Take-Two Interactive Annual Report 2016

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FY2016 Annual Report · Take-Two Interactive

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Generated signiﬁcant cash ﬂow and ended the ﬁscal year with nearly

in cash and short-term investments

Delivered record digitally-delivered net revenue of nearly

Generated highest
revenues ever from recurrent
consumer spending –

53% year-over-year increase

Series with at least one
ﬁve-million unit selling release;
and 50 individual multi-million
unit selling titles

of digitally-delivered net revenue
and

of total net revenue

One of the most critically-acclaimed and commercially
successful video games of all time with over

units sold-in to date

Sold-in nearly 7.5 million units to date and remains
the top-selling and top-rated NBA simulation

Employees working in game
development and 15 studios
around the world

TAKE-TWO INTERACTIVE SOFTWARE, INC. 2016 ANNUAL REPORT

Fiscal 2016 marked another year in which Take-Two delivered strong results, driven
principally by positive momentum in our core offerings. We generated record digitally-
delivered net revenue, including our highest-ever recurrent consumer spending, and
signiﬁcant cash ﬂow. Today, Take-Two is a global leader in the interactive entertainment
business, with some of the industry’s most commercially successful and critically
acclaimed series that engage and excite audiences around the world across all
relevant platforms.

OUR KEY ACHIEVEMENTS

• Grand Theft Auto V and Grand Theft Auto Online have exceeded our expectations in every quarter
since their release, and continue to expand their audience nearly three years after their initial launch.
Grand Theft Auto V remains the highest-rated title on PlayStation 4 and Xbox One, and is the “must-
have” experience for gamers, especially as the installed base of new-generation consoles continues
to grow. To date, Grand Theft Auto V has sold-in more than 65 million units worldwide. Moreover,
engagement with Grand Theft Auto Online continues to increase, with ﬁscal 2016 revenues up year-
over-year driven by Rockstar Games’ ongoing release of free content.

• We released NBA 2K16, which remains the highest-rated and top-selling NBA simulation. The title

outperformed our expectations and is poised to become our highest-selling sports game ever, with
sell-in to date of nearly 7.5 million units - up double-digits versus the same period for the prior release.
NBA 2K has beneﬁted from strong player engagement, and sales of the game’s virtual currency were
the largest contributor to recurrent consumer spending after Grand Theft Auto Online. During ﬁscal
2016, recurrent consumer spending on NBA 2K grew 64% year-over-year, driven both by online play
and the MyNBA2K companion app.

• We launched WWE 2K16, which has sold-in over 3 million units to date. Revenue from the title has
been enhanced by the success of its downloadable add-on content, including a Season Pass. During
ﬁscal 2016, we extended our long-term partnership with WWE, and look forward to many more years
of successful collaboration.

• We released XCOM 2, which was developed by the strategy game pioneers at Firaxis Games. The title

received stellar reviews, with IGN awarding it a 9.3 out of 10, PC Gamer a 94% out of 100%, and Game
Informer Magazine a 9.5 out of 10. Sales of the title have exceeded our expectations, and are higher than
the PC version of its predecessor, XCOM: Enemy Unknown, during the same period after launch.

• We launched 7 offerings for tablets and smartphones, including catalog titles such as Grand Theft Auto:
Liberty City Stories, new releases including NBA 2K16 and WWE 2K, and free-to-play apps supporting
our core releases, such as MyNBA2K16.

• We generated signiﬁcant cash ﬂow and ended the ﬁscal year with nearly $1.3 billion in cash and

short-term investments.

TAKE-TWO INTERACTIVE SOFTWARE, INC. 2016 ANNUAL REPORT

SUCCESSFUL GROWTH STRATEGY

Take-Two’s strategy is to develop the highest-quality, most compelling interactive entertainment franchises in the
business, and deliver them on every platform around the world that is relevant to our audience. Complementing
our core business with digitally-delivered offerings that drive ongoing engagement with, and recurrent consumer
spending on, our titles after their initial purchase is one of our most important long-term growth and margin
opportunities and, therefore, a key strategic priority of our organization. Recurrent consumer spending also helps to
strengthen our results between front-line releases, while prolonging consumers’ engagement with our franchises.
We now support virtually all of our new releases with innovative offerings designed to achieve this objective.

World-class creative teams: Creativity and innovation are among the core tenets of our organization, and are
integral drivers of our continued success. We have nearly 2,200 employees working in game development in 15
studios around the world – including some of the most talented visionaries in the business. The creative teams at
Rockstar Games and 2K are renowned for their consistent ability to deliver games that set new benchmarks for
excellence. Whether expanding proven franchises, launching new intellectual property or providing innovative ways
to keep consumers engaged, we have an unwavering commitment to producing the highest quality entertainment
experiences that captivate and delight audiences.

Diverse portfolio of industry-leading intellectual property: Take-Two is a ﬁnancially strong, global interactive
entertainment enterprise with numerous successful franchises encompassing a variety of genres. Our diverse
portfolio of intellectual property includes 11 series with at least one ﬁve-million unit selling release, and 50 individual,
multi-million unit selling titles. Since 2007, we have added 9 new brands to our lineup, including such hits as
BioShock, Borderlands, L.A. Noire, WWE 2K and XCOM.

Capitalizing on growth of digital distribution: During ﬁscal 2016, we continued to capitalize on our industry’s
ongoing transition towards digital distribution. We generated record digitally-delivered net revenue of $697.7 million,
which grew 53% year-over-year and accounted for 49% of our total net revenue. Recurrent consumer spending
grew to its highest level ever, and accounted for 52% of our digitally-delivered net revenue or 25% of our total net
revenue. In addition to virtual currency for Grand Theft Auto Online and NBA 2K, recurrent consumer spending was
enhanced by a variety of offerings, including downloadable add-on content led by Borderlands, WWE 2K, Sid Meier’s
Civilization and Evolve; WWE SuperCard, which has now been downloaded more than 10 million times and is our
most ﬁnancially successful, free-to-play mobile offering; and NBA 2K Online in China, which delivered record
revenues and now has over 31 million registered users. Our results also beneﬁted from strong growth in full-game
downloads, with over 20% of units for new-generation consoles and over 90% of units for PC delivered digitally.
In addition, approximately half of our catalog sales for old-generation consoles are being delivered through digital
download. Digital distribution is disproportionately beneﬁtting our catalog, as it gives consumers the opportunity
to buy older titles that no longer receive physical shelf space.

Expanding offerings for emerging platforms and developing markets: We are actively pursuing opportunities for
interactive entertainment on emerging platforms such as tablets, smartphones and virtual reality, and in developing
markets, such as China and Korea, with a highly disciplined approach. To date, our mobile releases have focused
primarily on popular catalog titles from both Rockstar Games and 2K, select front line releases and sports titles, and
companion apps that keep consumers connected with our core entertainment experiences. As mobile technology
continues to evolve, we expect to release our most groundbreaking and immersive new titles on every mobile device
that core gamers choose to embrace. We have what we believe is the best collection of owned intellectual property in
the business, and the extraordinary success of our products is breeding greater demand from consumers worldwide,
which in turn creates increased opportunities for our Company.

TAKE-TWO INTERACTIVE SOFTWARE, INC. 2016 ANNUAL REPORT

Innovative marketing and global distribution: Creating groundbreaking games is only part of our formula for
success. Our marketing teams execute well-coordinated global campaigns that leverage nearly every form of media –
from traditional to social – to turn our product launches into tent pole events. We also work in lockstep with our key
retail partners, both brick-and-mortar and online, to create promotions that drive consumer engagement at the
point of sale. Our global distribution network ensures that our products are available to consumers throughout the
world, both physically and digitally, and on all relevant platforms. In addition, the rise of video games as a spectator
sport is unquestionably an exciting trend in our industry. This year, we launched our ﬁrst eSports tournament in
support of NBA 2K16, where more than 100,000 teams competed in 2.3 million games to win $250,000 and a trip to
the NBA Finals. We view eSports as a great marketing tool and an additional way to gain exposure for our games
and expand our audience. We will continue to explore ways to leverage our properties in this growing segment of
the industry.

Sound ﬁnancial foundation: With approximately $1.3 billion in cash and short-term investments as of March 31, 2016,
Take-Two has the strongest balance sheet in the Company’s history and ample capital to pursue a variety of
investment opportunities. Our ﬁrst priority is to enhance the long-term growth and proﬁtability of our business,
both organically and potentially through acquisitions. We also have the ability to return capital to shareholders.
During ﬁscal 2016, Take-Two deployed $26.6 million to repurchase approximately 954,000 shares of our common
stock. Under our existing share repurchase authorization we can still repurchase up to approximately 9 million
shares as of March 31, 2016.

EXCITING LINEUP OF NEW RELEASES

Fiscal 2017 is poised to be another strong year for Take-Two. Our slate of new titles includes the following:

• On May 3, 2K launched Battleborn, a promising new brand from the makers of our popular Borderlands
series. The title is being supported with an array of free and paid additional content, including a Season
Pass and virtual currency, as well as the free-to-play Battleborn Tap companion app.

• On September 6, 2K will bring their smash PC hit, XCOM 2, to new-generation consoles. 2K and Firaxis

Games are excited to broaden the audience for this beloved series.

• On September 20, 2K will release NBA 2K17, which will feature Indiana Pacers All-Star shooting guard

Paul George as the game’s cover athlete and continue the series’ proud tradition of working with the
NBA’s most elite athletes. NBA 2K17 also will celebrate the basketball legacy of Kobe Bryant by featuring
the recently retired 18-time NBA All-Star on the cover of the NBA 2K17 Legend Edition. This special
edition will highlight Bryant’s career with themed memorabilia and exclusive digital content.

• On October 7, 2K will launch Maﬁa III. Currently in development at 2K’s Hangar 13 studio, Maﬁa III is

the next installment in our successful organized crime series. Set in New Bordeaux, a reimagined New
Orleans circa 1968, Maﬁa III places players in the role of gifted anti-hero Lincoln Clay, a Vietnam vet
determined to take revenge on the Italian mob for betraying and murdering his surrogate family. Maﬁa
III will take the series in a bold new direction by combining its trademark cinematic storytelling with a
dynamic open world.

• On October 11, 2K will launch WWE 2K17 and take our popular sports entertainment series to exciting
new heights. Brock Lesnar, perhaps best known for his unparalleled accomplishments in WWE, UFC®
and NCAA Division I wrestling, will be the game’s cover Superstar. We are conﬁdent that Yuke’s and
Visual Concepts will continue to innovate this series and build on its positive momentum.

TAKE-TWO INTERACTIVE SOFTWARE, INC. 2016 ANNUAL REPORT

• On October 21, 2K will release Sid Meier’s Civilization VI, the latest offering in our award-winning
turn-based strategy series that has sold-in over 34 million units worldwide. Developed by Firaxis
Games, Civilization VI will mark the 25th anniversary of the series, and provide the most detailed,
vivid and beautiful experience ever featured in a Civilization game. In this all-new title, active
research in technology and culture will unlock new potential ways to play; cities will physically expand
across the map; and world leaders will pursue their own agendas based on their historical character
traits, as players race to achieve victory.

Looking beyond the current ﬁscal year, we have a robust long-term development pipeline across both of our labels,
featuring offerings from our renowned franchises along with new intellectual properties that promise to diversify
further our industry-leading portfolio. In addition, we will continue to deliver an array of digitally-delivered offerings
designed to drive engagement with, and recurrent consumer spending on, our recent releases and upcoming titles,
including further free content updates for Grand Theft Auto Online.

OUR FUTURE

These are exciting times for both Take-Two and our industry. While interactive entertainment has been enjoyed for
decades, we are just beginning to see what can be achieved by combining technological innovation with the artistic
passion of our creative talent. We are committed to delivering the highest-quality, most engaging entertainment
experiences that captivate audiences wherever they are, and to generating returns for our shareholders over the
long term. Today, we believe Take-Two is better positioned than ever for continued success.

We’d like to thank our colleagues for delivering another strong year for our Company. To our shareholders, we want
to express our appreciation for your support.

Sincerely,

Strauss Zelnick
Chairman and Chief Executive Ofﬁcer

Karl Slatoff
K l Sl t ff
President

July 15, 2016

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K
(cid:2) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act

of 1934

For the fiscal year ended March 31, 2016

OR
(cid:3) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act

of 1934

For the transition period from

Commission file number 001-34003

TAKE-TWO INTERACTIVE SOFTWARE, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)

622 Broadway
New York, New York
(Address of principal executive offices)

51-0350842
(I.R.S. Employer
Identification No.)

10012
(Zip Code)

Registrant’s Telephone Number, Including Area Code: (646) 536-2842

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Stock, $.01 par value

Name of each exchange on which registered
NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:2) No (cid:3)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:3) No (cid:2)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes (cid:2) No (cid:3)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files). Yes (cid:2) No (cid:3)

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. (cid:2)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ and ‘‘smaller reporting company’’ in Rule 12b-2 of the
Exchange Act. (Check one):

Large accelerated filer (cid:2)

Accelerated filer (cid:3)

Non-accelerated filer (cid:3)
(Do not check if a smaller
reporting company)

Smaller reporting company (cid:3)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:3) No (cid:2)

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which
the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the Registrant’s
most recently completed second fiscal quarter was approximately $2,352,143,000.

As of May 13, 2016, there were 84,834,119 shares of the Registrant’s Common Stock outstanding, net of treasury stock.

Documents Incorporated by Reference:
Portions of the registrant’s definitive proxy statement for the 2016 Annual Meeting of Stockholders
are incorporated by reference into Part III herein.

[THIS PAGE INTENTIONALLY LEFT BLANK]

Item 1.

Business

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2.

Properties

Item 3.

Legal Proceedings

Item 4.

Mine Safety Disclosures

INDEX

PART I

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities

Item 6.

Selected Financial Data

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of
Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8.

Financial Statements and Supplementary Data

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 10. Directors, Executive Officers and Corporate Governance

Item 11.

Executive Compensation

PART III

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters

Item 13.

Certain Relationships and Related Transactions, and Director Independence

Item 14.

Principal Accounting Fees and Services

PART IV

Item 15.

Exhibits, Financial Statement Schedules

Index to Financial Statements

Signatures

PAGE

107

[THIS PAGE INTENTIONALLY LEFT BLANK]

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

The statements contained herein which are not historical facts are considered forward-looking statements under
federal securities laws and may be identified by words such as ‘‘anticipates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘expects,’’
‘‘intends,’’ ‘‘plans,’’ ‘‘potential,’’ ‘‘predicts,’’ ‘‘projects,’’ ‘‘seeks,’’ ‘‘will,’’ or words of similar meaning and
include, but are not limited to, statements regarding the outlook for the Company’s future business and financial
performance. Such forward-looking statements are based on the current beliefs of our management as well as
assumptions made by and information currently available to them, which are subject to inherent uncertainties,
risks and changes in circumstances that are difficult to predict. Actual outcomes and results may vary materially
from these forward-looking statements based on a variety of risks and uncertainties including, but not limited to,
those discussed under the heading ‘‘Risk Factors’’ included in Part I, Item 1A herein. All forward-looking
statements are qualified by these cautionary statements and speak only as of the date they are made. The
Company undertakes no obligation to update any forward-looking statement, whether as a result of new
information, future events or otherwise.

PART I

Item 1. Business

General

We are a leading developer, publisher and marketer of interactive entertainment for consumers around the
globe. We develop and publish products through our two wholly-owned labels Rockstar Games and 2K.
Our products are currently designed for console gaming systems such as the Sony Computer
Entertainment, Inc. (‘‘Sony’’) PlayStation(cid:4)4 (‘‘PS4’’) and PlayStation(cid:4)3 (‘‘PS3’’), Microsoft Corporation
(‘‘Microsoft’’) Xbox One(cid:4) (‘‘Xbox One’’) and Xbox 360(cid:4) (‘‘Xbox 360’’); and personal computers (‘‘PC’’),
including smartphones and tablets. We deliver our products through physical retail, digital download,
online platforms and cloud streaming services.

We were incorporated under the laws of the State of Delaware in 1993 and are headquartered in New
York, New York with approximately 2,933 employees globally. Our telephone number is (646) 536-2842
and our website address is www.take2games.com. We make all of our filings with the Securities and
Exchange Commission (‘‘SEC’’) available free of charge on our website under the caption ‘‘Corporate—
SEC Filings.’’ Included in these filings are our annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K and amendments to those reports, which are available as soon as
reasonably practicable after we electronically file or furnish such materials with the SEC pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

Our website and the information contained therein or connected thereto are not intended to be
incorporated into this Annual Report on Form 10-K. You may also obtain copies of our reports without
charge by writing to:

Take-Two Interactive Software, Inc.
622 Broadway
New York, NY 10012
Attn: Investor Relations

You may read and copy any document we file with the SEC at the SEC’s public reference room at
100 F Street, NE, Room 1580, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for
information on the public reference room. The SEC maintains a website that contains annual, quarterly
and current reports, proxy and information statements and other information that issuers (including the
Company) file electronically with the SEC. The SEC’s website is www.sec.gov.

Strategy

Overview. We endeavor to be the most creative, innovative and efficient company in our industry. Our
core strategy is to capitalize on the popularity of video games by developing and publishing high-quality
interactive entertainment experiences across a range of genres. We focus on building compelling
entertainment franchises by publishing a select number of titles for which we can create sequels and
incremental revenue opportunities through add-on content, microtransactions and online play. Most of our
intellectual property is internally owned and developed, which we believe best positions us financially and
competitively. We have established a portfolio of proprietary software content for the major hardware
platforms in a wide range of genres, including action, adventure, family/casual, racing, role-playing,
shooter, sports and strategy, which we distribute worldwide. We believe that our commitment to creativity
and innovation is a distinguishing strength, enabling us to differentiate our products in the marketplace by
combining advanced technology with compelling storylines and characters that provide unique gameplay
experiences for consumers. We have created, acquired or licensed a group of highly recognizable brands to
match the broad consumer demographics we serve, ranging from adults to children and game enthusiasts
to casual gamers. Another cornerstone of our strategy is to support the success of our products in the
marketplace through innovative marketing programs and global distribution on platforms and through
channels that are relevant to our target audience.

Support Label Structure to Target Distinct Market Segments. Our business consists of our wholly-owned labels
Rockstar Games and 2K. Rockstar Games is the developer and publisher of the interactive entertainment
industry’s most iconic and critically acclaimed brand, Grand Theft Auto, as well as other successful
franchises, including L.A. Noire, Max Payne, Midnight Club, and Red Dead. We expect Rockstar Games to
continue to be a leader in the action / adventure product category and create groundbreaking
entertainment by leveraging our existing franchises, as well as developing new brands. 2K publishes
high-quality, owned and licensed titles across a range of genres including shooter, action, role-playing,
strategy, sports and family/casual. 2K is the publisher of a number of critically acclaimed, multi-million unit
selling franchises including BioShock, Borderlands, Carnival Games, Evolve, Mafia, NBA 2K, Sid Meier’s
Civilization, WWE 2K and XCOM. In May 2016, 2K launched a new brand, Battleborn, which was created by
Gearbox Software, the makers of Borderlands. We expect 2K to continue to be a leader by building on its
existing brands, as well as by developing new franchises in the future.

Focus on Core Strength of Producing Select, High Quality Titles. We focus on publishing a select number of
high-quality titles based on internally-owned and developed intellectual properties. We currently own the
intellectual property rights to 20 proprietary brands. In addition, we will selectively develop titles based on
licensed properties, including sports, and also publish externally developed titles.

We use a product investment review process to evaluate potential titles for investment, to review existing
titles in development, and to assess titles after release to measure their performance in the market and the
return on our investment. We apply this process to all of our products, whether internally or externally
developed. The product investment review process includes reviews of each project at various stages of
development by our executive management team and the senior management of our publishing labels, and
includes coordination between our sales and marketing personnel before the launch of titles. This
disciplined approach to product investment is expected to enhance the competitiveness and profitability of
our titles.

We develop our products using a combination of our internal development teams and external
development resources acting under contract with us. We typically select external developers based on
their track record and expertise in developing products in the same category or genre. One developer will
generally produce the same game for multiple platforms and will also produce sequels to the original
game. We believe that selecting and using development resources in this manner allows us to leverage the
particular expertise of our internal and external development resources, which we believe increases the
quality of our products.

Leverage Emerging Technologies, Platforms and Distribution Channels, Including Digitally Delivered Content.
Interactive entertainment played online and on mobile platforms, including tablets and smartphones,
represents exciting opportunities to enhance our growth and profitability. In addition, the interactive
entertainment software industry is delivering a growing amount of content for traditional platforms
through digital download on the Internet. We provide a variety of digitally delivered products and
offerings, which typically have a higher gross margin than physically delivered products. Virtually all of our
titles that are available through retailers as packaged goods products are also available through direct
digital download on the Internet (from websites we own and third-party websites). We also aim to drive
ongoing engagement and incremental revenues from recurrent consumer spending on our titles after their
initial purchase through downloadable offerings including add-on content, microtransactions and online
play. In addition, we are publishing an expanding variety of titles for tablets and smartphones, which are
delivered to consumers through digital download via the Internet. We will continue to invest in emerging
opportunities in mobile and online gameplay, particularly for our wholly-owned franchises, as well as
downloadable content and microtransactions that enable gamers to pay to download additional content to
enhance their game playing experience.

Expand International Business. The global market for interactive entertainment continues to grow and we
seek to increase our presence internationally, particularly in Asia, Eastern Europe and Latin America. We
are continuing to execute on our growth initiatives in Asia, where our strategy is to broaden the
distribution of our existing products and expand our online gaming presence, especially in China and South
Korea. We are a direct publisher in Japan and South Korea. While we retain title to all intellectual
property, under license agreements local publishers are responsible for localization of software content,
distribution and marketing of the products in their respective local markets. We intend to continue to build
upon our licensing relationships and also continue to expand on finished goods distribution strategies to
grow our international business.

Our Businesses

Our revenue is primarily derived from the sale of internally developed software titles and software titles
developed by third-parties. Operating margins are dependent in part upon our ability to continually release
new, commercially successful software products and to manage effectively their development and
marketing costs. We have internal development studios located in Canada, China, Czech Republic, the
United Kingdom and the United States. As of March 31, 2016, we had a research and development staff of
2,179 employees with the technical capabilities to develop software titles for all major consoles, handheld
hardware platforms and PCs in multiple languages and territories.

Agreements with third-party developers generally give us exclusive publishing and marketing rights and
require us to make development payments, pay royalties based on product sales and to satisfy other
conditions. Development payments for software titles are typically recoupable against royalties otherwise
due to developers based on software sales. Our agreements with third-party developers generally provide
us with the right to monitor development efforts and to cease making development payments if specified
development milestones are not satisfied. We also regularly monitor the level of development payments in
light of the expected sales for the related titles.

We continue to engage in evolving business models such as downloadable content, online gaming and
microtransactions. We expect to continue to generate incremental revenue opportunities through add-on
content, microtransactions and online play.

Rockstar Games. Software titles published by our Rockstar Games label are primarily internally developed.
We expect Rockstar Games, our wholly-owned publisher of the Grand Theft Auto, Max Payne, Midnight
Club, Red Dead and other popular franchises, to continue to be a leader in the action / adventure product
category and to create groundbreaking entertainment by leveraging our existing titles as well as by
developing new brands. We believe that Rockstar has established a uniquely original, popular cultural

phenomenon with its Grand Theft Auto series, which is the interactive entertainment industry’s most iconic
and critically acclaimed brand and has sold-in over 240 million units. The latest installment, Grand Theft
Auto V, was released on Sony’s PS3 and Microsoft’s Xbox 360 in September 2013, on Sony’s PS4 and
Microsoft’s Xbox One in November 2014, and on PC in April 2015. Grand Theft Auto V includes access to
Grand Theft Auto Online, which initially launched in October 2013. Rockstar Games is also well known for
developing brands in other genres, including the LA Noire, Bully and Manhunt franchises. Rockstar Games
continues to expand on our established franchises by developing sequels, offering downloadable episodes,
content and virtual currency, and releasing titles for smartphones and tablets.

2K. Our 2K label has published a variety of popular entertainment properties across all key platforms and
across a range of genres including shooter, action, role-playing, strategy, sports and family/casual
entertainment. We expect 2K to continue to develop new, successful franchises in the future. 2K’s
internally owned and developed franchises include the critically acclaimed, multi-million unit selling
BioShock, Mafia, Sid Meier’s Civilization and XCOM series. 2K also publishes highly successful externally
developed franchises such as Borderlands and Evolve. In May 2016, 2K launched Battleborn, a new brand
created by Gearbox Software, the makers of Borderlands. 2K’s realistic sports simulation titles include our
flagship NBA 2K series, which continues to be the top-ranked NBA basketball video game, and the
WWE 2K professional wrestling series.

We are continuing to execute on our growth initiatives in Asia, where our strategy is to broaden the
distribution of our existing products and establish an online gaming presence, especially in China and
South Korea. 2K has secured a multi-year license from the NBA to develop an online version of our NBA
simulation game in China, Taiwan, South Korea and Southeast Asia. In October 2012, NBA 2K Online, our
free-to-play NBA simulation game, which was co-developed by 2K and Tencent, launched commercially on
the Tencent Games portal in China. In addition, in December 2015, Civilization Online, our free-to-play
massively multiplayer online game developed by South Korean-based studio XLGAMES, launched in
South Korea.

Intellectual Property

Our business is highly dependent on the creation, acquisition, licensing and protection of intellectual
property. The intellectual property rights we have created or acquired for our internally-owned portfolio of
brands include: BioShock, Bully, Carnival Games, Evolve, Grand Theft Auto, L.A. Noire, Mafia, Manhunt,
Max Payne, Midnight Club, Red Dead, Sid Meier’s Civilization, Spec Ops and XCOM. We believe that content
ownership facilitates our internal product development efforts and maximizes profit potential. We attempt
to protect our software and production techniques under copyright, patent, trademark and trade secret
laws as well as through contractual restrictions on disclosure, copying and distribution.

We also enter into content license agreements, such as those with sports leagues, players associations,
music labels and musicians. These licenses are typically limited to use of the licensed rights in products for
specific time periods. In addition, we license and include console manufacturer technology in our products
on a non-exclusive basis, which allows our games to be played on their respective hardware systems.

Manufacturing

Sony and Microsoft either manufacture or control the selection of approved manufacturers of software
products sold for use on their respective hardware platforms. We place a purchase order for the
manufacture of our products with Sony or Microsoft’s approved replicator and then send software code
and a prototype of the product to the manufacturer, together with related artwork, user instructions,
warranty information, brochures and packaging designs for approval, defect testing and manufacture.
Games are generally shipped within two to three weeks of receipt of our purchase order and all materials.

Production of PC software is performed by third-party vendors in accordance with our specifications and
includes DVD-ROM pressing, assembly of components, printing of packaging and user manuals and

shipping of finished goods. We send software code and a prototype of a title, together with related artwork,
user instructions, warranty information, brochures and packaging designs to the manufacturers. Games are
generally shipped within two weeks of receipt of our manufacturing order. Our software titles typically
carry a 90-day limited warranty.

Sales

We sell software titles both physically and digitally in the United States, Europe, Canada, Latin America
and Asia Pacific through direct relationships with large retail customers and third-party distributors. Our
top customers include, among others, GameStop Corporation, Microsoft, Sony, Steam and Wal-Mart. We
have sales operations in Australia, Canada, France, Germany, Japan, the Netherlands, New Zealand,
Singapore, South Korea, Spain, Taiwan, the United Kingdom and the United States.

We are dependent on a limited number of customers that account for a significant portion of our sales.
Sales to our five largest customers during the fiscal year ended March 31, 2016 accounted for 58.9% of our
net revenue, with Sony and Microsoft each accounting for more than 10.0% of our net revenue during the
fiscal year ended March 31, 2016.

We also distribute our titles, add-on content and microtransactions through direct digital download via the
Internet to consoles and PCs, including smartphones and tablets. We view digital distribution as an
important growth opportunity for our industry and Company; however, we expect that packaged goods and
traditional retailers will continue to be a significant channel for the sale of our products for the foreseeable
future.

Marketing

Our marketing and promotional efforts are intended to maximize consumer interest in our titles, promote
brand name recognition of our franchises, assist retailers and properly position, package and merchandise
our titles. From time to time, we also receive marketing support from hardware manufacturers in
connection with their own promotional efforts.

We market titles by:

• Implementing public relations campaigns, using print and online advertising, television, radio spots
and outdoor advertising. We believe that we label and market our products in accordance with the
applicable principles and guidelines of the Entertainment Software Rating Board, or the ESRB, an
independent self-regulatory body that assigns ratings and enforces advertising guidelines for the
interactive software industry.

• Satisfying certain shelf life and sales requirements under our agreements with hardware
manufacturers in order to qualify for Sony’s Greatest Hits Programs and Microsoft’s Platinum Hits
Program. In connection with these programs, we receive manufacturing discounts from Sony and
Microsoft.

• Stimulating continued sales by reducing the wholesale prices of our products to retailers at various
times during the life of a product. Price protection may occur at any time in a product’s life cycle,
but typically occurs three to nine months after a product’s initial launch. In certain international
markets, we also provide volume rebates to stimulate continued product sales. Price protection,
sales returns and other allowances amounted to $64.5 million, $50.1 million and $138.1 million
during the fiscal years ended March 31, 2016, 2015 and 2014, respectively.

• Employing various other marketing methods designed to promote consumer awareness, including
social media, in-store promotions and point-of-purchase displays, direct mail, co-operative
advertising, attendance at trade shows as well as product sampling through demonstration software
distributed via the Internet or the digital online services.

As of March 31, 2016, we had a sales and marketing staff of 355 people.

Product Procurement

We procure products from suppliers principally using standard purchase orders based on our assessment of
market demand. We carry inventory quantities that we believe are necessary to provide rapid response to
retailer orders. We utilize electronic data interchange with many of our customers to enhance the
efficiency of placing and shipping orders and receiving payments.

Competition

In our business, we compete with:

• Companies that range in size and cost structure from very small with limited resources to very large
with greater financial, marketing and technical personnel and other resources than ours, including
Activision Blizzard, Inc., Electronic Arts Inc. and Ubisoft Entertainment S.A.

• Sony and Microsoft for the sale of interactive entertainment software. Each of these competitors is
a large developer and marketer of software for their own platforms, and has the financial resources
to withstand significant price competition and to implement extensive advertising campaigns.

• Other software, hardware, entertainment and media for limited retail shelf space and promotional
resources. The competition is intense among an increasing number of newly introduced
entertainment software titles and hardware for adequate levels of shelf space and promotional
support.

• Other forms of entertainment such as motion pictures, television and audio, social networking,
online computer programs, mobile games and other forms of entertainment, which may be less
expensive or provide other advantages to consumers.

Competition in the entertainment software industry is based on innovation, features, playability, and
product quality; brand name recognition; compatibility with popular platforms; access to distribution
channels; price; marketing; and customer service. Our business is driven by hit titles, which require
increasing budgets for development and marketing. Competition for our titles is influenced by the timing
of competitive product releases and the similarity of such products to our titles and may result in loss of
shelf space or a reduction in sell-through of our titles at retail stores.

Trends and Factors Affecting our Business

Product Release Schedule. Our financial results are affected by the timing of our product releases and the
commercial success of those titles. Our Grand Theft Auto products in particular have historically accounted
for a substantial portion of our revenue. Grand Theft Auto products contributed 54.5% of our net revenue
for the fiscal year ended March 31, 2016. The timing of our Grand Theft Auto releases varies significantly,
which in turn may affect our financial performance on a quarterly and annual basis.

accounted for 18.5%, 18.4% and 17.6% of our gross accounts receivable as of March 31, 2015. We did not
have any additional customers that exceeded 10% of our gross accounts receivable as of March 31, 2016
and 2015. The economic environment has affected our customers in the past, and may do so in the future.
Bankruptcies or consolidations of our large retail customers could seriously hurt our business, due to
uncollectible accounts receivables and the concentration of purchasing power among the remaining large
retailers. Certain of our large customers sell used copies of our games, which may negatively affect our
business by reducing demand for new copies of our games. While the downloadable content that we now
offer for certain of our titles may serve to reduce used game sales, we expect used game sales to continue
to adversely affect our business.

Hardware Platforms. We derive most of our revenue from the sale of products made for video game
platforms manufactured by third-parties, such as Sony’s PS4 and PS3 and Microsoft’s Xbox One and
Xbox 360, which comprised 82.6% of our net revenue by product platform for the fiscal year ended
March 31, 2016. The success of our business is dependent upon the consumer acceptance of these
platforms and the continued growth in the installed base of these platforms. When new hardware
platforms are introduced, demand for software based on older platforms typically declines, which may
negatively affect our business during the market transition to the new consoles. Accordingly, our strategy is
to focus our development efforts on a select number of the highest quality titles for these platforms, while
also expanding our offerings for emerging platforms such as tablets, smartphones and online games.

Online Content and Digital Distribution. The interactive entertainment software industry is delivering a
growing amount of content through digital online delivery methods. We provide a variety of online
delivered products and offerings. Virtually all of our titles that are available through retailers as packaged
goods products are also available through direct digital download via the Internet (from websites we own
and others owned by third-parties). In addition, we aim to drive ongoing engagement and recurrent
consumer spending on our titles after their initial purchase by generating incremental revenues through
downloadable offerings, including add-on content, microtransactions and online play. We also publish an
expanding variety of titles for tablets and smartphones, which are delivered to consumers through digital
download via the Internet. Note 17 to the Consolidated Financial Statements, ‘‘Segment and Geographic
Information,’’ discloses that net revenue from digital online channels comprised 49.3% of our net revenue
by distribution channel for the fiscal year ended March 31, 2016. We expect online delivery of games and
game offerings to become an increasing part of our business over the long-term.

International Operations

International sales are a significant part of our business. For the fiscal years ended March 31, 2016, 2015
and 2014, 47.4%, 42.5% and 53.5%, respectively, of our net revenue was earned outside the United States.
We are continuing to execute on our growth initiatives in Asia, where our strategy is to broaden the
distribution of our existing products and expand our online gaming presence, especially in China and South
Korea. We are subject to risks inherent in foreign trade, including increased credit risks, tariffs and duties,
fluctuations in foreign currency exchange rates, shipping delays and international political, regulatory and
economic developments, all of which can have a significant effect on our operating results. See Notes 1 and
17 to the Consolidated Financial Statements.

Segment and Geographic Information

See Note 17 to the Consolidated Financial Statements.

Employees

As of March 31, 2016, we had 2,933 full-time employees, of which 1,302 were employed outside of the
United States. None of our employees is subject to collective bargaining agreements. We consider our
relations with employees to be satisfactory.

Item 1A. Risk Factors

Our business is subject to many risks and uncertainties, which may affect our future financial performance.
Because of the risks and uncertainties described below, as well as other factors affecting our operating results
and financial condition, past financial performance should not be considered to be a reliable indicator of future
performance and our business and financial performance could be harmed and the market value of our
securities could decline.

Risks relating to our business

We are dependent on the future success of our Grand Theft Auto products and we must continue to publish ‘‘hit’’
titles or sequels to such ‘‘hit’’ titles in order to compete successfully in our industry.

Grand Theft Auto and certain of our other titles are ‘‘hit’’ products and have historically accounted for a
substantial portion of our revenue. Grand Theft Auto products contributed 54.5% of the Company’s net
revenue for the fiscal year ended March 31, 2016 and the five best-selling franchises (including Grand Theft
Auto), which may change year over year, in the aggregate accounted for 93.7% of the Company’s net
revenue for the fiscal year ended March 31, 2016. If we fail to continue to develop and sell new
commercially successful ‘‘hit’’ titles or sequels to such ‘‘hit’’ titles or experience any delays in product
releases or disruptions following the commercial release of our ‘‘hit’’ titles or their sequels, our revenue
and profits may decrease substantially and we may incur losses. In addition, competition in our industry is
intense and a relatively small number of hit titles account for a large portion of total revenue in our
industry. Hit products offered by our competitors may take a larger share of consumer spending than we
anticipate, which could cause revenue generated from our products to fall below our expectations. If our
competitors develop more successful products or services at lower price points or based on payment
models perceived as offering better value, or if we do not continue to develop consistently high quality and
well-received products and services, our revenue and profitability may decline. In addition, both the online
and mobile games marketplaces are characterized by frequent product introductions, relatively low
barriers to entry, and new and evolving business methods, technologies and platforms for development.
Widespread consumer adoption of these new platforms for games and other technological advances in
online or mobile game offerings could negatively affect our sales of console and traditional PC products
before we have an opportunity to develop profitable businesses in such markets.

