TTWOTake-Two Interactive

Your disaggregation of revenue between "service and other" and "product" appears to be based on the timing of revenue recognition (point in time versus over time). Please tell us the amount of product revenue included in the service and other category and clarify whether you consider add-on content and in-game purchases to be a product or service.

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To the extent the remaining service revenue is greater than 10% of total revenue, separately present revenue and the related cost of revenues from product and services on the face of your consolidated statement of operations. Refer to Rule 5-03(b)(1) and (2) of Regulation S-X.

In evaluating the presentation of our statement of operations and applying the guidance in Rule 5-03(b)(1) and (2) of Regulation S-X, we have primarily focused on the presentation that we believe is most useful to investors. As a result, we have historically presented revenue generated from our software product sales, including sales of software products whose online gameplay is dependent on our game related services (i.e., online gameplay functionality that is dependent upon online support services and/or free content updates), as well as sales of virtual currency, downloadable add-on

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content, and in-game purchases under one caption: “Net revenue.” We note that the regulation was issued many years ago and did not contemplate sales of intangible products such as software. There has been limited guidance provided on how to apply Rule 5-03 as it relates to intangible product sales, resulting in diversity in practice.

We believe that this presentation is most useful to our investors, because they view our primary business as developing and publishing high-quality interactive entertainment experiences across a range of genres, regardless of how those experiences are delivered or subsequently supported by us. We believe that investors view us not as a products and services company but rather as a publisher/developer.

We acknowledge that many of our software product offerings (and those of our competitors) are supported by online support services, and there is diversity in practice in presenting revenue and cost of revenue for the non-service and service components of software products. In our view, we believe that the new disaggregated revenue disclosures required by ASC 606 provide the most relevant information with respect to the underlying sales of our products. We do not believe that breaking out product and service information on the face of our consolidated statement of operations would provide useful information to our investors, as we do not believe that the implied margins associated with the different revenue components would be meaningful. For our internal purposes, we view margins based on the product sale in its entirety and not based on the timing of when a performance obligation is satisfied or how a product is distributed (physical retail versus digital). In addition, our mix of revenue by product type or distribution method, the impact of deferring revenues, and the timing of recognizing such revenues for certain of our software products may not align with how cost recognition would be presented in cost of sales.

To address the fact that we do have software product offerings with significant service components, in accordance with ASC 606-10-50-1, we have provided footnote disclosure about the nature of our revenue and timing of our revenue recognition. This includes providing disaggregated revenue category disclosures primarily focused on the timing of revenue recognition (“product” and “service and other”), the nature of our software offerings underlying our revenue recognition (“full game and other” and “recurrent consumer spending”), how these software offerings are distributed (“physical retail and other” and “digital online”), and the types of platforms they are played on (“console” and “PC and other”).

With respect to the Staff’s question on the amount of product revenue included in the “service and other” category, for fiscal 2019, we had approximately $1.15 billion of product revenue that relied on our game related services included in this disaggregated revenue category. This included revenue allocated to our game related services of our full game software product sales as well as supplemental sales of virtual currency and in-game purchases. The remaining balance in the “service and other” category is comprised of other revenue that represents less than 10% of our total net revenue in fiscal 2019; therefore, we did not deem it necessary to present separately any additional “subcaptions” on the face of our consolidated statement of operations.

We will continue to monitor the composition of our revenue to assess whether additional “subcaptions” described in Rule 5-03(b)(1) and (2) of Regulation S-X should be presented on the face of our consolidated statement of operations.

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We note that international revenues comprised approximately 46% of total net revenues. To the extent that revenue from any one country is material, please separately disclose the revenue related to such country. Refer to ASC 280-10-50-41.

We respectfully note that there is no country outside of the United States (“U.S.”) from which we derive a material amount of net revenue. For fiscal 2019, 2018, and 2017, the country from which we derived the largest amount of net revenue outside the U.S. was [***]. Net revenue for [***] was [***], [***], and [***] of total net revenue, respectively, for each of those years.

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We regularly monitor this as part of our quarterly reporting process to assess whether additional disclosure would be required in accordance with ASC 280-10-50-41, and, should there be a change in magnitude or composition, we would make the appropriate disclosure for that reporting period.

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We note that you recognize revenue for full game products that are dependent on your game related service over an estimated service period as substantially all game play requires online access to your game related services.

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Please provide us with a detailed analysis of the factors considered in determining that the software and gaming services are not both distinct and separable for certain of your games and tell us to which specific games this accounting applies. Clarify whether such games can be played offline and if so, how that factored into your analysis. Tell us the amount of revenue recognized from such games for fiscal 2018 and to date in fiscal 2019. Refer to ASC 606-10-25-19 through 25-21.

Our revenue recognition policy generally differentiates among three types of full game software products we currently publish: software products with offline gameplay and insignificant online gameplay, software products with online gameplay and insignificant offline gameplay, and software products that have both significant offline and online gameplay.

As described in Note 1—Basis of Presentation and Significant Accounting Policies in our fiscal 2019 Form 10-K, “[c]ertain of our full game software products are delivered primarily as an online gaming experience with substantially all gameplay

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requiring online access to our game related services.” These software products have been designed to be played primarily as an online gaming experience, in which a user must have access to our game related services in order to play. The offline gameplay available in these software products is generally less than ten hours, which we believe is immaterial in the context of the overall game. [***] and [***], which were released in [***] and [***], respectively, are examples of these types of software products. Overall, revenue from our software products delivered primarily as an online gaming experience with insignificant offline gameplay represented [***] of total revenue in fiscal 2019 and [***] in fiscal 2018.

For the online gaming experience to function as designed, online gameplay and functionality depend on access to our game related services. Game related services are not sold separately or apart by us or any other vendor; a user cannot benefit from online gameplay without access to our dedicated game servers and game related services. The nature of these services can and does change, users are required to use the latest version of the software product, and users do not have the ability to opt-out. We also determine the duration for which game related services are provided (i.e., as disclosed in our end user license agreements, all online functionality terminates when we cease to operate our game servers).

We evaluated the guidance of ASC 606-10-25-19 through 25-21 and ASC 606-10-55-56(b) and concluded that we have a single performance obligation to provide an online gaming experience. Our conclusion is supported by ASC 606-10-55-56(b), which states that a “license that the customer can benefit from only in conjunction with a related service (such as an online service provided by the entity that enables, by granting a license, the customer to access content)” is not distinct. While the game’s code and related assets reside on the user’s game console, the user can only benefit from that online gameplay in conjunction with our online services. Further, we considered the factors listed in ASC 606-10-25-21(a) and (c) in determining whether the game’s online gameplay and online services are separately identifiable, noting that, in the context of the game design, the online software is highly dependent on, and interrelated with, the game related services and therefore would not be distinct. We therefore concluded that the software license and game related services should be combined into a single performance obligation and revenue would be recognized over an estimated service period.

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You state on 71 that upon the adoption of ASC 606, the "majority" of the sales price for certain of your games was allocated to the offline software and recognized upon transfer of control to your customers. Please describe for us each of the performance obligations included in your products with online functionality.

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Explain further the specific methods, inputs, estimates and assumptions used in determining the standalone selling price for each performance obligation and tell us the percentage of the transaction price allocated to each.

Performance Obligations

Certain of our software products have both significant offline and online gameplay functionality. Software products with identified significant offline and online gameplay functionality include Grand Theft Auto V (including Grand Theft Auto Online), Red Dead Redemption 2 (including Red Dead Online), and titles in our NBA 2K franchise.

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In accordance with ASC 606, we assess the promised goods and services offered for our software products to determine the separate performance obligations on a product-by-product basis, noting the following performance obligations:

· A license to our intellectual property that delivers a significant offline gameplay experience, sometimes referred to as the “Story Mode.” We determined this to be a distinct performance obligation under the guidance in ASC 625-10-25-19, as a user can benefit from offline functionality on its own and it is not dependent on our online services.

· Game related services (online functionality that is dependent on online support services and/or free content updates). For software products such as Grand Theft Auto V, Red Dead Redemption 2, and our NBA 2K series, a significant separate and distinct online gameplay experience from the Story Mode/offline functionality of these games is promised as part of the overall software product. The online functionality is dependent on our dedicated game servers and game related services for the online gaming experience to function as designed, similar to our online games with insignificant offline gameplay as more fully discussed in our response to comment 3, above. Therefore, we determined that the online game functionality is an identified performance obligation with revenue recognized over an estimated service period. In addition, for Grand Theft Auto V and Red Dead Redemption 2, free content updates are provided on a “when and if available” basis and only update the online gameplay functionality of these games (i.e., Grand Theft Auto Online and Red Dead Online). These free content updates happen throughout each game’s life. Examples of recent free content updates to these games include Diamond Casino and Resort for Grand Theft Auto Online and Frontier Pursuits for Red Dead Online. Because the free content updates for these software products only affect their online gameplay functionality, we consider the free content updates to be part of our game related services. For our NBA 2K series we provide roster updates continuously, which are considered part of our game related services.

