take-Two Opportun
Slide 25: Significant Earnings Upside Potential
25 Take-Two Interactive Software FY 2008 estimate represents Wall Street consensus estimates, excluding stock-based compensation. Margin Drivers • $25 million of annual cost savings • Additional scale for sports business • Lower legal expenses • Major launches of high-margin, owned IP (e.g., GTA IV,
Slide 26: Strong Balance Sheet and Significant Access to Capital
26 Take-Two Interactive Software Strong Balance Sheet and Significant Access to Capital Total Assets Total Liabilities and stockholders Equity Jan-06 Jan-07 Jan-08 Cash $142.9 $138.2 $54.4 Accounts receivable 84.1 79.1 63.3 Inventory 107.4 82.2 82.5 Software development costs 84.2 97.8 157.2 Prepaid
Slide 27: EA's Offer Undervalues Take-Two Relative to its Peers & Recent M&A Transactions
27 Take-Two Interactive Software 17.8x 37.2x 28.3x 28.1x 25.6x Take-Two at EA Offer EA Activision THQ Ubisoft EA’s Offer Undervalues Take-Two Relative to its Peers & Recent M&A Transactions Peer Median 28.2x 17.8x 28.5x 33.0x 28.5x Take-Two at EA Offer Vivendi / Activision EA / VGH Holdings EA / Jam
Slide 28: EA's Offer Does Not Compensate Stockholders for Significant Synergy Value
28 Take-Two Interactive Software EA’s Offer Does Not Compensate Stockholders for Significant Synergy Value • Research analysts estimate significant potential synergies for EA, ranging from $50-$210 million • Comparable transactions support these synergy estimates: – Reported synergies in ATVI/Vivend
Slide 29: EA's Offer Does Not Compensate for Significant Synergy Value
29 Take-Two Interactive Software EA’s Offer Does Not Compensate for Significant Synergy Value $29 $21 $14 $7 11.0x $26 $19 $13 $6 10.0x $24 $17 $11 $6 9.0x $210.0 $150.0 $100.0 $50.0 Illustrative Multiple Wall Street Research Estimated Synergy Range (in $ million) Illustrative Synergy Value Per Take
Slide 30: Conclusion: Board Recommends Stockholders REJECT EA Offer
30 Take-Two Interactive Software Conclusion: Board Recommends Stockholders REJECT EA Offer TAKE-TWO IS WORTH SIGNIFICANTLY MORE THAN $26 PER SHARE • EA’s offer is inadequate and substantially undervalues the Company and its assets, particularly its unique IP, proprietary and licensed brands, and cre
Slide 31: Questions and Answers
Questions and Answers