We are subject to product development risks which could result in delays and additional costs, and we must adapt to
changes in software technologies.

We depend on our internal development studios and third-party software developers to develop new
interactive entertainment software within anticipated release schedules and cost projections. The
development cycle for new titles generally ranges from 12 months for annual sports releases, to multiple
years for certain of our top-selling titles. Therefore our development costs can be substantial. If we or our
third party developers experience unanticipated development delays, financial difficulties or additional
costs, we may not be able to release titles according to our schedule and at budgeted costs. There can be no
assurance that our products will be sufficiently successful so that we can recoup these costs or make a
profit on these products.

Additionally, in order to stay competitive, our internal development studios must anticipate and adapt to
rapid technological changes affecting software development. Any inability to respond to technological
advances and implement new technologies could render our products obsolete or less marketable.

The inability of our products to achieve significant market acceptance, delays in product releases or disruptions
following the commercial release of our products may have a material adverse effect on our business, financial
condition and operating results.

New products may not achieve significant market acceptance, generate sufficient sales or be introduced in
a timely manner to permit us to recover development, manufacturing and marketing costs associated with
these products. The life cycle of a title generally involves a relatively high level of sales during the first few
months after introduction followed by a rapid decline in sales. Because sales associated with an initial
product launch generally constitute a high percentage of the total sales associated with the life of a
product, delays in product releases or disruptions following the commercial release of one or more new
products could have a material adverse effect on our business, financial condition and operating results
and cause our operating results to be materially different from our expectations.

Our business is subject to our ability to develop commercially successful products for the current video game
platforms.

We derive most of our revenue from the sale of products made for video game platforms manufactured by
third parties, such as Sony’s PS4 and PS3 and Microsoft’s Xbox One and Xbox 360, which comprised
82.6% of the Company’s net revenue by product platform for the fiscal year ended March 31, 2016. The
success of our business is subject to the continued popularity of these platforms and our ability to develop
commercially successful products for these platforms.

Connectivity issues could affect our ability to sell and provide online services for our products and could affect our
profitability.

We rely upon third-party digital delivery platforms, such as Microsoft’s Xbox Live, Sony Entertainment
Network, Steam and other third-party service providers, to provide connectivity from the consumer to our
digital products and our online services. Connectivity issues could prevent customers from accessing this
content and our ability to successfully market and sell our products could be adversely affected. In
addition, we could experience similar issues related to services we host on our internal servers. Such issues
also could affect our ability to provide online services and could have a material adverse effect on our
business, financial condition and operating results.

Our business could be adversely affected if our consumer data protection measures are not seen as adequate or there
are breaches of our security measures or unintended disclosures of our consumer data.

We are collecting and storing consumer information, including personal information. We take measures to
protect our consumer data from unauthorized access or disclosure. It is possible that our security controls
over consumer data may not prevent the improper access or disclosure of personally identifiable
information. In addition, due to the high profile nature of our products, we may draw a disproportionately
higher amount of attention and attempts to breach our security controls than companies with lower profile
products. A security breach that leads to disclosure of consumer account information (including personally
identifiable information) could harm our reputation, compel us to comply with disparate breach
notification laws in various jurisdictions and otherwise subject us to liability under laws that protect
personal data, resulting in increased costs or loss of revenue. A resulting perception that our products or
services do not adequately protect the privacy of personal information could result in a loss of current or
potential consumers and business partners. In addition, if any of our business partners experience a
security breach that leads to disclosure of consumer account information, our reputation could be harmed,
resulting in loss of revenue.

In addition, certain of our products are online enabled. The ability of our products to offer online
functionality, and our ability to offer content through a video game platform’s digital distribution channel,
is dependent upon the continued operation and security of such platform’s online network. These third

party networks, as well as our own internal systems and websites, and the security measures related thereto
may be breached as a result of third-party action, including intentional misconduct by computer hackers,
employee error, malfeasance or otherwise, and result in someone obtaining unauthorized access to our
customers’ data or our data, including our intellectual property and other confidential business
information, or our information technology systems. Because the techniques used to obtain unauthorized
access, or to sabotage systems, change frequently and generally are not recognized until launched against a
target, we may be unable to anticipate these techniques or to implement adequate preventative measures.
If an actual or perceived breach of our security occurs, we may lose business, suffer irreparable damage to
our reputation, and/or incur significant costs and expenses relating to the investigation and possible
litigation of claims relating to such event.

The laws and regulations concerning data privacy and certain other aspects of our business are continually evolving.
Failure to comply with these laws and regulations could harm our business.

We are subject to certain privacy and data protection laws, including those in the United States. Certain
aspects of our activities are subject to the E.U.-U.S. Privacy Shield and certain activities related to E.U.
customers are registered with our U.K. data controller. The U.S. Children’s Online Privacy Protection Act
also regulates the collection, use, and disclosure of personal information from children under 13 years of
age. Failure to comply with privacy laws, data protection laws, or age restrictions may increase our costs,
subject us to expensive and distracting government investigations, and result in substantial fines.

Privacy and data protection laws are rapidly changing and likely will continue to do so for the foreseeable
future, which could impact our approach to operating and marketing our games. For example, the Court of
Justice of the European Union’s recent decision to invalidate the E.U.-U.S. Safe Harbor regime that
legitimized the transfer of certain personal data from the E.U. to the U.S. was a material change to laws on
data privacy applicable to our business. The European Commission and the U.S. government have recently
agreed to a new framework for transatlantic data flows known as the ‘‘E.U.-U.S. Privacy Shield,’’ which is
intended to replace the Safe Harbor regime, but the details of how this will operate in practice and the
compliance implications for our business are not yet clear. The U.S. government, including the Federal
Trade Commission and the Department of Commerce, is continuing to review the need for greater
regulation over the collection of personal information and information about consumer behavior on the
Internet and on mobile devices, and the E.U. has proposed reforms to its existing data protection legal
framework. Various government and consumer agencies worldwide have also called for new regulation and
changes in industry practices.

Player use of our games is subject to our privacy policy, end user license agreements, and terms of service.
If we fail to comply with our posted privacy policy, EULAs, or terms of service, or if we fail to comply with
existing privacy-related or data protection laws and regulations, it could result in proceedings or litigation
against us by governmental authorities or others, which could result in fines or judgments against us,
damage our reputation, impact our financial condition and harm our business. If regulators, the media, or
consumers raise any concerns about our privacy and data protection or consumer protection practices,
even if unfounded, this could also result in fines or judgments against us, damage our reputation,
negatively impact our financial condition, and damage our business.

It is possible that a number of laws and regulations may be adopted or construed to apply to us in the
United States and elsewhere that could restrict the interactive entertainment industry, including player
privacy, advertising, taxation, content suitability, copyright, distribution and antitrust. Furthermore, the
growth and development of electronic commerce and virtual goods may prompt calls for more stringent
consumer protection laws that may impose additional burdens on companies such as ours conducting
business through digital sales. Any such changes would require us to devote legal and other resources to
address such regulation. For example, existing laws or new laws regarding the regulation of currency,
banking institutions and unclaimed property may be interpreted to cover virtual currency or virtual goods.
If that were to occur we may be required to seek licenses, authorizations or approvals from relevant

regulators, the granting of which may be dependent on us meeting certain capital and other requirements
and we may be subject to additional regulation and oversight, all of which could significantly increase our
operating costs. Changes in current laws or regulations or the imposition of new laws and regulations in the
United States or elsewhere regarding these activities may lessen the growth of the interactive
entertainment industry and impair our business, financial condition, and operating results.

Security breaches involving the source code for our products or other sensitive and proprietary information could
adversely affect our business.

We securely store the source code for our interactive entertainment software products as it is created. A
breach, whether physical, electronic or otherwise, of the systems on which such source code and other
sensitive data are stored could lead to damage or piracy of our software. In addition, certain parties with
whom we do business are given access to our sensitive and proprietary information in order to provide
services and support our team. These third parties may misappropriate our information and engage in
unauthorized use of it. If we are subject to data security breaches, we may have a loss in sales or increased
costs arising from the restoration or implementation of additional security measures which could
materially and adversely affect our business, financial condition and operating results. Any theft and/or
unauthorized use or publication of our trade secrets and other confidential business information as a result
of such an event could adversely affect our competitive position, reputation, brand, and future sales of our
products. Our business could be subject to significant disruption, and we could suffer monetary and other
losses and reputational harm, in the event of such incidents and claims.

We rely on complex information technology systems and networks to operate our business. Any significant system or
network disruption could negatively impact our business.

We rely on the efficient and uninterrupted operation of complex information technology systems and
networks, some of which are within Take-Two and some of which are managed and/or hosted by third-party
providers. All information technology systems and networks are potentially vulnerable to damage or
interruption from a variety of sources, including but not limited to cyber-attacks, malicious software,
security breach, energy blackouts, natural disasters, terrorism, war and telecommunication failures. We
may also face sophisticated attacks, referred to as advanced persistent threats, which are cyber-attacks
aimed at compromising our intellectual property and other commercially-sensitive information, such as the
source code and game assets for our software or confidential customer or employee information, which
remain undetected for prolonged periods of time. Information technology system or network failure or
security breach could negatively impact our business continuity, operations and financial results. These
risks extend to the networks and e-commerce sites of console platform providers and other partners who
sell and host our content online. We may incur additional costs to remedy the damages caused by these
disruptions or security breaches.

Our efforts to expand into new products and services may subject us to additional risks.

In recent years, we have invested in emerging opportunities in interactive entertainment played on mobile
platforms, including tablets and smartphones, and online platforms, including social networks. We have
also grown our product offerings that are available through digital download. We are actively investing to
capitalize on these trends in order to diversify our product mix, reduce our operating risks, and increase
our revenue. There are risks and uncertainties associated with these efforts, particularly in instances where
the markets are not fully developed. There is no assurance that we will be able to attract a sufficiently large
number of customers or recover costs incurred for developing and marketing these new products or
services. External factors, such as competitive alternatives and shifting market preferences, may also
impact the successful implementation of any new products or services. Failure to successfully manage these
risks in the development and implementation of new products or services could have a material adverse
effect on our business, financial condition and operating results.

We depend on our key management and product development personnel.

Our continued success will depend to a significant extent on our senior management team and our
relationship with ZelnickMedia Corporation (‘‘ZelnickMedia’’). Our Executive Chairman/Chief Executive
Officer and President are partners of ZelnickMedia. We are also highly dependent on the expertise, skills
and knowledge of certain of our Rockstar employees and other key creative personnel responsible for
content creation and development of our Grand Theft Auto titles and titles based on other brands. We may
not be able to continue to retain these personnel at current compensation levels, or at all.

The loss of the services of our executive officers, ZelnickMedia, our key Rockstar employees or other key
creative personnel could significantly harm our business. In addition, if one or more key employees were to
join a competitor or form a competing company, we may lose additional personnel, experience material
interruptions in product development, delays in bringing products to market and difficulties in our
relationships with licensors, suppliers and customers, which would significantly harm our business. Failure
to continue to attract and retain other qualified management and creative personnel could adversely affect
our business and prospects.

Declines in consumer spending and other adverse changes in the economy could have a material adverse effect on
our business, financial condition and operating results.

Most of our products involve discretionary spending on the part of consumers. We believe that consumer
spending is influenced by general economic conditions and the availability of discretionary income. This
makes our products particularly sensitive to general economic conditions and economic cycles as
consumers are generally more willing to make discretionary purchases, including purchases of products
like ours, during periods in which favorable economic conditions prevail. Adverse economic conditions
such as a prolonged U.S. or international general economic downturn, including periods of increased
inflation, unemployment levels, tax rates, interest rates, energy prices or declining consumer confidence
could also reduce consumer spending. Reduced consumer spending has and may in the future continue to
result in reduced demand for our products and may also require increased selling and promotional
expenses, which has had and may continue to have an adverse effect on our business, financial condition
and operating results. In addition, during periods of relative economic weakness, our consolidated credit
risk, reflecting our counterparty dealings with distributors, customers, capital providers and others may
increase, perhaps materially so. Furthermore, uncertainty and adverse changes in the economy could also
increase the risk of material losses on our investments, increase costs associated with developing and
publishing our products, increase the cost and availability of sources of financing, and increase our
exposure to material losses from bad debts, any of which could have a material adverse effect on our
business, financial condition and operating results. If economic conditions worsen, our business, financial
condition and operating results could be adversely affected.

Changes in our tax rates or exposure to additional tax liabilities could adversely affect our earnings and financial
condition.

We are subject to income taxes in the U.S. and in various other jurisdictions. Significant judgment is
required in determining our worldwide provision for income taxes, and in the ordinary course of business
there are many transactions and calculations where the ultimate tax determination is uncertain. We are
required to estimate future taxes. Although we currently believe our tax estimates are reasonable, the
estimate process is inherently uncertain, and such estimates are not binding on tax authorities. Further, our
effective tax rate could be adversely affected by a variety of factors, including changes in the business,
including the mix of earnings in countries with differing statutory tax rates, changes in tax elections, and
changes in applicable tax laws. Additionally, tax determinations are regularly subject to audit by tax
authorities and developments in those audits could adversely affect our income tax provision. Should the
ultimate tax liability exceed estimates, our income tax provision and net income or loss could be adversely
affected.

Historically, we recorded a valuation allowance against most of our U.S. deferred tax assets. We expect to
provide a valuation allowance on future U.S. tax benefits until we can sustain a level of profitability or until
other significant positive evidence arises that suggest that these benefits are more likely than not to be
realized. Further, our tax determinations are regularly subject to audit by tax authorities and developments
in those audits could adversely affect our income tax provision. Should our ultimate tax liability exceed our
estimates, our income tax provision and net income or loss could be materially affected.

We earn a significant amount of our operating income, and hold a significant portion of our cash, outside
the U.S. Any repatriation of funds currently held in foreign jurisdictions may result in higher effective tax
rates for the Company. In addition, there have been proposals to change U.S. tax laws that would
significantly impact how U.S. multinational corporations are taxed on foreign earnings. Although we
cannot predict whether or in what form this proposed legislation will pass, if enacted it could have a
material adverse impact on our income tax provision and financial condition.

We are also required to pay taxes other than income taxes, such as payroll, sales, use, value-added, net
worth, property and goods and services taxes, in both the U.S. and foreign jurisdictions. We are regularly
under examination by tax authorities with respect to these non-income taxes. There can be no assurance
that the outcomes from these examinations, changes in our business or changes in applicable tax rules will
not have an adverse effect on our net income or loss and financial condition.

Unclaimed property audits by governmental authorities could adversely impact our operating results.

We are subject to unclaimed property (escheat) laws which require us to turn over to certain government
authorities the property of others held by us that has been unclaimed for a specified period of time. We are
subject to audit by individual U.S. states with regard to our escheatment practices. The legislation and
regulations related to unclaimed property matters tend to be complex and subject to varying
interpretations by both government authorities and taxpayers. Although management believes that the
positions we have taken are reasonable, various taxing authorities may challenge certain of the positions
we have taken, which may also potentially result in additional liabilities for unclaimed property and
interest in excess of accrued liabilities. Our positions are reviewed as events occur such as the availability of
new information, the lapsing of applicable statutes of limitations, the measurement of additional estimated
liability based on current calculations or the rendering of relevant court decisions. An unfavorable
resolution of assessments by a governmental authority could have a material adverse effect on our financial
condition, results of operations and cash flows in future periods.

Our quarterly operating results are dependent on the release of ‘‘hit’’ titles and are highly seasonal which may cause
our quarterly operating results to fluctuate significantly.

We have experienced and may continue to experience wide fluctuations in quarterly operating results. The
release of a ‘‘hit’’ title typically leads to a high level of sales during the first few months after introduction
followed by a rapid decline in sales. In addition, the interactive entertainment industry is highly seasonal,
with sales typically higher during the fourth calendar quarter, due primarily to increased demand for games
during the holiday season. Demand for and sales of titles in our NBA 2K series are also seasonal in that
they are typically released just prior to the start of the NBA season. If a key event or sports season to which
our product release schedule is tied were to be delayed or cancelled, our sales might also suffer
disproportionately. Our failure or inability to produce ‘‘hit’’ titles or introduce products on a timely basis to
meet seasonal fluctuations in demand could adversely affect our business, financial condition and
operating results. The uncertainties associated with software development, manufacturing lead times,
production delays and the approval process for products by hardware manufacturers and other licensors
make it difficult to predict the quarter in which our products will ship and therefore may cause us to fail to
meet financial expectations.

Price protection granted to our customers and returns of our published titles by our customers may adversely affect
our operating results.

We are exposed to the risk of price protection and product returns with respect to our customers. Our
distribution arrangements with customers generally do not give them the right to return titles to us or to
cancel firm orders. However, we sometimes accept product returns from our distribution customers for
stock balancing and negotiate accommodations for customers, which include credits and returns, when
demand for specific products falls below expectations. We grant price protection and accept returns in
connection with our publishing arrangements and revenue is recognized after deducting estimated price
protection and reserves for returns. While we believe that we can reliably estimate future price protection
and returns, if price protection and return rates for our products exceed our reserves, our revenue could
decline, which could have a material adverse effect on our business, financial condition and operating
results.

Increased sales of used video game products could lower our sales.

Certain of our larger customers sell used video games, which are generally priced lower than new video
games. If our customers increase their sales of used video games, it could negatively affect our sales of new
video games and have an adverse influence on our business, financial condition and operating results.

A limited number of customers account for a significant portion of our sales. The loss of a principal customer or
other significant business relationship could seriously hurt our business.

A substantial portion of our product sales are made to a limited number of customers. Sales to our five
largest customers during the fiscal year ended March 31, 2016 accounted for 58.9% of our net revenue,
with Sony and Microsoft each accounting for more than 10.0% of our net revenue during the fiscal year
ended March 31, 2016. Our sales are made primarily pursuant to purchase orders without long-term
agreements or other commitments, and our customers may terminate their relationship with us at any time.
Certain of our customers may decline to carry products containing mature content. The loss of our
relationships with principal customers or a decline in sales to principal customers, including as a result of a
product being rated ‘‘AO’’ (age 18 and over) could materially adversely affect our business, financial
condition and operating results. In addition, if our customers are subject to pricing pressures due to
deteriorating demand for our products, competitive pressure, or otherwise, such customers may pass those
pricing pressures through to us, which could materially adversely affect our business, financial condition
and operating results.

Furthermore, our customers may also be placed into bankruptcy, become insolvent or be liquidated due to
economic downturns, global contractions of credit or for other factors. Bankruptcies or consolidations of
certain large retail customers could seriously hurt our business, including as a result of uncollectible
accounts receivable from such customers and the concentration of purchasing power among remaining
large retailers. In addition, our results of operations may be adversely affected if certain of our customers
who purchase on credit terms are no longer eligible to purchase on such terms due to their financial
distress, which may reduce the quantity of products they demand from us.

If our marketing and advertising efforts fail to resonate with consumers, our business, financial condition and
operating results could be adversely affected.

Our products are marketed worldwide through a diverse spectrum of advertising and promotional
programs such as television and online advertising, social media advertising, print advertising, retail
merchandising, website development and event sponsorship. Our ability to sell our products and services is
dependent in part on the success of these programs. If the marketing for our products and services fails to
resonate with consumers, particularly during the holiday season or other key selling periods, or if

advertising rates or other media placement costs increase, these factors could have a material adverse
influence on our business, financial condition and operating results.

The interactive entertainment software industry is highly competitive.

We compete for both licenses to properties and the sale of interactive entertainment software with Sony
and Microsoft, each of which is a large developer and marketer of software for its own platforms. We also
compete with game publishers, such as Activision Blizzard, Inc. and Electronic Arts Inc. and Ubisoft
Entertainment S.A. As our business is dependent upon our ability to develop hit titles, which require
increasing budgets for development and marketing, the availability of significant financial resources has
become a major competitive factor in developing and marketing software games. Some of our competitors
have greater financial, technical, personnel and other resources than we do and are able to finance larger
budgets for development and marketing and make higher offers to licensors and developers for
commercially desirable properties. Our titles also compete with other forms of entertainment, such as
social media and casual games, in addition to motion pictures, television and audio and video products
featuring similar themes, online computer programs and other entertainment, which may be less expensive
or provide other advantages to consumers.

A number of software publishers who compete with us have developed and commercialized or are
currently developing online games for use by consumers over the Internet. If technological advances
significantly increase the availability of online games and if consumer acceptance of online gaming grows
substantially, it could result in a decline in our platform-based software sales and negatively affect sales of
such products.

Increased competition for limited shelf space and promotional support from retailers could affect the success of our
business and require us to incur greater expenses to market our titles.

Retailers have limited shelf space and promotional resources and competition is intense among newly
introduced interactive entertainment software titles for adequate levels of shelf space and promotional
support. Competition for retail shelf space is expected to continue to increase, which may require us to
increase our marketing expenditures to maintain desirable sales levels of our titles. Competitors with more
extensive lines and more popular titles may have greater bargaining power with retailers. Accordingly, we
may not be able, or we may have to pay more than our competitors, to achieve similar levels of
promotional support and shelf space.

Our business is partly dependent on our ability to enter into successful software development arrangements with
third-parties.

Our success depends on our ability to continually identify and develop new titles on a timely basis. We rely
on third-party software developers for the development of some of our titles. Quality third-party
developers are continually in high demand. Software developers who have developed titles for us in the
past may not be available to develop software for us in the future. Due to the limited number of third-party
software developers and the limited control that we exercise over them, these developers may not be able
to complete titles for us on a timely basis or within acceptable quality standards, if at all. We have entered
into agreements with third-parties to acquire the rights to publish and distribute interactive entertainment
software as well as to use licensed intellectual properties in our titles. These agreements typically require
us to make development payments, pay royalties and satisfy other conditions. Our development payments
may not be sufficient to permit developers to develop new software successfully, which could result in
material delays and significantly increase our costs to bring particular products to market. Software
development costs, promotion and marketing expenses and royalties payable to software developers and
third-party licensors have increased significantly in recent years and reduce potential profits derived from
sales of our software. Future sales of our titles may not be sufficient to recover development payments and
advances to software developers and licensors, and we may not have adequate financial and other

resources to satisfy our contractual commitments to such developers. If we fail to satisfy our obligations
under agreements with third-party developers and licensors, the agreements may be terminated or
modified in ways that are burdensome to us, and have a material adverse effect on our business, financial
condition and operating results.

We cannot publish our titles without the approval of hardware licensors that are also our competitors.

We are required to obtain licenses from Sony and Microsoft, which are also our competitors, to develop
and publish titles for their respective hardware platforms. Our existing platform licenses require that we
obtain approval for the publication of new titles on a title-by-title basis. As a result, the number of titles we
are able to publish for these hardware platforms, our ability to manage the timing of the release of these
titles and, accordingly, our net revenue from titles for these hardware platforms, may be limited. If a
licensor chooses not to renew or extend our license agreement at the end of its current term, or if a
licensor were to terminate our license for any reason or does not approve one or more of our titles, we may
be unable to publish that title as well as additional titles for that licensor’s platform. Termination of any
such agreements or disapproval of titles could seriously hurt our business and prospects. We may be unable
to continue to enter into license agreements for certain current generation platforms on satisfactory terms
or at all. Failure to enter into any such agreement could also seriously hurt our business.

We rely on a limited number of channel partners some of whom influence the fee structures for online distribution of
our games on their platforms.

We rely on a limited number of channel partners, some of whom have retained the right to change the fee
structures for online distribution of both paid content and free content (including patches and corrections)
that we license to them for distribution on their platforms. Such channel partners’ ability to set or influence
royalty rates may increase costs, which could negatively affect our operating margins. We may be unable to
distribute our content in a cost-effective or profitable manner through such distribution channel, which
could adversely affect our business, financial condition and operating results.

Outside of fee arrangements, our agreements with our channel partners sometimes give them significant
control over other aspects of the distribution of our products and services that we develop for their
platform. If our channel partners establish terms that restrict our offerings through their channels, or
significantly impact the financial terms on which these products or services are offered to our customers,
we may be unable to distribute our product offerings through them or be forced to do so on a materially
worse financial or business terms.

We may not be able to adequately adjust our cost structure in a timely fashion in response to a sudden decrease in
demand.

In the event of a significant decline in revenue, we may not be able to dispose of facilities, reduce
personnel or make other changes to our cost structure without disruption to our operations or without
significant termination and exit costs. Management may not be able to implement such actions in a timely
manner, if at all, to offset an immediate shortfall in revenue and profit. Moreover, reducing costs may
impair our ability to produce and develop software titles at sufficient levels in the future.

The increasing importance of digital sales to our business exposes us to the risks of that business model, including
greater competition.

The proportion of our revenues derived from digital content delivery, as compared to traditional retail
sales, may continue to increase. The increased importance of digital content delivery in our industry
increases our potential competition, as the minimum capital needed to produce and publish a digitally
delivered game is significantly less than that needed to produce and publish one that is purchased through
retail distribution and is played on a game console. This will also require us to dedicate capital to

developing and implementing alternative marketing strategies, which we may not do successfully. If either
occurs, we may be unable to effectively market and distribute our products, which could materially
adversely affect our business, financial condition and operating results. In addition, a continuing shift to
digital delivery could result in a deprioritization of our products by traditional retailers. The increasing
importance of digital sales to our business could also result in increasing issues with our digital distribution
process, including difficulties our distributors have with collecting from consumers and any associated
rebates we would owe.

We use open source software in connection with certain of our games and services, which may pose particular risks
to our proprietary software, products, and services in a manner that could have a negative impact on our business.

We use open source software in connection with certain of our games and the services we offer. Some open
source software licenses require users who distribute open source software as part of their software to
publicly disclose all or part of the source code to such software or make available any derivative works of
the open source code on unfavorable terms or at no cost. The terms of various open source licenses have
not been interpreted by courts, and there is a risk that such licenses could be construed in a manner that
imposes unanticipated conditions or restrictions on our use of the open source software. Were it
determined that our use was not in compliance with a particular license, we may be required to release our
proprietary source code, pay damages for breach of contract, re-engineer our games, discontinue
distribution in the event re-engineering cannot be accomplished on a timely basis or take other remedial
action that may divert resources away from our game development efforts, any of which could harm our
business.

We depend on servers and Internet bandwidth to operate our games and digital services with online features. If we
were to lose server capacity or lack sufficient Internet bandwidth for any reason, our business could suffer.

We rely on data servers, including those owned or controlled by third parties, to enable our customers to
download our games and other downloadable content, and to operate our online games and other products
with online functionality. Events such as limited hardware failure, any broad-based catastrophic server
malfunction, a significant intrusion by hackers that circumvents security measures, or a failure of disaster
recovery services would likely interrupt the functionality of our games with online services and could result
in a loss of sales for games and related services. An extended interruption of service could materially
adversely affect our business, financial condition and operating results.

We expect a significant portion of our games to be on-line enabled in the future, and therefore we must
project our future server needs and make advance purchases of servers or server capacity to accommodate
expected business demands. If we underestimate the amount of server capacity our business requires or if
our business were to grow more quickly than expected, our consumers may experience service problems,
such as slow or interrupted gaming access. Insufficient server capacity may result in decreased sales, a loss
of our consumer base and adverse consequences to our reputation. Conversely, if we overestimate the
amount of server capacity required by our business, we may incur additional operating costs.

Because of the potential importance of our online business to our revenues and results of operations, our
ability to access adequate Internet bandwidth and online computational resources to support our business
is critical. If the price of either such resource increases, we may not be able to increase our prices or
subscriber levels to compensate for such costs, which could materially adversely affect our business,
financial condition and operating results.

We submit our products for rating by the Entertainment Software Rating Board (‘‘ESRB’’) in the United States and
other voluntary or government ratings organizations in foreign countries. Failure to obtain a target rating for
certain of our products could negatively affect our ability to distribute and sell those games, as could the re-rating of
a game for any reason.

We voluntarily submit our game products to the ESRB, a U.S.-based non-profit and independent ratings
organization. The ESRB system provides consumers with information about game content using a rating
symbol that generally suggests the appropriate player age group and specific content descriptors, such as
graphic violence, profanity or sexually explicit material. The ESRB may impose significant penalties on
game publishers for violations of its rules related to rating or marketing games, including revocation of a
rating or monetary fines. Other countries require voluntary or government backed ratings as prerequisites
for product sales. In some instances, we may have to modify our products in order to market them under
the target rating, which could delay or disrupt the release of our products. In addition, some of our titles
may not be sold at all or without extensive edits in certain countries, such as Germany.

In the United States, if the ESRB rates a game as ‘‘AO’’ (age 18 and older), platform licensors may not
certify the game and retailers may refuse to sell it. In addition, some consumers have reacted to re-ratings
or controversial game content by refusing to purchase such games, demanding refunds for games that they
had already purchased, and refraining from buying other games published by us. Many of our Rockstar
titles and certain of our 2K titles have been rated ‘‘M’’ (age 17 and older) by the ESRB. If we are unable to
obtain ‘‘M’’ ratings and instead receive ‘‘AO’’ ratings on future versions of those or similar titles as a result
of changes in the ESRB’s ratings standards or for other reasons, including the adoption of legislation in
this area, our business and prospects could be negatively affected. If any of our games are re-rated by the
ESRB or other foreign based ratings organizations, we could be exposed to litigation, administrative fines
and penalties and other potential liabilities, and our operating results and financial condition could be
significantly affected.

We have implemented processes to comply with the requirements of the ESRB and other ratings
organizations and properly display the designated rating symbols and content descriptions. Nonetheless,
these processes are subject to human error, circumvention, overriding and reasonable resource constraints.
If a video game we published were found to contain undisclosed pertinent content, the ESRB could re-rate
a game, retailers could refuse to sell it and demand that we accept the return of any unsold copies or
returns from customers, and consumers could refuse to buy it or demand that we refund their money. This
could have a material negative affect on our operating results and financial condition. In addition, we may
be exposed to litigation, administrative fines and penalties and our reputation could be harmed, which
could affect sales of other video games we sell. If any of these consequences were to occur, our business
and financial performance could be significantly harmed.

Content policies adopted by retailers, consumer opposition and litigation could negatively affect sales of our
products.

Retailers may decline to sell interactive entertainment software containing what they judge to be graphic
violence or sexually explicit material or other content that they deem inappropriate for their businesses. If
retailers decline to sell our products based upon their opinion that they contain objectionable themes,
graphic violence or sexually explicit material or other generally objectionable content, or if any of our
previously ‘‘M’’ rated series products are rated ‘‘AO,’’ we might be required to significantly change or
discontinue particular titles or series, which in the case of our best-selling Grand Theft Auto titles could
seriously affect our business. Consumer advocacy groups have opposed sales of interactive entertainment
software containing objectionable themes, violence or sexual material or other objectionable content by
pressing for legislation in these areas and by engaging in public demonstrations and media campaigns.
Additionally, although lawsuits seeking damages for injuries allegedly suffered by third-parties as a result
of video games have generally been unsuccessful in the courts, claims of this kind have been asserted
against us from time to time and may be asserted and be successful in the future.

Our results of operations or reputation may be harmed as a result of offensive consumer-created content.

We are subject to risks associated with the collaborative online features in our games which allow
consumers to post narrative comments, in real time, that are visible to other consumers. From time to time,
objectionable and offensive consumer content may be posted to a gaming or other site with online chat
features or game forums which allow consumers to post comments. We may be subject to lawsuits,
governmental regulation or restrictions, and consumer backlash (including decreased sales and harmed
reputation), as a result of consumers posting offensive content. We may also be subject to consumer
backlash from comments made in response to postings we make on social media sites such as Facebook,
YouTube and Twitter.

We are subject to risks and uncertainties of international trade, including fluctuations in the values of local foreign
currencies against the dollar.

Sales in international markets, primarily in Europe, have accounted for a significant portion of our net
revenue. For the fiscal year ended March 31, 2016, 47.4% of our net revenue was earned outside the
United States. We are continuing to execute on our growth initiatives in Asia, where our strategy is to
broaden the distribution of our existing products and expand our online gaming presence, especially in
China and South Korea. We are subject to risks inherent in foreign trade, including increased credit risks,
tariffs and duties, fluctuations in foreign currency exchange rates, shipping delays, and international
political, regulatory and economic developments, all of which can have a significant influence on our
operating results. Many of our international sales are made in local currencies, which could fluctuate
against the dollar. While we may use forward exchange contracts to a limited extent to seek to mitigate
foreign currency risk, our operating results could be adversely affected by unfavorable foreign currency
fluctuations.

We face risks from our international operations.

We are subject to certain risks because of our international operations, particularly as we continue to grow
our business and presence in Asia, Latin America and other parts of the world. Changes to and compliance
with a variety of foreign laws and regulations may increase our cost of doing business and our inability or
failure to obtain required approvals could harm our international and domestic sales. Trade legislation in
either the United States or other countries, such as a change in the current tariff structures, import/export
compliance laws or other trade laws or policies, could adversely affect our ability to sell or to distribute in
international markets. We incur additional legal compliance costs associated with our international
operations and could become subject to legal penalties in foreign countries if we do not comply with local
laws and regulations which may be substantially different from those in the United States. In many foreign
countries, particularly in those with developing economies, it may be common to engage in business
practices that are prohibited by United States laws and regulations, such as the Foreign Corrupt Practices
Act, and by local laws, such as laws prohibiting corrupt payments to government officials. Although we
implement policies and procedures designed to ensure compliance with these laws, there can be no
assurance that all of our employees, contractors and agents, as well as those companies to which we
outsource certain of our business operations, including those based in or from countries where practices
which violate such laws may be customary, will not take actions in violation of our policies. Any such
violation, even if prohibited by our policies, could have a material adverse effect on our business.

If we are unable to protect the intellectual property relating to our software, the commercial value of our products
will be adversely affected and our competitive position could be harmed.

We develop proprietary software and have obtained the rights to publish and distribute software developed
by third-parties. We attempt to protect our software and production techniques under patent, copyright,
trademark and trade secret laws as well as through contractual restrictions on disclosure, copying and
distribution. Our software is susceptible to piracy and unauthorized copying. Unauthorized third-parties

may be able to copy or to reverse engineer our software to obtain and use programming or production
techniques that we regard as proprietary. Well organized piracy operations have also proliferated in recent
years, resulting in the ability to download pirated copies of our software over the Internet. Although we
attempt to incorporate protective measures into our software, piracy of our products could negatively
affect our future profitability.

If we infringe on or are alleged to infringe on the intellectual property rights of third-parties, our business could be
adversely affected.

As our industry grows, we may be subject to an increasing amount of litigation that is common in the
software industry based on allegations of infringement or other alleged violations of patent, copyright
and/or trademarks. In addition, we believe that interactive entertainment software will increasingly become
the subject of claims that such software infringes on the intellectual property rights of others with both the
growth of online functionality and advances in technology, game content and software graphics as games
become more realistic. From time to time, we receive notices from third-parties or are named in lawsuits
by third-parties alleging infringement of their proprietary rights. Although we believe that our software
and technologies and the software and technologies of third-party developers and publishers with whom we
have contractual relations do not and will not infringe or violate proprietary rights of others, it is possible
that infringement of proprietary rights of others may occur. Any claims of infringement, with or without
merit, could be time consuming, costly and difficult to defend. Moreover, intellectual property litigation or
claims could require us to discontinue the distribution of products, obtain a license or redesign our
products, which could result in additional substantial costs and material delays.