For all of our software products, we also provide routine bug fixes and customer service, which we have deemed to be immaterial in the context of our software products and therefore do not consider them to be separate performance obligations under the guidance of ASC 606.

Estimated Standalone Selling Price

Due to the unique features of each software product and because we do not sell the identified performance obligations separately, for our software products with two performance obligations (Story Mode/offline functionality and game related services), we do not have observable standalone selling prices for each performance obligation. Therefore, to determine the standalone selling price for each performance obligation, we employ an expected cost-plus margin methodology at the time of each product release. Cost inputs utilized in our methodology generally consist of (a) our product development costs for the separate offline functionality (Story Mode) and online gameplay functionality, (b) post-release development costs for planned free content updates, (c) licensing costs (i.e., costs to license IP, music, or image rights in the software product), (d) game related service personnel and server costs, (e) physical disk inventory cost, (f) shipping/distribution costs, and (g) marketing costs.

Of the cost inputs noted above, product development and post-release development costs are the most significant amounts and primarily include direct development personnel expenses (payroll costs and stock-based compensation), third-party development/production expenses, and allocations of overhead. For most of our software products, the development of the offline (Story Mode) content represents the primary focus of the software product and therefore is the most significant input to the overall software product cost.

The most significant estimate in the determination of the standalone selling price primarily relates to the costs of the planned free future content updates that we expect to provide to users to update the online gameplay as part of our game related services. The estimates are based on internal cost forecasts around future development plans for the online functionality, which are dependent on the continuing success of the software product and consumer preferences.

To date, the margins applicable to the offline and online functionality have been the same since the primary driver of both the offline and online modes is similar game content from which we would expect to derive a similar margin. We did not observe market evidence that offline only or online only games would inherently have higher or lower margins when compared to each other as they have similar selling prices, rely on similar development techniques, have similar customers, and have similar distribution methods. Therefore, we concluded that uniform expected margins were reasonable.

To evaluate the results of our estimated standalone selling price for each identified performance obligation, we corroborate our cost-plus margin methodology to the extent available and applicable to market data, past pricing for games with similar content or functionality, other data points such as player usage patterns (offline versus online minutes played by users), and competitor-disclosed pricing information. If applicable, we also perform look-back analyses of actual costs to estimated costs for previous iterations of software products to inform our estimates.

We then allocate the overall software product transaction price to each performance obligation using the relative standalone selling price method. Amounts allocated to the offline functionality (Story Mode) performance obligation are recognized when control of the software product is transferred to the customer and amounts allocated to the online game related services performance obligation is recognized over an estimated service period, which is the period of time that faithfully depicts the satisfaction of our performance obligation.

Allocation percentages

As a result of applying our estimated standalone pricing methodology, the following relative percentages were allocated to the identified performance obligations of our software products that have both significant offline and online gameplay functionality:

[***] of the transaction consideration was allocated to offline (Story Mode) and [***] to game related services.

[***] of the transaction consideration was allocated to offline (Story Mode) and [***] to game related services

We note that for [***]. This is driven by [***]. We continue to update our cost-plus margin methodology to reflect additional investments or other new information related to our software products after their initial release. [***]. Therefore, such cost investments were factored into our estimated standalone selling price analysis of the performance obligations at the time of adopting ASC 606 for all open contracts and each reporting period since adoption for new game sales.

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Specifically with regards to the performance obligation related to online functionality, please help us understand the different roles and responsibilities that you and your platform partners have with respect to technology, host configurations, maintenance and services.

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Tell us whether you use your own or third-party servers to host the multiplayer or online game play and describe the interaction of your online functionality with Sony and Microsoft's platforms. Compare and contrast the different service obligations that you and your platform partners have with respect to the players who purchase your games and how such obligations factored into your determination of the standalone selling price and the transaction price allocation for your game related services.

For our console-based software products with significant online functionality—Grand Theft Auto V (including Grand Theft Auto Online), Red Dead Redemption 2 (including Red Dead Online), and titles in our NBA 2K franchise—we are responsible for fulfilling all obligations with respect to online functionality and features. The game data necessary for the proper functioning of the online game experience is managed by us.

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We and not Sony and/or Microsoft are primarily responsible for performing our game related services for our games with significant online functionality, with Sony/Microsoft’s role being relatively limited to initially authenticating a user for online gameplay through their subscription service, which we deem insignificant and not related to actual gameplay or the functionality of our products. Sony/Microsoft have no access to our gameplay data or ability to affect the online gameplay.

After a user purchases the game and loads the game, whether digitally or from a physical disk, onto their console, the game’s code reside primarily on the user’s console. From then, the offline functionality (Story Mode) of the game can be played without further involvement from us or any other party; however, the online functionality cannot be utilized without our game related services provided through our dedicated game servers, as discussed in our responses to comments 3 and 4, above. Our servers receive and process each user’s input, and users must connect to our dedicated game servers to interact during online gameplay. The online features of our software products generally include:

· Account authentication — ensuring the user is in good standing with us and has not been banned from allowing access to the online gameplay.

· Broadcast controller packets — facilitating and processing user movements occurring in real-time from one console to another (e.g., if, in NBA 2K, player 1 dribbles a basketball to the left or right, our servers relay that information to player 2 supporting the synchronized movement between the players without a time lag).

· Progress saving - storing, saving, and maintaining users’ game progress allowing them to pick up where they last left off in the online gameplay, including character attributes such as strength, stamina and other special abilities (shooting, driving, flying, etc.) obtained through gameplay, missions completed, inventory, etc.

· Leaderboard tracking — storing, saving, and maintaining various leaderboard statistics that allow individual users to track their performance against other users.

· Matchmaking — evaluating user skill levels and connecting users with similar game skillsets to play against one another.

· Management of in-game virtual currency and virtual goods — tracking virtual currency balances and related usages. Our servers authenticate and unlock virtual goods that have been transferred to an individual user for gameplay.

To access and play our console-based software products online functionality, users first must have access to Sony’s PlayStation Plus, in the case of PlayStation 4, or Microsoft’s Xbox Live Gold services, in the case of Xbox One, which requires a paid subscription directly with Sony/Microsoft.

If Sony/Microsoft determines the user is not authorized to access their servers, the user will not be able to access our software products’ online functionality.

If Sony/Microsoft authenticates a user, the user is then directed to our dedicated game servers, which connect users and facilitate online gameplay for our software products with significant online gameplay functionality as discussed above. We would not be able to fulfill our promise to transfer a functioning online game experience absent access to our game related services. Online gameplay can only be fully delivered to a user when our online intellectual property is on a user’s console and operates in combination with our dedicated game servers. As discussed in our responses to comments 3 and 4, above, all of the game related services occurring in an integrated manner on our dedicated game servers are highly interdependent and interrelated. If our servers are down, users cannot utilize the online gameplay functionality of our software products.

We use both owned and third-party servers to support our software products’ online gameplay functionality. We use internally owned and third-party servers for different aspects of the above noted online services on a title-by-title basis. We treat both internally owned and third-party servers the same when assessing our performance obligations and determining our estimated standalone selling prices.

When determining estimated standalone selling prices for our software products with significant online functionality, we do not factor in Sony/Microsoft’s performance obligations, as they would not have an impact on how we price our software products.

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Please describe further for us the nature of your in-game content. Tell us what product and/or services are transferred to the game-player upon sale of such goods and how that impacts the timing of revenue recognition. Clarify whether the type of game in which the in-game purchase is made (e.g. games with offline functionality vs. online only games) impacts the accounting for such transaction.

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Also, please cite the specific guidance you relied upon in accounting for such sales.

In-game content that users can acquire in connection with our software products typically consists of virtual goods that can be purchased either via virtual currency or direct monetary transaction in a separate transaction from the original software product sale.

Virtual good transactions can be initiated in our console-based software products that have online gameplay or in our mobile games through a separate purchase of virtual currency. When a purchase of virtual currency is made, we transfer the virtual purchasing power to a user’s virtual currency account.

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Each user’s virtual currency account is maintained on our servers, whether purchased or earned through gameplay. The user can then utilize virtual currency to purchase a virtual good within a specific game. When a user converts virtual currency to a virtual good, the virtual good is unlocked and transferred to the user’s account, enabling the user to begin benefiting from the good during gameplay. All virtual currency purchases and the related transfer of a virtual good, regardless of what software product they are associated with, require access to our game related services.

Additionally, virtual goods are available within our free-to-play mobile software products through direct monetary transactions, which are referred to as in-game purchases and which are consistent with virtual currency transactions.

Revenue from such in-game content transactions is deferred and recognized ratably over an estimated service period, which is the time period in which an average user plays our software products (“user life”). As the user will typically continue to benefit from the virtual good over the period of time during which they play the related software product, we have aligned our revenue recognition policy to account for these transactions as a performance obligation satisfied over time as per ASC 606-10-25-27:

An entity transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognizes revenue over time, if one of the following criteria is met:

a. The customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs (see paragraphs 606-10-55-5 through 55-6).

In addition to virtual goods discussed above, we also sell downloadable add-on content, which consists of optional items purchased by users that include separate game content to supplement the previously purchased software product and generally provides additional gameplay elements, such as missions, characters, abilities, and environments. Use of such add-on content typically provides incremental hours of gameplay. Revenue from the sale of separate add-on content is evaluated for revenue recognition on the same basis as our full game software products. Historically, however, add-on content has typically been available for our software products that primarily have a significant offline gaming experience and insignificant online gameplay, and, thus, the related revenue has been recognized at the time of purchase as per ASC 606-10-25-23:

An entity shall recognize revenue when (or as) the entity satisfies a performance obligation by transferring a promised good or service (that is, an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset.

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We note your measure of adjusted cash flow includes an adjustment for changes in restricted cash. Considering the presentation of restricted cash within the statement of cash flows was amended with the adoption of ASC 2016-08, tell us how you determined that such adjustment does not result in a non-GAAP measure based on individually tailored accounting principles and why you believe this measure is useful to

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investors. Refer to the guidance in Question 100.04 of the Non-GAAP C&DIs and Rule 100(b) of Regulation G.

We use Adjusted Operating Cash Flow, a non-GAAP measure of financial performance, which is defined as U.S. GAAP net cash from operating activities, adjusted for changes in restricted cash. As disclosed in our earnings releases, we believe it is important to consider Adjusted Operating Cash Flow, in addition to net cash from operating activities, as it provides more transparency into our current business trends without regard to the timing of payments from restricted cash, which is primarily related to a dedicated account limited to the payment of certain internal royalty obligations, as

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further described below. Internally, management uses Adjusted Operating Cash Flow in assessing our operating results and in projecting future results. Accordingly, we believe that our presentation of Adjusted Operating Cash Flow provides investors with an opportunity to see the Company as viewed by management, to assess our performance with the same metrics that management utilizes internally and to be able to compare such information with prior periods. We have presented this non-GAAP financial measure on a consistent basis since the quarter ended September 30, 2018.

As described in Note 1—Basis of Presentation and Significant Accounting Policies of our fiscal 2019 Form 10-K, “[o]ur restricted cash balance is primarily related to a dedicated account limited to the payment of certain internal royalty obligations.” The withdrawal from these accounts do not occur at regular intervals, and, therefore, the inclusion of restricted cash in our beginning and ending balances for calculating operating cash flows can result in less outflows when the restricted cash balance is increasing and more outflows when a withdrawal is made. Management does not believe these changes reflect our operations for a particular period because the withdrawals are not directly caused by our performance or use of cash.

In Management’s view, the supplementary presentation of Adjusted Operating Cash Flow informs investors about this particular driver of operating cash flows in an efficient and understandable manner, providing investors with useful information and additional insight into the cash generated and used by the Company during the period to support operations.

Question 100.04 of the Non-GAAP CD&Is addresses using non-GAAP items that are “individually tailored to recognition and measurement methods for financial statement line items” other than the GAAP measure itself. We considered the following questions in evaluating whether the adjustment for changes in restricted cash is an individually tailored accounting principle as described in Question 100.4 of the Non-GAAP C&DIs:

· Does the adjustment shift the measure from an accrual basis of accounting to a cash or modified basis of accounting?

We do not believe this consideration is applicable for a cash flow measure.

· Does the adjustment include transactions that are also reportable in another company’s financial statements?

We do not believe this consideration is applicable as we are adjusting for changes in our own restricted cash.

· Does the adjustment render the measure inconsistent with the underlying economics or ignore certain aspects of the economics?

We believe the adjustment shows, on a supplementary basis, cash flows that remove the impact of the timing of payments from our restricted cash, which is primarily related to a dedicated account limited to the payment of certain internal royalty obligations.

· Does the adjustment reflect parts, but not all, of an accounting concept?

We are adjusting for all changes in restricted cash, which represent the entire accounting concept.

We do not believe the adjustment for changes in restricted cash meets the criteria in any of the above questions. As such, the adjustment for changes in restricted cash should not be considered an individually tailored recognition and measurement method.

Rule 100(b) of Regulation G requires a registrant not to make a non-GAAP financial measure public that “contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the presentation of the non-GAAP financial measure, in light of the circumstances under which it is presented, not misleading.” As discussed in the preceding paragraphs, we do not believe the adjustment for changes in restricted cash is an untrue statement of a material fact or an omission that results in a misleading presentation.

In addition, the Company acknowledges that:

· the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

· Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and

· the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

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We note your responses to prior comments 4 and 5. We continue to evaluate your responses and may have further comments.

We respectfully acknowledge the Staff’s continued evaluation of our responses to prior comments 4 and 5. Read in the reply ↗

We note from your response to prior comment 6 that revenue from the sale of in-game content transactions is recognized ratably over an estimated service period, which is the time period in which an average user plays your software products (“user life”). Please clarify whether you recognize revenue from the sale of such goods over the user life remaining subsequent to the time in which the good was purchased.

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Alternatively, if the service period for the virtual goods extends beyond the user life, please explain why and tell us the specific guidance you considered.

We have determined that individual sales of our full game software products and in-game content are separate contracts that contain separate units of accounting as each transaction is distinct. For purposes of recognizing revenue for our performance obligations satisfied over time, we must make an estimate of the service period.

We evaluated ASC 606-10-25-31 and 25-32 in determining how to measure progress for the recognition of revenue for performance obligations satisfied over time.

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We believe that the estimated service period that most faithfully depicts the timing of satisfying our game-related service performance obligation for each unique sale transaction (full game or in-game content) is the period of time that an average user plays our software products (“user life”). Our estimated user lives, which currently range between 9 and 15 months as determined on a title-by-title basis, are primarily based on the weighted average number of days between players’ first and last days played online utilizing the total population of users for a title (which ranges between 13 million and over 100 million unique users for our titles with significant online gameplay functionality). We consider that this methodology enables us to capture the most reasonable and relevant estimated service period to ascribe to each distinct transaction as it encapsulates all user behavior in the aggregate (e.g., some users will play for longer periods, some users will play for shorter periods, each user has a different in-game content purchasing pattern). When a new game is launched and therefore no history of online player data is available, we consider other factors to determine the user life, such as the estimated service period of other games actively being sold with similar characteristics. We also consider known online trends and, to the extent publicly available, the service periods of our competitors’ software products that are similar to ours. Determining the estimated service period is subjective and requires management judgment. We continually monitor our user life determinations over the life of a game to assess whether they need to be updated.

In applying ASC 606 to our transactions, we have concluded that each sale (full game or in-game content) is a separate contract with the customer as separate sales generally contain distinct performance obligations at the relevant standalone selling price. Therefore, we do not modify the original contract when we provide additional in-game content to a specific user. As we sell distinct content to our customers, we need to determine an estimated service period for each distinct service component that is required to be recognized over-time (i.e., distinct performance obligations related to online play for our full game sales and in-game content).

ASC 606-10-25-32 requires us to apply a single method to measure progress for each performance obligation satisfied over time and apply the method consistently to each performance obligation. We believe that our policy of determining and assigning an estimated service period based on our average user life, as more fully described above, for each distinct service component that is required to be recognized over-time (i.e., distinct performance obligations related to online play for our full game sales and in-game content), complies with these provisions in ASC 606 and most appropriately depicts the satisfaction of our performance obligations.

Therefore, our policy of utilizing one estimated service period for each distinct performance obligation may result in the service period for an in-game content sale extending beyond the original service period for the full game sale. However, we believe our policy complies with ASC 606 and appropriately reflects the satisfaction of our performance obligations for each distinct in-game content transaction as our service period encapsulates an average of all user lives. We do not believe that ASC 606 requires us to link performance obligations for in-game content sold in new contracts to performance obligations sold in previous contracts for the purpose of estimating a service period. In addition, applying such a policy would result in assigning a different service period for each in-game content sale (based on when the in-game content is sold in relation to the sale of the full game), which would not result in a consistent measure of progress for each distinct performance obligation sold in new contracts.

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We note your response to prior comment 7. Please consider changing the title of your non-GAAP measure of adjusted operating cash flow to a more descriptive title such as "adjusted unrestricted operating cash flow."

Beginning with the earnings release furnished with our Form 8-K on November 7, 2019, we have changed the title of our non-GAAP measure to Adjusted Unrestricted Operating Cash Flow.

In addition, the Company acknowledges that:

· the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

· Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and

· the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person

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under the federal securities laws of the United States.

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We note that your effective tax rate was significantly impacted by tax credits in both fiscal 2016 and 2017. In your September 22, 2016 response letter you indicated that the company did not expect the UK tax credits to have a material impact on your future tax provision. Please explain what the fiscal 2017 tax credits relate to.

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Also, revise your disclosures to address the significant factors impacting your tax provision (benefit) year- over-year and whether you anticipate such credits impacting your effective tax rate in the future. We refer you to Item 303(a)(1) of Regulation S-K and Section III.B.3 of SEC Release No. 33-8350.