Our software is susceptible to errors, which can harm our financial results and reputation.

The technological advancements of new hardware platforms result in the development of more complex
software products. As software products become more complex, the risk of undetected errors in new
products increases. We may need to produce and distribute patches in order to repair such errors, which
could be costly and may distract our developers from working on new products. If, despite testing, errors
are found in new products or releases after shipments have been made, we could experience a loss of or
delay in timely market acceptance, product returns, loss of revenue, increases in costs relating to the repair
of such errors and damage to our reputation.

If we acquire or invest in other businesses, intellectual properties or other assets, we may be unable to integrate them
with our business, our financial performance may be impaired and/or we may not realize the anticipated financial
and strategic goals for such transactions.

If appropriate opportunities present themselves, we may acquire or make investments in businesses,
intellectual properties and other assets that we believe are strategic. We may not be able to identify,
negotiate or finance any future acquisition or investment successfully. Even if we do succeed in acquiring
or investing in a business, intellectual property or other asset, such acquisitions and investments involve a
number of risks, including:

• retaining key employees and maintaining the key business and customer relationships of the

businesses we acquire;

• cultural challenges associated with integrating employees from an acquired company or business

into our organization;

• the possibility that the combined company would not achieve the expected benefits, including any
anticipated operating and product synergies, of the acquisition as quickly as anticipated or that the
costs of, or operational difficulties arising from, an acquisition would be greater than anticipated;

• significant acquisition-related accounting adjustments, particularly relating to an acquired
company’s deferred revenue, that may cause reported revenue and profits of the combined
company to be lower than the sum of their stand-alone revenue and profits;

• significant accounting charges resulting from the completion and integration of a sizeable
acquisition and increased capital expenditures, including potential impairment charges incurred to
write down the carrying amount of intangible assets generated as a result of an acquisition;

• the possibility that we will not discover important facts during due diligence that could have a
material adverse effect on the value of the businesses we acquire, including the possibility that a
change of control of a company we acquire triggers a termination of contractual or intellectual
property rights important to the operation of its business;

• the need to integrate an acquired company’s accounting, management information, human resource
and other administrative systems to permit effective management and timely reporting, and the
need to implement or remediate controls, procedures and policies appropriate for a public company
in an acquired company that, prior to the acquisition, lacked these controls, procedures and
policies;

• litigation or other claims in connection with, or inheritance of claims or litigation risks as a result of,
an acquisition, including claims from terminated employees, customers or other third-parties; and

• to the extent that we engage in strategic transactions outside of the United States, we face
additional risks, including risks related to integration of operations across different cultures and
languages, currency risks and the particular economic, political and regulatory risks associated with
specific countries.

Future acquisitions and investments could also involve the issuance of our equity and equity-linked
securities (potentially diluting our existing stockholders), the incurrence of debt, contingent liabilities or
amortization expenses, write-offs of goodwill, intangibles, or acquired in-process technology, or other
increased cash and non-cash expenses such as stock-based compensation. Any of the foregoing factors
could harm our financial condition or prevent us from achieving improvements in our financial condition
and operating performance that could have otherwise been achieved by us on a stand-alone basis. Our
stockholders may not have the opportunity to review, vote on or evaluate future acquisitions or
investments.

Our ability to acquire and maintain licenses to intellectual property, especially for sports titles, affects our revenue
and profitability. Competition for these licenses may make them more expensive and increase our costs.

Certain of our products are based on or incorporate intellectual property owned by others. For example,
certain of our 2K products include rights licensed from major sports leagues and players’ associations.
Similarly, some of our other titles are based on licenses of popular entertainment products. Competition
for these licenses is intense. If we are unable to maintain these licenses or obtain additional licenses on
reasonable economic terms or with significant commercial value, our revenue and profitability could
decline significantly. Competition for these licenses may also increase the advances, guarantees and
royalties that we must pay to the licensor, which could significantly increase our costs and adversely affect
our profitability. In addition, on certain intellectual property licenses, we are subject to guaranteed
minimum payments, royalties or standards of performance and may not be able to terminate these
agreements prior to their stated expiration. If such licensed products do not generate revenues in excess of
such minimum guarantees, our profitability will be adversely affected.

We are subject to contractual covenants which place certain limitations on how we manage our business.

Our Second Amended and Restated Credit Agreement (as amended, the ‘‘Credit Agreement’’) and the
indentures governing our 1.75% Convertible Notes due 2016 in November 2011 (‘‘ the 1.75% Convertible

Notes’’) and 1.00% Convertible Notes due 2018 in June 2013 (the ‘‘1.00% Convertible Notes’’ and together
with the 1.75% Convertible Notes, the ‘‘Convertible Notes’’) may limit our ability to take various actions,
including incurring additional debt, paying dividends, repurchasing shares and acquiring or disposing of
assets or businesses. In addition, we have granted a security interest in connection with certain
compensatory arrangements which limits our ability to incur senior debt in excess of certain amounts.
Accordingly, we may be restricted from taking actions that management believes would be desirable and in
the best interests of us and our stockholders. Our Credit Agreement and the indentures also require us to
satisfy specified financial and non-financial covenants. A breach of any of the covenants contained in our
Credit Agreement could result in an event of default under the agreement and under the indentures
governing our Convertible Notes and would allow our lenders and noteholders to pursue various remedies,
including accelerating the repayment of any outstanding indebtedness.

Our business and products are subject to potential legislation. The adoption of such proposed legislation could limit
the retail market for our products.

Several proposals have been made for federal legislation to regulate our industry. Such proposals seek to
prohibit the sale of products containing certain content included in some of our games. If any such
proposals are enacted into law, it may limit the potential market for some of our games in the United
States, and adversely affect our business, financial condition and operating results. Other countries, such as
Germany, have adopted laws regulating content both in packaged games and those transmitted over the
Internet that are stricter than current United States laws. In the United States, proposals have also been
made by numerous state legislators to regulate and prohibit the sale of interactive entertainment software
products containing certain types of violent or sexual content to under 17 or 18 audiences, such as the State
of California’s ‘‘ultraviolent video games law’’ that sought to ban the sale or rental of violent video games
to minors. While such legislation to date has been enjoined by industry and retail groups or been found
unconstitutional, the adoption into law of such legislation in federal and/or in state jurisdictions in which
we do significant business could severely limit the retail market for some of our games.

We may be required to record a significant charge to earnings if our goodwill becomes impaired.

We are required under U.S. generally accepted accounting principles to review our goodwill for
impairment at least annually or more frequently when events or changes in circumstances indicate the
carrying value may not be recoverable. Factors that may be considered a change in circumstances,
indicating a requirement to reevaluate whether our goodwill continues to be recoverable, include a
significant decline in stock price and market capitalization, slower growth rates in our industry or other
materially adverse events. We may be required to record a significant charge to earnings in our financial
statements during the period in which any impairment of our goodwill is determined. This may adversely
affect our operating results.

Our reported financial results could be adversely affected by the application of existing or future accounting
standards to our business as it evolves.

Our reported financial results are affected by the accounting policies promulgated by the SEC and national
accounting standards bodies and the methods, estimates, and judgments that we use in applying our
accounting policies. For example, standards regarding revenue recognition have and could further
significantly affect the way we account for revenue related to our products and services. We expect that an
increasing number of our games will be online-enabled in the future and that we could be required to
recognize the related revenues over a period of time rather than at the time of sale. Further, as we increase
our downloadable content and add new features to our online services, our estimate of the service period
may change and we could be required to recognize revenues, and defer related costs, over a shorter or
longer period of time than we initially allocated. As we enhance, expand and diversify our business and
product offerings, the application of existing or future financial accounting standards, particularly those

relating to the way we account for revenue, could have a significant adverse effect on our reported results
although not necessarily on our cash flows.

Risks relating to our common stock

For purposes of this section ‘‘Risks relating to our common stock,’’ references to ‘‘the Company,’’ ‘‘we,’’
‘‘our,’’ and ‘‘us’’ refer only to Take-Two Interactive Software, Inc. and not to its subsidiaries.

Additional issuances or sales of equity securities by us would dilute the ownership of our existing stockholders and
could adversely affect the market price of our common stock.

We may issue equity or equity-based securities (such as our Convertible Notes) in the future in connection
with acquisitions or strategic transactions, to adjust our ratio of debt to equity, including through
repayment of outstanding debt, to fund expansion of our operations or for other purposes. To the extent
we issue additional equity securities, including upon conversion of our outstanding Convertible Notes, the
percentage ownership of our existing stockholders would be reduced. The sale of substantial amounts of
our common stock could adversely affect its price. The sale or the availability for sale of a large number of
shares of our common stock in the public market could cause the price of our common stock to decline.
The issuance of shares of our common stock upon conversion of our Convertible Notes could also
adversely affect the price of our common stock.

There is no guarantee that we will do additional share repurchases in the future.

The share repurchase program authorized by the Board of Directors, which authorized the repurchase of
up to 14,217,683 shares of our common stock and had 9,046,353 shares available for repurchase as of
March 31, 2016, does not obligate the Company to make any purchases at any specific time or situation.
Discontinuing repurchases could adversely affect the price of the Company’s common stock. The program
may be suspended or discontinued at any time for any reason.

Our stock price has been volatile and may continue to fluctuate significantly.

The market price of our common stock historically has been, and we expect will continue to be, subject to
significant fluctuations. These fluctuations may be due to factors specific to us including those discussed in
the risk factors in this section as well as others not currently known to us or that we currently do not
believe are material, to changes in securities analysts’ earnings estimates or ratings, to our results or future
financial guidance falling below our expectations and analysts’ and investors’ expectations, to factors
affecting the computer, software, entertainment, media or electronics industries, or to national or
international economic conditions.

Stock markets, in general, have experienced over the years, and continue to experience significant price
and volume fluctuations that have affected market prices for companies such as ours and that may be
unrelated or disproportionate to the operating performance of the affected companies. These broad
market and industry fluctuations may adversely affect the price of our stock, regardless of our operating
performance.

Delaware law, our charter documents and provisions of our debt agreements may impede or discourage a takeover,
which could cause the market price of our shares to decline.

We are a Delaware corporation, and the anti-takeover provisions of Delaware law impose various
impediments to the ability of a third-party to acquire control of us, even if a change in control would be
beneficial to our existing stockholders. Our Board of Directors has the power, without stockholder
approval, to adopt a stockholder rights plan and/or to designate the terms of one or more series of
preferred stock and issue shares of preferred stock. In addition, we may under certain circumstances
involving a change of control, be obligated to repurchase all or a portion of our Convertible Notes and any

potential acquirer would be required to assume our obligations related to any outstanding Convertible
Notes. We or any possible acquirer may not have available financial resources necessary to repurchase
those notes. The ability of our Board of Directors to create and issue a new series of preferred stock and
certain provisions of Delaware law, our certificate of incorporation and bylaws and the indenture
governing our notes could impede a merger, takeover or other business combination involving us or
discourage a potential acquirer from making a tender offer for our common stock, which, under certain
circumstances, could reduce the market price of our common stock and the value of any outstanding notes.

Our ability to use net operating loss carryforwards to reduce future years’ taxes could be substantially limited if we
experience an ownership change as defined in the Internal Revenue Code.

Section 382 of the Internal Revenue Code contains rules that limit the ability of a company to use its net
operating loss carryforwards in years after an ownership change, which is generally defined as any change
in ownership of more than 50% of its stock over a three-year testing period. These rules generally operate
by focusing on ownership changes among stockholders owning directly or indirectly 5% or more of the
stock of a company and/or any change in ownership arising from a new issuance of stock by the company.
If, as a result of future transactions involving our common stock, including purchases or sales of stock by
5% stockholders, we undergo cumulative ownership changes which exceed 50% over the testing period,
our ability to use our net operating loss carryforwards would be subject to additional limitations under
Section 382.

Generally, if an ownership change occurs, the annual taxable income limitation on the use of net operating
loss carryforwards is equal to the product of the applicable long-term tax exempt rate and the value of the
company’s stock immediately before the ownership change. Depending on the resulting limitation, a
portion of our net operating loss carryforwards could expire before we would be able to use them.

Our inability to fully utilize our net operating losses to offset taxable income generated in the future could
have a material and negative affect on our future financial position and results of operations.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our principal executive offices are located at 622 Broadway, New York, New York in approximately 64,000
square feet of space under a lease expiring in March 2023.

Take-Two Interactive Software Europe Ltd, our wholly-owned subsidiary, leases 12,500 square feet of office
space in Windsor, United Kingdom, which expires in January 2022. Rockstar North, our wholly-owned
subsidiary, leases 72,000 square feet of office space in Edinburgh, Scotland, which expires in June 2024.

2K corporate offices and two development studios occupy approximately 110,000 square feet of leased
office space in Novato, California. The lease expires in March 2019.

In addition, our other subsidiaries lease office space in Sydney, Australia; Toronto, Canada; Chengdu,
China; Brno, Czech Republic; Paris, France; Munich, Germany; Tokyo, Japan; Seoul, South Korea; Breda,
Netherlands; Auckland, New Zealand; Singapore; Madrid, Spain; Lucerne, Switzerland; Taipei, Taiwan;
London, Lincoln, and Leeds, United Kingdom; and, in the United States, Petaluma and San Diego,
California; Sparks, Maryland; Andover and Westwood, Massachusetts; Las Vegas, Nevada; Glen Cove and
New York, New York; and Kirkland, Washington.

For information regarding our lease commitments, see Note 13 to the Consolidated Financial Statements.

Item 3. Legal Proceedings

We are, or may become, subject to demands and claims (including intellectual property claims) and are
involved in routine litigation in the ordinary course of business which we do not believe to be material to
our business or financial statements. We have appropriately accrued amounts related to certain of these
claims and legal and other proceedings. While it is reasonably possible that a loss may be incurred in excess
of the amounts accrued in our financial statements, we believe that such losses, unless otherwise disclosed,
would not be material.

On April 11, 2016, we filed a declaratory judgment action in the United States District Court for the
Southern District of New York seeking, among other things, a judicial declaration that Leslie Benzies, the
former president of one of our subsidiaries with whom we had been in ongoing discussions regarding his
separation of employment, is not entitled to any minimum allocation or financial parity with any other
person under the applicable royalty plan. We believe we will prevail in this matter, although there can be
no assurance of the outcome. On April 12, 2016, Mr. Benzies filed a complaint in the Supreme Court of
the State of New York, New York County against us, and certain of our subsidiaries and employees. We
removed this case to the United States District Court for the Southern District of New York, where our
declaratory judgment action is pending. Mr. Benzies’ complaint claims damages of at least $150.0 million
and contains allegations of breach of fiduciary duty; fraudulent inducement and fraudulent concealment;
aiding and abetting breach of fiduciary duty; breach of various contracts; breach of implied duty of good
faith and fair dealing; tortious interference with contract; unjust enrichment; reformation; constructive
trust; declaration of rights; constructive discharge; defamation and fraud. We believe that we have
meritorious defenses to these claims, and we intend to vigorously defend against them and to pursue any
counterclaims.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases

of Equity Securities

Market Information and Holders

Our common stock trades on the NASDAQ Global Select Market under the symbol ‘‘TTWO.’’ The
following table sets forth, for the periods indicated, the range of the high and low sale prices for our
common stock as reported by NASDAQ.

High

Low

Fiscal Year Ended March 31, 2016

First Quarter ended June 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter ended September 30, 2015 . . . . . . . . . . . . . . . . . .
Third Quarter ended December 31, 2015 . . . . . . . . . . . . . . . . . . .
Fourth Quarter ended March 31, 2016 . . . . . . . . . . . . . . . . . . . . .

$28.98
32.71
37.00
37.95

$23.30
25.01
27.89
31.36

Fiscal Year Ended March 31, 2015

First Quarter ended June 30, 2014 . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter ended September 30, 2014 . . . . . . . . . . . . . . . . . .
Third Quarter ended December 31, 2014 . . . . . . . . . . . . . . . . . . .
Fourth Quarter ended March 31, 2015 . . . . . . . . . . . . . . . . . . . . .

$22.47
24.28
29.10
30.80

$18.45
20.40
20.13
24.19

The number of record holders of our common stock was 63 as of May 13, 2016.

Dividend Policy

We have never declared or paid cash dividends. We currently anticipate that all future earnings will be
retained to finance the growth of our business and we do not expect to declare or pay any cash dividends in
the foreseeable future. The payment of dividends in the future is within the discretion of our Board of
Directors and will depend upon future earnings, capital requirements and other relevant factors. Our
Credit Agreement restricts the payment of dividends on our stock. See ‘‘Liquidity and Capital Resources’’
under Item 7 for additional information on our Credit Agreement.

Securities Authorized for Issuance under Equity Compensation Plans

The table setting forth this information is included in Part III—Item 12, Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters.

Stock Performance Graph

The following line graph compares, from March 31, 2011 through March 31, 2016, the cumulative total
stockholder return on our common stock with the cumulative total return on the stocks comprising the
NASDAQ Composite Index and the stocks comprising a peer group index consisting of Activision
Blizzard, Inc. and Electronic Arts Inc. The comparison assumes $100 was invested on March 31, 2011 in
our common stock and in each of the following indices and assumes reinvestment of all cash dividends, if
any, paid on such securities. We have not paid any cash dividends and, therefore, our cumulative total
return calculation is based solely upon stock price appreciation and not upon reinvestment of cash
dividends. Historical stock price is not necessarily indicative of future stock price performance.

Comparison of 5 Year Cumulative Total Return*
Among Take-Two Interactive Software, Inc., the NASDAQ Composite Index and a Peer Group
March 2016

400.00

350.00

300.00

250.00

200.00

150.00

100.00

50.00

0.00

3/31/2011

3/31/2012

3/31/2013

3/31/2014

3/31/2015

3/31/2016

Take-Two Interactive Software Inc

NASDAQ Composite Index

Peer Group
11MAY201620503004

$100 invested on March 31, 2011 in stock or index- including reinvestment of dividends.

2011

2012

2013

2014

2015

2016

March 31,

Take-Two Interactive Software, Inc.
NASDAQ Composite Index
Peer Group

$100.00
100.00
100.00

$100.13
112.31
107.10

$105.07
120.33
121.01

$142.68
156.65
178.05

$165.65
185.03
261.39

$245.09
186.06
340.56

Issuer Purchases of Equity Securities

Share Repurchase Program—In January 2013, our Board of Directors authorized the repurchase of up to
7,500,000 shares of our common stock. During the fiscal year ended March 31, 2014, we repurchased
4,217,683 shares of our common stock in the open market for $73.3 million as part of the program. In May
2015, our Board of Directors authorized the repurchase of an additional 6,717,683 shares of our common
stock pursuant to the share repurchase program. During the fiscal year ended March 31, 2016 we
repurchased 953,647 shares of our common stock in the open market for $26.6 million as part of the
program. As of March 31, 2016, we have repurchased a total of 5,171,330 shares of our common stock and
have 9,046,353 shares of our common stock that remain available for repurchase under our share
repurchase authorization. We are authorized to purchase shares from time to time through a variety of
methods, including in the open market or through privately negotiated transactions, in accordance with
applicable securities laws. Repurchases are subject to the availability of stock, prevailing market conditions,
the trading price of the stock, our financial performance and other conditions. The program does not
require us to repurchase shares and may be suspended or discontinued at any time for any reason.

During the fiscal year ended March 31, 2016, we repurchased 238,981 shares of our common stock for
$7.9 million, in connection with our obligation to holders of restricted stock awards to withhold the number
of shares required to satisfy the holders’ tax liabilities in connection with the vesting of such shares. These
238,981 shares were not part of the publicly announced share repurchase program.

Summary Table—The table below details the share repurchases that were made by us during the three
months ended March 31, 2016:

Period

Shares
purchased*

Average price
per share

Total number of shares
purchased as part of publicly
announced plans or programs

Maximum number of shares that
may yet be purchased under the
repurchase program

January 1 - 31, 2016 . .
February 1 - 29, 2016 .
March 1 - 31, 2016 . .

3,454
9,125
115,085

$34.11
$34.31
$37.67

—
—
—

9,046,353
9,046,353
9,046,353

All of the shares purchased during this period were purchased in connection with our obligation to holders of restricted stock
awards to withhold the number of shares required to satisfy the holders’ tax liabilities in connection with the vesting of such
shares. None of the shares repurchased during the three months ended March 31, 2016 were part of the publicly announced
share repurchase program.

Item 6. Selected Financial Data

The following Selected Financial Data should be read in conjunction with our Consolidated Financial
Statements and related Notes, and Management’s Discussion and Analysis of Financial Condition and
Results of Operations included elsewhere in this Annual Report on Form 10-K. (in thousands, except per
share data)

STATEMENT OF OPERATIONS DATA:
Net revenue
Gross profit
(Loss) income from operations
(Loss) income from continuing

operations

Net (loss) income

(Loss) earnings per share:
Basic:

Continuing operations
(Loss) earnings per share

Diluted:

Continuing operations
(Loss) earnings per share

BALANCE SHEET DATA:
Total assets
Long-term debt

Fiscal Year Ended March 31,

2016

2015

2014

2013

2012

$1,413,698
599,825
(10,828)

$1,082,938
288,071
(258,463)

$2,350,568
936,241
415,256

$1,214,483
498,646
5,239

$ 825,823
296,968
(84,266)

(8,302)
(8,302)

(279,470)
(279,470)

361,691
361,605

(31,162)
(29,491)

(107,700)
(108,816)

(0.10) $
(0.10)

(3.48) $
(3.48)

(0.10)
(0.10)

(3.48)
(3.48)

3.79
3.79

3.20
3.20

(0.36) $
(0.34)

(1.30)
(1.31)

(0.36)
(0.34)

(1.30)
(1.31)

2016

2015(1)

As of March 31,
2014(1)

2013(1)

2012(1)

$2,590,277
497,935

$2,228,073
473,030

$1,795,083
449,484

$1,273,221
330,584

$1,142,969
309,882

(1) We retrospectively adopted Accounting Standards Update 2015-03, ‘‘Simplifying the Presentation of Debt Issuance Costs,’’ and
as a result previously reported Total assets and Long-term debt have both decreased from previously reported amounts by
$3,027, $4,547, $4,618 and $6,458 as of March 31, 2015, 2014, 2013 and 2012, respectively. See Note 1 to the Consolidated
Financial Statements.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Our Business

We endeavor to be the most creative, innovative and efficient company in our industry. Our core strategy is
to capitalize on the popularity of video games by developing and publishing high-quality interactive
entertainment experiences across a range of genres. We focus on building compelling entertainment
franchises by publishing a select number of titles for which we can create sequels and incremental revenue
opportunities through add-on content, microtransactions and online play. Most of our intellectual property
is internally owned and developed, which we believe best positions us financially and competitively. We
have established a portfolio of proprietary software content for the major hardware platforms in a wide
range of genres, including action, adventure, family/casual, racing, role-playing, shooter, sports and
strategy, which we distribute worldwide. We believe that our commitment to creativity and innovation is a
distinguishing strength, enabling us to differentiate our products in the marketplace by combining
advanced technology with compelling storylines and characters that provide unique gameplay experiences
for consumers. We have created, acquired or licensed a group of highly recognizable brands to match the
broad consumer demographics we serve, ranging from adults to children and game enthusiasts to casual
gamers. Another cornerstone of our strategy is to support the success of our products in the marketplace
through innovative marketing programs and global distribution on platforms and through channels that are
relevant to our target audience.

Software titles published by our Rockstar Games label are primarily internally developed. We expect
Rockstar Games, our wholly-owned publisher of the Grand Theft Auto, Max Payne, Midnight Club, Red
Dead and other popular franchises, to continue to be a leader in the action / adventure product category
and to create groundbreaking entertainment by leveraging our existing titles as well as by developing new
brands. We believe that Rockstar has established a uniquely original, popular cultural phenomenon with its
Grand Theft Auto series, which is the interactive entertainment industry’s most iconic and critically
acclaimed brand and has sold-in over 240 million units. The latest installment, Grand Theft Auto V, was
released on Sony’s PS3 and Microsoft’s Xbox 360 in September 2013, on Sony’s PS4 and Microsoft’s Xbox
One in November 2014, and on PC in April 2015. Grand Theft Auto V includes access to Grand Theft Auto
Online, which initially launched in October 2013. Rockstar Games is also well known for developing brands
in other genres, including the L.A. Noire, Bully and Manhunt franchises. Rockstar Games continues to
expand on our established franchises by developing sequels, offering downloadable episodes, content and
virtual currency, and releasing titles for smartphones and tablets.

Our 2K label has published a variety of popular entertainment properties across all key platforms and
across a range of genres including shooter, action, role-playing, strategy, sports and family/casual
entertainment. We expect 2K to continue to develop new, successful franchises in the future. 2K’s
internally owned and developed franchises include the critically acclaimed, multi-million unit selling
BioShock, Mafia, Sid Meier’s Civilization and XCOM series. In May 2016, 2K launched Battleborn, a new

brand created by Gearbox Software, the makers of Borderlands. 2K also publishes successful externally
developed franchises, such as Borderlands and Evolve. 2K’s realistic sports simulation titles include our
flagship NBA 2K series, which continues to be the top-ranked NBA basketball video game, and the WWE
2K professional wrestling series.

We are continuing to execute on our growth initiatives in Asia, where our strategy is to broaden the
distribution of our existing products and expand our online gaming presence, especially in China and South
Korea. 2K has secured a multi-year license from the NBA to develop an online version of the NBA
simulation game in China, Taiwan, South Korea and Southeast Asia. In October 2012, NBA 2K Online, our
free-to-play NBA simulation game, which was co-developed by 2K and Tencent, launched commercially on
the Tencent Games portal in China. In addition, in December 2015, Civilization Online, our free-to-play
massively multiplayer online game developed by South Korean-based studio XLGAMES, launched in
South Korea.

Trends and Factors Affecting our Business

Product Release Schedule. Our financial results are affected by the timing of our product releases and the
commercial success of those titles. Our Grand Theft Auto products in particular have historically accounted
for a significant portion of our revenue. Sales of Grand Theft Auto products generated 54.5% of our net
revenue for the fiscal year ended March 31, 2016. The timing of our Grand Theft Auto product releases
may affect our financial performance on a quarterly and annual basis.

Economic Environment and Retailer Performance. We continue to monitor economic conditions that may
unfavorably affect our businesses, such as deteriorating consumer demand, pricing pressure on our
products, credit quality of our receivables, and foreign currency exchange rates. Our business is dependent
upon a limited number of customers that account for a significant portion of our revenue. Our five largest
customers accounted for 58.9%, 64.6% and 39.4% of net revenue during the fiscal years ended March 31,
2016, 2015 and 2014, respectively. As of March 31, 2016 and 2015, our five largest customers comprised
73.9% and 63.9% of our gross accounts receivable, respectively, with our significant customers (those that
individually comprised more than 10% of our gross accounts receivable balance) accounting for 64.1% and
54.5% of such balance at March 31, 2016 and 2015, respectively. We had three customers who accounted
for 35.2%, 16.8% and 12.1% of our gross accounts receivable as of March 31, 2016 and three customers
who accounted for 18.5%, 18.4% and 17.6% of our gross accounts receivable as of March 31, 2015. We did
not have any additional customers that exceeded 10% of our gross accounts receivable as of March 31,
2016 and 2015. The economic environment has affected our customers in the past, and may do so in the
future. Bankruptcies or consolidations of our large retail customers could seriously hurt our business, due
to uncollectible accounts receivables and the concentration of purchasing power among the remaining
large retailers. Certain of our large customers sell used copies of our games, which may negatively affect
our business by reducing demand for new copies of our games. While the downloadable content that we
now offer for certain of our titles may serve to reduce used game sales, we expect used game sales to
continue to adversely affect our business.

Hardware Platforms. We derive most of our revenue from the sale of products made for video game
consoles manufactured by third-parties, such as Sony’s PS4 and PS3 and Microsoft’s Xbox One and
Xbox 360, which comprised 82.6% of our net revenue by product platform for the fiscal year ended
March 31, 2016. The success of our business is dependent upon the consumer acceptance of these consoles
and continued growth in their installed base. When new hardware platforms are introduced, demand for
software used on older platforms typically declines, which may negatively affect our business during the
market transition to the new consoles. We continually monitor console hardware sales. We manage our
product delivery on each current and future platform in a manner we believe to be most effective to
maximize our revenue opportunities and achieve the desired return on our investments in product
development. Accordingly, our strategy is to focus our development efforts on a select number of the

highest quality titles for these platforms, while also expanding our offerings for emerging platforms such as
tablets, smartphones and online games.

Online Content and Digital Distribution. The interactive entertainment software industry is delivering a
growing amount of content through digital online delivery methods. We provide a variety of online
delivered products and offerings. Most of our titles that are available through retailers as packaged goods
products are also available through direct digital download (from websites we own and others owned by
third-parties). In addition, we aim to drive ongoing engagement and incremental revenue from recurrent
consumer spending on our titles after their initial purchase through downloadable offerings, including
add-on content, microtransactions and online play. We also publish an expanding variety of titles for
tablets and smartphones, which are delivered to consumers through digital download via the Internet.
Note 17 to the Consolidated Financial Statements, ‘‘Segment and Geographic Information,’’ discloses that
net revenue from digital online channels comprised 49.3% of our net revenue by distribution channel for
the fiscal year ended March 31, 2016. We expect online delivery of games and game offerings to continue
to grow and to become an increasing part of our business over the long-term.

Product Releases

We released the following key titles in fiscal year 2016:

Title

Grand Theft Auto V
WWE 2K15
NBA 2K16
WWE 2K16
XCOM 2

Product Pipeline

Publishing Label

Rockstar Games
2K
2K
2K
2K

Internal or
External
Development

Platform(s)

Date Released

Internal
Internal/External
Internal
Internal/External
Internal

PC
PC
Xbox 360, Xbox One, PS3, PS4, PC
Xbox 360, Xbox One, PS3, PS4
PC, Mac, Linux

April 14, 2015
April 28, 2015
September 29, 2015
October 27, 2015
February 5, 2016

We have announced the following key titles to date (this list does not represent all titles currently in
development):

Title

Publishing Label

Internal or
External
Development

Platform(s)

Expected Release Date

Battleborn
NBA 2K17
Mafia III
Sid Meier’s Civilization VI
WWE 2K17

2K
2K
2K
2K
2K

Fiscal 2016 Financial Summary

External
Internal
Internal
Internal

Xbox One, PS4, PC
Xbox 360, Xbox One, PS3, PS4, PC
Xbox One, PS4, PC
PC

Internal/External TBA

May 3, 2016 (released)
September 2016
October 7, 2016
October 21, 2016
October 2016

Our net revenue for fiscal year ended March 31, 2016 was led by titles from a variety of our top franchises,
primarily Grand Theft Auto, NBA 2K and WWE 2K. Our net revenue increased to $1,413.7 million, an
increase of $330.8 million or 30.5% compared to the fiscal year ended March 31, 2015.

For the fiscal year ended March 31, 2016, our net loss was $8.3 million, as compared to $279.5 million in
the prior year. Diluted loss per share for the fiscal year ended March 31, 2016 was $0.10, as compared to
$3.48 for the fiscal year ended March 31, 2015. Our operating loss for the fiscal year ended March 31, 2016
decreased compared to the fiscal year ended March 31, 2015, due primarily to higher revenues from our
Grand Theft Auto franchise and higher gross profit, due primarily to lower internal royalties as a
percentage of revenue due to the timing of when internal royalties are earned. The increase in gross profit
was partially offset by $71.3 million in business reorganization expenses.

At March 31, 2016 we had $798.7 million of cash and cash equivalents, compared to $911.1 million at
March 31, 2015. The decrease in cash and cash equivalents from March 31, 2015 was due primarily to cash
used in investing and financing activities partially offset by cash provided by operating activities. Net cash
used in investing and financing activities related to purchases of short-term investments, purchases of fixed
assets, the repurchase of common stock and net share settlements of stock-based awards, which were
slightly offset by the proceeds received from the sale and maturities of our available-for-sale securities. Net
cash provided by operations was due primarily to cash generated from the sale of Grand Theft Auto V, NBA
2K16, WWE 2K16, and virtual currency, partially offset by investments in software development and
licenses and the funding of internal royalty payments.

Critical Accounting Policies and Estimates

We have identified the policies below as critical to our business operations and the understanding of our
financial results and they require management’s most difficult, subjective or complex judgments, resulting
from the need to make estimates about the effect of matters that are inherently uncertain. The effect and
any associated risks related to these policies on our business operations is discussed throughout
Management’s Discussion and Analysis of Financial Condition and Results of Operations where such
policies affect our reported and expected financial results. For a detailed discussion on the application of
these and other accounting policies, see Note 1 to the Consolidated Financial Statements. Management
has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our
Board of Directors.

Revenue Recognition

We recognize revenue on the sales of software products upon the transfer of title and risk of loss to our
customers. Accordingly, we recognize revenue for software titles when there is (1) persuasive evidence that
an arrangement with the customer exists, which is generally based on a customer purchase order, (2) the
product is delivered, (3) the selling price is fixed or determinable and (4) collection of the customer
receivable is deemed probable. Certain products are sold to customers with a street date (i.e., the earliest
date these products may be sold by retailers). For these products we recognize revenue on the later of the
street date or the sale date. In addition, some of our software products are sold as full game digital
downloads and digital add-on content for which the consumer takes possession of the digital content for a
fee. Revenue from product downloads is generally recognized when the download is made available
(assuming all other recognition criteria are met).

In providing credit terms to our customers, our payment arrangements typically provide net 30 and 60 day
terms. Advances received for licensing and exclusivity arrangements are reported on our Consolidated
Balance Sheets as deferred revenue until we meet our performance obligations, at which point we
recognize the revenue.

customer support (‘‘PCS’’) which generally includes additional free unspecified add-on content updates,
maintenance, and online support services. For these arrangements, we evaluate the significance of the PCS
at the time each game is released based on the guidance in Accounting Standards Codification 985-605,
‘‘Software—Revenue Recognition’’ (‘‘ASC 985-605’’) to determine if the PCS rises to the level of a
separate deliverable. We monitor our initial assessments on an ongoing basis and consider any changes that
may arise. In conjunction with our evaluation, we consider such factors as the significance of the
development effort, the nature of online features, the extent of anticipated marketing focus on online
features, the significance of the online features to the consumers’ anticipated overall gameplay experience,
and the significance and length of time of our post sale obligations to consumers. Determining whether
PCS is significant for a particular game is subjective and requires management’s judgment.

When a software arrangement includes multiple elements, the arrangement consideration is allocated to
each revenue element based on its relative fair value, based on the vendor specific objective evidence
(‘‘VSOE’’) of fair value for each element. When VSOE of fair value does not exist for all of the elements
in the arrangement, ASC 985-605 requires either the use of the residual method or the deferral of revenue
until the earlier point at which VSOE of fair value exists for any undelivered element or until only one
undelivered element remains. For arrangements that require the deferral of revenue, the cost of goods sold
is deferred and recognized as the related net revenue is recognized. Deferred cost of goods sold includes
product costs and licenses. We do not have VSOE for our PCS obligations and in those arrangements
where PCS obligations have been determined to be significant we recognize revenue from the sale of
software products over the period we expect to offer the PCS to the consumer (‘‘estimated service
period’’). We also do not have VSOE for our online multi-player functionality; however it is generally
delivered at the same time with the full game software. Determining the estimated service period is
subjective and requires management’s judgment, therefore, the estimated service period may change in the
future. The estimated service periods of our current games, with online functionality and related PCS, are
generally twelve to thirty-six months.

When our software products provide insignificant PCS at no additional cost to the consumer, we recognize
revenue when the four primary revenue recognition criteria described above have been met for all other
deliverables in the arrangement and, in those situations, we estimate and accrue the future costs of
providing those services. When software products provide PCS determined to be significant and as we are
unable to establish VSOE for that deliverable, we defer all of the software-related revenues and the
related cost of goods sold and recognize the software-related revenues and the related cost of goods sold
ratably over the estimated service period of the title (assuming all other recognition criteria are met).