We respectfully acknowledge the Staff’s comment and the requirements of Item 303(a)(1) of Regulation S-K and Section III.B.3 of SEC Release 33-8350. Our tax credits for fiscal 2017 primarily consisted of U.S Research and Development credits of $23.0 million related to software development activities. We note that the benefit from UK tax credits generated in fiscal year 2017 was $6.2 million, consistent with the forecasted UK tax credits at the time of our September 22, 2016 response letter, which we concluded was immaterial as this amount was not expected to materially impact our financial

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condition, results of operations, or our fiscal year 2017 expected annual effective tax rate.

We also note that, subsequent to the date of our response letter, we [***] within the “Tax credits” caption of the reconciliation of our effective tax rate to the U.S. statutory federal income tax rate in Note 14 to our Consolidated Financial Statements in our 2017 Form 10-K.

We believe it is possible that the U.S. Research and Development credits could have a significant impact on our effective tax rate in the future, depending on the amount of research and development credits generated, our ability to utilize such credits and our mix of earnings. On page 23 of our Form 10-Q for the three months-ended June 30, 2017 in the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), we provided a more robust disclosure with respect to the significant factors impacting our tax benefit quarter over quarter as well as the impact of tax credits among other significant factors expected to affect our effective tax rate, as follows:

“The benefit from income taxes was $12.9 million for the three months ended June 30, 2017, as compared to $3.6 million for the three months ended June 30, 2016. The increase in tax benefit was primarily due to excess tax benefits from employee stock compensation that were recorded as a discrete benefit of approximately $16.5 million in the three months ended June 30, 2017. Our effective tax rate differed from the federal statutory rate due primarily to excess tax benefits related to stock compensation, certain tax credits, changes in valuation allowances related to tax loss and tax credit carryforwards anticipated to be utilized, as well as the mix of projected pre-tax income.”

We believe that such disclosure appropriately addresses the most significant factors having an impact our tax provision (benefit) and the reason for the change period-over-period. We will continue to provide such disclosure in future filings. Additionally, we will enhance our disclosures in future filings to provide additional discussion as to whether we believe the tax credits or other significant factors are expected to have a material impact on our effective tax rate in the future.

Consistent with the foregoing, we will continue to assess known trends, events and uncertainties and provide appropriate MD&A disclosure in accordance with Item 303 of Regulation S-K if we conclude that the trend, event or uncertainty is reasonably likely to have a material effect on our liquidity, capital resources or results of operation.

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We note that you extended the estimated service period for Grand Theft Auto V to 41 months during the three months ended March 31, 2017 and then to 50 months in the following quarter. Please address the following:  Describe the factors that resulted in both of these changes;  Specifically address what new information you considered in recording an additional change during the quarter ended June 30, 2017;  Clarify

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whether revenue from new sales will be recognized over 50 months or a shorter period;  Tell us how you determined that these were changes in estimates rather than corrections of an error. Refer to ASC 250-10-45 and the related definitions in ASC 250-10-20; and  Disclose the impact of this change in estimate on net income and earnings per share pursuant to ASC 250-10-50-4.

We acknowledge the Staff’s comment with respect to the estimated service period of Grand Theft Auto V and its related online multiplayer mode Grand Theft Auto Online (collectively, GTA V), and the related impact on the Company’s financial statements. We address the Staff’s comment as follows:

Describe the factors that resulted in both of these changes and specifically address what new information you considered in recording an additional change during the quarter ended June 30, 2017;

Consistent with what we disclose in Note 1 of our 2017 Form 10-K, we consider the below factors as part of

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our on-going process of reassessing estimated service periods for our titles, including GTA V:

· the period of time over which the substantial majority of a respective title’s estimated lifetime game sales and in-game virtual currency sales are expected to occur;

· the period of time over which we plan to provide free unspecified add-on content updates, maintenance or other remaining material online support services associated with our online-enabled games;

· the time over which we plan to dedicate internal resources to support the online functionality of a title;

· known and expected online gameplay trends;

· the results from prior analyses;

· the nature of the game (e.g., annual title, genre, period of time between franchise title releases, etc.); and

· the disclosed service periods for competitors’ games.

As discussed in Note 1 to the Consolidated Financial Statements in our 2017 Form 10-K, the determination of the estimated service period (or economic game life) is inherently subjective, requiring management’s judgment, and is subject to regular review based on numerous factors and considerations. The estimated service period for GTA V has reflected this subjectivity given the unique success of the game, which was released several years ago [***] This trend is inconsistent with the playing patterns and spending patterns for other title releases for which the historic trend is for [***] over time. The lasting success of GTA V continues to exceed our expectations given the length of time it has been in the marketplace and the competitive landscape. Determining how long GTA V will continue to be successful is difficult to predict, and the interest in GTA V at this juncture in its life-cycle could also change quickly.

GTA V continues to demonstrate unique trends that differ from our historical experiences with our other title releases. Recently, we have seen an [***] as free content updates are provided. Based on data gathered and gameplay trends, we have determined that there is a high correlation between our investment in the game via the development of free content updates and the continued gameplay and monetization of GTA V. In periods when free content updates are provided, we see an [***]. In recent periods, we have seen this level of player engagement [***].

In connection with our ongoing reassessment of GTA V’s estimated service period, we believe that while we continue to consider all of the factors outlined above in making this estimate, [***] are given significant consideration. However, this estimate continues to be highly subjective and sensitive to consumer preferences. Changes in consumer preferences may cause us to reallocate resources and internal investments as part of our forecasting and quarterly Product Investment Review Process (“PIRP”). This will, in turn, change the estimated service period of the game, resulting in revenues being recognized over a shorter or longer period of time. We specifically have communicated to the users of our financial statements in Item 1A, Risk Factors of our 2017 Form 10-K, that “our estimate of the service period may change and we could be required to recognize revenues over a shorter or longer period of time than we initially allocated.”

Change in estimate during the three months ended March 31, 2017:

Specifically related to the three months-ended March 31, 2017 we note the following factors that informed our decision to extend the estimated service period of GTA V.

During March 2017, the following considerations were discussed and agreed upon by our management team:

· [***].

[***]. In addition, during the quarter-ended March 31, 2017, we saw [***] from previous periods. These factors led us to modify our estimate of the game’s estimated service period by extending it to March 2018 from October 2017.

Change in estimate during the three months ended June 30, 2017:

Subsequent to filing our 2017 Form 10-K, new events occurred which we considered as part of our on-going assessment of the estimated service period of GTA V and which resulted in our extending GTA V’s estimated service period an additional nine months through December 2018.

Given the success of the game in June 2017, management approved the following changes to our internal investment plans:

During the first quarter of fiscal 2018, primarily as a result of the June 2017 “Gunrunning” free content update, the overall sales from GTA V significantly exceeded the first quarter of fiscal

2018 amounts forecasted in our annual budget. As a result, we once again increased GTA V’s forecasted lifetime revenues. Specifically, we experienced the following:

· The June 2017 sales of in-game virtual currency were the highest-ever sales of in-game virtual currency for a single month for Grand Theft Auto Online, and the

· Highest monthly active users since the release of GTA V.

Given the consumer reaction to, and success of, the “Gunrunning” update, including the trend of [***] noted prior to issuing our Form 10-Q for the quarter-ended June 30, 2017, we subsequently increased our [***].

Based on the updated information noted above and the facts and circumstances, we determined that it was appropriate in June 2017 to extend the estimated service period through December 2018 (fiscal year 2019) as part of our first quarter of fiscal 2018 reassessment process.

Clarify whether revenue from new sales will be recognized over 50 months or a shorter period;

New sales are recognized ratably from the point of sale for the game and virtual currency over the remaining estimated service period (economic game life) of GTA V to December 2018, which represents a 50-month game period from the time GTA V was released. In future filings we will clarify that our deferral period for GTA V will run through December 2018.

Tell us how you determined that these were changes in estimates rather than corrections of an error. Refer to ASC 250-10-45 and the related definitions in ASC 250-10-20;

In evaluating the change to GTA V’s estimated service period, the Company considered the guidance in ASC 250-10-45 and determined this was a change in estimate rather than the correction of an error. As noted in ASC 250-10-20, “[c]hanges in accounting estimates result from new information.” In contrast, as also noted in ASC 250-10-20, “[a]n error in recognition, measurement, presentation, or disclosure in financial statements result[s] from mathematical mistakes, mistakes in the application of generally accepted accounting principles, or oversight or misuse of facts that existed at the time the financial statements were prepared.”

As discussed above, we updated our estimated service period for GTA V in both the fourth quarter of fiscal 2017 and in the first quarter of fiscal 2018 as changes in player behavior took place. We believe there were distinct events that drove the changes in estimates in both the fourth quarter of fiscal 2017 and the first quarter of fiscal 2018, and that in each case the changes were made based on information available as of each assessment point. For example, the additional extension of the estimated service period in the first quarter of fiscal 2018 was due to new information, due primarily to the [***] sales [***] that occurred in June 2017 because of the release of the “Gunrunning” free content update. This led us to increase [***] for the game and change [***] than we had contemplated during the previous assessment performed. This update was not the result of any mistakes or failure to consider information available at any given time but rather due to new information gathered during the relevant periods. We concluded based on the above that we were changing the estimated service period, not correcting an error.