Certain of our games provide consumers with the option to purchase virtual currency to use in the game to
acquire virtual goods. We currently recognize revenue from the sale of virtual currency, using the
game-based model, ratably over the estimated remaining life of the game.

As part of our on-going assessment of estimated service periods during the three months ended March 31,
2016, we changed Grand Theft Auto V’s estimated service period from 24 to 36 months. The change in
estimate resulted in a decrease in net revenues of $40.2 million and income from operations of
$35.8 million to our fiscal 2016 financial results. We expect this change in estimated service period to have
a material impact to our fiscal 2017 and fiscal 2018 financial results.

Revenue is recognized after deducting estimated price protection, reserves for returns and other
allowances. In circumstances when we do not have a reliable basis to estimate price protection, returns and
other allowances or are unable to determine that collection of a receivable is probable, we defer the
revenue until such time as we can reliably estimate any related returns and allowances and determine that
collection of the receivable is probable.

Price protection and Allowances for Returns

We grant price protection and accept returns in connection with our publishing arrangements. Following
reductions in the price of our products, we grant price protection to permit customers to take credits
against amounts they owe us with respect to merchandise unsold by them. Our customers must satisfy
certain conditions to entitle them to receive price protection or return products, including compliance with
applicable payment terms and confirmation of field inventory levels.

Generally our distribution arrangements with customers do not give them the right to return titles or to
cancel firm orders. However, we occasionally accept returns from our customers for stock balancing and
make accommodations to customers, which include credits and returns, when demand for specific titles
falls below expectations.

We make estimates of future price protection and product returns related to current period product
revenue. We estimate the amount of future price protection and returns for published titles based upon,
among other factors, historical experience and performance of the titles in similar genres, historical
performance of the hardware platform, customer inventory levels, analysis of sell-through rates, sales force
and retail customer feedback, industry pricing, market conditions and changes in demand and acceptance
of our products by consumers.

Significant management judgments and estimates must be made and used in connection with establishing
price protection and the allowance for returns in any accounting period. We believe we can make reliable
estimates of price protection and returns. However, actual results may differ from initial estimates as a
result of changes in circumstances, market conditions and assumptions. Adjustments to estimates are
recorded in the period in which they become known.

Software Development Costs and Licenses

Capitalized software development costs include direct costs incurred for internally developed titles and
payments made to third-party software developers under development agreements.

We capitalize internal software development costs (including stock-based compensation, specifically
identifiable employee payroll expense and incentive compensation costs related to the completion and
release of titles), third-party production and other content costs, subsequent to establishing technological
feasibility of a software title. Technological feasibility of a product includes the completion of both
technical design documentation and game design documentation. Significant management judgments and
estimates are utilized in the assessment of when technological feasibility is established. For products where
proven technology exists, this may occur early in the development cycle. Technological feasibility is
evaluated on a product by product basis.

We enter into agreements with third-party developers that require us to make payments for game
development and production services. In exchange for our payments, we receive the exclusive publishing
and distribution rights to the finished game title as well as, in some cases, the underlying intellectual
property rights. Such agreements typically allow us to fully recover these payments to the developers at an
agreed upon royalty rate earned on the subsequent sales of such software, net of any agreed upon costs.
Prior to establishing technological feasibility of a product we record any costs incurred by third-party
developers as research and development expenses. Subsequent to establishing technological feasibility of a
product we capitalize all development and production service payments to third-party developers as
software development costs and licenses. We typically enter into agreements with third-party developers
after completing the technical design documentation for our products and therefore record the design
costs leading up to a signed development contract as research and development expense. When we
contract with third-party developers, we generally select those that have proven technology and experience
in the genre of the software being developed, which often allows for the establishment of technological
feasibility early in the development cycle. In instances where the documentation of the design and
technology are not in place prior to an executed contract, we monitor the software development process
and require our third-party developers to adhere to the same technological feasibility standards that apply
to our internally developed products.

Licenses consist of payments and guarantees made to holders of intellectual property rights for use of their
trademarks, copyrights or other intellectual property rights in the development of our products.
Agreements with license holders generally provide for guaranteed minimum payments for use of their
intellectual property. Certain licenses, especially those related to our sports products, extend over
multi-year periods and encompass multiple game titles. In addition to guaranteed minimum payments,
these licenses frequently contain provisions that could require us to pay royalties to the license holder
based on pre-agreed unit sales thresholds.

Amortization of capitalized software development costs and licenses commences when a product is
released and is recorded on a title-by-title basis in cost of goods sold. For capitalized software development
costs, amortization is calculated using (1) the proportion of current year revenues to the total revenues
expected to be recorded over the life of the title or (2) the straight-line method over the remaining
estimated useful life of the title, whichever is greater. For capitalized licenses, amortization is calculated as
a ratio of (1) current period revenues to the total revenues expected to be recorded over the remaining life
of the title or (2) the contractual royalty rate based on actual net product sales as defined in the licensing
agreement, whichever is greater.

We evaluate the future recoverability of capitalized software development costs and licenses on a quarterly
basis. Recoverability is primarily assessed based on the actual title’s performance. For products that are
scheduled to be released in the future, recoverability is evaluated based on the expected performance of
the specific products to which the cost or license relates. We utilize a number of criteria in evaluating
expected product performance, including: historical performance of comparable products developed with
comparable technology; market performance of comparable titles; orders for the product prior to its
release; general market conditions; and, past performance of the franchise. When we determine that the
value of the title is unlikely to be recovered by product sales, capitalized costs are charged to cost of goods
sold in the period in which such determination is made.

We have profit and unit sales based internal royalty programs that allow selected employees to each
participate in the success of software titles that they assist in developing. Royalties earned under this
program are recorded as a component of cost of goods sold in the period earned.

Fair Value Estimates

The preparation of financial statements in conformity with U.S. GAAP often requires us to determine the
fair value of a particular item to fairly present our Consolidated Financial Statements. Without an
independent market or another representative transaction, determining the fair value of a particular item
requires us to make several assumptions that are inherently difficult to predict and can have a material
influence on the conclusion of the appropriate accounting.

Various valuation techniques are used to estimate fair value. These include (1) the market approach where
market transactions for identical or comparable assets or liabilities are used to determine the fair value,
(2) the income approach, which uses valuation techniques to convert future amounts (for example, future
cash flows or future earnings) to a single present amount, and (3) the cost approach, which is based on the
amount that would be required to replace an asset. For many of our fair value estimates, including our
estimates of the fair value of acquired intangible assets, we use the income approach. Using the income
approach requires the use of financial models, which require us to make various estimates including, but

not limited to (1) the potential future cash flows for the asset, liability or equity instrument being
measured, (2) the timing of receipt or payment of those future cash flows, (3) the time value of money
associated with the delayed receipt or payment of such cash flows, and (4) the inherent risk associated with
the cash flows (risk premium). Developing these cash flow estimates is inherently difficult and subjective,
and, if any of the estimates used to determine the fair value using the income approach turn out to be
inaccurate, our financial results may be negatively affected. Furthermore, relatively small changes in many
of these estimates can have a significant influence on the estimated fair value resulting from the financial
models or the related accounting conclusion reached. For example, a relatively small change in the
estimated fair value of an asset may change a conclusion as to whether an asset is impaired. While we are
required to make certain fair value assessments associated with the accounting for several types of
transactions, the following areas are the most sensitive to the assessments:

• Business Combinations—Goodwill and Intangible Assets. We must estimate the fair value of assets
acquired and liabilities assumed in a business combination. Our assessment of the estimated fair
value of each of these can have a material effect on our reported results as intangible assets are
amortized over various lives. Goodwill represents the excess of purchase price over the fair value of
the net tangible assets and intangible assets acquired in a business combination. A change in the
estimated fair value of an acquired asset or liability assumed often has a direct influence on the
amount recognized as goodwill, which is an asset that is not amortized. Often determining the fair
value of these acquired assets and liabilities assumed requires an assessment of expected use of the
asset, the expected cost to extinguish the liability or our expectations related to the timing and the
successful completion of development of an acquired in-process technology. Such estimates are
inherently difficult and subjective and can have a material influence on our financial statements.

We use either the income, cost or market approach to aid in our conclusions of such fair values and
asset lives. The income approach presumes that the value of an asset can be estimated by the net
economic benefit to be received over the life of the asset, discounted to present value. The cost
approach presumes that an investor would pay no more for an asset than its replacement or
reproduction cost. The market approach estimates value based on what other participants in the
market have paid for reasonably similar assets. Although each valuation approach is considered in
valuing the assets acquired, the approach ultimately selected is based on the characteristics of the
asset and the availability of information.

We test our goodwill for impairment annually, in our second fiscal quarter, or more frequently if
events and circumstances indicate the fair value of a reporting unit may be below its carrying
amount. A reporting unit is defined as an operating segment or one level below an operating
segment. We have determined that we operate in one reporting unit which is our operating
segment. The determination of whether or not goodwill has become impaired involves a significant
level of judgment in the assumptions underlying the approach used to determine the value of our
reporting units. Changes in our strategy and/or market conditions could significantly affect these
judgments and require reductions to recorded intangible asset balances. We have the option to first
perform a qualitative assessment to determine if the fair value of its reporting unit is more likely
than not (i.e., a likelihood of more than 50%) less than its carrying value before performing the
two-step impairment test. If the two-step impairment test for goodwill is utilized, step one compares
the fair value of the reporting unit to its carrying value. If the carrying value exceeds the fair value,
there is a potential impairment and step two must be performed. Step two compares the carrying
value of the reporting unit’s goodwill to its implied fair value (i.e., fair value of reporting unit less
the fair value of the unit’s assets and liabilities, including identifiable intangible assets). If the
implied fair value of goodwill is less than the carrying amount of goodwill, an impairment is
recognized. Based on our annual impairment assessment process for goodwill, no impairments were
recorded during the fiscal year ended March 31, 2016 or 2015.

• Long-lived assets. We review long-lived assets for impairment whenever events or changes in
circumstances indicate that the related carrying amount of an asset or asset group may not be
recoverable. Determining whether impairment has occurred typically requires various estimates and
assumptions, including determining which cash flows are directly related to the potentially impaired
asset, the useful life over which cash flows will occur, their amount and the asset’s residual value, if
any. In turn, measurement of an impairment loss requires a determination of fair value, which is
based on the best information available. We use internal discounted cash flow estimates, quoted
market prices when available and independent appraisals, as appropriate, to determine fair value.
We derive the required cash flow estimates from our historical experience and our internal business
plans and apply an appropriate discount rate. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset with future undiscounted cash flows
expected to be generated from the use and eventual disposition of the asset. If the carrying amount
of an asset exceeds its estimated future undiscounted cash flows, an impairment charge is
recognized for the amount by which the carrying amount of the asset exceeds the fair value of the
asset.

• Inventory Obsolescence. We regularly review inventory quantities on-hand and in the retail channels
and record an inventory provision for excess or obsolete inventory based on the future expected
demand for our products. Significant changes in demand for our products would affect
management’s estimates in establishing our inventory provision. We write down inventory based on
excess or obsolete inventories determined primarily by future anticipated demand for our products.
Inventory write-downs are measured as the difference between the cost of the inventory and net
realizable value, based upon assumptions about future demand that are inherently difficult to
assess.

Stock-based Compensation

We account for stock-based awards under the fair value method of accounting. The fair value of all stock-
based compensation is either capitalized and amortized in accordance with our software development cost
accounting policy or recognized as expense on a straight-line basis over the full vesting period of the
awards.

We estimate the fair value of time-based awards to employees using our closing stock price on the date of
grant. We estimate the fair value of market-based awards using a Monte Carlo Simulation method which
takes into account assumptions such as the expected volatility of our common stock, the risk-free interest
rate based on the contractual term of the award, expected dividend yield, vesting schedule and the
probability that the market conditions of the awards will be achieved.

We apply variable accounting to our non-employee stock-based awards, whereby we remeasure the value
of such awards at each balance sheet date and adjust the value of the awards based on its fair value at the
end of the reporting period. For non-employee time-based awards fair value is determined by the closing
price of our common stock at the end of the reporting period. For non-employee market-based awards fair
value is determined using a Monte Carlo Simulation method which takes into account assumptions such as
the expected volatility of our common stock, the risk-free interest rate based on the contractual term of the
award, expected dividend yield, vesting schedule and the probability that the market conditions of the
awards will be achieved. For non-employee performance-based awards we do not record an expense until a
performance target(s) have been achieved and once achieved fair value is determined by the closing price
of our common stock at the end of the reporting period.

We issue time and performance based restricted stock units to certain employees, which currently can only
be settled in cash. These awards are accounted for as liability awards and we apply variable accounting to
these awards, whereby we remeasure the value of such awards at each balance sheet date and adjust the
value of the awards based on the closing price of our common stock at the end of the reporting period.

Changes in the value of the awards from period to period are recorded as stock-based compensation
expense over the vesting period.

See Note 15 to the Consolidated Financial Statements for a full discussion of our stock-based
compensation arrangements.

Income Taxes

We record a tax provision for the anticipated tax consequences of the reported results of operations. The
provision for income taxes is computed using the asset and liability method, under which deferred income
taxes are recognized for differences between the financial statement and tax bases of assets and liabilities
at currently enacted statutory tax rates for the years in which the differences are expected to reverse. The
effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the
enactment.

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than
not to be realized. Our history of pre-tax losses represents sufficient evidence for us to determine that the
establishment of a valuation allowance against the deferred tax asset is appropriate. This valuation
allowance offsets deferred tax assets associated with future tax deductions as well as carryforward items.

Our future effective tax rates could be adversely affected by earnings being lower than anticipated in
countries where we have lower statutory rates, changes in the valuation of our deferred tax assets or
liabilities, or changes in tax laws or interpretations thereof. In addition, our filed tax returns are subject to
examination by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood
of adverse outcomes resulting from these examinations to determine the adequacy of our provision for
income taxes.

Recently Issued Accounting Pronouncements

Accounting for Stock Compensation

In March 2016, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards Update
identifies areas for
(‘‘ASU’’) 2016-09, Compensation—Stock Compensation. This new guidance
simplification involving several aspects of accounting for share-based payment transactions, including the
income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross
stock compensation expense with actual forfeitures recognized as they occur, as well as certain
classifications on the statement of cash flows. This update is effective for annual periods beginning after
December 15, 2016 (April 1, 2017 for the Company) and interim periods within those annual periods.
Early adoption is not permitted. We are currently evaluating the impact of adopting this update on our
Consolidated Financial Statements.

Accounting for Leases

In February 2016, the FASB issued ASU 2016-02, ‘‘Leases.’’ This new guidance requires lessees to
recognize a right-of-use asset and a lease liability for virtually all leases (other than leases that meet the
definition of a short-term lease). The liability will be equal to the present value of lease payments. The
asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income
statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating
or finance. Operating leases will result in straight-line expense (similar to current operating leases) while
finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification
will be based on criteria that are largely similar to those applied in current lease accounting. This update is
effective for annual periods, and interim periods within those years, beginning after December 15, 2018
(April 1, 2019 for the Company). This new guidance must be adopted using a modified retrospective
approach whereby, lessees and lessors are required to recognize and measure leases at the beginning of the

earliest period presented using a modified retrospective approach. Early adoption is permitted. We are
currently evaluating the impact of adopting this update on our Consolidated Financial Statements.

Classification of Deferred Taxes

In November 2015, the FASB issued ASU 2015-17, ‘‘Balance Sheet Classification of Deferred Taxes.’’ This
new guidance simplifies the balance sheet classification of deferred taxes by requiring all deferred taxes to
be presented as noncurrent assets or liabilities. This update can be applied either retrospectively or
prospectively and is effective for annual periods, and interim periods within those years, beginning after
December 15, 2016 (April 1, 2017 for the Company). Early adoption is permitted. We adopted
ASU 2015-17 prospectively during the fourth quarter of fiscal 2016, therefore, prior periods have not been
restated to conform to current presentation. The adoption of ASU 2015-17 did not have a material effect
on our Consolidated Financial Statements.

Presentation of Debt Issuance Costs

In April 2015, the FASB issued ASU 2015-03, ‘‘Simplifying the Presentation of Debt Issuance Costs’’
(‘‘AUS 2015-03’’).This new guidance requires the presentation of debt issuance costs in the balance sheet
as a deduction from the carrying amount of the related debt liability. This update will be applied
retrospectively and is effective for annual periods, and interim periods within those years, beginning after
December 15, 2015 (April 1, 2016 for the Company). Early adoption is permitted.

We adopted ASU 2015-03 during the third quarter of fiscal 2016, and it did not have a material effect on
our Consolidated Financial Statements.

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (‘‘ASU 2014-09’’), as
a new Topic, Accounting Standards Codification Topic 606. The new revenue recognition standard provides
a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is
that a company should recognize revenue to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services. In March 2016, the FASB amended ASU 2014-09 by issuing ASU 2016-08, Revenue
from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus
Net) which clarifies the implementation guidance on principal versus agent considerations included in
ASU 2014-09. The guidance includes indicators to assist an entity in determining whether it controls a
specified good or service before it is transferred to the customers. In April 2016, the FASB issued
ASU 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and
Licensing which clarifies the implementation guidance on licensing and identifying performance
obligations. This guidance can be adopted retrospectively to each period presented or as a cumulative-
effect adjustment as of the date of adoption. In July 2015, the FASB voted to defer the effective date by
one year to annual and interim years beginning after December 15, 2017 (April 1, 2018 for the Company).
Early adoption is permitted, but no earlier than the original effective date of annual and interim periods
beginning after December 15, 2016 (April 1, 2017 for the Company). We are currently determining the
implementation approach and evaluating the impact of adopting these updates on our Consolidated
Financial Statements.

Results of Operations

The following table sets forth, for the periods indicated, our statements of operations, net revenue by
geographic region, net revenue by platform and net revenue by distribution channel:

Net revenue
Cost of goods sold

Gross profit

Selling and marketing
General and administrative
Research and development
Business reorganization
Depreciation and amortization

Total operating expenses

(Loss) income from operations
Interest and other, net
Gain on long-term investments, net
Loss on extinguishment of debt
Gain on convertible note hedge and warrants, net

(Loss) income before income taxes
(Benefit from) provision for income taxes

(Loss) income from continuing operations
Loss from discontinued operations, net of taxes

Fiscal Year Ended March 31,

2016

2015

2014

$1,413,698
813,873

100.0% $1,082,938
57.6%
794,867

100.0% $2,350,568
73.4% 1,414,327

100.0%
60.2%

599,825

198,309
192,452
119,807
71,285
28,800

610,653

(10,828)
(30,205)
2,683
—
—

(38,350)
(30,048)

(8,302)
—

42.4%

14.0%
13.6%
8.5%
5.1%
2.0%

43.2%

288,071

26.6% 936,241

39.8%

235,341
175,093
115,043
—
21,057

21.7% 240,996
16.2% 161,374
10.6% 105,256
—
13,359

—
2.0%

10.2%
6.9%
4.5%
—
0.6%

546,534

50.5% 520,985

22.2%

(0.8)% (258,463)
(2.1)%
(31,893)
0.2%
17,476
—
—
—
—

(23.9)% 415,256
(2.9)% (33,553)
—
1.6%
(9,014)
—
3,461
—

(2.7)% (272,880)
(2.1)%
6,590

(25.2)% 376,150
14,459

0.6%

17.7%
(1.4)%
—
(0.4)%
0.1%

16.0%
0.6%

(0.6)% (279,470)
—

—

(25.8)% 361,691
(86)

—

15.4%
(0.0)%

Net (loss) income

(8,302)

(0.6)% $ (279,470)

(25.8)% $ 361,605

15.4%

Net revenue by geographic region:

United States
International

Net revenue by platform:

Console
PC and other

Net revenue by distribution channel:

Physical retail and other
Digital online

Fiscal Year Ended March 31,

2016

2015

2014

$ 742,963
670,735

52.6% $623,080
47.4% 459,858

57.5% $1,093,918
42.5% 1,256,650

46.5%
53.5%

1,167,623
246,075

82.6% 881,516
17.4% 201,422

81.4% 2,148,494
18.6% 202,074

91.4%
8.6%

716,040
697,658

50.7% 627,639
49.3% 455,299

58.0% 1,978,598
42.0% 371,970

84.2%
15.8%

Fiscal Years ended March 31, 2016 and 2015

(thousands of dollars)

Net revenue

Internal royalties
Software development costs and

royalties(1)
Product costs
Licenses

Cost of goods sold

Gross profit

2016

% of net
revenue

2015

% of net
revenue

Increase/
(decrease)

% Increase/
(decrease)

$1,413,698
328,610

100.0% $1,082,938
23.2%
306,717

100.0% $330,760
28.3% 21,893

30.5%
7.1%

223,512
200,206
61,545

813,873

15.8%
14.2%
4.4%

57.6%

231,615
178,810
77,725

794,867

21.4% (8,103)
16.5% 21,396
7.2% (16,180)

(3.5)%
12.0%
(20.8)%

73.4% 19,006

2.4%

$ 599,825

42.4% $ 288,071

26.6% $311,754

108.2%

(1)

Includes $15,323 and $17,121 of stock-based compensation expense in 2016 and 2015, respectively.

For the fiscal year ended March 31, 2016, net revenue increased by $330.8 million, as compared to the
prior year. This increase was due primarily to an increase of $467.7 million in revenue from our Grand
Theft Auto franchise, due principally to higher revenue from the console versions of Grand Theft Auto V
and Grand Theft Auto Online, and the release of Grand Theft Auto V and Grand Theft Auto Online for PC in
April 2015. Also contributing to the increase was higher revenue from Evolve. These increases were
partially offset by lower revenues from the Borderlands franchise, as the prior fiscal year benefitted from
the release of Borderlands: The Pre-Sequel and lower revenues from our NBA 2K franchise, due to the
deferral of revenues from NBA 2K16.

Net revenue from console games increased by $286.1 million, and accounted for 82.6% of our total net
revenue in the fiscal year ended March 31, 2016, as compared to 81.4% in the prior year, due primarily to
higher revenue from the console versions of Grand Theft Auto V and Grand Theft Auto Online. Net revenue
from PC and other increased by $44.7 million, as compared to the prior year, and decreased as a
percentage of revenue to 17.4% compared to 18.6% in the prior year. The increase in net revenue from PC
was due primarily to higher revenue from the PC versions of Grand Theft Auto V and Grand Theft Auto
Online, partially offset by lower revenue from Sid Meier’s Civilization: Beyond Earth, which was released for
PC in the prior year.

For the fiscal year ended March 31, 2016, net revenue from physical retail and other channels increased by
$88.4 million, as compared to the prior year, and decreased as a percentage of total net revenue to 50.7%,
compared to 58.0% in the prior year. The increase in net revenue from physical retail and other channels
was due primarily to higher revenues from Grand Theft Auto V. Net revenue from digital online channels
increased by $242.4 million and accounted for 49.3% of our total net revenue in the fiscal year ended
March 31, 2016, as compared to 42.0% in the prior year, driven by increased recurrent consumer spending
and full game digital downloads of Grand Theft Auto V. Recurrent consumer spending (including add-on
content, microtransactions and online play) increased to 51.8% of net revenue from digital online channels
in the fiscal year ended March 31, 2016, as compared to 49.4% of net revenue from digital online channels
in the prior year, due primarily to revenue related to virtual currency for Grand Theft Auto Online and our
NBA 2K franchise.

Gross profit as a percentage of net revenue for the fiscal year ended March 31, 2016 was 42.4%, as
compared to 26.6% in the prior year. The increase was due primarily to (1) lower internal royalties as a
percentage of revenue due to the timing of when internal royalties are earned, (2) lower software
development costs and royalties as a percentage of net revenues due primarily to the sales mix and a higher
percentage of revenues from catalog titles, which typically have lower capitalized software costs, and
(3) lower product costs as a percentage of net revenues due primarily to an increase in the proportion of
net revenues from digital online channels.

Net revenue earned outside of the United States accounted for 47.4% of our total net revenue in the fiscal
year ended March 31, 2016, as compared to 42.5% in the prior year, due to an increase in Grand Theft Auto
V sales outside of the United States. Changes in foreign currency exchange rates decreased net revenue
and gross profit by $29.5 million and $18.6 million, respectively, in the fiscal year ended March 31, 2016 as
compared to the prior year.

Operating Expenses

(thousands of dollars)

Selling and marketing
General and administrative
Research and development
Business reorganization
Depreciation and amortization

2016

$198,309
192,452
119,807
71,285
28,800

% of net
revenue

2015

% of net
revenue

Increase/
(decrease)

% Increase/
(decrease)

14.0% $235,341
13.6% 175,093
8.5% 115,043
5.1%
—
2.0%
21,057

21.7% $(37,032)
16.2% 17,359
10.6%
4,764
71,285
—
7,743
2.0%

(15.7)%
9.9%
4.1%
100.0%
36.8%

Total operating expenses(1)

$610,653

43.2% $546,534

50.5% $ 64,119

11.7%

(1)

Includes stock-based compensation expense, which was allocated as follows (in thousands):

Selling and marketing
General and administrative
Research and development

2016

$ 9,425
$40,322
$ 4,926

2015

$ 8,798
$33,636
$ 5,691

Foreign currency exchange rates decreased total operating expenses by $13.0 million in the fiscal year
ended March 31, 2016 as compared to the prior year.

Selling and marketing

Selling and marketing expenses decreased by $37.0 million in the fiscal year ended March 31, 2016 as
compared to the prior year, due primarily to $38.6 million in lower advertising expenses. Advertising
expenses were higher in the prior year due primarily to the releases of Evolve, Grand Theft Auto V for PS4
and Xbox One, and Borderlands: The Pre-Sequel, offset in part by expenses for the releases of Battleborn
and XCOM 2, and higher expenses for the NBA 2K series. Also contributing to the decrease was
$5.3 million in lower performance based compensation at our labels. Partially offsetting the decrease to
selling and marketing expenses was $8.3 million in higher third party customer service costs to support our
growing online titles.

General and administrative

General and administrative expenses increased by $17.4 million for the fiscal year ended March 31, 2016,
as compared to the prior year, due to (1) a $6.7 million increase in stock-based compensation expense,
which was due primarily to this year’s grants of employee restricted stock units having a higher fair value
on the grant date, (2) a $4.9 million increase in personnel costs, due primarily to higher headcount, and
(3) a $3.1 million increase in third party legal and tax consulting fees.

General and administrative expenses for the fiscal years ended March 31, 2016 and 2015 include occupancy
expense (primarily rent, utilities and office expenses) of $17.2 million and $17.9 million, respectively,
related to our development studios.

Research and development

Research and development expenses increased by $4.8 million for the fiscal year ended March 31, 2016, as
compared to the prior year, due primarily to $8.7 million in higher production expenses for new titles in
development that have not reached technological feasibility, and $3.1 million in lower government grants

recognized at certain of our development studios. This increase was partially offset by higher payroll
capitalization at our development studios due to upcoming product releases.

Business Reorganization

During the fiscal year ended March 31, 2016, we incurred Business reorganization expenses of
$71.3 million due primarily to employee separation costs in connection with reorganizing one development
studio and closing two development studios. Through March 31, 2016 we have paid $5.0 million related to
these reorganization activities and $66.3 million remains accrued for in Accrued expenses and other
current liabilities. See Note 20 to the Consolidated Financial Statements.

Depreciation and amortization

Depreciation and amortization expenses increased by $7.7 million for the fiscal year ended March 31, 2016,
as compared to the prior year, due primarily to higher purchases of fixed assets for information technology
infrastructure and studio build-outs.

Interest and other, net

(thousands of dollars)

Interest income (expense), net
Foreign exchange loss
Other

2016

$(29,239)
(1,407)
441

% of net
revenue

2015

% of net
revenue

(Increase)/ % Increase/
(decrease)
decrease

(2.0)% $(29,901)
(0.1)%
(2,068)
0.0%
76

(2.7)% $ 662
661
(0.2)%
365
0.0%

(2.2)%
(32.0)%
480.3%

(5.3)%

Interest and other, net

$(30,205)

(2.1)% $(31,893)

(2.9)% $1,688

Interest and other, net was an expense of $30.2 million for the fiscal year ended March 31, 2016, as
compared to an expense of $31.9 million for the fiscal year ended March 31, 2015. The change of
$1.7 million in interest and other, net was due primarily to $2.0 million in increased interest income, due
primarily to higher short-term investment balances and lower foreign currency exchange losses of
$0.7 million, which was partially offset by $1.4 million in higher interest expense related to the amortization
of the discount related to our Convertible Notes.

Gain on long-term investments, net

We recognized a $2.7 million and a $17.5 million net gain on long-term investments for the fiscal years
ended March 31, 2016 and 2015, respectively. The net gain in both years was primarily comprised of the
sale of our investment in Twitch Interactive, Inc.’s (‘‘Twitch’’) Class C Preferred stock, which was accounted
for under the cost method of accounting.

(Benefit from) provision for income taxes

Income tax benefit was $30.0 million for the fiscal year ended March 31, 2016 as compared to income tax
expense of $6.6 million for the fiscal year ended March 31, 2015. The increase in income tax benefit was
primarily attributable to the Company becoming eligible to claim certain tax deductions on applicable
video games in the United Kingdom, which was recognized during fiscal 2016. Our effective tax rate
differed from the federal statutory rate due primarily to the benefit recognized from the tax incentive
relating to a prior period and the current period, changes in valuation allowances related to tax loss and tax
credit carryforwards anticipated to be utilized and the mix of earnings. Our valuation allowances increased
by $37.1 million during the fiscal year ended March 31, 2016 and increased by $92.7 million during the
fiscal year ended March 31, 2015 due to changes in net operating loss and tax credit carryforwards.

As of March 31, 2016, we had gross unrecognized tax benefits, including interest and penalties, of
$56.0 million, of which $41.3 million would affect our effective tax rate if recognized. For the fiscal year
ended March 31, 2016, gross unrecognized tax benefits increased by $13.3 million.

We generally are no longer subject to audit for U.S. federal income tax returns for periods prior to our
fiscal year ended March 31, 2012 and state income tax returns for periods prior to the fiscal year ended
March 31, 2011. With few exceptions, we are no longer subject to income tax examinations in non-U.S.
jurisdictions for years prior to the fiscal year ended March 31, 2011. Certain U.S. state taxing authorities
are currently examining our income tax returns from the fiscal years ended March 31, 2011 through
March 31, 2013. The determination as to further adjustments to our gross unrecognized tax benefits during
the next 12 months is not practicable.

Net loss and loss per share

For the fiscal year ended March 31, 2016, our net loss was $8.3 million, as compared to $279.5 million in
the prior year. Basic and diluted loss per share for the fiscal year ended March 31, 2016 was $0.10, as
compared to $3.48 for the fiscal year ended March 31, 2015. Basic and diluted weighted average shares
outstanding were higher compared to the prior fiscal year due primarily to the vesting of 4.2 million shares
for stock-based awards, which was partially offset by the repurchase of 1.0 million shares during the fiscal
year ended March 31, 2016. See Notes 1 and 12 to the Consolidated Financial Statements for additional
information regarding (loss) earnings per share.

Fiscal Years Ended March 31, 2015 and 2014

(thousands of dollars)

Net revenue

Software development costs

and royalties(1)

Product costs
Licenses
Internal royalties

Cost of goods sold

Gross profit

2015

% of net
revenue

2014

% of net
revenue

Increase/
(decrease)

% Increase/
(decrease)

$1,082,938

100.0% $2,350,568

100.0% $(1,267,630)

(53.9)%

231,615
178,810
77,725
306,717

794,867

21.4%
16.5%
7.2%
28.3%

333,450
477,861
64,412
538,604

14.2% (101,835)
20.3% (299,051)
13,313
22.9% (231,887)

2.8%

(30.5)%
(62.6)%
20.7%
(43.1)%

73.4% 1,414,327

60.2% (619,460)

(43.8)%

$ 288,071

26.6% $ 936,241

39.8% $ (648,170)

(69.2)%

(1)

Includes $17,121and $30,124 of stock-based compensation expense in 2015 and 2014, respectively.

Net revenue decreased $1,267.6 million for the fiscal year ended March 31, 2015 as compared to the prior
year. This decrease was due primarily to a decrease of $1,315.3 million in sales from our Grand Theft Auto
franchise, as the prior year’s results included the release of Grand Theft Auto V on Sony’s PS3 and
Microsoft’s Xbox 360 console gaming systems, which was partially offset this year by the November 2014
release of Grand Theft Auto V on Sony’s PS4 and Microsoft’s Xbox One console gaming systems and the
growth from Grand Theft Auto Online. The decrease in net revenue from Grand Theft Auto was partially
offset by a $186.3 million increase in net sales due to the October 2014 release of Borderlands: The
Pre-Sequel, higher sales from our WWE 2K franchise, the release of Sid Meier’s Civilization: Beyond Earth in
October 2014, higher sales from our NBA 2K franchise and sales from our release of Evolve in February
2015.

Net revenue on consoles decreased to 81.4% of our total net revenue for the fiscal year ended March 31,
2015 as compared to 91.4% for the same period in the prior year primarily because last year’s results
included the release of Grand Theft Auto V on Microsoft’s Xbox 360 and Sony’s PS3 console gaming
systems. PC and other sales increased to 18.6% of our total net revenue for the year ended March 31, 2015
as compared to 8.6% for the year ended March 31, 2014, due primarily to the release of Sid Meier’s
Civilization: Beyond Earth for the PC in October 2014. Net revenue from physical retail and other channels
decreased to 58.0% of our total net revenue for the fiscal year ended March 31, 2015 as compared to
84.2% for the same period in the prior year due primarily to last year’s net revenue from physical retail
benefitting from the release of Grand Theft Auto V on Sony’s PS3 and Microsoft’s Xbox 360 console
gaming systems. Net revenue from digital online channels increased to 42.0% of our total net revenue for
the fiscal year ended March 31, 2015 as compared to 15.8% in the prior fiscal year. Recurrent consumer
spending (including add-on content, microtransactions and online play) represented 51.8% and 40.4% of
net revenue from digital online channels for the fiscal years ended March 31, 2015 and 2014, respectively.

Gross profit as a percentage of net revenue was 26.6% for the fiscal year ended March 31, 2015, a decrease
of 13.2 percentage points as compared to the prior year, due primarily to higher software development
costs and royalties as a percentage of net revenue and the deferral of net revenue and cost of goods sold
related to sell-in of certain titles during the second half of our fiscal year 2015. In addition, internal
royalties were higher as a percentage of net revenues due to the timing of when internal royalties are
earned.

Net revenue earned outside of the United States accounted for 42.5% of our total net revenue for the
fiscal year ended March 31, 2015, as compared to 53.5% in the prior year. The year-over-year percentage
decrease was due primarily to Grand Theft Auto V, which generated higher sales outside of the United
States during the fiscal year ended March 31, 2014. Foreign currency exchange rates decreased net revenue
by $14.4 million and decreased gross profit by $8.2 million for the fiscal year ended March 31, 2015.

Operating Expenses

(thousands of dollars)

Selling and marketing
General and administrative
Research and development
Depreciation and amortization

2015

$235,341
175,093
115,043
21,057

% of net
revenue

2014

% of net
revenue

Increase/
(decrease)

21.7% $240,996
16.2% 161,374
10.6% 105,256
2.0%
13,359

10.2% $ (5,655)
6.9% 13,719
9,787
4.5%
7,698
0.6%

Total operating expenses(1)

$546,534

50.5% $520,985

22.2% $25,549

%
Increase/
(decrease)

(2.3)%
8.5%
9.3%
57.6%

4.9%

(1)

Includes stock-based compensation expense, which was allocated as follows (in thousands):

Selling and marketing
General and administrative
Research and development

2015

$ 8,798
$33,636
$ 5,691

2014

$10,136
$28,991
$ 8,867

Foreign currency exchange rates decreased total operating expenses by $4.3 million in the fiscal year ended
March 31, 2015 as compared to the prior year.

Selling and marketing

Selling and marketing expenses decreased by $5.7 million for the fiscal year ended March 31, 2015, as
compared to the prior year, due primarily to $20.7 million in higher advertising expenses incurred in the
prior year for the releases of Grand Theft Auto V on Sony’s PS3 and Microsoft’s Xbox 360 gaming consoles
in September 2013, and The Bureau: XCOM: Declassified in August 2013, which were partially offset by

advertising expenses incurred in the current year for the releases of Grand Theft Auto V on Sony’s PS4 and
Microsoft’s Xbox One gaming consoles in November 2014, and Borderlands: The Pre-Sequel and Sid Meier’s
Civilization: Beyond Earth in October 2014. Partially offsetting the overall decrease in selling and marketing
expenses was $8.2 million in higher customer service costs and $6.0 million of higher incentive
compensation based on label performance.

General and administrative

General and administrative expenses increased $13.7 million for the fiscal year ended March 31, 2015, as
compared to the prior year due primarily to $9.0 million of higher expense related to our compensation of
ZelnickMedia which was predominantly stock based compensation expense resulting from our relative
stock price performance during fiscal year 2015 as well as $2.6 million of higher rent expense.

General and administrative expenses for the fiscal years ended March 31, 2015 and 2014 include occupancy
expense (primarily rent, utilities and office expenses) of $17.9 million and $16.4 million, respectively,
related to our development studios.

Research and development

Research and development expenses increased $9.8 million for the fiscal year ended March 31, 2015, as
compared to the prior year due primarily to an increase of $3.9 million in IT spend on equipment at our
development studios, higher personnel costs of $1.4 million, higher studio support costs of $1.4 million and
higher occupancy related costs of $1.3 million.

Depreciation and amortization

Depreciation and amortization expenses increased $7.7 million for the fiscal year ended March 31, 2015, as
compared to the prior year, due primarily to higher purchases of fixed assets for studio build-outs and
information technology infrastructure.

Interest and other, net

(thousands of dollars)

Interest income (expense), net
Foreign exchange loss
Other

2015

$(29,901)
(2,068)
76

% of net
revenue

2014

% of net
revenue

(Increase)/ % Increase/
(decrease)
decrease

(2.7)% $(33,961)
(0.2)%
209
0.0%
199

(1.4)% $ 4,060
0.0% (2,277)
(123)
0.0%

(12.0)%
(1089.5)%
(61.8)%

Interest and other, net

$(31,893)

(2.9)% $(33,553)

(1.4)% $ 1,660

(4.9)%

Interest and other, net was an expense of $31.9 million for the fiscal year ended March 31, 2015, as
compared to an expense of $33.6 million for the fiscal year ended March 31, 2014. The decrease of
$1.7 million in interest and other, net was primarily related to a net decrease of $4.1 million in interest
expense due primarily to the redemption of our 4.375% Convertible Notes in August 2013, partially offset
by interest on the 1.00% Convertible Notes issued in June 2013. This decrease was partially offset by an
increase of $2.3 million due to greater foreign currency exchange losses recorded during the fiscal year
ended March 31, 2015.

Gain on long-term investments, net

During the fiscal year ended March 31, 2015 we recognized a $17.5 million net gain on long-term
investments, which was primarily comprised of the sale of our investment in Twitch Class C Preferred
stock, which was accounted for under the cost method of accounting. In September 2014, we recognized a
pretax gain of $19.0 million in connection with the sale of Twitch.

Loss on extinguishment of debt

Loss on extinguishment of debt was $9.0 million for the fiscal year ended March 31, 2014 due to the
conversion and redemption of our 4.375% Convertible Notes.

Gain on convertible note hedge and warrants, net

Gain on convertible note hedge and warrants, net was $3.5 million for the fiscal year ended March 31, 2014
due to the increase in our share price during the period from June 2013 to the date of the net settlement of
the hedge and warrants in August 2013.

Provision for income taxes

Income tax expense was $6.6 million for the fiscal year ended March 31, 2015, as compared to $14.5 million
for the fiscal year ended March 31, 2014. The decrease in income tax expense is primarily attributable to a
decrease in net income. Our effective tax rate differed from the federal statutory rate due primarily to
changes in valuation allowances related to tax losses and tax credit carryforwards and due to the mix of
earnings in our foreign entities, which are taxed at a rate other than the U.S. statutory rate of 35%. Our
valuation allowances increased by $92.7 million during the fiscal year ended March 31, 2015 and decreased
by $92.1 million during the fiscal year ended March 31, 2014 due to changes in net operating loss and tax
credit carryforwards.

As of March 31, 2015, we had gross unrecognized tax benefits, including interest and penalties, of
$42.7 million, of which $29.2 million would affect our effective tax rate if realized. For the fiscal year ended
March 31, 2015, gross unrecognized tax benefits increased by $17.8 million, which primarily relates to an
increase in uncertain tax position for certain tax credits in domestic jurisdictions.

We generally are no longer subject to audit for U.S. federal income tax returns for periods prior to our
fiscal year ended March 31, 2011 and state income tax returns for periods prior to the fiscal year ended
October 31, 2010. With few exceptions, we are no longer subject to income tax examinations in non-U.S.
jurisdictions for years prior to fiscal year ended October 31, 2010. U.S. federal taxing authorities have
completed their audit through the fiscal years ended October 31, 2009. Certain U.S. state taxing authorities
are currently examining our income tax returns from fiscal years ended March 31, 2011 through March 31,
2013. The determination as to further adjustments to our gross unrecognized tax benefits during the next
12 months is not practicable.

Net (loss) income and (loss) earnings per share

For the fiscal year ended March 31, 2015, our net loss was $279.5 million, as compared to net income of
$361.6 million in the prior year. Basic and diluted loss per share for the fiscal year ended March 31, 2015
was $3.48, as compared to basic earnings per share of $3.79 and diluted earnings per share of $3.20 for the
fiscal year ended March 31, 2014. Basic and diluted weighted average shares outstanding were lower
compared to the prior fiscal year due primarily to the repurchase of 16.2 million shares during the fiscal
year ended March 31, 2014 and due to Convertible Notes shares being anti-dilutive in the current period,
partially offset by vesting of restricted stock awards. See Notes 1 and 12 to the Consolidated Financial
Statements for additional information regarding earnings (loss) per share.

Liquidity and Capital Resources

Our primary cash requirements have been to fund (i) the development, manufacturing and marketing of
our published products, (ii) working capital, (iii) acquisitions and (iv) capital expenditures. We expect to

rely on funds provided by our operating activities, our Credit Agreement and our Convertible Notes to
satisfy our working capital needs.

Short-term Investments

As of March 31, 2016, we had $470.8 million of short-term investments, which are highly-liquid in nature
and represent an investment of cash that is available for current operations. From time to time, we may
purchase additional short-term investments depending on future market conditions and liquidity needs.

Credit Agreement

In February 2016, we entered into a Fifth Amendment to our Credit Agreement. The Credit Agreement
provides for borrowings of up to $100.0 million which may be increased by up to $100.0 million pursuant to
the terms of the Credit Agreement, and is secured by substantially all of our assets and the equity of our
subsidiaries. The Credit Agreement expires on August 18, 2019. Revolving loans under the Credit
Agreement bear interest at our election of (a) 0.25% to 0.75% above a certain base rate (3.75% at
March 31, 2016), or (b) 1.25% to 1.75% above the LIBOR Rate (approximately 1.68% at March 31, 2016),
with the margin rate subject to the achievement of certain average liquidity levels. We are also required to
pay a monthly fee on the unused available balance, ranging from 0.25% to 0.375% based on availability.

Availability under the Credit Agreement is unrestricted when liquidity is at least $300,000. When liquidity
is below $300,000 availability under the Credit Agreement is restricted by our United States and United
Kingdom based accounts receivable and inventory balances. The Credit Agreement also allows for the
issuance of letters of credit in an aggregate amount of up to $5.0 million.

As of March 31, 2016, there was $98.3 million available to borrow under the Credit Agreement and we had
$1.7 million of letters of credit outstanding. At March 31, 2016 and 2015, we had no outstanding
borrowings under the Credit Agreement.

The Credit Agreement contains covenants that substantially limit us and our subsidiaries’ ability to: create,
incur, assume or be liable for indebtedness; dispose of assets outside the ordinary course of business;
acquire, merge or consolidate with or into another person or entity; create, incur or allow any lien on any
of their respective properties; make investments; or pay dividends or make distributions (each subject to
certain limitations); or optionally prepay any indebtedness (subject to certain exceptions, including an
exception permitting the redemption of our unsecured convertible senior notes upon the meeting of
certain minimum liquidity requirements). In addition, the Credit Agreement provides for certain events of
default such as nonpayment of principal and interest, breaches of representations and warranties,
noncompliance with covenants, acts of insolvency, default on indebtedness held by third parties and default
on certain material contracts (subject to certain limitations and cure periods). The Credit Agreement also
contains a requirement that we maintain an interest coverage ratio of more than one to one for the trailing
twelve month period, if certain average liquidity levels fall below $30.0 million. As of March 31, 2016, we
were in compliance with all covenants and requirements outlined in the Credit Agreement.

1.75% Convertible Notes Due 2016

On November 16, 2011, we issued $250.0 million aggregate principal amount of 1.75% Convertible Notes
due 2016 (the ‘‘1.75% Convertible Notes’’). Interest on the 1.75% Convertible Notes is payable
semi-annually in arrears on June 1st and December 1st of each year, commencing on June 1, 2012. The
1.75% Convertible Notes mature on December 1, 2016, unless earlier repurchased by us or converted. We
do not have the right to redeem the 1.75% Convertible Notes prior to maturity.

The 1.75% Convertible Notes are convertible at an initial conversion rate of 52.3745 shares of our common
stock per $1,000 principal amount of 1.75% Convertible Notes (representing an initial conversion price of
approximately $19.093 per share of common stock for a total of approximately 13,094,000 underlying

conversion shares) subject to adjustment in certain circumstances. Holders may convert the 1.75%
Convertible Notes at their option prior to the close of business on the business day immediately preceding
June 1, 2016 only under the following circumstances: (1) during any fiscal quarter commencing after
March 31, 2012, if the last reported sale price of the common stock for at least 20 trading days (whether or
not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the
preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price on each
applicable trading day; (2) during the five business day period after any 10 consecutive trading day period
(the ‘‘measurement period’’) in which the trading price per $1,000 principal amount of 1.75% Convertible
Notes for each day of that measurement period was less than 98% of the product of the last reported sale
price of our common stock and the applicable conversion rate on each such day; or (3) upon the
occurrence of specified corporate events. On and after June 1, 2016 until the close of business on the
business day immediately preceding the maturity date, holders may convert their 1.75% Convertible Notes
at any time, regardless of the foregoing circumstances. Upon conversion, the 1.75% Convertible Notes may
be settled, at our election, in cash, shares of our common stock, or a combination of cash and shares of our
common stock. Our common stock price exceeded 130% of the applicable conversion price per share for at
least 20 trading days during the 30 consecutive trading days ended March 31, 2016. As of April 1, 2016 the
1.75% Convertible Notes may be converted at the holder’s option through the maturity date. Our current
intent and ability, given our option, would be to settle the 1.75% Convertible Notes in shares of our
common stock. As such, we have continued to classify these 1.75% Convertible Notes as long-term debt.

The indenture governing the 1.75% Convertible Notes contains customary terms and covenants and events
of default. As of March 31, 2016, we were in compliance with all covenants and requirements outlined in
the indenture governing the 1.75% Convertible Notes.

1.00% Convertible Notes Due 2018

On June 18, 2013, we issued $250.0 million aggregate principal amount of 1.00% Convertible Notes due
2018 (the ‘‘1.00% Convertible Notes’’ and together with the 1.75% Convertible Notes, the ‘‘Convertible
Notes’’). The 1.00% Convertible Notes were issued at 98.5% of par value for proceeds of $246.3 million.
Interest on the 1.00% Convertible Notes is payable semi-annually in arrears on July 1st and January 1st of
each year, commencing on January 1, 2014. The 1.00% Convertible Notes mature on July 1, 2018, unless
earlier repurchased by us or converted. We do not have the right to redeem the 1.00% Convertible Notes
prior to maturity. We also granted the underwriters a 30-day option to purchase up to an additional
$37.5 million principal amount of 1.00% Convertible Notes to cover overallotments, if any. On July 17,
2013, we closed our public offering of $37.5 million principal amount of our 1.00% Convertible Notes as a
result of the underwriters exercising their overallotment option in full on July 12, 2013, bringing the
proceeds to $283.2 million.

The 1.00% Convertible Notes are convertible at an initial conversion rate of 46.4727 shares of our common
stock per $1,000 principal amount of 1.00% Convertible Notes (representing an initial conversion price of
approximately $21.52 per share of common stock for a total of approximately 13,361,000 underlying
conversion shares) subject to adjustment in certain circumstances. Holders may convert the 1.00%
Convertible Notes at their option prior to the close of business on the business day immediately preceding
January 1, 2018 only under the following circumstances: (1) during any fiscal quarter commencing after
September 30, 2013, if the last reported sale price of the common stock for at least 20 trading days
(whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day
of the preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price on each
applicable trading day; (2) during the five business day period after any 10 consecutive trading day period
(the ‘‘measurement period’’) in which the trading price per $1,000 principal amount of 1.00% Convertible
Notes for each day of that measurement period was less than 98% of the product of the last reported sale
price of our common stock and the applicable conversion rate on each such day; or (3) upon the
occurrence of specified corporate events. On and after January 1, 2018 until the close of business on the

business day immediately preceding the maturity date, holders may convert their 1.00% Convertible Notes
at any time, regardless of the foregoing circumstances. Upon conversion, the 1.00% Convertible Notes may
be settled, at our election, in cash, shares of our common stock, or a combination of cash and shares of our
common stock. Our common stock price exceeded 130% of the applicable conversion price per share for at
least 20 trading days during the 30 consecutive trading days ended March 31, 2016. Accordingly, as of
April 1, 2016 the 1.00% Convertible Notes may be converted at the holder’s option through June 30, 2016.
Our current intent and ability, given our option, would be to settle the 1.00% Convertible Notes in shares
of our common stock. As such, we have continued to classify these 1.00% Convertible Notes as long-term
debt.

The indenture governing the 1.00% Convertible Notes contains customary terms and covenants and events
of default. As of the fiscal year end March 31, 2016, we were in compliance with all covenants and
requirements outlined in the indenture governing the 1.00% Convertible Notes.

Financial Condition

We are subject to credit risks, particularly if any of our receivables represent a limited number of
customers or are concentrated in foreign markets. If we are unable to collect our accounts receivable as
they become due, it could adversely affect our liquidity and working capital position.

Generally, we have been able to collect our accounts receivable in the ordinary course of business. We do
not hold any collateral to secure payment from customers. We have trade credit insurance on the majority
of our customers to mitigate accounts receivable risk.

A majority of our trade receivables are derived from sales to major retailers and distributors. Our five
largest customers accounted for 58.9%, 64.6% and 39.4% of net revenue during the fiscal years ended
March 31, 2016, 2015 and 2014, respectively. As of March 31, 2016 and 2015, five customers accounted for
73.9% and 63.9% of our gross accounts receivable, respectively. Customers that individually accounted for
more than 10% of our gross accounts receivable balance comprised 64.1% and 54.5% of such balances at
March 31, 2016 and 2015, respectively. We had three customers who accounted for 35.2%, 16.8% and
12.1% of our gross accounts receivable as of March 31, 2016 and three customers who accounted for
18.5%, 18.4% and 17.6% of our gross accounts receivable as of March 31, 2015. We did not have any
additional customers that exceeded 10% of our gross accounts receivable as of March 31, 2016 and 2015.
Based upon performing ongoing credit evaluations, maintaining trade credit insurance on a majority of our
customers and our past collection experience, we believe that the receivable balances from these largest
customers do not represent a significant credit risk, although we actively monitor each customer’s credit
worthiness and economic conditions that may affect our customers’ business and access to capital. We are
monitoring the current global economic conditions, including credit markets and other factors as it relates
to our customers in order to manage the risk of uncollectible accounts receivable.

We believe our current cash, short term investments and projected cash flow from operations, along with
availability under our Credit Agreement will provide us with sufficient liquidity to satisfy our cash
requirements for working capital, capital expenditures and commitments on both a short-term and
long-term basis.

As of March 31, 2016, the amount of cash and cash equivalents held outside of the U.S. by our foreign
subsidiaries was $185.4 million. These balances are dispersed across various locations around the world.
We believe that such dispersion meets the business and liquidity needs of our foreign affiliates. In addition,
we expect in the foreseeable future to have the ability to generate sufficient cash domestically to support
ongoing operations. Consequently, it is the Company’s intention to indefinitely reinvest undistributed
earnings of its foreign subsidiaries. In the event we needed to repatriate funds outside of the U.S., such
repatriation may be subject to local laws and tax consequences including foreign withholding taxes or U.S.
income taxes. It is not practicable to estimate the tax liability and we would try to minimize the tax effect to

the extent possible. However, any repatriation may not result in significant cash payments as the taxable
event would likely be offset by the utilization of the then available tax credits.

In January 2013, our Board of Directors authorized the repurchase of up to 7,500,000 shares of our
common stock. During the fiscal year ended March 31, 2014, we repurchased 4,217,683 shares of our
common stock in the open market for $73.3 million as part of the program. In May 2015, our Board of
Directors authorized the repurchase of an additional 6,717,683 shares of our common stock pursuant to
the share repurchase program. During the fiscal year ended March 31, 2016 we repurchased 953,647 shares
of our common stock in the open market for $26.6 million as part of the program. As of March 31, 2016,
we have repurchased a total of 5,171,330 shares of our common stock and have 9,046,353 shares of our
common stock that remain available for repurchase under our share repurchase authorization. We are
authorized to purchase shares from time to time through a variety of methods, including in the open
market or through privately negotiated transactions, in accordance with applicable securities laws.
Repurchases are subject to the availability of stock, prevailing market conditions, the trading price of the
stock, our financial performance and other conditions. The program may be suspended or discontinued at
any time for any reason.

Our changes in cash flows were as follows:

(thousands of dollars)

Net cash provided by operating activities
Net cash used in investing activities
Net cash (used in) provided by financing activities
Effects of foreign currency exchange rates on cash and cash

equivalents

Fiscal Year Ended March 31,

2016

2015

2014

$ 261,305
(324,516)
(48,047)

$ 212,814
(220,141)
928

$ 700,262
(30,813)
(133,684)

(1,120)

(17,881)

(2,867)

Net (decrease) increase in cash and cash equivalents

$(112,378) $ (24,280) $ 532,898

At March 31, 2016 we had $798.7 million of cash and cash equivalents, compared to $911.1 million at
March 31, 2015. The decrease in cash and cash equivalents from March 31, 2015 was due primarily to cash
used in investing and financing activities partially offset by cash provided by operating activities. Net cash
used in investing and financing activities related to purchases of short-term investments, purchases of fixed
assets, the repurchase of common stock and net share settlements of stock-based awards, which were
slightly offset by the proceeds received from the sale and maturities of our available-for-sale securities. Net
cash provided by operations was due primarily to cash generated from sales of Grand Theft Auto V, NBA
2K16, WWE 2K16 and virtual currency, partially offset by investments in software development and
licenses, and the funding of internal royalty payments.

Contractual Obligations and Commitments

We have entered into various agreements in the ordinary course of business that require substantial cash
commitments over the next several years. Generally, these include:

• Software Development and Licensing: We make payments to third-party software developers that
include contractual payments to developers under several software development agreements that
expire at various times through January 2022. Our aggregate outstanding software development
commitments assume satisfactory performance by third-party software developers. We also have
licensing commitments that primarily consist of obligations to holders of intellectual property rights
for use of their trademarks, copyrights, technology or other intellectual property rights in the
development of our products.

• Marketing: We have certain minimum marketing support commitments where we commit to spend
specified amounts related to marketing our products. Marketing commitments expire at various
times through December 2022.

• Operating Leases: Our offices are occupied under non-cancelable operating leases expiring at
various times through June 2024. We also lease certain furniture, equipment and automobiles under
non-cancelable leases expiring through March 2020. Some of the leases have fixed rent increases
and also include inducements to enter into the lease. The effect of such amounts are deferred and
recognized on a straight-line basis over the related lease term.

• Purchase obligations primarily related to agreements to purchase services that are enforceable and
legally binding on the Company that specifies all significant terms, including fixed, minimum or
variable pricing provisions; and the approximate timing of the transactions, expiring at various times
through January 2019.

A summary of annual minimum contractual obligations and commitments as of March 31, 2016 is as
follows (in thousands of dollars):

Fiscal Year Ending March 31,

Software
Development
and Licensing Marketing

Operating
Leases

Purchase

Convertible Convertible

Obligations Notes Interest

Notes

Total

2017
2018
2019
2020
2021
Thereafter

Total

$106,340
67,278
57,893
22,387
14,982
15,000

$ 9,490 $ 20,272 $18,631
7,584
19,719
1,681
20,006
—
15,751
—
14,192
—
38,698

6,520
46,460
12,650
3,250
6,500

$ 7,250
2,875
1,438
—
—
—

$250,000 $ 411,983
— 103,976
414,978
50,788
32,424
60,198

287,500
—
—
—

$283,880

$84,870 $128,638 $27,896

$11,563

$537,500 $1,074,347

Income Taxes. At March 31, 2016, we had recorded a liability for gross unrecognized tax benefits,
including interest and penalties, of $41.3 million for which we are unable to make a reasonable and reliable
estimate of the period in which these liabilities will be settled with the respective tax authorities, therefore,
these liabilities have not been included in the contractual obligations table.

Legal and Other Proceedings: We are, or may become, subject to demands and claims (including
intellectual property claims) and are involved in routine litigation in the ordinary course of business which
we do not believe to be material to our business or financial statements. We have appropriately accrued
amounts related to certain of these claims and legal and other proceedings. While it is reasonably possible
that a loss may be incurred in excess of the amounts accrued in our financial statements, we believe that
such losses, unless otherwise disclosed, would not be material.

Off-Balance Sheet Arrangements

As of March 31, 2016 and 2015, we did not have any material relationships with unconsolidated entities or
financial parties, such as entities often referred to as structured finance or variable interest entities, which
would have been established for the purpose of facilitating off-balance sheet arrangements or other
contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or
credit risk that could arise if we had engaged in such relationships.

International Operations

Net revenue earned outside of the United States is principally generated by our operations in Europe,
Asia, Australia, Canada and Latin America. For the fiscal years ended March 31, 2016, 2015 and 2014,
47.4%, 42.5% and 53.5%, respectively, of our net revenue was earned outside the United States. We are
subject to risks inherent in foreign trade, including increased credit risks, tariffs and duties, fluctuations in
foreign currency exchange rates, shipping delays and international political, regulatory and economic
developments, all of which can have a significant effect on our operating results.

Fluctuations in Quarterly Operating Results and Seasonality

We have experienced fluctuations in quarterly and annual operating results as a result of the timing of the
introduction of new titles; variations in sales of titles developed for particular platforms; market
acceptance of our titles; development and promotional expenses relating to the introduction of new titles;
sequels or enhancements of existing titles; projected and actual changes in platforms; the timing and
success of title introductions by our competitors; product returns; changes in pricing policies by us and our
competitors; the accuracy of retailers’ forecasts of consumer demand; the size and timing of acquisitions;
the timing of orders from major customers; and order cancellations and delays in product shipment. Sales
of our products are also seasonal, with peak shipments typically occurring in the fourth calendar quarter as
a result of increased demand for products during the holiday season. For certain of our software products
with multiple element revenue arrangements where we do not have VSOE for each element and the
deliverables are deemed more-than-inconsequential, we defer the recognition of our net revenues over an
estimated service period which generally ranges from 12 to 36 months. As a result, the quarter in which we
generate the highest net sales volume may be different from the quarter in which we recognize the highest
amount of net revenues. Quarterly comparisons of operating results are not necessarily indicative of future
operating results.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the potential loss arising from fluctuations in market rates and prices. Our market risk
exposures primarily include fluctuations in interest rates and foreign currency exchange rates.

Interest Rate Risk

Our exposure to fluctuations in interest rates relates primarily to our short-term investment portfolio and
variable rate debt under the Credit Agreement.

We seek to manage our interest rate risk by maintaining a short-term investment portfolio that includes
corporate bonds with high credit quality and maturities less than two years. Since short-term investments
mature relatively quickly and can be reinvested at the then-current market rates, interest income on a
portfolio consisting of short-term securities is more subject to market fluctuations than a portfolio of
longer term maturities. However, the fair value of a short-term portfolio is less sensitive to market
fluctuations than a portfolio of longer term securities. We do not currently use derivative financial
instruments in our short-term investment portfolio. Our investments are held for purposes other than
trading.

As of March 31, 2016, we had $470.8 million of short-term investments which included $205.3 million of
available-for-sale securities. The available-for-sale securities were recorded at fair market value with
unrealized gains or losses resulting from changes in fair value reported as a separate component of
accumulated other comprehensive income (loss), net of tax, in stockholders’ equity. We also had
$798.7 million of cash and cash equivalents that are comprised primarily of money market funds and
bank-time deposits. We determined that, based on the composition of our investment portfolio, there was
no material interest rate risk exposure to our Consolidated Financial Statements or liquidity as of
March 31, 2016.

Historically, fluctuations in interest rates have not had a significant effect on our operating results. Under
our Credit Agreement, outstanding balances bear interest at our election of (a) 0.25% to 0.75% above a
certain base rate (3.75% at March 31, 2016), or (b) 1.25% to 1.75% above the LIBOR rate (approximately
1.68% at March 31, 2016), with the margin rate subject to the achievement of certain average liquidity
levels. Changes in market rates may affect our future interest expense if there is an outstanding balance on
our line of credit. At March 31, 2016, there were no outstanding borrowings under our Credit Agreement.
The 1.75% Convertible Notes and the 1.00% Convertible Notes pay interest semi-annually at a fixed rate
of 1.75% and 1.00%, respectively, per annum and we expect that there will be no fluctuation related to the
Convertible Notes affecting our cash component of interest expense. For additional details on our
Convertible Notes see Note 11 to the Consolidated Financial Statements.

Foreign Currency Exchange Rate Risk

We transact business in foreign currencies and are exposed to risks resulting from fluctuations in foreign
currency exchange rates. Accounts relating to foreign operations are translated into United States dollars
using prevailing exchange rates at the relevant period end. Translation adjustments are included as a
separate component of stockholders’ equity. For the fiscal year ended March 31, 2016 and 2015, our
foreign currency translation adjustment loss was $7.4 million and $32.7 million, respectively. We
recognized a foreign currency exchange transaction loss of $1.4 million and $2.1 million for the fiscal years
ended March 31, 2016 and 2015, respectively, and a foreign currency exchange transaction gain of
$0.2 million for the fiscal year ended March 31, 2014, in interest and other, net in our Consolidated
Statements of Operations.

Balance Sheet Hedging Activities

We use foreign currency forward contracts to mitigate foreign currency exchange rate risk associated with
non-functional currency denominated cash balances and inter-company funding loans, non-functional
currency denominated accounts receivable and non-functional currency denominated accounts payable.
These transactions are not designated as hedging instruments and are accounted for as derivatives whereby
the fair value of the contracts is reported as either assets or liabilities on our Consolidated Balance Sheets,
and gains and losses resulting from changes in the fair value are reported in interest and other, net, in our
Consolidated Statements of Operations. We do not enter into derivative financial contracts for speculative
or trading purposes. At March 31, 2016, we had $2.4 million of forward contracts outstanding to buy
foreign currencies in exchange for U.S. dollars and $54.5 million of forward contracts outstanding to sell
foreign currencies in exchange for U.S. dollars all of which have maturities of less than one year. At
March 31, 2015, we had $4.1 million of forward contracts outstanding to buy foreign currencies in exchange
for U.S. dollars and $72.5 million of forward contracts outstanding to sell foreign currencies in exchange
for U.S. dollars all of which have maturities of less than one year. For the fiscal years ended March 31,
2016, 2015 and 2014, we recorded gains of $0.1 million and $18.5 million and a loss of $18.4 million,
respectively, related to foreign currency forward contracts in interest and other, net on the Consolidated
Statements of Operations. As of March 31, 2016 the fair value of these outstanding forward contracts was a
loss of $0.1 million and is included in accrued and other current liabilities. As of March 31, 2015 the fair
value of these outstanding forward contracts was $0.6 million and is included in prepaid expenses and

other. The fair value of these outstanding forward contracts is estimated based on the prevailing exchange
rates of the various hedged currencies as of the end of the period.

Our hedging programs are designed to reduce, but do not entirely eliminate, the effect of currency
exchange rate movements. We believe the counterparties to these foreign currency forward contracts are
creditworthy multinational commercial banks and that the risk of counterparty nonperformance is not
material. Notwithstanding our efforts to mitigate some foreign currency exchange rate risks, there can be
no assurance that our hedging activities will adequately protect us against the risks associated with foreign
currency fluctuations. For the fiscal year ended March 31, 2016, 47.4% of our revenue was generated
outside the United States. Using sensitivity analysis, a hypothetical 10% increase in the value of the U.S.
dollar against all currencies would decrease revenues by 4.7%, while a hypothetical 10% decrease in the
value of the U.S. dollar against all currencies would increase revenues by 4.7%. In the opinion of
management, a substantial portion of this fluctuation would be offset by cost of goods sold and operating
expenses incurred in local currency.

Item 8. Financial Statements and Supplementary Data

The financial statements and supplementary data appear in a separate section of this report following
Part IV. We provide details of our valuation and qualifying accounts in ‘‘Note 21—Supplementary
Financial Information’’ to the Consolidated Financial Statements. All schedules have been omitted since
the information required to be submitted has been included on the Consolidated Financial Statements or
notes thereto or has been omitted as not applicable or not required.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Definition and Limitations of Disclosure Controls and Procedures

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the ‘‘Exchange Act’’)) are designed to reasonably ensure that
information required to be disclosed in our reports filed under the Exchange Act is (i) recorded, processed,
summarized, and reported within the time periods specified in the Securities and Exchange Commission’s
rules and forms and (ii) accumulated and communicated to management, including our principal executive
officer and principal financial officer, as appropriate, to allow timely decisions regarding required
disclosures.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures.
These limitations include the possibility of human error, the circumvention or overriding of the controls
and procedures and reasonable resource constraints. In addition, because we have designed our system of
controls based on certain assumptions, which we believe are reasonable, about the likelihood of future
events, our system of controls may not achieve its desired purpose under all possible future conditions.
Accordingly, our disclosure controls and procedures provide reasonable assurance, but not absolute
assurance, of achieving their objectives.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer,
has evaluated the effectiveness of our disclosure controls and procedures at March 31, 2016, the end of the
period covered by this report. Based on this evaluation, the principal executive officer and principal
financial officer concluded that, at March 31, 2016, our disclosure controls and procedures were effective
to provide reasonable assurance that information required to be disclosed by us in the reports that we file

or submit under the Exchange Act is (i) recorded, processed, summarized, and reported on a timely basis,
and (ii) accumulated and communicated to management, including our principal executive officer and
principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management conducted an evaluation of
the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission 2013 framework (‘‘COSO’’). Based on this evaluation, management has concluded that our
internal control over financial reporting was effective as of March 31, 2016.

Our independent registered public accounting firm, Ernst & Young LLP, has issued an audit report on our
internal control over financial reporting. The report on the audit of internal control over financial
reporting is included in this Form 10-K.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal quarter ended
March 31, 2016, which were identified in connection with management’s evaluation required by
paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this Item is incorporated herein by reference to the sections entitled
‘‘Proposal 1—Election of Directors’’ and ‘‘Executive Compensation—Section 16(a) Beneficial Ownership
Reporting Compliance’’ in our definitive Proxy Statement (the ‘‘Proxy Statement’’) for the Annual Meeting
of Stockholders to be held in 2016. We intend to file the Proxy Statement within 120 days after the end of
the fiscal year (i.e. on or before July 29, 2016). Our Code of Business Conduct and Ethics applicable to its
directors and all employees, including senior financial officers, is available on our website at
www.take2games.com. If we make any amendment to our Code of Business Conduct and Ethics that is
required to be disclosed pursuant to the Exchange Act, we will make such disclosures on its website.

Item 11. Executive Compensation

The information required by this Item is incorporated herein by reference to the section entitled
‘‘Executive Compensation’’ in our Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

The information required by this Item is incorporated herein by reference to the sections entitled ‘‘Voting
Security Ownership of Certain Beneficial Owners and Management’’ and ‘‘Equity Compensation Plan
Information’’ in our Proxy Statement.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item is incorporated herein by reference to the section entitled ‘‘Certain
Relationships and Related Transactions’’ in our Proxy Statement.

Item 14. Principal Accounting Fees and Services

The information required by this Item is incorporated herein by reference to the section entitled
‘‘Independent Auditor Fee Information’’ in our Proxy Statement.

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) The following documents are filed as part of this Report:

(i) Financial Statements. See Index to Financial Statements on page 66 of this Report.

(ii) Financial Statement Schedule. See Note 21 to the Consolidated Financial Statements.

(iii) Index to Exhibits:

Exhibit
Number

3.1

3.1.1

3.1.2

3.1.3

3.1.4

3.2

3.3

3.4

4.1

4.2

4.3

Exhibit Description

Form

Filing Date

Exhibit

Filed
Herewith

Incorporated by Reference

Restated Certificate of Incorporation

10-K 2/12/2004 3.1

Certificate of Amendment of Restated
Certificate of Incorporation, dated April 30,
1998

Certificate of Amendment of Restated
Certificate of Incorporation, dated
November 17, 2003

Certificate of Amendment of Restated
Certificate of Incorporation, dated April 23,
2009.

Certificate of Amendment of Restated
Certificate of Incorporation, dated
September 21, 2012

Certificate of Designation of Series A
Preferred Stock, dated March 11, 1998

Certificate of Designation of Series B
Preferred Stock, dated March 26, 2008

Amended and Restated Bylaws of Take-Two
Interactive Software, Inc., effective as of
December 2, 2014.