Disclose the impact of this change in estimate on net income and earnings per share pursuant to ASC 250-10-50-4.

The effect of the March 2017 change in estimate was to reduce fiscal year 2017 net income by $25.0 million, reduce fiscal year 2017 basic earnings per share by $0.27, and reduce fiscal year 2017 diluted earnings per share by $0.26. The effect of the June 2017 change in estimate was to reduce the first quarter of fiscal 2018 net income by $21.9 million, reduce basic earnings per share by $0.21, and reduce diluted earnings per share by $0.18. The Staff’s comment is respectfully noted and in future filings we will include the impact to net income and earnings per share in our disclosure.

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Please tell us the amount of costs initially capitalized related to the Grand Theft Auto V and the remaining balance at each balance sheet date presented. Also, tell us what impact, if any, the change in estimated service period for this game had on the amortization of such costs.

We initially capitalized [***] of software development costs associated with GTA V in accordance with ASC 985-20. We had a remaining balance at each balance sheet date presented as follows:

· March 31, 2016 - [***]

· March 31, 2017 - [***]

· June 30, 2017 - [***]

The change in our estimated service period in March 2017 reduced our monthly amortization expense by approximately [***]. The change in our estimated service period in June 2017 reduced our monthly amortization expense by approximately [***]. Read in the reply ↗

We note statements made in your Q1 2018 and Q4 2017 earnings transcripts indicating that your margins, both in percentage and dollars, are higher for digital distribution sales. We further note that gross profit as a percentage of net revenue increased to 53.5% for the three months ended June 30, 2017 from 38.6% for the same period in fiscal 2016.

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Please tell us what impact, if any, the increase in digital distribution sales had on the increase in your gross margins and if material, include a discussion of such impact in your future filings. In your response, provide us with the margins for both digital distribution and physical retail sales. Also, to the extent it is reasonably likely that the shift between digital distribution and retail sales will have a material impact on your operating performance; please revise to include a discussion of such trends. Refer to SEC Release No. 33-8350.

Within MD&A in our Form 10-Q for the three months-ended June 30, 2017, we describe two primary factors for the change in gross profit margin period-over-period, including, lower software development costs and royalties as a percentage of net revenue and an impairment of capitalized software development costs recognized in the prior year period.

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We believe these factors best explain the period-over-period change.

Moreover, we do not calculate specific margins by distribution method as we do not internally allocate certain components of costs of goods sold, such as internal royalties and software development cost amortization, to specific sales by distribution method. Additionally, our mix of revenue by digital or retail distribution may change significantly year-to-year based on our product mix in any given year and the impact of deferring revenues and the timing of recognizing such revenues for certain of our titles. For example, for a major title release, we typically see a significant shift away from digital to physical retail in our product mix. As such, we are not able to reasonably predict or quantify whether there will be a significant shift between digital distribution and physical retail sales that will have a material impact on our future operating performance at this time.

We respectfully submit that the statements the Staff noted were made in response to specific questions from analysts about the shift to digital during our earnings call. These statements were of a general nature and were not meant to represent an analysis of margins against prior year periods as presented within the MD&A in our Form 10-Q. These statements were meant to convey that, among other things, to the extent that there is no physical product to create or associated costs, there would be an expectation that day one economic margins (excluding the effect of deferrals) would be higher overall for digital sales.

In future filings, we will continue to consider the quantitative and qualitative disclosures we make in our periodic filings in light of the requirements of Item 303(a)(3)(i) and (iii) of Regulation S-K and Section III.B.3 of SEC Release 33-8350. To the extent applicable, we will include appropriate disclosures regarding the material factors affecting our financial results for prior periods and trends in its business.

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Please provide us with your calculations of the significance tests outlined in Rule 1-02(w) of Regulation S-X that you used in applying the requirements of Rule 3-05 and Article 11 of Regulation S-X. In your response, please provide us with the reconciliation of Spanish GAAP to U.S. GAAP that supports your calculations.

We performed the three tests prescribed by Rule 1-02(w) —Investment, Asset, and Income—and noted that based on our financial data for the most recent fiscal year, the acquisition would be considered more than 20% significant under the income test, although less than 20% significant under both the investment and asset tests.

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Below are the results of the three tests ($ in millions), including the reconciliations of Spanish GAAP to US GAAP:

Income Test:

12/31/2015

Social Point Spanish GAAP PBT

$

19.9

Net impact of revenue deferral

(38.5

)

Accrual of bonuses

(0.7

Social Point US GAAP PBT

(19.3

Take-Two five-year average PBT*

75.2

Income test significance

25.7

%

Considered significant.

Asset Test:

Social Point Spanish GAAP Total Assets

52.2

Social Point US GAAP Total Assets

Take-Two Total Assets at 3/31/2016

2,590.2

Asset test significance

2.0

Not considered significant.

Investment Test:

Total estimated purchase price

238.7

9.2

* With respect to the Income Test, consistent with Computational Note 2 to Rule 1-02(w), as we reported a pre-tax loss of $38.3 million for fiscal year 2016, which was more than 10% lower than our average for the previous five fiscal years, we used the average profit before tax (“PBT”) over the last five fiscal years, or $75.2 million. That average was computed based on excluding pre-tax losses in fiscal years 2012, 2013, 2015 and 2016 and including PBT of $376.2 million in fiscal year 2014.

Based on the results of the tests above, we concluded that U.S. GAAP loss before tax of $19.3 million for Social Point was within a 20% - 40% range as compared to our average PBT for the five-year period, and specifically under the 30% threshold where reconciliation to U.S. GAAP is required as Social Point is a foreign business. In computing the significance, we relied on the guidance of the Staff’s Financial Reporting Manual, section 2015.9, to compare the absolute value of the U.S. GAAP pre-tax loss for Social Point to our PBT.

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We note that in Q1 2018 you began presenting a new operational metric called “Net Sales.” This measure appears to be calculated by taking net revenue plus/minus the change in deferred revenue, which is typically referred to as billings or bookings. Please consider revising the description of this measure as it is confusingly similar to titles or descriptions used in Rule 5-03 of Regulation S-X.

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Also, consider including the calculations that support this measure in your future filings.

We acknowledge the Staff’s comment and will change the name of our operational metric to billings to avoid confusion with descriptions used in Rule 5-03 of Regulation S-X.

In addition, the Company acknowledges that:

· the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

· Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and

· the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the

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federal securities laws of the United States.

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Your response to prior comment 1 indicates that you believe the disclosures surrounding your income tax benefit appropriately address the most significant factors that impacted your tax provision (benefit) period-over-period.

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While we note that you have quantified the impact of excess tax benefits from employee stock compensation, it is unclear how the other factors noted, such as tax credits or change in valuation allowance, impacted your tax benefit. Please provide us with a quantified breakdown for each of the factors that impacted your tax provision (benefit) and confirm that in future filings, you will provide a quantified discussion of the individual factors that contributed to a material change in your tax provision (benefit). Refer to Section III.D of SEC Release 33-6835.

We respectfully acknowledge the Staff’s comment and the requirements of Section III.D of SEC Release 33-6835. The overall benefit for income taxes reported for the three months ended June 30, 2017 is based on our projected annual effective tax rate for fiscal year 2018, adjusted for specific items that are required to be recognized in the period in which they are incurred such as the impact of the excess tax benefits from employee stock compensation previously disclosed.

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Excluding these excess tax benefits, our estimated annual effective tax rate was approximately 9.8 percent for the three months ended June 30, 2017 compared to an estimated annual effective tax rate of approximately 9.3 percent for the comparable period ended June 30, 2016. The primary factors that had an impact on our overall tax benefit and estimated annual effective tax rate when compared to our U.S. federal statutory tax rate of 35 percent for the three months ended June 30, 2017 and June 30, 2016 consisted principally of the following:

Amounts shown in millions

Three months ended

June 30, 2017

June 30, 2016

Impact to:

Tax Expense/(Benefit)

ETR

Tax Credits

$

(10.0

)

(21.2

)%

2.1

(5.0

Valuation Allowance

(2.9

(6.0

5.7

(13.4

Mix of Earnings

(1.8

(3.9

3.3

(7.8

In future filings, we will provide quantitative and qualitative discussion of significant items that contribute to a material change on our tax provision (benefit).

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Your response to prior comment 5 indicates that as part of the income test, you made an adjustment of $38.5 million for the “net impact of revenue deferral” in arriving at Social Point’s U.S. GAAP loss before income taxes. Please explain how you determined the amount of such adjustment and reconcile this amount to pro forma revenue adjustment (j) in Exhibit 99.2 for the year ended March 31, 2016.

In performing the significance test outlined in Rule 1-02(w) of Regulation S-X, we determined that a $38.5 million adjustment to revenue was necessary to reflect recognition over an estimated service period under U.S. GAAP instead of upfront recognition per Spanish GAAP and to arrive at Social Point’s U.S. GAAP loss before income taxes.

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We calculated the net impact of the revenue deferral adjustment using historic life-to-date sales for Social Point’s games through December 31, 2015, adjusted to reflect the estimated service period consistent with our accounting policies.

The pro forma revenue adjustment of $52.0 million made to derive pro forma combined results as disclosed in Exhibit 99.2 of our Form 8-K/A filed April 18, 2017 (adjustment (j)) combined two items: (a) the $38.5 million reduction in revenue for the Spanish-to-U.S. GAAP conversion adjustment described above and (b) an adjustment to write down Social Point’s U.S. GAAP historical deferred revenue balance of $13.5 million to a $0 fair value calculated in conjunction with our preliminary purchase price allocation. Therefore, the Social Point U.S. GAAP revenue for pro forma is $13.5 million less than the amount that was reflected in the U.S. GAAP revenue balance used in the significance test.

The table below reconciles Social Point’s Spanish GAAP revenue to standalone U.S. GAAP revenue used in the significance test described in our previous response. The table also reconciles to the Social Point U.S. GAAP revenue, net of pro forma adjustments.

12/31/2015

Social Point Spanish GAAP revenue

67.9

Net impact of revenue deferral to reconcile Spanish GAAP to US GAAP on a historical basis

(38.5

A

Social Point US GAAP revenue

29.4 less

Difference in recognition of previously deferred revenues due to purchase accounting adjustments

(13.5

B

Social Point US GAAP pro forma adjusted revenue

15.9

Pro forma adjustment to net revenue

(52.0

A+ B

In addition, the Company acknowledges that:

· the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

· Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and

· the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

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On pages 14 and 16, you disclose that you are required to obtain licenses from Sony and Microsoft to develop and publish titles for their respective hardware platforms and that each accounted for more than 10% of your net revenue during fiscal 2016. Additionally, we note that you have filed publisher license agreements for the Xbox 360, Xbox One and PlayStation 3.

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However, it does not appear that you have filed one for the PlayStation 4. Please advise. Lastly, in future filings please summarize the material terms of your publisher license agreements with Sony and Microsoft.

The Company has not currently entered into a publisher license agreement with Sony for PlayStation 4 and operates its business with Sony for PlayStation 4 based on its existing publisher license agreements with Sony (which the Company has previously filed with the Commission). The Company is currently negotiating the final terms of a publisher license agreement for PlayStation 4 games with Sony, and once such agreement has been entered into, we will file such agreement with the Company’s applicable filings with the Commission.

The Company has previously filed its existing publisher license

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agreements with Sony and Microsoft as Exhibits to the Company’s applicable filings with the Commission under grants of confidential treatment and has, including in the “Risk Factors” section of applicable filings, disclosed certain risks associated with its relationships with Sony and Microsoft. In future filings, the Company will also summarize the material terms of its publisher license agreements with Sony and Microsoft, specifically in the “Business” section of its annual reports on Form 10-K.

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We note that during the three months ended March 31, 2016, you changed the estimated service period for Grand Theft Auto V from 24 to 36 months, which materially impacted your results of operations. We further note your disclosure indicating that “determining the estimated service period is subjective and requires management's judgment, therefore, the estimated service period may change in the future.” Please tell

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us what consideration was given to disclosing how you determine estimated service periods for Grand Theft Auto and other franchises, such as the proprietary data and any other factors you evaluate. In this regard, such disclosure would appear to provide greater insight into the quality and variability of information regarding your revenue recognition and operating performance. Refer to Section V of SEC Release No. 33-8350.

The Company respectfully acknowledges the Staff’s comment. Beginning with our Form 10-Q for the quarterly period ended September 30, 2016, the Company will expand its discussion of the considerations that factor into how we determine estimated service periods along with any relevant information with respect to titles in which a change in service period would have a material impact on our financial results.

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Our proposed disclosure is set forth below:

“Because the service period for our online-enabled games with significant post-contract customer support (“PCS”) is not an explicitly defined period, we must make an estimate of the service offering period for purposes of recognizing revenue. As our franchise offerings with significant PCS are relatively new offerings, we have limited historical data to assess end-user game playing patterns. Therefore, the estimated service period for current deferred title offerings is based on our estimate of the economic game life of the respective title. Determining the estimated service period (or economic game life) is inherently subjective and is subject to regular revision based on numerous factors and considerations. The factors that we primarily consider as part of our process of initially determining and subsequently reassessing estimated service periods for our Grand Theft Auto (“GTA”) and other franchise titles include:

● the period of time over which the substantial majority of a respective title’s estimated lifetime game sales and in-game virtual currency sales are expected to occur;

the period of time over which we plan to provide free unspecified add-on content updates, maintenance or other remaining material online support services associated with our online-enabled games;

the time over which we plan to dedicate internal resources to support the online functionality of a title;

known and expected online gameplay trends;

the results from prior analyses;

the nature of the game (e.g., annual title, genre, period of time between franchise title releases, etc.); and the disclosed service periods for competitors’ games.

To the extent we have recorded significant amounts of revenue deferred for specific titles, changes in the estimated service periods could materially impact the revenue recognition reported in a particular period.”

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You state on page 103 that part of the information your CODM considers to make operational decisions and assess financial performance is sales by major product title. Please tell us your consideration to include a discussion of sales by major product title in your results of operations pursuant to Section III.B.1 of SEC Release No. 33-8350.

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In addition, you discuss the impact of certain titles on the increase in revenue from fiscal 2015 to 2016; however, you only quantify the impact from your Grand Theft Auto franchise. Tell us how you considered quantifying the other factors that impacted such revenues such as higher revenues from Evolve and decreased revenues from Borderlands, The Pre-Sequel and NBA 2K. We refer you to Section III.D of SEC Release No. 33- 6835. Fiscal Years ended March 31, 2016 and 2015 (Benefit from) provision for income taxes, page 44

The Company respectfully acknowledges the Staff’s comment and advises that in preparing our Results of Operations for Management’s Discussion and Analysis (the “MD&A”), we considered Section III.B.1 of SEC Release No. 33-8350.

As you noted, we included the impact of certain titles on the increase in revenue from fiscal year 2015 to 2016, quantifying the impact from the GTA franchise. Based on the guidance in Section III.D of SEC Release No.

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33-6835, we believe that the fluctuation in this one franchise is the most significant reason for the material change as it represents $467.7 million of the $330.8 million variance. We further provided additional disclosure that the fluctuations related to Evolve, the NBA franchise and the Borderlands franchise were the primary drivers for the remaining fluctuation. We note to the Staff that the fluctuation for these titles aggregated to a net decrease of $69.4 million comprised of a $70.1 million increase related to Evolve and an aggregate decrease of $139.5 million related to the NBA and Borderlands franchises. The remaining increases and decreases in revenues by title were not material individually. We further note that the titles referenced above contributed approximately $1,186 million or 84% of the net revenue for the fiscal year ended March 31, 2016. The WWE franchise, which generated an additional 10% of our revenue, did not have a material contribution to the year over year revenue fluctuation.

We determined the combination of our disclosures in both the results of operations and discussion of our titles within the other sections of MD&A, such as our revenue concentration from the GTA franchise on p.31 and our discussion of key titles referenced above allowed readers to understand our performance, revenue trends, major product titles, and the effects of material changes arising during the periods being discussed as such disclosures covered the substantial majority of revenue and changes in revenue. However, we acknowledge the Staff’s comment, and in future filings, the Company will provide additional detailed quantification as noted above for the material titles and franchises which comprise the period over period increases and decreases and the primary factors related to such changes.

Fiscal Years ended March 31, 2016 and 2015

(Benefit from) provision for income taxes, page 44

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We note that the impact of foreign tax rate differential on your effective income tax rate was 25.8%, (12.1%) and (10.4%) for fiscal years 2016, 2015 and 2014, respectively. Considering the change in trends, as well as the impact on your effective income tax rate in fiscal 2016, please tell us what consideration was given to including a discussion of the nature of foreign tax rate differential and changes therein.

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Also, please tell us whether your eligibility to claim the U.K. tax credit is expected to materially impact your tax provision (benefit) in the future and if so, what consideration was given to disclosing this trend. Refer to Item 303(a)(3)(ii) of Regulation S-K and Section III.B.3 of SEC Release No. 33-8350.

We respectfully acknowledge the Staff’s comment and the requirements of Item 303(a)(3)(ii) of Regulation S-K and Section III.B.3 of SEC Release 33-8350 as they relate to the MD&A. The foreign rate differential disclosed in the Form 10-K consistently represented a reduction in the income tax expense (benefit) as a result of lower tax rates in foreign jurisdictions for the fiscal years presented (2016, 2015 and 2014).

For fiscal year 2014, domestic and foreign jurisdictions had pre-tax income, whereas for fiscal year 2015 both had losses.