Indenture, dated as of November 16, 2011,
by and between the Company and The
Bank of New York Mellon, as Trustee,
relating to 1.75% Convertible Notes

Form of 1.75% Convertible Note (included
in Exhibit 4.1)

Indenture, dated as of June 18, 2013, by
and between the Company and The Bank
of New York Mellon, as Trustee, relating to
1.00% Convertible Notes

10-K 2/12/2004 3.1.2

10-K 2/12/2004 3.1.3

8-K 4/23/2009 3.1

8-K 9/24/2012 3.1

10-K 2/12/2004 3.1.1

8-A12B 3/26/2008 4.2

8-K 12/5/2014 3.1

8-K 11/18/2011 4.1

8-K 6/18/2013 4.1

Exhibit
Number

4.4

4.5

10.1

10.2

10.3

10.4

10.5

10.6

10.7

10.8

10.9

10.10

10.11

10.12

10.13

Exhibit Description

Form

Filing Date

Exhibit

Filed
Herewith

Incorporated by Reference

Supplemental Indenture, dated as of
June 18, 2013, between the Company and
The Bank of New York Mellon, as Trustee,
to Indenture, dated as of June 18, 2013,
between the Company and The Bank of
New York Mellon, as Trustee

Form of 1.00% Convertible Note (included
in Exhibit 4.4)

Take-Two Interactive Software, Inc. Change
in Control Employee Severance Plan+

Form of Employee Restricted Stock
Agreement+

8-K 6/18/2013 4.2

8-K

3/7/2008 10.1

10-Q 6/5/2009 10.2

Form of Non-Employee Director Restricted
Stock Agreement+

10-Q 6/5/2009 10.3

Form of Employee Restricted Unit
Agreement+

Employment Agreement, dated May 12,
2010, between the Company and Lainie
Goldstein+

First Amendment to Employment
Agreement, dated October 25, 2010,
between the Company and Lainie
Goldstein+

Second Amendment to Employment
Agreement, dated August 27, 2012, between
the Company and Lainie Goldstein+

Employment Agreement, dated
February 14, 2008, by and between the
Company and Karl Slatoff+

10.14 Management Agreement, dated as of

May 20, 2011, by and between Take-Two
Interactive Software, Inc. and ZelnickMedia
Corporation+

10-Q 8/1/2012 10.1

10-Q 10/30/2013 10.1

10-Q 10/30/2013 10.2

10-Q 10/30/2013 10.3

10-Q 10/30/2013 10.4

10-Q 10/30/2013 10.5

8-K 5/14/2010 10.1

8-K 10/25/2010 10.1

10-Q 10/31/2012 10.6

8-K 2/15/2008 10.3

8-K 5/24/2011 10.1

Exhibit Description

Form

Filing Date

Exhibit

Filed
Herewith

Incorporated by Reference

Exhibit
Number

10.15

Amendment to Non-Qualified Stock Option
Agreement with ZelnickMedia Corporation,
dated as of November 18, 2013+

10.16 Management Agreement, dated as of
March 10, 2014, by and between the
Company and ZelnickMedia Corporation+

10.17

10.18

10.19

10.20

10.21

10.22

10.23

10.24

Security Agreement dated as of July 3,
2007, made by each of the Grantors listed
on the signature pages thereof and Wells
Fargo Foothill, Inc. in its capacity as
administrative agent for the Lender Group
and the Bank Product Providers

Supplement to Security Agreement dated as
of November 16, 2007, made by each of the
grantors listed on the signature pages
thereof and Wells Fargo Foothill, Inc. in its
capacity as administrative agent for the
Lender Group and the Bank Product
Providers

Second Amended and Restated Credit
Agreement, dated as of October 17, 2011,
by and among the Company, each of its
Subsidiaries identified on the signature
pages thereto as Borrowers, each of its
Subsidiaries identified on the signature
pages thereto as Guarantors, the lender
parties thereto, and Wells Fargo Capital
Finance, Inc., as administrative agent

First Amendment to Second Amended and
Restated Credit Agreement, dated June 12,
2013

Second Amendment to Second Amended
and Restated Credit Agreement, dated
April 28, 2014

Xbox 360 Publisher License Agreement
dated November 17, 2005, between
Microsoft Licensing, GP and the Company*

Amendment to Xbox 360 Publisher License
Agreement, dated December 4, 2008,
between Microsoft Licensing, GP and the
Company*

Amendment to the Xbox 360 Publisher
License Agreement, dated November 22,
2011, between the Company and Microsoft
Licensing, GP*

8-K 11/18/2013 10.1

8-K 3/10/2014 10.1

8-K

7/9/2007 10.2

8-K 11/20/2007 99.2

8-K 10/17/2011 10.1

10-K 5/14/2014 10.27

10-K 5/14/2014 10.28

10-Q 11/8/2011 10.3

10-Q 6/5/2009 10.1

10-Q 2/3/2012 10.1

Exhibit
Number

10.25

10.26

10.27

10.28

10.29

10.30

10.31

10.32

10.33

10.34

10.35

10.36

Exhibit Description

Form

Filing Date

Exhibit

Filed
Herewith

Incorporated by Reference

Amendment to the Xbox 360 Publisher
License Agreement, dated December 11,
2012, between the Company and Microsoft
Licensing, GP*

Amendment to the Xbox 360 Publisher
License Agreement, dated November 13,
2013, between the Company and Microsoft
Licensing, GP.*

Xbox One Publisher License Agreement
dated October 31, 2013, between Microsoft
Licensing, GP and the Company*

Global Playstation 3 Format Licensed
Publisher Agreement, dated May 18, 2010,
between Take-Two International S.A. and
Sony Computer Entertainment Europe
Limited*

Global Playstation 3 Format Licensed
Publisher Agreement, dated May 20, 2010,
between the Company and Sony Computer
Entertainment America LLC*

Lease Agreement between the Company
and Moklam Enterprises, Inc. dated July 1,
2002

Sixth Lease Modification Agreement, dated
January 18, 2012, between the Company
and Moklam Enterprises, Inc.

Seventh Lease Modification Agreement,
dated April 8, 2014, between the Company
and Moklam Enterprises, Inc.

Amendment to the Xbox One Publisher
License Agreement, dated May 7, 2014,
between Microsoft Licensing, GP and the
Company*

Amendment to the Xbox 360 Publisher
License Agreement, dated September 30,
2014, between Microsoft Corporation and
the Company*

Amended and Restated Take-Two
Interactive Software, Inc. 2009 Stock
Incentive Plan, effective as of July 23, 2014

Third Amendment to Second Amended and
Restated Credit Agreement, dated
August 18, 2014

10-Q 2/6/2013 10.2

10-Q 2/4/2014 10.2

10-Q 2/4/2014 10.1

10-Q 11/8/2011 10.2

10-Q 11/8/2011 10.1

10-Q 9/16/2002 10.2

10-K 5/23/2012 10.45

10-K 5/14/2014 10.39

10-Q 8/6/2014 10.1

10-Q 10/30/2014 10.1

14A 7/28/2014 Annex A

8-K 8/21/2014 10.1

Exhibit
Number

10.37

10.38

10.39

10.40

10.41

10.42

10.43

10.44

10.45

10.46

10.47

Exhibit Description

Form

Filing Date

Exhibit

Filed
Herewith

Incorporated by Reference

Employment Agreement dated January 28,
2015 between the Company and Daniel
Emerson

Amendment to the Restricted Stock
Agreement dated as of May 20, 2011
between the Company and ZelnickMedia
Corporation, effective as of December 2,
2014

Amendment to the Performance Based
Restricted Stock Agreement dated as of
May 20, 2011 between the Company and
ZelnickMedia Corporation, effective as of
December 2, 2014

Second Amendment to the Restricted Stock
Agreement dated as of May 20, 2011
between the Company and ZelnickMedia
Corporation, effective as of April 24, 2015

Second Amendment to the Performance
Based Restricted Stock Agreement dated as
of May 20, 2011 between the Company and
ZelnickMedia Corporation, effective as of
April 24, 2015

Restricted Unit Agreement, dated as of
May 20, 2015, by and between the Company
and ZelnickMedia Corporation

Amended and Restated Restricted Unit
Agreement Pursuant to the Take-Two
Interactive Software, Inc. 2009 Incentive
Stock Plan, dated as of June 30, 2015

Ninth Lease Modification Agreement, dated
as of December 15, 2015, by and between
Take-Two Interactive Software, Inc. and
Moklam Enterprises, Inc.

Fourth Amendment to Second Amended
and Restated Credit Agreement, May 21,
2015

Fifth Amendment to Second Amended and
Restated Credit Agreement, dated
February 11, 2016

Eighth Lease Modification Agreement,
dated as of January 5, 2015, by and between
Take-Two Interactive Software, Inc. and
Moklam Enterprises, Inc.

10-Q 2/6/2015 10.1

10-Q 2/6/2015 10.2

10-Q 2/6/2015 10.3

S-3ASR 5/20/2015 10.5

S-3ASR 5/20/2015 10.6

S-3ASR 5/20/2015 10.2

10-Q 8/10/2015 10.1

10-Q 2/4/2016 10.1

8-K 2/12/2016 10.1

Exhibit Description

Form

Filing Date

Exhibit

Filed
Herewith

Incorporated by Reference

Exhibit
Number

10.48

10.49

10.50

21.1

23.1

31.1

31.2

32.1

32.2

Amendment to the Xbox One Publisher
License Agreement, dated January 30, 2015,
between Microsoft Corporation and the
Company**

Amendment No. 3 to the Xbox One
Publisher License Agreement, dated
August 13, 2015, between Microsoft
Corporation and the Company**

Amendment to the Restricted Stock Unit
Agreement, dated as of March 30, 2016, by
and between Take-Two Interactive
Software, Inc. and ZelnickMedia
Corporation

Subsidiaries of the Company

Consent of Ernst & Young LLP

Chief Executive Officer Certification
Pursuant to Rules 13a-15(e) and 15d-15(e)
under the Securities and Exchange Act of
1934, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002

Chief Financial Officer Certification
Pursuant to Rules 13a-15(e) and 15d-15(e)
under the Securities and Exchange Act of
1934, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002

Chief Executive Officer Certification
pursuant to 18 U.S.C. Section 1350, as
adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

Chief Financial Officer Certification
pursuant to 18 U.S.C. Section 1350, as
adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

101.INS XBRL Instance Document.

101.SCH XBRL Taxonomy Extension Schema

Document.

101.CAL XBRL Taxonomy Calculation Linkbase

Document.

101.LAB XBRL Taxonomy Label Linkbase

Document.

101.PRE XBRL Taxonomy Presentation Linkbase

Document.

Exhibit
Number

Exhibit Description

Form

Filing Date

Exhibit

Incorporated by Reference

101.DEF XBRL Taxonomy Extension Definition

Document.

Represents a management contract or compensatory plan or arrangement.

Filed
Herewith

Portions thereof were omitted and filed separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment that was granted in accordance with Exchange Act Rule 24b-2.

Portions hereof have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment in accordance with Exchange Act Rule 24b-2

Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business
Reporting Language): (i) Consolidated Balance Sheets at March 31, 2016 and 2015, (ii) Consolidated
Statements of Operations for the fiscal years ended March 31, 2016, 2015 and 2014, (iii) Consolidated
Statements of Comprehensive (Loss) Income for the fiscal years ended March 31, 2016, 2015 and 2014,
(iv) Consolidated Statements of Cash Flows for the fiscal years ended March 31, 2016, 2015 and 2014,
(v) Consolidated Statements of Stockholders’ Equity for the fiscal years ended March 31, 2016, 2015 and
2014; and (vi) Notes to the Consolidated Financial Statements.

TAKE-TWO INTERACTIVE SOFTWARE, INC.
FISCAL YEAR ENDED MARCH 31, 2016

INDEX TO FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets—At March 31, 2016 and 2015

Consolidated Statements of Operations—For the fiscal years ended March 31, 2016, 2015 and

2014

Consolidated Statements of Comprehensive (Loss) Income—For the fiscal years ended March 31,

2016, 2015 and 2014

Consolidated Statements of Cash Flows—For the fiscal years ended March 31, 2016, 2015 and

2014

Consolidated Statements of Stockholders’ Equity—For the fiscal years ended March 31, 2016,

2015 and 2014

Notes to the Consolidated Financial Statements

(All other items in this report are inapplicable)

Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Take-Two Interactive Software, Inc.

We have audited the accompanying consolidated balance sheets of Take-Two Interactive Software, Inc. as
of March 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive (loss)
income, cash flows and stockholders’ equity for each of the three years in the period ended March 31,
2016. These financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Take-Two Interactive Software, Inc. at March 31, 2016 and 2015, and the
consolidated results of its operations and its cash flows for each of the three years in the period ended
March 31, 2016, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Take-Two Interactive Software, Inc.’s internal control over financial reporting as of
March 31, 2016, based on criteria established in Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report
dated May 18, 2016 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

New York, New York

May 18, 2016

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Take-Two Interactive Software, Inc.

We have audited Take-Two Interactive Software, Inc.’s internal control over financial reporting as of
March 31, 2016, based on criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO
criteria). Take-Two Interactive Software, Inc.’s management is responsible for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over
financial reporting included in the accompanying Management’s Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over
financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, Take-Two Interactive Software, Inc. maintained, in all material respects, effective internal
control over financial reporting as of March 31, 2016, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Take-Two Interactive Software, Inc. as of
March 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive (loss)
income, cash flows and stockholders’ equity for each of the three years in the period ended March 31, 2016
of Take-Two Interactive Software, Inc. and our report dated May 18, 2016 expressed an unqualified opinion
thereon.

/s/ Ernst & Young LLP

New York, New York

May 18, 2016

TAKE-TWO INTERACTIVE SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)

Current assets:

ASSETS

Cash and cash equivalents
Short-term investments
Restricted cash
Accounts receivable, net of allowances of $45,552 and $70,471 at March 31, 2016

and 2015, respectively

Inventory
Software development costs and licenses
Deferred cost of goods sold
Prepaid expenses and other

Total current assets

Fixed assets, net
Software development costs and licenses, net of current portion
Deferred cost of goods sold, net of current portion
Goodwill
Other intangibles, net
Other assets

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable
Accrued expenses and other current liabilities
Deferred revenue

Total current liabilities

Long-term debt
Non-current deferred revenue
Other long-term liabilities

Total liabilities

Commitments and contingencies
Stockholders’ equity:

Preferred stock, $.01 par value, 5,000 shares authorized: no shares issued and

outstanding at March 31, 2016 and 2015

Common stock, $.01 par value, 200,000 shares authorized; 103,765 and 104,594
shares issued and 86,573 and 88,356 outstanding at March 31, 2016 and 2015,
respectively

Additional paid-in capital
Treasury stock, at cost; 17,192 and 16,238 common shares at March 31, 2016 and

2015, respectively
Accumulated deficit
Accumulated other comprehensive loss

Total stockholders’ equity

Total liabilities and stockholders’ equity

See accompanying Notes.

March 31,

2016

2015

$ 798,742
470,820
261,169

$ 911,120
186,929
169,678

168,527
15,888
178,387
98,474
53,269

217,860
20,051
163,385
56,779
54,057

2,045,276

1,779,859

77,127
214,831
17,915
217,080
4,609
13,439

69,792
124,329
19,869
217,288
4,769
12,167

$2,590,277

$2,228,073

30,448
607,479
582,484

1,220,411

497,935
216,319
74,227

38,789
444,738
482,733

966,260

473,030
164,618
61,077

2,008,892

1,664,985

—

1,038
1,088,628

1,046
1,028,197

(303,388)
(166,997)
(37,896)

(276,836)
(158,695)
(30,624)

581,385

563,088

$2,590,277

$2,228,073

TAKE-TWO INTERACTIVE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

Net revenue
Cost of goods sold

Gross profit

Selling and marketing
General and administrative
Research and development
Business reorganization
Depreciation and amortization

Total operating expenses

(Loss) income from operations
Interest and other, net
Gain on long-term investments, net
Loss on extinguishment of debt
Gain on convertible note hedge and warrants, net

(Loss) income from continuing operations before income taxes
(Benefit from) provision for income taxes

(Loss) income from continuing operations
Loss from discontinued operations, net of taxes

Net (loss) income

(Loss) earnings per share:
Continuing operations
Discontinued operations

Basic (loss) earnings per share

Continuing operations
Discontinued operations

Diluted (loss) earnings per share

Fiscal Year Ended March 31,

2016

2015

2014

$1,413,698
813,873

$1,082,938
794,867

$2,350,568
1,414,327

599,825
198,309
192,452
119,807
71,285
28,800

610,653

(10,828)
(30,205)
2,683
—
—

(38,350)
(30,048)

(8,302)
—

288,071
235,341
175,093
115,043
—
21,057

546,534

(258,463)
(31,893)
17,476
—
—

(272,880)
6,590

(279,470)
—

936,241
240,996
161,374
105,256
—
13,359

520,985

415,256
(33,553)
—
(9,014)
3,461

376,150
14,459

361,691
(86)

(8,302) $ (279,470) $ 361,605

(0.10) $
—

(3.48) $
—

(0.10) $

(3.48) $

(0.10) $
—

(3.48) $
—

(0.10) $

(3.48) $

3.79
—

3.79

3.20
—

3.20

See accompanying Notes.

TAKE-TWO INTERACTIVE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands)

Net (loss) income

Other comprehensive (loss) income:

Foreign currency translation adjustment

Cash flow hedges:

Change in unrealized gains, net of taxes
Reclassification to earnings, net of taxes

Change in fair value of effective cash flow hedges

Available-for-sale securities:

Net unrealized gain (loss), net of taxes
Reclassification to earnings for realized net loss, net of taxes

Change in fair value of available-for-sale securities

Other comprehensive (loss) income

Comprehensive (loss) income

Fiscal Year Ended March 31,

2016

2015

2014

$ (8,302) $(279,470) $361,605

(7,364)

(32,747)

6,447

—
(17)

(17)

73
36

109

32
—

(25)
—

(25)

241
—

241

—
—

—

(7,272)

(32,740)

6,688

$(15,574) $(312,210) $368,293

See accompanying Notes.

TAKE-TWO INTERACTIVE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Operating activities:
Net (loss) income
Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Amortization and impairment of software development costs and licenses
Depreciation and amortization
Loss from discontinued operations
Stock-based compensation
Deferred income taxes
Amortization of discount on Convertible Notes
Amortization of debt issuance costs
Gain on long-term investments, net
Loss on extinguishment of debt
Gain on convertible note hedge and warrants, net
Amortization and impairment of intellectual property
Other, net

Changes in assets and liabilities:

Restricted cash
Accounts receivable
Inventory
Software development costs and licenses
Prepaid expenses, other current and other non-current assets
Deferred revenue
Deferred cost of goods sold
Accounts payable, accrued expenses and other liabilities
Net cash used in discontinued operations

Net cash provided by operating activities

Investing activities:

Change in bank time deposits
Proceeds from available-for-sale securities
Purchases of available-for-sale securities
Purchases of fixed assets
Purchase of long-term investments
Proceeds from sale of long-term investment
Other

Net cash used in investing activities

Financing activities:

Tax payment related to net share settlements on restricted stock awards
Repurchase of common stock
Excess tax benefit from stock-based compensation
Proceeds from issuance of 1.00% Convertible Notes
Payment for extinguishment of 4.375% Convertible Notes
Proceeds from termination of convertible note hedge transactions
Payment for termination of convertible note warrant transactions
Payment of debt issuance costs for the issuance of 1.00% Convertible Notes

Net cash (used in) provided by financing activities

Effects of foreign currency exchange rates on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

Supplemental data:
Interest paid
Income taxes (refunded) paid

See accompanying Notes.

Fiscal Year Ended March 31,

2016

2015

2014

(8,302)

$(279,470)

$ 361,605

134,472
28,800
—
69,996
(270)
23,457
1,567
(2,683)
—
—
160
2,588

(91,491)
49,348
3,809
(219,217)
(12,272)
152,325
(41,144)
170,162
—

133,453
21,057
—
65,246
2,279
22,026
1,663
(17,476)
—
—
344
2,068

24,161
(164,717)
9,729
(188,772)
5,398
568,028
(70,788)
78,585
—

265,533
13,359
86
78,118
(19,036)
22,801
1,947
—
9,014
(3,461)
3,558
(208)

(186,350)
136,453
438
(192,357)
(18,424)
34,276
—
194,228
(1,318)

261,305

212,814

700,262

(182,383)
43,314
(150,501)
(37,280)
—
2,683
(349)

(87,500)
—
(100,116)
(49,501)
(5,000)
21,976
—

(324,516)

(220,141)

(22,916)
(26,552)
1,421
—
—
—
—
—

(48,047)

(1,120)

(112,378)
911,120

—
—
928
—
—
—
—
—

928

(17,881)

(24,280)
935,400

—
—
—
(29,813)
—
—
(1,000)

(30,813)

—
(276,836)
—
283,188
(165,999)
84,429
(55,651)
(2,815)

(133,684)

(2,867)

532,898
402,502

$ 798,742

$ 911,120

$ 935,400

$
7,626
$ (26,223)

$
$

7,657
9,749

$
9,095
$ 10,025

TAKE-TWO INTERACTIVE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)

Common Stock

Shares Amount

Additional
Paid-in
Capital

Treasury Stock

Shares Amount

(Accumulated
Deficit) /
Retained
Earnings

Accumulated
Other
Comprehensive
(Loss)
Income

Total
Stockholders’
Equity

Balance, March 31, 2013

93,743

$ 937

$ 832,460

— $

— $(240,830)

$ (4,572)

$ 587,995

361,605

—

361,605

Net income
Change in cumulative foreign currency

translation adjustment

Change in unrealized gains on
derivative instruments, net

Exercise of stock options
Stock-based compensation
Tax benefit associated with stock

awards

Issuance of 1.00% Convertible Notes
Extinguishment of 4.375% Convertible

Notes

Termination of convertible note hedge

transactions

Termination of convertible note

warrant transactions

Issuance of restricted stock, net of
forfeitures and cancellations

Repurchased common stock

—

—
557
—

—
—

3,217

—

7,639
—

—

—
6
—

—
—

—

77
—

—

—
(6)
80,285

7,416
35,784

(26,480)

67,170

(41,853)

—

—
—
—

—
—

—

—
—
—

—
—

—

—
(77)
— (16,238)

—
(276,836)

—

—
—
—

—
—

—

—
—

Balance, March 31, 2014

105,156

1,052

954,699 (16,238)

(276,836)

120,775

Net loss
Change in cumulative foreign currency

translation adjustment

Change in unrealized gains on
derivative instruments, net

Net unrealized loss on

available-for-sale securities, net of
taxes

Stock-based compensation
Tax benefit associated with stock

awards

Issuance of restricted stock, net of
forfeitures and cancellations

Issuance of common stock in
connection with acquisition

—

—
—

—

(570)

—

—
—

—

(6)

—

—
72,579

928

(108)

—

—
—

—

—
—

—

(279,470)

—

—
—

—

6,447

241
—
—

—
—

—

—
—

2,116

—

6,447

241
—
80,285

7,416
35,784

(26,448)

67,170

(41,853)

—
(276,836)

801,806

(279,470)

(32,747)

(25)
—

—

(25)
72,579

928

(114)

563,088

(8,302)

Balance, March 31, 2015

104,594

1,046

1,028,197 (16,238)

(276,836)

(158,695)

(30,624)

Net loss
Change in cumulative foreign currency

translation adjustment

Change in unrealized gains on
derivative instruments, net

Net unrealized gain on

available-for-sale securities, net of
taxes

Stock-based compensation
Tax benefit associated with stock

awards

Issuance of restricted stock, net of
forfeitures and cancellations

Repurchased common stock
Net share settlement of restricted stock

awards

—

—
—

—

(84)
—

(745)

—

—
—

—

(1)
—

(7)

—

—
83,137

1,421

—

—
—

—

—
—

—

1
—

—
(954)

—
(26,552)

(24,128)

—

(8,302)

—

—
—

—

(7,364)

(17)

109
—

—

—
—

—

109
83,137

1,421

—
(26,552)

(24,135)

Balance, March 31, 2016

103,765

$1,038

$1,088,628 (17,192) $(303,388)

$(166,997)

$(37,896)

$ 581,385

See accompanying Notes.

TAKE-TWO INTERACTIVE SOFTWARE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Take-Two Interactive Software, Inc. (the ‘‘Company,’’ ‘‘we,’’ ‘‘us,’’ or similar pronouns) was incorporated in
the state of Delaware in 1993. We are a leading developer, publisher and marketer of interactive
entertainment for consumers around the globe. The Company develops and publishes products through its
two wholly-owned labels Rockstar Games and 2K. Our products are designed for console systems and
personal computers, including smart phones and tablets, and are delivered through physical retail, digital
download, online platforms and cloud streaming services.

Principles of Consolidation

The Consolidated Financial Statements include the financial statements of the Company and its wholly-
owned subsidiaries. All inter-company balances and transactions have been eliminated in consolidation.

Reclassifications

Certain immaterial amounts in the financial statements of the prior years have been reclassified to
conform to the current year presentation for comparative purposes.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles
(‘‘U.S. GAAP’’) requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of net revenue and expenses during the reporting periods.
Our most significant estimates and assumptions relate to the recoverability of software development costs
and prepaid royalties, licenses and intangibles, valuation of inventories, realization of deferred income
taxes, the adequacy of price protection, allowances for sales returns and doubtful accounts, accrued
liabilities, the service period for deferred net revenue and related cost of goods sold, fair value estimates,
the valuation of stock-based compensation, and assumptions used in our goodwill and short-term
investments impairment tests. These estimates generally involve complex issues and require us to make
judgments, involve analysis of historical and the prediction of future trends, and are subject to change from
period to period. Actual amounts could differ significantly from these estimates. The Company considers
transactions or events that occur after the balance sheet date, but before the financial statements are
issued, to provide additional evidence relative to certain estimates or to identify matters that require
additional disclosures.

Concentration of Credit Risk and Accounts Receivable

We maintain cash balances at several major financial institutions. While we attempt to limit credit
exposure with any single institution, balances often exceed insurable amounts.

If the financial condition and operations of our customers deteriorate, our risk of collection could increase
substantially. A majority of our trade receivables are derived from sales to major retailers and distributors.
Our five largest customers accounted for 58.9%, 64.6% and 39.4% of net revenue during the fiscal years
ended March 31, 2016, 2015 and 2014, respectively. One customer accounted for 20.7% and 13.3% of net
revenues during the fiscal years ended March 31, 2016 and 2015, respectively. A second customer
accounted for 15.5% and 11.7% of net revenue during the fiscal years ended March 31, 2016 and 2015,
respectively. A third customer accounted for 21.0% and 18.4% of net revenue during the fiscal years ended
March 31, 2015 and 2014, respectively, and a fourth customer accounted for 10.4% of net revenue during

the fiscal year ended March 31, 2015. As of March 31, 2016 and 2015, five customers accounted for 73.9%
and 63.9% of our gross accounts receivable, respectively. Customers that individually accounted for more
than 10% of our gross accounts receivable balance comprised 64.1% and 54.5% of such balances at
March 31, 2016 and 2015, respectively. We had three customers who accounted for 35.2%, 16.8% and
12.1% of our gross accounts receivable as of March 31, 2016 and three customers who accounted for
18.5%, 18.4% and 17.6% of our gross accounts receivable as of March 31, 2015. We did not have any
additional customers that exceeded 10% of our gross accounts receivable as of March 31, 2016 and 2015.
Based upon performing ongoing credit evaluations, maintaining trade credit insurance on a majority of our
customers and our past collection experience, we believe that the receivable balances from these largest
customers do not represent a significant credit risk.

Cash and Cash Equivalents

We consider all highly liquid instruments purchased with original maturities of three months or less to be
cash equivalents. Our restricted cash balance is primarily related to a dedicated account limited to the
payment of certain royalty obligations.

Short-term Investments

Short-term investments designated as available-for-sale securities are carried at fair value, which is based
on quoted market prices for such securities, if available, or is estimated on the basis of quoted market
prices of financial instruments with similar characteristics. Investments with original maturities greater
than 90 days and remaining maturities of less than one year are normally classified within short-term
investments. In addition, investments with maturities beyond one year at the time of purchase that are
highly liquid in nature and represent the investment of cash that is available for current operations are
classified as short-term investments.

Unrealized gains and losses of the Company’s available-for-sale securities are excluded from earnings and
are reported as a component of other comprehensive (loss) income, net of tax, until the security is sold, the
security has matured, or the Company determines that the fair value of the security has declined below its
adjusted cost basis and the decline is other-than-temporary. Realized gains and losses on short-term
investments are calculated based on the specific identification method and would be reclassified from
accumulated other comprehensive loss to interest and other, net.

Short-term investments are evaluated for impairment quarterly. The Company considers various factors in
determining whether it should recognize an impairment charge, including the credit quality of the issuer,
the duration that the fair value has been less than the adjusted cost basis, the severity of the impairment,
the reason for the decline in value, and our intent to sell and ability to hold the investment for a period of
time sufficient to allow for any anticipated recovery in market value. If the Company concludes that an
investment is other-than-temporarily impaired, it recognizes an impairment charge at that time in the
is
Consolidated Statements of Operations. In determining whether the decline
other-than-temporary requires management judgment based on the specific facts and circumstances of
each security. The ultimate value realized on these securities is subject to market price volatility until they
are sold.

in fair value

Inventory

Inventory consists of materials, including manufacturing royalties paid to console manufacturers, and is
stated at the lower of weighted average cost or net realizable value. Estimated product returns are included
in the inventory balance at their cost. We regularly review inventory quantities on-hand and in the retail
channels and record an inventory provision for excess or obsolete inventory based on the future expected
demand for our products. Significant changes in demand for our products would affect management’s
estimates in establishing our inventory provision. We write down inventory based on excess or obsolete

inventories determined primarily by future anticipated demand for our products. Inventory write-downs
are measured as the difference between the cost of the inventory and market value, based upon
assumptions about future demand that are inherently difficult to assess.

Sale of Long-Term Investment

We held an investment in Twitch Interactive, Inc.’s (‘‘Twitch’’) Class C Preferred stock, which was
accounted for under the cost method of accounting. In connection with the sale of Twitch, we recognized a
pretax gain of $2,683 and $18,976, during the fiscal years ended March 31, 2016 and 2015, respectively. The
pretax gain is presented within ‘‘Gain on long-term investments, net’’ in our Consolidated Statements of
Operations.

Software Development Costs and Licenses

Capitalized software development costs include direct costs incurred for internally developed titles and
payments made to third-party software developers under development agreements.

costs, amortization is calculated using (1) the proportion of current year revenues to the total revenues
expected to be recorded over the life of the title or (2) the straight-line method over the remaining
estimated useful life of the title, whichever is greater. For capitalized licenses, amortization is calculated as
a ratio of (1) current period revenues to the total revenues expected to be recorded over the remaining life
of the title or (2) the contractual royalty rate based on actual net product sales as defined in the licensing
agreement, whichever is greater.

Fixed Assets, net

Office equipment, furniture and fixtures are depreciated using the straight-line method over their
estimated useful life of five years. Computer equipment and software are generally depreciated using the
straight-line method over three to five years. Leasehold improvements are amortized over the lesser of the
term of the related lease or seven years. The cost of additions and betterments are capitalized, and repairs
and maintenance costs are charged to operations, in the periods incurred. When depreciable assets are
retired or sold, the cost and related allowances for depreciation are removed from the accounts and the
gain or loss is recognized. The carrying amounts of these assets are recorded at historical cost.

Goodwill and Intangible Assets

Goodwill is the excess of purchase price paid over identified intangible and tangible net assets of acquired
companies. Intangible assets consist of trademarks, intellectual property, non-compete agreements,
customer lists and acquired technology. Certain intangible assets acquired in a business combination are
recognized as assets apart from goodwill.

We use either the income, cost or market approach to aid in our conclusions of such fair values and asset
lives. The income approach presumes that the value of an asset can be estimated by the net economic
benefit to be received over the life of the asset, discounted to present value. The cost approach presumes
that an investor would pay no more for an asset than its replacement or reproduction cost. The market
approach estimates value based on what other participants in the market have paid for reasonably similar
assets. Although each valuation approach is considered in valuing the assets acquired, the approach
ultimately selected is based on the characteristics of the asset and the availability of information.

We test our goodwill for impairment annually, at the beginning of August, or more frequently, if events and
circumstances indicate the fair value of a reporting unit may be below its carrying amount. A reporting unit
is defined as an operating segment or one level below an operating segment. We have determined that we
operate in one reporting unit which is our operating segment. In the evaluation of goodwill for
impairment, we have the option to first perform a qualitative assessment to determine if the fair value of
its reporting unit is more likely than not (i.e., a likelihood of more than 50%) less than the carrying value
before performing the two-step impairment test. If the carrying value exceeds the fair value, there is a
potential impairment and step two must be performed. If the two-step impairment test is utilized to test

goodwill for impairment, step one compares the fair value of the reporting unit to its carrying value. In
performing the quantitative assessment in step-one, we measure the fair value of the reporting unit using a
combination of the income approach, which uses discounted cash flows, and the market approach, which
uses market capitalization and comparable companies’ data. Each step requires us to make judgments and
involves the use of significant estimates and assumptions. These estimates and assumptions include
long-term growth rates and operating margins used to calculate projected future cash flows, risk-adjusted
discount rates based on our weighted average cost of capital, future economic and market conditions and
the determination of appropriate market comparables. Our estimates for market growth are based on
historical data, various internal estimates and observable external sources when available, and are based on
assumptions that are consistent with the plans and estimates we use to manage the underlying business. If
the carrying value of the reporting unit exceeds its fair value, the goodwill of that reporting unit is
potentially impaired and step two must be performed. Step two compares the carrying value of the
reporting unit’s goodwill to its implied fair value (i.e., fair value of reporting unit less the fair value of the
unit’s assets and liabilities, including identifiable intangible assets). If the implied fair value of goodwill is
less than the carrying amount of goodwill, an impairment is recognized. Based on our annual impairment
assessment process for goodwill, no impairments were recorded during the fiscal years ended March 31,
2016, 2015 or 2014.

Long-lived Assets

We review all long-lived assets for impairment whenever events or changes in circumstances indicate that
the related carrying amount of an asset or asset group may not be recoverable. We compare the carrying
amount of the asset to the estimated undiscounted future cash flows expected to result from the use of the
asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, we
record an impairment charge for the difference between the carrying amount of the asset and its fair value.
The estimated fair value is generally measured by discounting expected future cash flows using our
incremental borrowing rate or fair value, if available. As of March 31, 2016 no indicators of impairment
existed.

Derivatives and Hedging

We transact business in various foreign currencies and have significant sales and purchase transactions
denominated in foreign currencies, subjecting us to foreign currency exchange rate risk. From time to time,
we carry out transactions involving foreign currency exchange derivative financial instruments. The
transactions are designed to hedge our exposure in currency exchange rate movements. We recognize
derivative instruments as either assets or liabilities on our Consolidated Balance Sheets and we measure
those instruments at fair value. The changes in fair value of derivatives that are not designated as hedges
are recognized currently in earnings as interest and other, net in our Consolidated Statements of
Operations. If a derivative meets the definition of a cash flow hedge and is so designated, the effective
portion of changes in the fair value of the derivative are recognized, as a component of other
comprehensive (loss) income while the ineffective portion of the changes in fair value is recorded currently
in earnings as interest and other, net in our Consolidated Statements of Operations. Amounts included in
Accumulated other comprehensive (loss) income for cash flow hedges are reclassified into earnings in the
same period that the hedged item is recognized in into cost of goods sold or research and development
expenses, as appropriate.

Income Taxes

We record a tax provision for the anticipated tax consequences of the reported results of operations. Our
provision for income taxes is computed using the asset and liability method, under which deferred income
taxes are recognized for differences between the financial statement and tax bases of assets and liabilities
at currently enacted statutory tax rates for the years in which the differences are expected to reverse. The

effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the
enactment.

Valuation allowances are established when we determine that it is more likely than not that such deferred
tax assets will not be realized. We do not record income tax expense related to foreign withholding taxes or
United States income taxes which may become payable upon the repatriation of undistributed earnings of
foreign subsidiaries, as such earnings are expected to be reinvested indefinitely outside of the United
States.

We use estimates and assumptions to compute the provision for income taxes including allocations of
certain transactions to different tax jurisdictions, amounts of permanent and temporary differences, the
likelihood of deferred tax assets being recovered and the outcome of contingent tax risks. These estimates
and assumptions are revised as new events occur, more experience is acquired and additional information
is obtained. The effect of these revisions is recorded in income tax expense or benefit in the period in
which they become known.

Revenue Recognition

For some of our software products, we enter into multiple element revenue arrangements in which we may
provide a combination of full game software, online multi-player functionality, and related post-contract
customer support (‘‘PCS’’) which generally includes additional free unspecified add-on content updates,
maintenance, and online support services. For these arrangements, we evaluate the significance of the PCS
at the time each game is released based on the guidance in Accounting Standards Codification 985-605,
‘‘Software—Revenue Recognition’’ (‘‘ASC 985-605’’) to determine if the PCS rises to the level of a
separate deliverable. We monitor our initial assessments on an ongoing basis and consider any changes that
may arise. In conjunction with our evaluation, we consider such factors as the significance of the
development effort, the nature of online features, the extent of anticipated marketing focus on online
features, the significance of the online features to the consumers’ anticipated overall gameplay experience,
and the significance and length of time of our post sale obligations to consumers. Determining whether
PCS is significant for a particular game is subjective and requires management’s judgment.

product costs and licenses. We do not have VSOE for our PCS obligations and in those arrangements
where PCS obligations have been determined to be significant we recognize revenue from the sale of
software products over the period we expect to offer the PCS to the consumer (‘‘estimated service
period’’). We also do not have VSOE for our online multi-player functionality; however it is generally
delivered at the same time with the full game software. Determining the estimated service period is
subjective and requires management’s judgment, therefore, the estimated service period may change in the
future. The estimated service periods of our current games, with online functionality and related PCS, are
generally twelve to thirty-six months.

As part of our on-going assessment of estimated service periods during the three months ended March 31,
2016, we changed Grand Theft Auto V’s estimated service period from 24 to 36 months. The change in
estimate resulted in a decrease in net revenues of $40,176 and income from operations of $35,767 to our
fiscal 2016 financial results. We expect this change in estimated service period to have a material impact to
our fiscal 2017 and fiscal 2018 financial results.

Price protection and Allowances for Returns

We grant price protection and accept returns in connection with our distribution arrangements with
customers. Following reductions in the price of our products, we grant price protection to permit
customers to take credits against amounts they owe us with respect to merchandise unsold by them. Our
customers must satisfy certain conditions to entitle them to receive price protection or return products,
including compliance with applicable payment terms and confirmation of field inventory levels.

Generally, our distribution arrangements with customers do not give them the right to return titles or to
cancel firm orders. However, we occasionally accept returns from our customers for stock balancing and
make accommodations to customers, which include credits and returns, when demand for specific titles
falls below expectations.

estimates of price protection and returns. However, actual results may differ from initial estimates as a
result of changes in circumstances, market conditions and assumptions. Adjustments to estimates are
recorded in the period in which they become known.

Consideration Given to Customers and Received from Vendors

We have various marketing arrangements with retailers and distributors of our products that provide for
cooperative advertising and market development funds, among others, which are generally based on single
exchange transactions. Such amounts are accrued as a reduction to revenue at the later of: (1) the date at
which the related revenue is recognized by us, or (2) the date at which the sales incentive is offered, except
for cooperative advertising which is included in selling and marketing expense if there is a separate
identifiable benefit and the benefit’s fair value can be established.

We receive various incentives from our manufacturers, including up-front cash payments as well as rebates
based on a cumulative level of purchases. Such amounts are generally accounted for as a reduction in the
price of the manufacturer’s product and included as a reduction of inventory or cost of goods sold, based
on an agreed upon per unit rebate.

Advertising

We expense advertising costs as incurred. Advertising expense for the fiscal years ended March 31, 2016,
2015 and 2014 amounted to $94,743, $132,990 and $153,732, respectively, and are included in ‘‘Selling and
marketing expense’’ in our Consolidated Statements of Operations.

(Loss) Earnings per Share (‘‘EPS’’)

Basic EPS is computed by dividing the net income (loss) applicable to common stockholders for the period
by the weighted average number of shares of common stock outstanding during the same period. Diluted
EPS is computed by dividing the net income (loss) applicable to common stockholders for the period by
the weighted average number of shares of common stock and common stock equivalents outstanding.

Certain of our unvested restricted stock awards (including restricted stock units, time-based and market-
based restricted stock awards) are considered participating securities since these securities have
non-forfeitable rights to dividends or dividend equivalents during the contractual period of the award, and
thus require the two-class method of computing EPS. The calculation of EPS for common stock under the
two-class method excludes the income attributable to the participating securities from the numerator and
excludes the dilutive effect of those awards from the denominator.

We define common stock equivalents as unexercised stock options, unvested restricted stock awards,
common stock equivalents underlying the Convertible Notes (see Note 11) and warrants outstanding
during the period. Common stock equivalents are measured using the treasury stock method, except for
the Convertible Notes, which are assessed for their effect on diluted EPS using the more dilutive of the
treasury stock method or the if-converted method. Under the provisions of the if-converted method, the
Convertible Notes are assumed to be converted and included in the denominator of the EPS calculation
and the interest expense, net of tax, recorded in connection with the Convertible Notes is added back to
the numerator. However, potential common shares are not included in the denominator of the diluted
earnings (loss) per share calculation when inclusion of such shares would be anti-dilutive, such as in a
period in which a net loss is recorded.

Stock-based Compensation

See Note 15 for a full discussion of our stock-based compensation arrangements.

Foreign Currency

The functional currency for our foreign operations is primarily the applicable local currency. Accounts of
foreign operations are translated into U.S. dollars using exchange rates for assets and liabilities at the
balance sheet date and average prevailing exchange rates for the period for revenue and expense accounts.
Adjustments resulting from translation are included in accumulated other comprehensive income (loss).
Realized and unrealized transaction gains and losses are included in our Consolidated Statements of
Operations in the period in which they occur.

Comprehensive (Loss) Income

Comprehensive (loss) income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Accumulated other comprehensive (loss) income
includes foreign currency translation adjustments, which relate to investments that are permanent in
nature and therefore do not require tax adjustments, and the net of tax amounts for unrealized gains
(losses), net on derivative instruments designated as cash flow hedges and available for sale securities.

Recently Issued Accounting Pronouncements

Accounting for Stock Compensation

Accounting for Leases

Classification of Deferred Taxes

In November 2015, the FASB issued ASU 2015-17, ‘‘Balance Sheet Classification of Deferred Taxes’’
(‘‘ASU 2015-17’’) This new guidance simplifies the balance sheet classification of deferred taxes by
requiring all deferred taxes to be presented as noncurrent assets or liabilities. This update can be applied
either retrospectively or prospectively and is effective for annual periods, and interim periods within those
years, beginning after December 15, 2016 (April 1, 2017 for the Company). Early adoption is permitted.
We adopted ASU 2015-17 prospectively during the fourth quarter of fiscal 2016, therefore, prior periods
have not been restated to conform to current presentation. The adoption of ASU 2015-17 resulted in a
reclassification of net current deferred tax assets of $32,537 from prepaid expenses and other to other
long-term liabilities.

Presentation of Debt Issuance Costs

In April 2015, the FASB issued ASU 2015-03, ‘‘Simplifying the Presentation of Debt Issuance Costs.’’ This
new guidance requires the presentation of debt issuance costs in the balance sheet as a deduction from the
carrying amount of the related debt liability. This update will be applied retrospectively and is effective for
annual periods, and interim periods within those years, beginning after December 15, 2015 (April 1, 2016
for the Company). Early adoption is permitted.

We adopted ASU 2015-03 during the third quarter of fiscal 2016. The adoption of ASU 2015-03 had no
impact on our Consolidated Statement of Operations and Consolidated Statement of Cash Flows, and had
the following impact to our previously reported March 31, 2015 Consolidated Balance Sheet:

Prepaid expenses and other
Other assets
Long-term debt

Revenue from Contracts with Customers

March 31, 2015

Originally
Reported

$ 55,506
13,745
476,057

As Adjusted

$ 54,057
12,167
473,030

Effect of
Change

$(1,449)
(1,578)
(3,027)

2. MANAGEMENT AGREEMENT

In May 2011, we entered into an amended management services agreement, (the ‘‘2011 Management
Agreement’’) with ZelnickMedia Corporation (‘‘ZelnickMedia’’) pursuant to which ZelnickMedia
provided us with certain management, consulting and executive level services. In March 2014, we entered
into a new management agreement, (the ‘‘2014 Management Agreement’’), with ZelnickMedia pursuant to
which ZelnickMedia continues to provide financial and management consulting services to the Company
through March 31, 2019. The 2014 Management Agreement became effective April 1, 2014 and supersedes
and replaces the 2011 Management Agreement, except as otherwise contemplated by the 2014
Management Agreement. As part of the 2014 Management Agreement, Strauss Zelnick, the President of
ZelnickMedia, continues to serve as Executive Chairman and Chief Executive Officer and Karl Slatoff, a
partner of ZelnickMedia, continues to serve as President of the Company. The 2014 Management
Agreement provides for an annual management fee of $2,970 over the term of the agreement and a
maximum annual bonus opportunity of $4,752 over the term of the agreement, based on the Company
achieving certain performance thresholds. In consideration for ZelnickMedia’s services, we recorded
consulting expense (a component of general and administrative expenses) of $7,722, $7,737 and $6,365 for
the fiscal years ended March 31, 2016, 2015 and 2014, respectively.

Pursuant to the 2011 Management Agreement and the 2014 Management Agreement, we also issued
stock-based awards to ZelnickMedia. During the fiscal years ended March 31, 2016, 2015 and 2014, we

recorded $26,652, $24,449 and $16,807, respectively, of stock-based compensation expense for
non-employee awards, which is included in general and administrative expenses. See Note 15 for a
discussion of such awards.

FAIR VALUE MEASUREMENTS

The carrying amounts of our financial instruments, including cash and cash equivalents, restricted cash,
accounts receivable, accounts payable and accrued liabilities, approximate fair value because of their short
maturities.

We follow a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This
hierarchy requires entities to maximize the use of ‘‘observable inputs’’ and minimize the use of
‘‘unobservable inputs.’’ The three levels of inputs used to measure fair value are as follows:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for
markets that are not active or other inputs that are observable or can be corroborated by observable
market data.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities. This includes certain pricing models,
discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The table below segregates all assets that are measured at fair value on a recurring basis (which is
measured at least annually) into the most appropriate level within the fair value hierarchy based on the
inputs used to determine the fair value at the measurement date.

Quoted prices

Significant

in active markets Significant other unobservable

March 31,
2016

for identical
assets (level 1)

observable inputs
(level 2)

inputs
(level 3)

Balance Sheet Classification

$ 562,726
205,250
265,570

$562,726
—
265,570

$
—
205,250
—

$—
—
—

Cash and cash equivalents
Short-term investments
Short-term investments

(137)

—

(137)

—

Accrued and other current liabilities

$1,033,409

$828,296

$205,113

$—

Quoted prices

Significant

in active markets Significant other unobservable

March 31,
2015

for identical
assets (level 1)

observable inputs
(level 2)

inputs
(level 3)

Balance Sheet Classification

$544,334
79,852
99,429
87,500

$544,334
79,852
—
87,500

—
—
99,429
—

$—
—
—
—

Cash and cash equivalents
Cash and cash equivalents
Short-term investments
Short-term investments

587

—

587

—

Prepaid expenses and other

$811,702

$711,686

$100,016

$—

Money market funds
Corporate bonds
Bank-time deposits
Foreign currency forward

contracts

Total recurring fair value
measurements, net

Money market funds
Bank-time deposits
Corporate bonds
Bank-time deposits
Foreign currency forward

contracts

Total recurring fair value
measurements, net

We did not have any transfers between Level 1 and Level 2 fair value measurements during the fiscal year
ended March 31, 2016.

Debt

As of March 31, 2016, the estimated fair value of our 1.75% Convertible Notes due 2016 (the ‘‘1.75%
Convertible Notes’’) and our 1.00% Convertible Notes due 2018 (the ‘‘1.00% Convertible Notes’’ and
together with the 1.75% Convertible Notes, the ‘‘Convertible Notes’’) was $493,750 and $515,286,
respectively. The fair value was determined using Level 2 inputs, observable market data for the
Convertible Notes and its embedded option feature. See Note 11 for additional information regarding our
Convertible Notes.

SHORT-TERM INVESTMENTS

Our short-term investments consisted of the following as of March 31, 2016:

Short-term investments
Bank time deposits
Available-for-sale securities:

Corporate bonds

Total short-term investments

Short-term investments
Bank time deposits
Available-for-sale securities:

Corporate bonds

Total short-term investments

March 31, 2016

Gross
Unrealized

Cost or

Amortized Cost Gains

Losses

Fair Value

$265,570

$ — $ — $265,570

205,166

131

(47)

205,250

$470,736

$131

$(47)

$470,820

March 31, 2015

Gross
Unrealized

Cost or

Amortized Cost Gains

Losses

Fair Value

$ 87,500

$— $ — $ 87,500

99,454

$186,954

$39

(64)

99,429

$(64)

$186,929

Unrealized gains and losses of our available-for-sale securities are reported as a component of other
comprehensive income (loss), net of tax, until the security is sold, the security has matured, or we
determine that the fair value of the security has declined below its adjusted cost basis and the decline is
other-than-temporary. We evaluate our investments for impairment quarterly. We consider various factors
in the review of investments with an unrealized loss, including the credit quality of the issuer, the duration
that the fair value has been less than the adjusted cost basis, the severity of the impairment, the reason for
the decline in value and our intent to sell and ability to hold the investment for a period of time sufficient
to allow for any anticipated recovery in market value. Based on our review, we did not consider any of
these investments to be other-than-temporarily impaired as of March 31, 2016 or 2015.

The following table summarizes the contracted maturities of our short-term investments at March 31,
2016:

Short-term investments
Due in 1 year or less
Due in 1-2 years

Total short-term investments

March 31, 2016

Amortized Cost

Fair Value

$390,386
80,350
$470,736

$390,384
80,436
$470,820

5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Our risk management strategy includes the use of derivative financial instruments to reduce the volatility
of earnings and cash flows associated with changes in foreign currency exchange rates. We do not enter
into derivative financial contracts for speculative or trading purposes. We classify cash flows from its
derivative transactions as cash flows from operating activities in the consolidated statements of cash flow.

The following table shows the gross notional amounts of foreign currency forward contracts:

Forward contracts to sell foreign currencies
Forward contracts to purchase foreign currencies

March 31,

2016

2015

$54,529
$ 2,409

$72,488
4,097

For the fiscal years ended March 31, 2016, 2015 and 2014, we recorded gains of $144 and $18,548, and a
loss of $18,425, respectively, related to foreign currency forward contracts in interest and other, net on the
Consolidated Statements of Operations. Our derivative contracts are foreign currency exchange forward
contracts that are not designated as hedging instruments under hedge accounting and are used to reduce
the impact of foreign currency on certain balance sheet exposures and certain revenue and expense. These
instruments are generally short term in nature, with typical maturities of less than one year, and are subject
to fluctuations in foreign exchange rates. As of March 31, 2016, amounts related to derivatives designated
as cash flow hedges and recorded in accumulated other comprehensive (loss) income are immaterial.

INVENTORY

Inventory balances by category are as follows:

Finished products
Parts and supplies

Inventory

March 31,

2016

2015

$14,321
1,567

$17,229
2,822

$15,888

$20,051

Estimated product returns included in inventory at March 31, 2016 and 2015 were $527 and $921,
respectively.

SOFTWARE DEVELOPMENT COSTS AND LICENSES

Details of our capitalized software development costs and licenses are as follows:

Software development costs, internally developed
Software development costs, externally developed
Licenses

March 31,

2016

2015

Current

Non-current

Current

Non-current

$131,378
46,888
121

$162,261
45,703
6,867

$ 54,225
102,713
6,447

$116,026
8,303
—

Software development costs and licenses

$178,387

$214,831

$163,385

$124,329

Software development costs and licenses as of March 31, 2016 and 2015 included $343,450 and $211,248,
respectively, related to titles that have not been released.

Amortization and impairment of software development costs and licenses are as follows:

Amortization of software development costs and licenses
Impairment of software development costs and licenses
Less: Portion representing stock-based compensation

Fiscal Year Ended March 31,

2016

2015

2014

$117,506
22,671
(5,705)

$119,488
23,947
(9,982)

$236,759
52,863
(24,089)

Amortization and impairment, net of stock-based compensation

$134,472

$133,453

$265,533

FIXED ASSETS, NET

Fixed asset balances by category are as follows:

Computer equipment
Computer software
Leasehold improvements
Office equipment
Furniture and fixtures

Less: accumulated depreciation

Fixed assets, net

March 31,

2016

2015

$ 74,684
39,277
47,773
6,344
8,051

176,129
99,002

$ 73,675
59,575
35,535
7,002
7,073

182,860
113,068

$ 77,127

$ 69,792

Depreciation expense related to fixed assets for the fiscal years ended March 31, 2016, 2015 and 2014 was
$28,800, $21,057 and $13,203, respectively.

9. GOODWILL AND INTANGIBLE ASSETS, NET

The change in our goodwill balance is as follows:

Balance at March 31, 2014
Currency translation adjustment

Balance at March 31, 2015
Currency translation adjustment

Balance at March 31, 2016

Total

$226,705
(9,417)

$217,288
(208)

$217,080

The following table sets forth the intangible assets for Intellectual property, which is subject to
amortization:

March 31,

2016

2015

Gross

Carrying Accumulated Net Book Carrying Accumulated Net Book
Amount Amortization

Amount Amortization

Value

Intellectual property

$26,859

$(22,250) $4,609 $26,859

$(22,090) $4,769

Amortization of intangible assets is included in our Consolidated Statements of Operations as follows:

Cost of goods sold
Depreciation and amortization

Total amortization of intangible assets

Fiscal Year Ended March 31,

2016

$160
—

$160

2015

$344
—

$344

2014

$3,558
156

$3,714

Estimated future amortization of intangible assets that will be recorded in cost of goods sold and operating
expenses for the years ending March 31, are as follows:

2017
2018
2019

Total

10. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of:

Software development royalties
Business reorganization (see Note 20)
Compensation and benefits
Licenses
Marketing and promotions
Other

Accrued expenses and other current liabilities

11. LONG-TERM DEBT

Credit Agreement

$4,036
548
25

$4,609

March 31,

2016

2015

$414,492
66,323
39,919
31,825
14,938
39,982

$307,953
—
47,763
23,974
21,708
43,340

$607,479

$444,738

In February 2016, we entered into a Fifth Amendment to our Credit Agreement. The Credit Agreement
provides for borrowings of up to $100,000 which may be increased by up to $100,000 pursuant to the terms
of the Credit Agreement, and is secured by substantially all of our assets and the equity of our subsidiaries.
The Credit Agreement expires on August 18, 2019. Revolving loans under the Credit Agreement bear
interest at our election of (a) 0.25% to 0.75% above a certain base rate (3.75% at March 31, 2016), or
(b) 1.25% to 1.75% above the LIBOR Rate (approximately 1.68% at March 31, 2016), with the margin rate
subject to the achievement of certain average liquidity levels. We are also required to pay a monthly fee on
the unused available balance, ranging from 0.25% to 0.375% based on availability. We had no outstanding
borrowings at March 31, 2016 and 2015.

Availability under the Credit Agreement is unrestricted when liquidity, as defined in the Credit
Agreement, is at least $300,000. When liquidity is below $300,000 availability under the Credit Agreement
is restricted by our United States and United Kingdom based accounts receivable and inventory balances.
The Credit Agreement also allows for the issuance of letters of credit in an aggregate amount of up to
$5,000.

Information related to availability on our Credit Agreement is as follows:

Available borrowings
Outstanding letters of credit

March 31,

2016

2015

$98,335
1,664

We recorded interest expense and fees related to the Credit Agreement of $438, $518 and $637, for the
fiscal years ended March 31, 2016, 2015 and 2014, respectively. The Credit Agreement contains covenants
that substantially limit us and our subsidiaries’ ability to: create, incur, assume or be liable for
indebtedness; dispose of assets outside the ordinary course of business; acquire, merge or consolidate with
or into another person or entity; create, incur or allow any lien on any of their respective properties; make
investments; or pay dividends or make distributions (each subject to certain limitations); or optionally
prepay any indebtedness (subject to certain exceptions, including an exception permitting the redemption
of the Company’s unsecured convertible senior notes upon the meeting of certain minimum liquidity
requirements). In addition, the Credit Agreement provides for certain events of default such as
nonpayment of principal and interest, breaches of representations and warranties, noncompliance with
covenants, acts of insolvency, default on indebtedness held by third parties and default on certain material
contracts (subject to certain limitations and cure periods). The Credit Agreement also contains a
requirement that we maintain an interest coverage ratio of more than one to one for the trailing twelve
month period, if certain average liquidity levels fall below $30,000. As of March 31, 2016, we were in
compliance with all covenants and requirements outlined in the Credit Agreement.

1.75% Convertible Notes Due 2016

On November 16, 2011, we issued $250,000 aggregate principal amount of 1.75% Convertible Notes due
2016. The issuance of the 1.75% Convertible Notes included $30,000 related to the exercise of an
over-allotment option by the underwriters. Interest on the 1.75% Convertible Notes is payable
semi-annually in arrears on June 1st and December 1st of each year, commencing on June 1, 2012. The
1.75% Convertible Notes mature on December 1, 2016, unless earlier repurchased by the Company or
converted. The Company does not have the right to redeem the 1.75% Convertible Notes prior to
maturity.

The 1.75% Convertible Notes are convertible at an initial conversion rate of 52.3745 shares of our common
stock per $1 principal amount of 1.75% Convertible Notes (representing an initial conversion price of
approximately $19.093 per share of common stock for a total of approximately 13,094,000 underlying
conversion shares) subject to adjustment in certain circumstances. Holders may convert the 1.75%
Convertible Notes at their option prior to the close of business on the business day immediately preceding
June 1, 2016 only under the following circumstances: (1) during any fiscal quarter commencing after
March 31, 2012, if the last reported sale price of the common stock for at least 20 trading days (whether or
not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the
preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price on each
applicable trading day; (2) during the five business day period after any 10 consecutive trading day period
(the ‘‘measurement period’’) in which the trading price per $1 principal amount of 1.75% Convertible
Notes for each day of that measurement period was less than 98% of the product of the last reported sale
price of our common stock and the applicable conversion rate on each such day; or (3) upon the
occurrence of specified corporate events. On and after June 1, 2016 until the close of business on the
business day immediately preceding the maturity date, holders may convert their 1.75% Convertible Notes
at any time, regardless of the foregoing circumstances. Upon conversion, the 1.75% Convertible Notes may
be settled, at our election, in cash, shares of our common stock, or a combination of cash and shares of the
Company’s common stock. Our common stock price exceeded 130% of the applicable conversion price per
share for at least 20 trading days during the 30 consecutive trading days ended March 31, 2016. As of

April 1, 2016, the 1.75% Convertible Notes may be converted at the holder’s option through the maturity
date. Our current intent and ability, given our option, would be to settle the 1.75% Convertible Notes
conversion in shares of our common stock. As such, we have continued to classify these 1.75% Convertible
Notes as long-term debt.

Upon the occurrence of certain fundamental changes involving the Company, holders of the 1.75%
Convertible Notes may require us to purchase all or a portion of their 1.75% Convertible Notes for cash at
a price equal to 100% of the principal amount of the notes to be purchased, plus accrued and unpaid
interest (including additional interest, if any) to, but excluding, the fundamental change purchase date.

The indenture governing the 1.75% Convertible Notes contains customary terms and covenants and events
of default. If an event of default (as defined therein) occurs and is continuing, the Trustee by notice to the
Company, or the holders of at least 25% in aggregate principal amount of the 1.75% Convertible Notes
then outstanding by notice to the Company and the Trustee, may, and the Trustee at the request of such
holders shall, declare 100% of the principal of and accrued and unpaid interest (including additional
interest, if any) on all the 1.75% Convertible Notes to be due and payable. In the case of an event of
default arising out of certain bankruptcy events, 100% of the principal of and accrued and unpaid interest
(including additional interest, if any), on the 1.75% Convertible Notes will automatically become due and
payable immediately. As of March 31, 2016, we were in compliance with all covenants and requirements
outlined in the indenture governing the 1.75% Convertible Notes.

The 1.75% Convertible Notes are senior unsecured obligations and rank senior in right of payment to our
existing and future indebtedness that is expressly subordinated in right of payment to the 1.75%
Convertible Notes; equal in right of payment to our existing and future indebtedness that is not so
subordinated; effectively junior in right of payment to any of our secured indebtedness to the extent of the
value of the assets securing such indebtedness; and structurally junior to all existing and future
indebtedness incurred by our subsidiaries.

We separately account for the liability and equity components of the 1.75% Convertible Notes in a manner
that reflects the Company’s nonconvertible debt borrowing rate when interest expense is recognized in
subsequent periods. We estimated the fair value of the 1.75% Convertible Notes to be $197,373, as of the
date of issuance of our 1.75% Convertible Notes, assuming a 6.9% non-convertible borrowing rate. The
carrying amount of the equity component was determined to be $52,627 by deducting the fair value of the
liability component from the par value of the 1.75% Convertible Notes. The excess of the principal amount
of the liability component over its carrying amount is amortized to interest and other, net over the term of
the 1.75% Convertible Notes using the effective interest method. The equity component is not remeasured
as long as it continues to meet the conditions for equity classification. In accounting for the $6,875 of
banking, legal and accounting fees related to the issuance of the 1.75% Convertible Notes, we allocated
$5,428 to the liability component and $1,447 to the equity component. Debt issuance costs attributable to
the liability component are being amortized to interest and other, net over the term of the 1.75%
Convertible Notes, and issuance costs attributable to the equity component were netted with the equity
component in additional paid-in capital.

As of March 31, 2016 and 2015, the if-converted value of our 1.75% Convertible Notes exceeded the
principal amount of $250,000 by $243,251 and $83,373, respectively.

The following table provides additional information related to our 1.75% Convertible Notes:

Additional paid-in capital

Principal amount of 1.75% Convertible Notes
Unamortized discount of the liability component
Carrying amount of debt issuance costs

Net carrying amount of 1.75% Convertible Notes

March 31,

2016

2015

$ 51,180

$250,000
8,014
657

$250,000
19,386
1,662

$241,329

$228,952

The following table provides the components of interest expense related to our 1.75% Convertible Notes:

Cash interest expense (coupon interest expense)
Non-cash amortization of discount on 1.75% Convertible Notes
Amortization of debt issuance costs

Total interest expense related to 1.75% Convertible Notes

1.00% Convertible Notes Due 2018

Fiscal Year Ended March 31,

2016

2015

2014

$ 4,375
11,372
1,005

$ 4,375
10,639
1,054

$ 4,375
9,954
1,105

$16,752

$16,068

$15,434

On June 18, 2013, we issued $250,000 aggregate principal amount of 1.00% Convertible Notes due 2018.
The 1.00% Convertible Notes were issued at 98.5% of par value for proceeds of $246,250. Interest on the
1.00% Convertible Notes is payable semi-annually in arrears on July 1st and January 1st of each year,
commencing on January 1, 2014. The 1.00% Convertible Notes mature on July 1, 2018, unless earlier
repurchased by the Company or converted. The Company does not have the right to redeem the 1.00%
Convertible Notes prior to maturity. The Company also granted the underwriters a 30-day option to
purchase up to an additional $37,500 principal amount of 1.00% Convertible Notes to cover
overallotments, if any. On July 17, 2013, the Company closed its public offering of $37,500 principal
amount of the Company’s 1.00% Convertible Notes as a result of the underwriters exercising their
overallotment option in full on July 12, 2013, bringing the total proceeds to $283,188.

The 1.00% Convertible Notes are convertible at an initial conversion rate of 46.4727 shares of our common
stock per $1 principal amount of 1.00% Convertible Notes (representing an initial conversion price of
approximately $21.52 per share of common stock for a total of approximately 13,361,000 underlying
conversion shares) subject to adjustment in certain circumstances. Holders may convert the 1.00%
Convertible Notes at their option prior to the close of business on the business day immediately preceding
January 1, 2018 only under the following circumstances: (1) during any fiscal quarter commencing after
September 30, 2013, if the last reported sale price of the common stock for at least 20 trading days
(whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day
of the preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price on each
applicable trading day; (2) during the five business day period after any 10 consecutive trading day period
(the ‘‘measurement period’’) in which the trading price per $1 principal amount of 1.00% Convertible
Notes for each day of that measurement period was less than 98% of the product of the last reported sale
price of our common stock and the applicable conversion rate on each such day; or (3) upon the
occurrence of specified corporate events. On and after January 1, 2018 until the close of business on the
business day immediately preceding the maturity date, holders may convert their 1.00% Convertible Notes
at any time, regardless of the foregoing circumstances. Upon conversion, the 1.00% Convertible Notes may
be settled, at our election, in cash, shares of our common stock, or a combination of cash and shares of the
Company’s common stock. Our common stock price exceeded 130% of the applicable conversion price per

share for at least 20 trading days during the 30 consecutive trading days ended March 31, 2016.
Accordingly, as of April 1, 2016, the 1.00% Convertible Notes may be converted at the holder’s option
through June 30, 2016. Our current intent and ability, given our option, would be to settle the 1.00%
Convertible Notes conversion in shares of our common stock. As such, we have continued to classify these
1.00% Convertible Notes as long-term debt.

Upon the occurrence of certain fundamental changes involving the Company, holders of the 1.00%
Convertible Notes may require us to purchase all or a portion of their 1.00% Convertible Notes for cash at
a price equal to 100% of the principal amount of the notes to be purchased, plus accrued and unpaid
interest (including additional interest, if any) to, but excluding, the fundamental change purchase date.

The indenture governing the 1.00% Convertible Notes contains customary terms and covenants and events
of default. If an event of default (as defined therein) occurs and is continuing, the Trustee by notice to the
Company, or the holders of at least 25% in aggregate principal amount of the 1.00% Convertible Notes
then outstanding by notice to the Company and the Trustee, may, and the Trustee at the request of such
holders shall, declare 100% of the principal of and accrued and unpaid interest (including additional
interest, if any) on all the 1.00% Convertible Notes to be due and payable. In the case of an event of
default arising out of certain bankruptcy events, 100% of the principal of and accrued and unpaid interest
(including additional interest, if any), on the 1.00% Convertible Notes will automatically become due and
payable immediately. As of March 31, 2016, we were in compliance with all covenants and requirements
outlined in the indenture governing the 1.00% Convertible Notes.

The 1.00% Convertible Notes are senior unsecured obligations and rank senior in right of payment to our
existing and future indebtedness that is expressly subordinated in right of payment to the 1.00%
Convertible Notes; equal in right of payment to our existing and future indebtedness that is not so
subordinated; effectively junior in right of payment to any of our secured indebtedness to the extent of the
value of the assets securing such indebtedness; and structurally junior to all existing and future
indebtedness incurred by our subsidiaries.

We separately account for the liability and equity components of the 1.00% Convertible Notes in a manner
that reflects the Company’s nonconvertible debt borrowing rate. We estimated the fair value of the 1.00%
Convertible Notes to be $225,567 upon issuance of our 1.00% Convertible Notes, assuming a 6.15%
non-convertible borrowing rate. The carrying amount of the equity component was determined to be
approximately $57,621 by deducting the fair value of the liability component from the net proceeds of the
1.00% Convertible Notes. The excess of the principal amount of the liability component over its carrying
amount is amortized to interest and other, net over the term of the 1.00% Convertible Notes using the
effective interest method. The equity component is not remeasured as long as it continues to meet the
conditions for equity classification. In accounting for the $2,815 of banking, legal and accounting fees
related to the issuance of the 1.00% Convertible Notes, we allocated $2,209 to the liability component and
$606 to the equity component. Debt issuance costs attributable to the liability component are being
amortized to interest and other, net over the term of the 1.00% Convertible Notes, and issuance costs
attributable to the equity component were netted with the equity component in additional paid-in capital.

As of March 31, 2016 and 2015, the if-converted value of our 1.00% Convertible Notes exceeded the
principal amount of $287,500 by $215,809 and $52,671, respectively.

The following table provides additional information related to our 1.00% Convertible Notes:

Additional paid-in capital

Principal amount of 1.00% Convertible Notes
Unamortized discount of the liability component
Carrying amount of debt issuance costs

Net carrying amount of 1.00% Convertible Notes

March 31,

2016

2015

$ 35,784

$287,500
29,972
922

$287,500
42,057
1,365

$256,606

$244,078

The following table provides the components of interest expense related to our 1.00% Convertible Notes:

Cash interest expense (coupon interest expense)
Non-cash amortization of discount on 1.00% Convertible Notes
Amortization of debt issuance costs

Total interest expense related to 1.00% Convertible Notes

Fiscal Year Ended March 31,

2016

2015

2014

$ 2,875
12,085
443

$ 2,875
11,387
466

$ 2,259
8,489
378

$15,403

$14,728

$11,126

12. (LOSS) EARNINGS PER SHARE (‘‘EPS’’)

The following table sets forth the computation of basic and diluted EPS (shares in thousands):

Computation of Basic (loss) earnings per share:

Net (loss) income
Less: net income allocated to participating securities

Fiscal Year Ended March 31,

2016

2015

2014

$ (8,302) $(279,470) $361,605
— (41,065)

—

Net (loss) income for basic (loss) earnings per share calculation

$ (8,302) $(279,470) $320,540

Total weighted average shares outstanding—basic
Less: weighted average participating shares outstanding

Weighted average common shares outstanding—basic

Basic (loss) earnings per share

Computation of Diluted (loss) earnings per share:

Net (loss) income
Less: net income allocated to participating securities
Add: interest expense, net of tax, on Convertible Notes

83,417
—

83,417

80,367

95,347
— (10,828)

80,367

84,519

$ (0.10) $

(3.48) $

3.79

$ (8,302) $(279,470) $361,605
— (31,397)
33,718
—

—
—

Net (loss) income for diluted (loss) earnings per share calculation

$ (8,302) $(279,470) $363,926

Weighted average common shares outstanding—basic
Add: dilutive effect of common stock equivalents

Weighted average common shares outstanding—diluted

Diluted (loss) earnings per share

83,417
—

83,417

80,367
—

80,367

84,519
29,363

113,882

$ (0.10) $

(3.48) $

3.20

The calculation of EPS for common stock under the two-class method shown above for the fiscal year
ended March 31, 2014 excludes income attributable to the participating securities from the numerator and
excludes the dilutive effect of those awards from the denominator.

We incurred a net loss for the fiscal year ended March 31, 2016 and 2015; therefore, the basic and diluted
weighted average shares outstanding exclude the effect of unvested share-based awards that are considered
participating securities and all common stock equivalents because their effect would be antidilutive. For
the fiscal year ended March 31, 2016 and 2015 we had 6,405,000 and 6,061,000, respectively, of unvested
share-based awards which are excluded due to the net loss for the periods.

13. COMMITMENTS AND CONTINGENCIES

A summary of annual minimum contractual obligations and commitments as of March 31, 2016 is as
follows:

Fiscal Year Ending March 31,

Software
Development
and Licensing Marketing

Operating
Leases

Purchase

Convertible Convertible

Obligations Notes Interest

Notes

Total

2017
2018
2019
2020
2021
Thereafter

Total

$106,340
67,278
57,893
22,387
14,982
15,000

$ 9,490 $ 20,272 $18,631
7,584
19,719
1,681
20,006
—
15,751
—
14,192
—
38,698

6,520
46,460
12,650
3,250
6,500

$ 7,250
2,875
1,438
—
—
—

$250,000 $ 411,983
— 103,976
414,978
50,788
32,424
60,198

287,500
—
—
—

$283,880

$84,870 $128,638 $27,896

$11,563

$537,500 $1,074,347

Software Development and Licensing Agreements: We make payments to third-party software developers
that include contractual payments to developers under several software development agreements that
expire at various times through January 2022. Our aggregate outstanding software development
commitments assume satisfactory performance by third-party software developers. We also have licensing
commitments that primarily consist of obligations to holders of intellectual property rights for use of their
trademarks, copyrights, technology or other intellectual property rights in the development of our
products.

Marketing Agreements: We have certain minimum marketing support commitments where we commit to
spend specified amounts related to marketing our products. Marketing commitments expire at various
times through December 2022 and primarily reflect our agreements with major sports leagues and players’
associations.

Operating Leases: Our offices are occupied under non-cancelable operating leases expiring at various
times through June 2024. We also lease certain furniture, equipment and automobiles under
non-cancelable leases expiring through March 2020. Some of the leases have fixed rent increases and also
include inducements to enter into the lease. The effect of such amounts are deferred and recognized on a
straight-line basis over the related lease term. Rent expense amounted to $18,032, $18,120 and $15,574 for
the fiscal years ended March 31, 2016, 2015 and 2014, respectively.

Purchase obligations: These obligations are primarily related to agreements to purchase services that are
enforceable and legally binding on the Company that specifies all significant terms, including fixed,
minimum or variable pricing provisions; and the approximate timing of the transactions, expiring at various
times through January 2019.