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Accordingly, for both fiscal years, the foreign tax rate differential had the effect of reducing the income tax expense or benefit and was shown as a reduction to the 35% U.S. federal statutory rate. For fiscal year 2016, the Company had a domestic pre-tax loss partially offset by foreign pre-tax income resulting in a much lower consolidated loss as compared to the prior fiscal year. Consequently, the lower income taxes in foreign jurisdictions had a greater impact on the foreign tax rate differential percentage than in prior fiscal years. See illustration below:

Fiscal Year Ending March 31,

2016

2015

2014

Domestic

$(94,174)

$(126,582)

$197,992

Foreign (a)

55,824

(146,298)

178,158

(Loss) income from continuing operations before income taxes (b)

$(38,350)

$(272,880)

$376,150

Foreign rate differential amount (c)

$(9,889)

$32,989

$(39,217)

Effective tax rate reconciliation foreign rate differential (c/b)

25.8%

(12.1)%

(10.4)%

Foreign rate differential in relation to foreign earnings (c/a)

17.7%

22.5%

22.0%

As illustrated in the table above, our foreign rate differential in relation to foreign earnings was within a range of 17.7% and 22.5% for all periods presented, with variances primarily driven by changes in the mix of our foreign earnings. We determined that the fluctuation between the fiscal year 2016 and 2015 foreign rate differential percentage was not material to the overall income tax provision, nor did it constitute a change in trend. However, we acknowledge the Staff’s comment, and in future filings, to the extent there is a fluctuation in the foreign differential amount, such as the Staff noted between fiscal years 2016 and 2015, we will provide appropriate additional disclosure to assist the readers in understanding such differences.

As disclosed in the Form 10-K, in fiscal year 2016 we recognized the benefit of the UK credit for the prior period and the current period as a result of the Company becoming eligible to take the deduction during the fiscal year. Based on current eligibility, the Company did not expect the credit to materially impact the tax provision (benefit) in the future. We acknowledge the Staff’s comment and in future filings will disclose that “if the Company becomes eligible to claim tax deductions on additional titles in the future it could have a material impact.”

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Pursuant to ASC 280-10-10-1, the objective of requiring segment disclosures is to provide information about the different types of business activities in which an entity engages and the different economic environments in which it operates. However, we note that your business consists of a single operating segment and you do not present disaggregated information about different components of the company.

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Please tell us your basis for presenting segment net revenues and segment operating (loss) income, which is essentially presenting measures for the same set of operations that is included in your consolidated financial statements, or revise to remove such disclosures in future filings.

In preparing our disclosure for Note 17 Segment and Geographic Information in the Form 10-K, we considered the guidance of ASC 280, and we determined that presenting these additional measures of net revenues and operating (loss) income was appropriate because our CODM uses these measures to assess performance and allocate resources to our single operating segment.

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In considering the objectives of ASC 280, we recognize that these measures are for the same set of operations included in our consolidated financial statements, and, based on the Staff’s suggestion, we will remove such disclosures from future filings.

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Please tell us your consideration to include, for each major type of cost associated with your business reorganization, the disclosures required by ASC 420-10-50-1 in all periods, including interim periods, until the plan is complete. In your response provide us with a breakdown of such costs.

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In addition, tell us your consideration to include a discussion in MD&A of the expected effects on future earnings and cash flows resulting from such plan, along with the initial period in which those effects are expected to be realized. Refer to SAB Topic 5.P.4.

In preparing Note 20 Business Reorganization (“Note 20”) in the Form 10-K, we considered the disclosure requirements of ASC 420-10-50-1. Within Note 20, we provided a description of the reorganization activities and noted the total amount of expense incurred, the fact that such amounts primarily related to employee separation costs, the amount paid through March 31, 2016, and the remaining amount accrued at March 31, 2016.

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Though ASC 420-10-50-1 requires a breakdown of the information noted previously by major type of cost, consistent with our disclosure, the primary costs were employee separation costs of $70.5 million or 99% of the business reorganization costs, with the remaining $0.8 million or 1% of the total costs for other types of reorganization costs. In addition, as of March 31, 2016, employee separation costs represented $65.9 million or 99% of the remaining amounts initially accrued with the remaining $0.4 million or 1% related to other types of reorganization costs accrued. We determined that our disclosure provides information about the primary components of the reorganization costs and that the other cost components were not significant.

We note that the largest component of our employee separation costs incurred as part of the business reorganization costs is related to the separation of one of our employees as a result of the reorganization of our management structure at a development studio. At the time of the business reorganization in our fiscal third quarter of 2016, we accrued our estimate of the probable employee separation costs related to this individual’s separation. Subsequent to the filing of our Form 10-Q for the quarter ended December 31, 2015, the former employee informed the Company of his intent to file a lawsuit. A full description of the lawsuit was disclosed in Note 13 Commitments and Contingencies (“Note 13”) in the Form 10-K. The amount initially accrued in conjunction with our business reorganization related to this employee’s separation remained our best estimate of the probable loss related to this matter at March 31, 2016. Our MD&A also includes a discussion of this matter on page 44 and a cross-reference to Note 20, which cross-references Note 13, where we state that we do not believe that the ultimate outcome of such litigation, even if in excess or our current accrual, will have a material adverse effect on our business, financial condition or results of operations. We will provide additional information in future filings if facts and circumstances change.

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We note that your 1.00% and 1.75% convertible notes each contain customary terms and covenants. Please tell us whether you were in compliance with all covenants and requirements as of June 30, 2016 and what consideration was given to providing this disclosure in your Form 10-Q. Refer to Section IV.C of SEC Release No. 33-8350.

The Company was in compliance with all covenants and requirements as of June 30, 2016 related to our 1.00% and 1.75% convertible notes. In preparing our discussion and disclosure of liquidity and capital resources for the MD&A, we considered the disclosure requirements of Section IV.C of SEC Release No. 33-8350 (the “Release”).

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We concluded that the scenarios outlined in the Release stating companies should consider whether discussion and analysis of material covenants related to their outstanding debt may be required – i.e., where an issuer is, or is reasonably likely to be, in breach of such covenants or where such covenants would impact the issuer’s ability to undertake additional debt or equity financing – were not applicable to the Company. We will continue to consider the disclosure requirements of the Release in connection with the preparation of future filings.

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We note that you exclude the non-cash amortization of discount on convertible notes from your non-GAAP measures as you do not believe such amounts are related to your ongoing business operations. Considering you rely on convertible notes to satisfy your working capital needs, please explain further why the non-cash portion of the interest expense related to such notes would not be considered part of your core

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operations or revise your explanation accordingly.

As stated in Exhibit 99.1 to the Form 8-K, the Company records non-cash amortization of discount on convertible notes as interest expense in addition to the interest expense recorded for coupon payments. We believe the non-cash portion of the interest expense, which represents the accretion of the bifurcated equity component of the conversion option of our convertible notes, is not core to our operations given our intent and ability to settle the notes in shares of our common stock.

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The convertible notes are accounted for under the assumption that they will be settled in shares, and we include the related underlying shares when calculating if-converted EPS. Therefore, the exclusion of the non-cash amortization from the Company’s non-GAAP financial measures provides management with a consistent measure for assessing financial results.

We acknowledge the Staff’s comment, and in the future we will include additional disclosures regarding why we believe the non-cash amortization of discount on convertible notes should be excluded from our non-GAAP financial measures.

In addition, the Company acknowledges that:

- the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

- Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and

- the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

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We note your response to prior comment 1 and have the following additional comments:  You indicate that at some point after the initial release of GTA V you began to focus on the ability to monetize the GTA franchise through the sale of virtual currency.

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Please tell us the date you began focusing on providing virtual currency and the date you began offering virtual currency, both purchased and free, to GTA Online players.  You indicate that during the third quarter of fiscal 2015 you determined the release of Heists would occur after the one year anniversary of the release of GTA Online. Please tell us the date of this determination.

Virtual currency was launched upon the initial release of GTA Online on October 1, 2013. End users were able to earn and spend virtual currency immediately upon launch of GTA Online which was populated with significant content that enables the earning and use of virtual currency (e.g. significant content and features that could be accessed through the use of virtual currency were loaded on the game disk upon initial launch).

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As mentioned to the Staff, the ability to purchase virtual currency was also made available upon the launch of GTA Online; [***].

While the game allowed for the purchase of virtual currency essentially from launch, based on the Company’s past practice and approach used successfully with prior releases from the GTA franchise, [***]. With respect to paid virtual currency, this marked the first time in our

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franchise’s history that we gave players the option to purchase the virtual currency that is required to access the content provided. [***].

[***]. Further, GTA V next generation came out approximately one year after the release of GTA V current generation [***].

[***] you determined the release of Heists would occur after the one year anniversary of the release of GTA Online. Please tell us the date of this determination.

Response:

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We note your response to prior comment 2 that until the beginning of the third fiscal quarter of fiscal 2015, unspecified updates were expected to continue to be minimal and infrequent based on your history of providing such updates and your planned approach of developing additional content that is sold separately.

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Upon the release of GTA V, please tell us what was contemplated internally in terms of the number of potential updates, including how you determined such updates were considered minimal and infrequent, and the timeline you planned to release such updates. As part of your response, please also address the fact that from information provided on your website, to date you have issued 23 updates pertaining to the PS3/XBOX 360 version of GTA V.

To date there have been 23 updates to the PS3 and XBOX 360 version of GTA V (updates 1.01 to 1.23); [***].

As we discussed on our calls with the Staff on March 16, 2015 and March 26, 2015, [***]. Read in the reply ↗

You also indicate that the updates to GTA V, including Heists, do not represent upgrades in your view because they do not include new maps (areas) or provide players with new functionality that they did not have previously, such as the ability to fly a plane.

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However, we note that the term “upgrade,” as defined in ASC 985-605-20, is “an improvement to an existing product that is intended to extend the life or improve significantly the marketability of the original product through added functionality, enhanced performed, or both.” Please address the following:  You state that the updates to GTA V do not add new functionality to the game. However, considering the definition of an upgrade encompasses more than just new functionality, please clarify your basis for concluding that your updates do not extend the life or improve marketability through enhanced performance. In this regard, it appears to us that the addition of new vehicles, access to new apartments, new jobs and new missions would enhance a player’s performance and overall game experience;  You indicate that in order to continuously extend game play and keep players interested, you need to continue to offer updates to the online content as part of your strategy to further monetize GTA V through the sale of virtual currency. Considering your reasons for providing these updates, please tell us how you determined these updates were not in substance an upgrade;  Please tell us whether you observed an increase in sales of GTA V subsequent to the release of Heists; and  Please clarify whether the USS Luxington (“the aircraft carrier”) existed in GTA V prior to the release of Heists and if so, whether players previously had full access to the aircraft carrier. If access to the aircraft carrier was delivered with the release of Heists, please tell us whether access to this area was contemplated as an update upon the release of GTA V and explain how you assessed whether this represents a new area of the map considering the aircraft carrier appears to represent a new section through which a mission can be conducted as opposed to a vehicle that can be driven or piloted by a player, such as a car or an airplane.

We do not consider enhanced gamer experience through content as equivalent to enhanced performance as contemplated by the software literature. While not explicitly defined in the

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literature, in practice this phrase has been considered to refer to the performance of the software itself, such as enhanced speed or increased user capacity2.

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[***]

As it relates to distinguishing between an update and an upgrade we believe an update generally is composed of minor enhancements, bug fixes and other small changes that do not result in significant changes to the features and functionality of the licensed software (although they may improve functionality and sometimes add new functionality). An update generally is signified by minor changes to the version number, such as an update from version 4.0 to version 4.1 or 4.01 (e.g. “right-of-the-dot changes”) and we followed this approach in classifying our content updates since the initial launch. In contrast, an upgrade generally consists of major enhancements, including significant new features and functionality, to licensed software. Upgrades generally are signified by a change in the first digit of the version number of the software, such as from version 4.0 to version 5.0 (e.g. “left-of-the-dot changes”).

We believe content updates are unique to a gaming company as compared to core software vendors. For example, given the high cost and significant up-front investment of core software, customers of core software typically demand protection against obsolescence and the risk that the software product will not continue to meet their needs. In the gaming industry, purchasers typically buy multiple gaming software products given the generally low up-front investment. [***].

You indicate that in order to continuously extend game play and keep players interested, you need to continue to offer updates to the online content as part of your strategy to further monetize GTA V through the sale of virtual currency. Considering your reasons for providing these updates, please tell us how you determined these updates were not in substance an upgrade;

Response:

[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

2 For example, see KPMG publication Software and Revenue Recognition: An Analysis of SOP 97-2 and Related Guidance, Example 5.29, which provides an example of enhancements as being increased speed and user capacity. Also, see the EY Financial Reporting Developments Software – Revenue Recognition publication which uses the terms “upgrades” and “enhancements” interchangeably.

Please tell us whether you observed an increase in sales of GTA V subsequent to the release of Heists; and

Response:

GTA V current generation was released in September 2013, GTA Online was launched on October 1, 2013, GTA V next generation was released in November, 2014 and the Heists update was released on March 10, 2015. [***].

Please clarify whether the USS Luxington (“the aircraft carrier”) existed in GTA V prior to the release of Heists and if so, whether players previously had full access to the aircraft carrier. If access to the aircraft carrier was delivered with the release of Heists, please tell us whether access to this area was contemplated as an update upon the release of GTA V and explain how you assessed whether this represents a new area of the map considering the aircraft carrier appears to represent a new section through which a mission can be conducted as opposed to a vehicle that can be driven or piloted by a player, such as a car or an airplane.

Response:

The USS Luxington (“the aircraft carrier”) did not exist in GTA V prior to the release of Heists. [***].

[***]:

i.

ii.

Because the Company concluded during the third fiscal quarter of 2015 that it no longer met all of the criteria in ASC 985-605-25-71, due to the extended period over which the updates had been provided, the Company determined that as of its third fiscal quarter of 2015 it no longer met the criteria to recognize revenues associated with PCS at the time of delivery of the software.

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We note in your response to comment 2 in our letter dated November 12, 2014, you indicated that for virtual goods, the primary deliverable is to provide access to a player’s purchased virtual goods through your server network for the time period that the virtual good is available to the game player which is considered to be the expected life of the game.

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It appears that an ongoing obligation to track and provide access would exist with regard to free virtual currency and goods as well. In this regard, we note that players earn virtual currency during game play and use the currency to purchase virtual goods that they did not previously have access to. Please address the following:  It appears to us that the tracking of a player’s virtual currency balance would be similar to tracking the player’s leaderboard rankings and statistics, which the company has considered to be components of its post-contract customer support (PCS) obligation. Please tell us whether you consider the ongoing tracking of virtual currency balances, including those awarded to players free of charge, to also be components of PCS and if not, why not;  Please tell us if you consider the rewarding of virtual currency to enhance a player’s experience and whether this feature is designed to keep players engaged over time. If so, tell us how you considered this aspect of game play when evaluating your ongoing performance obligations at the inception of the arrangement;  To the extent players’ virtual currency balances contain a combination of currency that is purchased, earned by players and/or otherwise awarded for free by you, please tell us how you recognize revenue for such purchased virtual currency and whether you can differentiate between free and purchased currency balances;  We note that the company has a two year implicit obligation related to purchased virtual currency and virtual goods. How does this correlate with your assertion that your implied PCS obligation is less than a year?; and  If you do not believe that providing players with access to their free virtual currency and goods is part of PCS, please tell us what you believe this ongoing service is and how you account for it.

The tracking of virtual currency, either awarded to players free of charge or paid, is not akin to the PCS in typical software arrangements. The tracking of virtual currency occurs on the player’s console (e.g. Microsoft’s XBOX 360 or Sony’s PS3) and is then saved by the Company.

For example, the tracking of virtual currency is not similar to customer support lines or bug fixes, which require post-release activities of third party customer service providers and the Company’s developers.

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[***].

Please tell us if you consider the rewarding of virtual currency to enhance a player’s experience and whether this feature is designed to keep players engaged over time. If so, tell us how you considered this aspect of game play when evaluating your ongoing performance obligations at the inception of the arrangement;

Response:

We view the rewarding of virtual currency as a feature that is part of the game software upon initial release and is not an ongoing obligation. For example, we believe this is similar to scenarios in other games where, when a sufficient amount of experience is obtained, the end user’s character “levels up,” thereby achieving the next stage of character development. Such an event usually increases the character’s progression in the game, statistics, such as maximum health and strength, and may permit the character to acquire or improve new abilities. Like “leveling up,” the rewarding of virtual currency is a feature that is part of the game software upon initial release and although this is a dynamic element in gameplay, it is not an ongoing obligation.

To the extent players’ virtual currency balances contain a combination of currency that is purchased, earned by players and/or otherwise awarded for free by you, please tell us how you recognize revenue for such purchased virtual currency and whether you can differentiate between free and purchased currency balances;

Response:

We follow the game-based revenue model to record virtual currency revenue over the estimated life of the game. That is, upon the sale of virtual currency, we recognize the

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transaction amount over the expected life of the game. Therefore, the game-based revenue model does not require us to be able to subsequently differentiate between virtual currency balances that are purchased versus earned by the end user.

We note that the company has a two year implicit obligation related to purchased virtual currency and virtual goods. How does this correlate with your assertion that your implied PCS obligation is less than a year?; and

Response:

We acknowledge that we use a two year estimated life when applying the game-based revenue model to our purchased virtual currency revenue, which suggests that the implied PCS period may also be two years. [***]. As a result, we initially concluded that the implied PCS period for our software was actually one year. As discussed elsewhere in this response letter, we changed this conclusion during our reassessment of PCS during the third quarter of fiscal 2015. When we concluded that the Company had begun to offer content updates beyond one year from release of the software, the Company also concluded that the implied PCS period had now effectively been extended to the expected life of the game, or two years. As a result, during the third quarter of fiscal 2015, we began to recognize the revenue from the sale of GTA V over the expected remaining life of the game.

If you do not believe that providing players with access to their free virtual currency and goods is part of PCS, please tell us what you believe this ongoing service is and how you account for it.

Response:

As mentioned in our previous responses, in our view the tracking of virtual currency is not akin to the PCS in typical software arrangements. For example, it is not similar to customer support lines or bug fixes which require post-release activities of third party customer service providers and the Company’s developers. [***].

In addition, the Company acknowledges that:

- the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

- Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and

- the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

[***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

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