Employee Savings Plans: For our United States employees we maintain a 401(k) retirement savings plan
and trust. Our 401(k) plan is offered to all eligible employees and participants may make voluntary
contributions. We also have various pension plans for our non-U.S. employees, some of which are required
by local laws, and allow or require Company contributions. Employer contributions under all defined
contribution and pension plans during the fiscal years ended March 31, 2016, 2015 and 2014 were $8,348,
$8,554 and $7,476, respectively.

On April 11, 2016, we filed a declaratory judgment action in the United States District Court for the
Southern District of New York seeking, among other things, a judicial declaration that Leslie Benzies, the
former president of one of our subsidiaries with whom we had been in ongoing discussions regarding his
separation of employment, is not entitled to any minimum allocation or financial parity with any other
person under the applicable royalty plan. We believe we will prevail in this matter, although there can be
no assurance of the outcome. On April 12, 2016, Mr. Benzies filed a complaint in the Supreme Court of
the State of New York, New York County against us, and certain of our subsidiaries and employees. We
removed this case to the United States District Court for the Southern District of New York, where our
declaratory judgment action is pending. Mr. Benzies’ complaint claims damages of at least $150,000 and
contains allegations of breach of fiduciary duty; fraudulent inducement and fraudulent concealment; aiding
and abetting breach of fiduciary duty; breach of various contracts; breach of implied duty of good faith and
fair dealing; tortious interference with contract; unjust enrichment; reformation; constructive trust;
declaration of rights; constructive discharge; defamation and fraud. While we believe that we have
meritorious defenses to these claims, and we intend to vigorously defend against them and to pursue any
counterclaims, we have accrued what we believe is an adequate reserve for this matter, which amounts are
included in Business reorganization in our Consolidated Statement of Operations (see Note 20) and we do
not believe that the ultimate outcome of such litigation, even if in excess of our current reserve, will have a
material adverse effect on our business, financial condition or results of operations.

14. INCOME TAXES

Components of (loss) income from continuing operations before income taxes are as follows:

Domestic
Foreign

Fiscal Year Ended March 31,

2016

2015

2014

$(94,174) $(126,582) $197,992
178,158
(146,298)

55,824

(Loss) income from continuing operations before income taxes

$(38,350) $(272,880) $376,150

(Benefit from) provision for current and deferred income taxes consists of the following:

Current:

U.S. federal
U.S. state and local
Foreign

Total current income taxes

Deferred:

U.S. federal
U.S. state and local
Foreign

Total deferred income taxes

(Benefit from) provision for income taxes

Fiscal Year Ended March 31,

2016

2015

2014

792
938
(31,508)

$ 2,773
(1,406)
2,944

$ 16,340
4,527
12,628

(29,778)

4,311

33,495

1,211
(231)
(1,250)

(270)

1,575
72
632

2,279

(14,216)
(3,462)
(1,358)

(19,036)

$(30,048) $ 6,590

$ 14,459

A reconciliation of our effective tax rate to the U.S. statutory federal income tax rate is as follows:

U.S. federal statutory rate
Foreign tax rate differential
Tax amortization of goodwill
Foreign earnings
State and local taxes, net of U.S. federal benefit
Tax credit(1)
Valuation allowance—domestic
Valuation allowance—foreign
Change in reserves
Other

Effective tax rate

Fiscal Year Ended
March 31,

2016

2015

2014

35.0% 35.0% 35.0%
25.8% (12.1)% (10.4)%
(3.2)% (0.6)% 0.5%
(3.3)% (1.5)% 2.0%
0.9%
0.9% 0.3%
98.7%
—
(77.8)% (16.8)% (19.8)%
10.4% (5.1)% (5.1)%
(7.0)% (1.6)% (0.7)%
(1.1)% (0.6)% 2.0%

—

78.4% (2.4)% 3.8%

(1)

Income tax benefit of $37,838 was recorded for the fiscal year ended March 31, 2016 attributable to the Company becoming
eligible to claim certain tax deductions on applicable video games in the United Kingdom, relating to a prior period, which was
recognized during fiscal 2016.

The effects of temporary differences that gave rise to our deferred tax assets and liabilities were as follows:

Deferred tax assets:

Accrued compensation expense
Deferred revenue
Domestic net operating loss carryforward
Tax credit carryforward
Foreign net operating loss carryforwards
Business reorganization
Sales returns and allowances (including bad debt)
Deferred rent
Other

Total deferred tax assets
Less: Valuation allowance

Net deferred tax assets

Deferred tax liabilities:

Capitalized software and depreciation
Convertible debt
Intangible amortization
Other

Total deferred tax liabilities

Net deferred tax liability(a)

March 31,

2016

2015

$ 101,337
33,254
28,811
76,565
16,910
24,143
2,257
5,359
2,443

$ 52,051
5,011
70,159
60,278
22,390
72
8,670
4,692
830

291,079
(170,574)

224,153
(133,468)

120,505

90,685

(104,294)
(12,716)
(8,306)
—

(125,316)

(69,298)
(21,391)
(4,356)
(703)

(95,748)

(4,811)

(5,063)

(a) As of March 31, 2016 and 2015, $4,811 and $18,125, respectively, is included in other long-term liabilities and as of March 31,

2015, $13,062 is included in prepaid expenses and other current assets.

The valuation allowance is primarily attributable to deferred tax assets for which no benefit is provided due
to uncertainty with respect to their realization. The net deferred tax liability is primarily the result of
deferred tax liabilities related to goodwill, which cannot be used to offset deferred tax assets.

At March 31, 2016, we had domestic net operating loss carryforwards totaling $28,811 of which $14 will
expire in 2019, $1,195 will expire in 2020, $2,332 will expire from 2021 to 2027 and $25,270 will expire from
2029 to 2036. In addition, we had foreign net operating loss carryforwards of $16,910, of which $2,999 will
expire in 2020, $11,854 will expire in 2022 and the remainder may be carried forward indefinitely.

The total amount of undistributed earnings of foreign subsidiaries was approximately $197,300 at
March 31, 2016 and $156,000 at March 31, 2015. It is our intention to reinvest undistributed earnings of
our foreign subsidiaries and thereby indefinitely postpone their remittance. Accordingly, no provision has
been made for foreign withholding taxes or U.S. income taxes which may become payable if undistributed
earnings of foreign subsidiaries are repatriated. It is not practicable to estimate the tax liability that would
arise if these earnings were remitted.

We are regularly audited by domestic and foreign taxing authorities. Audits may result in tax assessments
in excess of amounts claimed and the payment of additional taxes. We believe that our tax return positions
comply with applicable tax law and that we have adequately provided for reasonably foreseeable
assessments of additional taxes. Additionally, we believe that any assessments in excess of the amounts
provided for will not have a material adverse effect on the Consolidated Financial Statements.

As of March 31, 2016 and March 31, 2015, we had gross unrecognized tax benefits, including interest and
penalties, of $56,012 and $42,706, of which $41,285 and $29,153, respectively, would affect our effective tax
rate if realized.

The aggregate changes to the liability for gross uncertain tax positions, excluding interest and penalties,
were as follows:

Balance, beginning of period
Additions:

Current year tax positions
Prior year tax positions

Reduction of prior year tax positions
Lapse of statute of limitations
Other, net

Balance, end of period

Fiscal Year Ended March 31,

2016

2015

2014

$40,591

$23,536

$20,400

12,208
—
—
—
—

8,297
9,040
(256)
(26)
—

5,069
2,008
(3,219)
(667)
(55)

$52,799

$40,591

$23,536

We recognize interest and penalties related to uncertain tax positions in the provision for income taxes in
our Consolidated Statements of Operations. For the fiscal years ended March 31, 2016, 2015 and 2014, we
recognized an increase in interest and penalties of $1,098, $771 and $32, respectively. The gross amount of
interest and penalties accrued as of March 31, 2016 and March 31, 2015 was $ 3,213 and $2,115,
respectively.

We are generally no longer subject to audit for U.S. federal income tax returns for periods prior to our
fiscal year ended March 31, 2012 and state income tax returns for periods prior to the fiscal year ended
March 31, 2011. With few exceptions, we are no longer subject to income tax examinations in non-U.S.
jurisdictions for years prior to our fiscal year ended March 31, 2011. The statute relating to the fiscal year
ended October 31, 2010 has expired. Certain U.S. state taxing authorities are currently examining our
income tax returns for fiscal years ended March 31, 2011 through March 31, 2013. The determination as to
further adjustments to our gross unrecognized tax benefits during the next 12 months is not practicable.

We believe that we have provided for any reasonably foreseeable outcomes related to our tax audits and
that any settlement will not have a material adverse effect on our consolidated financial statements.
However, there can be no assurances as to the possible outcomes.

15. STOCK-BASED COMPENSATION

Our stock-based compensation plans are broad-based long-term retention programs intended to attract
and retain talented employees and align stockholder and employee interests. For similar reasons, we also
granted non-employee equity awards, which are subject to variable accounting, to ZelnickMedia in
connection with their contract to provide executive management services to us. In April 2009, our
stockholders approved our 2009 Stock Incentive Plan (the ‘‘2009 Plan’’). The aggregate number of shares
issuable under the 2009 Plan is 27,209,000 and as of March 31, 2016, there were approximately 1,722,000
shares available for issuance. The 2009 Plan is administered by the Compensation Committee of the Board
of Directors and allows for awards of restricted stock and other stock-based awards of our common stock
to employees and non-employees. Subject to the provisions of the plans, the Board of Directors or any
Committee appointed by the Board of Directors, has the authority to determine the individuals to whom
the equity awards are to be granted, the number of shares to be covered by each equity award, the vesting
period, restrictions, if any, on the equity award and the terms and conditions of the equity award.

Under our unvested restricted stock awards we issue shares to employees on the date the restricted stock
awards are granted and therefore shares granted have voting rights, participate in dividends and are

considered issued and outstanding. Shares issued for any restricted stock awards that are forfeited prior to
vesting are canceled and no longer outstanding. Upon the vesting of certain restricted stock awards
employees have the option to have the Company withhold shares to satisfy the employee’s federal and
state tax withholding requirements.

The following table summarizes stock-based compensation expense included in our Consolidated
Statements of Operations:

Cost of goods sold
Selling and marketing
General and administrative
Research and development

Stock-based compensation expense

Capitalized stock-based compensation expense

Restricted Stock Awards

Fiscal Year Ended March 31,

2016

2015

2014

$15,323
9,425
40,322
4,926

$17,121
8,798
33,636
5,691

$30,124
10,136
28,991
8,867

$69,996

$65,246

$78,118

$30,367

$17,423

$26,156

Restricted stock awards granted to employees under our stock-based compensation plans generally vest
annually over 3 years from the date of grant. Certain restricted stock awards granted to key officers, senior-
level employees, and key employees vest based on market conditions, primarily related to the performance
of the price of our common stock.

Pursuant to the 2011 Management Agreement, we granted 1,100,000 shares of restricted stock to
ZelnickMedia that vested annually through May 15, 2015 and 1,650,000 shares of market-based restricted
stock that were eligible to vest through May 15, 2015, based on the Company’s Total Shareholder Return
(as defined in the relevant grant agreements) relative to the Total Shareholder Return of the companies
that constitute the NASDAQ Composite Index measured annually on a cumulative basis. To earn all of the
shares of market-based restricted stock, the Company must perform at the 75th percentile, or top quartile,
of the NASDAQ Composite Index. None of the shares of restricted stock grant pursuant to the 2011
Management Agreement remained unvested as of March 31, 2016 and 1,133,000 shares of restricted stock
remained unvested as of March 31, 2015. During the fiscal year ended March 31, 2016, 1,108,250 shares of
restricted stock vested and 24,750 shares of rested stock were forfeited related to the 2011 Management
Agreement.

In connection with the 2014 Management Agreement, we granted 525,591 and 619,490 restricted stock
units to ZelnickMedia on May 20, 2015 and April 1, 2014, respectively, as follows:

Time-based
Market-based(1)
Performance-based(1)

New IP
Major IP

Total-Performance-based

Total Restricted Stock Units

(1) Represents the maximum number of shares eligible to vest.

100

Fiscal Year Ended
March 31,

2016

2015

151,575
280,512

178,654
330,628

46,752
46,752

55,104
55,104

93,504

110,208

525,591

619,490

Time-based restricted stock units granted on April 1, 2014 will vest on May 20, 2016 and those granted on
May 20, 2015 will vest on April 1, 2017, in each case provided that the 2014 Management Agreement has
not been terminated prior to such vesting date.

Market-based restricted stock units granted on April 1, 2014 are eligible to vest on May 20, 2016 and those
granted on May 20, 2015 are eligible to vest on April 1, 2017, in each case provided that the 2014
Management Agreement has not been terminated prior to such vesting date. Market-based restricted stock
units are eligible to vest based on the Company’s Total Shareholder Return (as defined in the relevant
grant agreement) relative to the Total Shareholder Return (as defined in the relevant grant agreement) of
the companies that constitute the NASDAQ Composite Index as of the grant date measured over a
two-year period. To earn the target number of market-based restricted stock units (which represents 50%
of the number of the market-based restricted stock units set forth in the table above), the Company must
perform at the 50th percentile, with the maximum number of market-based restricted stock units earned if
the Company performs at the 75th percentile. Each reporting period, we re-measure the fair value of the
unvested shares of market-based restricted stock units granted to ZelnickMedia.

Performance-based restricted stock units granted on April 1, 2014 are eligible to vest on May 20, 2016 and
those granted on May 20, 2015 are eligible to vest on April 1, 2017, in each case provided that the 2014
Management Agreement has not been terminated prior to such vesting date. Performance-based restricted
stock units, of which 50% are tied to ‘‘New IP’’ and 50% to ‘‘Major IP’’ (as defined in the relevant grant
agreement), are eligible to vest based on the Company’s achievement of certain performance metrics (as
defined in the relevant grant agreement) of individual product releases of ‘‘New IP’’ or ‘‘Major IP’’
measured over a two-year period. The target number of performance-based restricted stock units that may
be earned pursuant to these grants is equal to 50% of the grant amounts set forth in the above table (which
represents the maximum number of performance-based restricted stock units that may be earned). Each
reporting period, we assess the performance metric and upon achievement of certain thresholds record an
expense for the unvested portion of the shares of performance-based restricted stock units. Certain
performance metrics, based on unit sales, have been achieved as of March 31, 2016 and 2015 for the ‘‘New
IP’’ and ‘‘Major IP’’ performance-based restricted stock units granted on April 1, 2014 and May 20, 2015.

The unvested portion of time-based, market-based and performance-based restricted units granted
pursuant to the 2014 Management Agreement as of March 31, 2016 and 2015 was 1,145,081 and 619,490,
respectively.

The following table summarizes the weighted-average assumptions used in the Monte Carlo Simulation
method:

Fiscal Year Ended March 31,

2016

2015

2014

Employee

Non-Employee
Market-Based Market-Based Market-Based Market-Based Market-Based Market-Based

Non-Employee

Employee

Risk-free interest rate
Expected stock price

volatility

Expected service period

(years)
Dividends

0.6%

0.4%

0.1%

0.6%

0.2%

33.9%

32.2%

31.9%

33.7%

39.1%

36.5%

1.9
None

1.1
None

2.0
None

3.7
None

2.0
None

3.4
None

The estimated value of market-based restricted stock awards granted to employees during the fiscal years
ended March 31, 2016, 2015 and 2014 was $43.66, $36.56 and $15.73 per share, respectively. For the fiscal
years ended March 31, 2016, 2015 and 2014, the estimated value of the market-based restricted stock
awards granted to ZelnickMedia was $58.45, $24.21 and $11.83 per share, respectively.

101

The following table summarizes the activity in non-vested restricted stock awards to employees and
ZelnickMedia under our stock-based compensation plans with performance and market based restricted
stock awards presented at 100% of target number of shares that may potentially vest:

Non-vested restricted stock at March 31, 2015
Granted
Vested
Forfeited

Non-vested restricted stock at March 31, 2016

Shares
(in thousands)

Weighted
Average Fair
Value on
Grant Date

8,995
2,313
(4,191)
(712)

6,405

$17.52
33.47
15.30
19.44

$24.74

The maximum number of common shares that could vest is 293,521 for performance-based and market-
based restricted stock awards granted during the current year. As of March 31, 2016, the maximum number
of shares that could vest is 657,773 for performance-based and market-based restricted stock units
outstanding.

As of March 31, 2016, the total future unrecognized compensation cost, net of estimated forfeitures,
related to outstanding unvested restricted stock was $101,124 and will be recognized as compensation
expense on a straight-line basis over a weighted-average period of approximately 1 year, or capitalized as
software development costs.

Liability Awards

During the fiscal year ended March 31, 2016, we issued 5,500,000 of time and performance based restricted
stock units, to certain employees, which currently can only be settled in cash and are therefore treated as
liability awards. The awards are expected to vest between September 2018 and June 2021. As of March 31,
2016, the total future unrecognized compensation cost, based on the March 31, 2016 closing stock price, is
estimated to be $199,759 and will be recognized as compensation expense on a straight-line basis over a
weighted-average period of approximately 4.9 years, or capitalized as software development costs.

16. SHARE REPURCHASE PROGRAM

In January 2013, our Board of Directors authorized the repurchase of up to 7,500,000 shares of our
common stock. In May 2015, our Board of Directors authorized the repurchase of an additional 6,717,683
shares of our common stock pursuant to the share repurchase program. During the fiscal year ended
March 31, 2016 we repurchased 953,647 shares of our common stock in the open market for $26,552,
including commissions of $10, as part of the program. We did not repurchase any shares of our common
stock during the fiscal year ended March 31, 2015. During the fiscal year ended March 31, 2014, we
repurchased 4,217,683 shares of our common stock in the open market for $73,325, including commissions
of $42, as part of the program. As of March 31, 2016, we have repurchased a total of 5,171,330 shares of
our common stock and have 9,046,353 shares of our common stock that remain available for repurchase
under our share repurchase authorization. We are authorized to purchase shares from time to time
through a variety of methods, including in the open market or through privately negotiated transactions, in
accordance with applicable securities laws. Repurchases are subject to the availability of stock, prevailing
market conditions, the trading price of the stock, our financial performance and other conditions. The
program may be suspended or discontinued at any time for any reason.

All of the repurchased shares are classified as treasury stock in our Consolidated Balance Sheets.

102

17. SEGMENT AND GEOGRAPHIC INFORMATION

We are a publisher of interactive software games designed for console systems and personal computers,
including smart phones and tablets, which are delivered through physical retail, digital download, online
platforms and cloud streaming services. Our business consists of our Rockstar Games and 2K labels, which
represent a single operating segment, the ‘‘publishing segment’’. Our operations involve similar products
and customers worldwide. Revenue earned from our publishing segment is primarily derived from the sale
of internally developed software titles and software titles developed by third-parties. Our publishing
segment is based upon our internal organizational structure, the manner in which our operations are
managed and the criteria used by our Chief Executive Officer, our Chief Operating Decision Maker
(‘‘CODM’’), to evaluate performance and allocate resources. We are centrally managed and the CODM
primarily uses segment operating income supplemented by sales information by product category, major
product title and platform to make operational decisions and assess financial performance. We include the
change in deferred revenue to GAAP revenue to arrive at Segment Revenue. Segment Revenue is a key
metric that we use to manage our business as it reflects the sales activity in a given period and provides a
more timely indication of trends in our business, provides comparability with the way our business is
measured by analysts, and provides consistency with industry data sources. Furthermore, Segment Revenue
incorporates the change in deferred revenue that is reflected in the calculation of Segment operating
income. Segment operating income differs from consolidated operating income due to the exclusion of the
deferral of net revenues and associated costs related to sales generated from certain titles for which we
have or expect to provide PCS deemed to be significant (see Note 1) and virtual currency transactions,
stock-based compensation expenses, and business reorganization and other expenses that may not be
indicative of the Company’s core business, operating results or future outlook. Our CODM reviews assets
on a consolidated basis and not on a segment basis. The following table summarizes the financial
performance of our operating segment revenue and operating income (loss) and provides reconciliations
to our consolidated net revenue and operating (loss) income:

Operating Segment
Reconciliation to consolidated net revenue /

operating (loss) income:
Net effect of deferral of net revenues and

related cost of sales

Stock based compensation expense
Business reorganization and other expenses

Fiscal Year Ended March 31,

2016

2015

2014

2016

2015

2014

Net Revenue

Operating (loss) income

$1,560,626

$1,668,765

$2,413,720

$ 238,212

$ 309,543

$534,043

(146,928)
—
—

(585,827)
—
—

(63,152)
—
—

(106,531)
(69,996)
(72,513)

(502,565)
(65,246)
(195)

(36,179)
(78,118)
(4,490)

Consolidated net revenue / operating (loss) income

$1,413,698

$1,082,938

$2,350,568

$ (10,828)

$(258,463)

$415,256

We attribute net revenue to geographic regions based on product destination. Net revenue by geographic
region was as follows:

Net revenue by geographic region:

United States
Europe
Asia Pacific
Canada and Latin America

Total net revenue

Fiscal Year Ended March 31,

2016

2015

2014

$ 742,963
449,577
120,629
100,529

$ 623,080
322,645
69,923
67,290

$1,093,918
903,610
178,816
174,224

$1,413,698

$1,082,938

$2,350,568

103

Net revenue by product platform was as follows:

Net revenue by product platform:

Console
PC and other

Total net revenue

Fiscal Year Ended March 31,

2016

2015

2014

$1,167,623
246,075

$ 881,516
201,422

$2,148,494
202,074

$1,413,698

$1,082,938

$2,350,568

Our products are delivered through physical retail and digital online services (digital download, online
platforms and cloud streaming). Net revenue by distribution channel was as follows:

Net revenue by distribution channel:

Physical retail and other
Digital online

Total net revenue

18. INTEREST AND OTHER, NET

Interest expense, net
Foreign currency exchange gain (loss)
Other

Interest and other, net

Fiscal Year Ended March 31,

2016

2015

2014

$ 716,040
697,658

$ 627,639
455,299

$1,978,598
371,970

$1,413,698

$1,082,938

$2,350,568

Fiscal Year Ended March 31,

2016

2015

2014

$(29,239) $(29,901) $(33,961)
209
(2,068)
199
76

(1,407)
441

$(30,205) $(31,893) $(33,553)

19. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The following table provides the components of accumulated other comprehensive (loss) income:

Foreign currency
translation
adjustments

Unrealized gain
(loss) on
derivative
instruments

Unrealized gain
(loss) on
available-
for-sales
securities

Total

Balance at March 31, 2014

$ 1,531

$585

$ —

$ 2,116

Other comprehensive (loss) income before

reclassifications

Amounts reclassified from accumulated
other comprehensive income (loss)

(32,747)

—

Balance at March 31, 2015

$(31,216)

$617

Other comprehensive (loss) income before

reclassifications

Amounts reclassified from accumulated
other comprehensive income (loss)

Balance at March 31, 2016

(7,364)

—

$(38,580)

(17)

$600

(25)

(32,740)

—

$(25)

—

$(30,624)

(7,291)

$ 84

$(37,896)

104

20. BUSINESS REORGANIZATION

During the fiscal year ended March 31, 2016, the Company incurred business reorganization expenses of
$71,285 due primarily to employee separation costs in connection with reorganizing one development
studio and closing two development studios. Through March 31, 2016, the Company has paid $4,962
related to these reorganization activities and $66,323 remains accrued for in Accrued expenses and other
current liabilities. See Note 13 for additional information.

21. SUPPLEMENTARY FINANCIAL INFORMATION

The following table provides details of our valuation and qualifying accounts:

Fiscal Year Ended March 31, 2016

Valuation allowance for deferred income taxes

$133,468

$ 37,106

— $ — $170,574

Beginning
Balance

Additions(1)

Deductions

Other

Ending
Balance

Price protection, sales returns and other

allowances

Allowance for doubtful accounts

$ 69,305
1,166

$ 64,498
—

$ (86,622) $(2,028) $ 45,153
399

(767)

—

Total accounts receivable allowances

$ 70,471

$ 64,498

$ (87,389) $(2,028) $ 45,552

Fiscal Year Ended March 31, 2015

Valuation allowance for deferred income taxes

$ 40,774

$ 92,694

— $ — $133,468

Price protection, sales returns and other

allowances

Allowance for doubtful accounts

$ 74,078
1,440

$ 50,114
—

$ (57,982) $ 3,095
—

(274)

$ 69,305
1,166

Total accounts receivable allowances

$ 75,518

$ 50,114

$ (58,256) $ 3,095

$ 70,471

Fiscal Year Ended March 31, 2014

Valuation allowance for deferred income taxes

$132,912

— $ (92,138) $ — $ 40,774

Price protection, sales returns and other

allowances

Allowance for doubtful accounts

$ 62,880
1,201

$138,050
736

$(127,458) $
(497)

Total accounts receivable allowances

$ 64,081

$138,786

$(127,955) $

606
—

606

$ 74,078
1,440

$ 75,518

(1)

Includes price protection of $36,546, $16,669 and $65,996; other allowances including rebates, discounts and cooperative
advertising of $23,073, $24,402 and $48,755; and sales returns of $4,879, $9,043 and $23,299 for the fiscal years ended March 31,
2016, 2015 and 2014, respectively.

105

22. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following tables set forth quarterly supplementary data for each of the years in the two-year period
ended March 31, 2016:

Fiscal Year Ended March 31, 2016

Net revenue
Gross profit
(Loss) income from operations
Net (loss) income
(Loss) earnings per share:

Basic (loss) earnings per share
Diluted (loss) earnings per share

Fiscal Year Ended March 31, 2015

Net revenue
Gross profit (loss)
(Loss) income from operations
Net (loss) income
(Loss) earnings per share:

Basic (loss) earnings per share
Diluted (loss) earnings per share

Quarter

First

Second

Third

Fourth

$275,297
72,682
(62,637)

$346,974
203,034
66,431
$ (67,023) $ 54,735

$414,221
156,360
(59,197)

$377,206
167,749
44,575
$ (42,413) $ 46,399

$
$

(0.81) $
(0.81) $

0.63
0.55

$
$

(0.51) $
(0.51) $

0.54
0.48

Quarter

First

Second

Third

Fourth

$125,425
71,269
(33,209)

$531,147
253,134
65,612
$ (35,403) $ (41,369) $ 40,093

$126,277
74,261
(48,513)

$ 300,089
(110,593)
(242,353)
$(242,791)

$
$

(0.45) $
(0.45) $

(0.51) $
(0.51) $

0.46
0.42

$
$

(2.99)
(2.99)

Basic and diluted (loss) earnings per share are computed independently for each of the quarters presented.
Therefore, the sum of quarterly basic and diluted (loss) earnings per share information may not equal
annual basic and diluted earnings per share.

106

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

TAKE-TWO INTERACTIVE SOFTWARE, INC.

By: /s/ STRAUSS ZELNICK

Strauss Zelnick
Chairman and Chief Executive Officer

May 18, 2016

POWER OF ATTORNEY

Each individual whose signature appears below constitutes and appoints Strauss Zelnick and Lainie
Goldstein and each of them, his or her true and lawful attorneys-in-fact and agents with full power of
substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any
and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his, her or their substitute or substitutes, may lawfully do or
cause to be done or by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the Registrant in the capacities and on the date indicated.

Signature

Title

Date

/s/ STRAUSS ZELNICK

Strauss Zelnick

/s/ LAINIE GOLDSTEIN

Lainie Goldstein

/s/ MICHAEL DORNEMANN

Michael Dornemann

/s/ ROBERT A. BOWMAN

Robert A. Bowman

/s/ J MOSES

J Moses

Chairman and Chief Executive Officer
(Principal Executive Officer)

May 18, 2016

Chief Financial Officer (Principal
Financial and Accounting Officer)

May 18, 2016

Lead Independent Director

May 18, 2016

Director

107

Signature

Title

Date

/s/ MICHAEL SHERESKY

Michael Sheresky

/s/ SUSAN TOLSON

Susan Tolson

Director

May 18, 2016

108

Name

2K Australia Pty. Ltd.
2K Czech, s.r.o.
2K Games (Chengdu) Co., Ltd.
2K Games (Hangzhou) Co. Ltd.
2K Games (Shanghai) Co., Ltd.
2K Games, Inc.
2K, Inc.
2K Marin, Inc.
2K Play, Inc.
2K Games Songs LLC
2K Games Sounds LLC
2K Games Tunes LLC
2K Vegas, Inc.
2KSports, Inc.
Cat Daddy Games, L.L.C.
Digital Productions S.A.
DMA Design Holdings Limited
Double Take LLC
Firaxis Games, Inc.
Frog City Software, Inc.
Gathering of Developers, Inc.
Gearhead Entertainment, Inc.
Indie Built, Inc.
Inventory Management Systems, Inc.
Irrational Games, LLC
Jack of All Games Norge A.S.
Jack of All Games Scandinavia A.S.
Joytech Europe Limited
Joytech Ltd.
Kush Games, Inc.
Maxcorp Ltd.
Rockstar Events Inc.
Rockstar Games, Inc.
Rockstar Games Songs LLC
Rockstar Games Sounds LLC
Rockstar Games Toronto ULC
Rockstar Games Tunes LLC
Rockstar Games Vancouver ULC
Rockstar Interactive India LLP
Rockstar International Limited
Rockstar Leeds Limited
Rockstar Lincoln Limited
Rockstar London Limited
Rockstar New England, Inc.
Rockstar North Limited
Rockstar San Diego, Inc.
T2 Developer, Inc.
Take 2 Interactive Software Pty. Ltd.

Subsidiaries of the Company

Exhibit 21.1

Jurisdiction of Incorporation

Australia
Czech Republic
China
China
China
Delaware
New York
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Washington
Luxembourg
United Kingdom
Delaware
Delaware
Delaware
Texas
Pennsylvania
Delaware
Delaware
Delaware
Norway
Norway
United Kingdom
Hong Kong
California
Bermuda
New York
Delaware
Delaware
Delaware
British Columbia
Delaware
British Columbia
India
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Delaware
United Kingdom
Virginia
Delaware
Australia

Name

Jurisdiction of Incorporation

Take 2 Productions, Inc.
Take-Two Asia Pte. Ltd.
Take-Two Chile SpA
Take-Two Europe (Holdings) Limited
Take-Two GB Limited.
Take-Two Holdings II LLC
Take Two Holdings LLC
Take-Two Interactive Austria GmbH
Take-Two Interactive Benelux B.V.
Take-Two Interactive Canada Holdings, Inc.
Take-Two Interactive Canada, Inc.
Take-Two Interactive Espana S.L.
Take-Two Interactive France SAS
Take-Two Interactive GmbH
Take-Two Interactive Japan G.K.
Take-Two Interactive Korea Ltd.
Take-Two Interactive Software Europe Limited
Take-Two Interactive Software UK Limited
Take-Two International B.V.
Take-Two International Holdings L.P.
Take Two International GmbH
Talonsoft, Inc.
Techcorp Ltd.
Venom Games Limited
Visual Concepts China Co., Ltd.
Visual Concepts Entertainment
VLM Entertainment Group, Inc.
WC Holdco, Inc.

Delaware
Singapore
Chile
United Kingdom
United Kingdom
Delaware
Delaware
Austria
Netherlands
Ontario
Ontario
Spain
France
Germany
Japan
South Korea
United Kingdom
United Kingdom
Netherlands
Cayman Islands
Switzerland
Delaware
Hong Kong
United Kingdom
China
California
Delaware
New York

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-158735,
333-177822, 333-191993 and 333-198787 and Form S-3 Nos. 333-189246, 333-204318 and 333-204339) of
Take-Two Interactive Software, Inc., of our reports dated May 18, 2016, with respect to the consolidated
financial statements of Take-Two Interactive Software, Inc. and the effectiveness of internal control over
financial reporting of Take-Two Interactive Software, Inc. included in its Annual Report (Form 10-K) for
the year ended March 31, 2016 filed with the Securities and Exchange Commission.

/s/ ERNST & YOUNG LLP

Exhibit 23.1

New York, New York

May 18, 2016

TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Section 302 Certification

Exhibit 31.1

I, Strauss Zelnick, certify that:

1. I have reviewed this Annual Report on Form 10-K of Take-Two Interactive Software, Inc. (the

‘‘registrant’’);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation
of internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s ability
to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a

significant role in the registrant’s internal control over financial reporting.

May 18, 2016

/s/ STRAUSS ZELNICK

Strauss Zelnick
Chairman and Chief Executive Officer

TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES

CERTIFICATION OF CHIEF FINANCIAL OFFICER
Section 302 Certification

Exhibit 31.2

I, Lainie Goldstein, certify that:

1. I have reviewed this Annual Report on Form 10-K of Take-Two Interactive Software, Inc. (the

‘‘registrant’’);

b) Any fraud, whether or not material, that involves management or other employees who have a

significant role in the registrant’s internal control over financial reporting.

May 18, 2016

/s/ LAINIE GOLDSTEIN

Lainie Goldstein
Chief Financial Officer

TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES

CERTIFICATION PURSUANT TO
18 U. S. C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EXHIBIT 32.1

In connection with the Annual Report of Take-Two Interactive Software, Inc. (the ‘‘Company’’) on
Form 10-K for the period ended March 31, 2016 as filed with the Securities and Exchange Commission on
the date hereof (the ‘‘Report’’), I, Strauss Zelnick, as Chairman and Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities

Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial

condition and results of operations of the Company.

May 18, 2016

/s/ STRAUSS ZELNICK

Strauss Zelnick
Chairman and Chief Executive Officer

TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES

CERTIFICATION PURSUANT TO
18 U. S. C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EXHIBIT 32.2

In connection with the Annual Report of Take-Two Interactive Software, Inc. (the ‘‘Company’’) on
Form 10-K for the period ended March 31, 2016 as filed with the Securities and Exchange Commission on
the date hereof (the ‘‘Report’’), I, Lainie Goldstein, as Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities

Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial

condition and results of operations of the Company.

May 18, 2016

/s/ LAINIE GOLDSTEIN

Lainie Goldstein
Chief Financial Officer

[THIS PAGE INTENTIONALLY LEFT BLANK]

OFFICERS

CORPORATE OFFICERS

CORPORATE INFORMATION

STRAUSS ZELNICK
Chairman and
Chief Executive Ofﬁcer

KARL SLATOFF
President

LAINIE GOLDSTEIN
Chief Financial Ofﬁcer

DANIEL P. EMERSON
Executive Vice President and
General Counsel

BOARD OF DIRECTORS

STRAUSS ZELNICK
Chairman

MICHAEL DORNEMANN
Lead Independent Director

ROBERT BOWMAN
J MOSES
MICHAEL SHERESKY
SUSAN TOLSON

CORPORATE HEADQUARTERS

Take-Two Interactive Software, Inc.
622 Broadway
New York, NY 10012
(646) 536-2842

Take-Two Interactive
Software Europe, Ltd.
Saxon House
2-4 Victoria Street
Windsor, Berkshire SL4 1EN

Take-Two Asia Pte. Ltd.
47 Scotts Road
#11-01 Goldbell Towers
Singapore 228233

PRINCIPAL OPERATING OFFICES

Rockstar Games, Inc.
622 Broadway
New York, NY 10012

2K Games, Inc.
2K Sports, Inc.
10 Hamilton Landing
Novato, CA 94949

STOCKHOLDER INFORMATION
A copy of the Company’s Annual
Report on Form 10-K, as ﬁled with the
Securities and Exchange
Commission, will be furnished
without charge upon written
request to Investor Relations at
the Corporate Headquarters.

INVESTOR RELATIONS
IR@take2games.com

INDEPENDENT AUDITORS
Ernst & Young LLP
5 Times Square
New York, NY 10036

TRANSFER AGENT
American Stock Transfer
& Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219

COMMON STOCK INFORMATION
The Company’s common
stock is listed on the NASDAQ
Global Select Market under
the symbol TTWO.

www.take2games.com

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TAKE-TWO INTERACTIVE SOFTWARE, INC.
622 Broadway
New York, NY 10012
(646) 536-2842