2. 2—CONSUMER ELECTRONICS DAILY THURSDAY, MAY 15, 2014
HBO seems to be far outpacing other networks in making its content available to consumers via
nontraditional platforms via a wide range of devices, panelists said. That is, in part, because HBO got off
to such a huge "head start" with its HBO Go app, said Pirot. HBO also has a "deep" selection of content
from which viewers can choose, she said. It’s also a "little easier" for a "premium" pay cable TV network
that consumers subscribe to, like HBO, to make such a wide variety of content available on demand com-
pared with networks like NBC that depend on ads, she said.
The need for better targeted advertising by TV networks across all devices was stressed during that
panel and one earlier in the day on online distribution and monetization strategies for the TV industry.
Targeted advertising will "help a lot," said Michael Fisher, Sling Media senior director-business develop-
ment. He predicted that will happen to a more meaningful degree across TV networks within the next two
years. Earlier, Rich Greenfield, managing director and analyst-media and technology at research company
BTIG, complained that every viewer watching a TV program such as ABC’s Modern Family is subjected
to the same ads instead of more useful targeted spots.
Traditional TV ads aren’t as useful as they once were, said Betsy Morgan, president of multi-
platform TV network TheBlaze. Her company has shifted its ad focus to more sponsorship deals and "live
reads" of ads by a network personality, she said. "We found that people stay" and watch such ads and are
"not changing channels," she said. In stark contrast, viewers don’t pay attention to more traditional spots
when viewing content on their devices, she said.
Netflix continues to significantly grow its user base and despite having about 35 million members,
it’s "growing faster than overall streaming bandwidth" on the Internet, said Greenfield, citing data re-
leased Wednesday by Sandvine. That shows consumers "really love to stream video, especially to big
screens when it’s a great experience and when it’s easy," he said. Despite the popularity of HBO Go, the
streaming gaming site Twitch has more viewers, he said, also citing Sandvine’s data. Twitch has
"established itself among the top-15 applications on many fixed networks across the globe, and now gen-
erates more traffic" than HBO GO on U.S. networks, said Sandvine. — Jeff Berman
'TailWaggingtheDog'
LackofStandards,BandwidthKey4KVideoProductionChallenges
The CE industry “ran with things before the cake was fully baked,” Matt Smith, chief evangelist
for video software platform company Anvato, said of Ultra HD at the Streaming Media East conference in
New York. Smith led a panel on the challenges video content and distribution companies face in bringing
4K TV content to market — including lack of standards — “because of the notion that they can sell more
monitors to us.” Ian Trow, senior director-emerging technology and strategy at Harmonic, said, “Anyone
new to the subject would think the standards we’ve got are a fait accompli, and we’re ready to roll.” But
issues remain on color space and high dynamic range, he said.
Smith cited a perception in the video industry that “4K will be the next 3D TV where the tail is
wagging the dog.” Will Law, chief architect in the Media division at Akamai Technologies, said 4K
“doesn’t require new viewing technology,” removing a large barrier to adoption. At its best, 4K is “like
3. THURSDAY, MAY 15, 2014 CONSUMER ELECTRONICS DAILY—3
having a little IMAX in your house,” Law said, saying 4K has a “much surer and predictable path than 3D
ever did.” But looming questions include “how do we generate the content, do we have enough band-
width to deliver it to the consumer, what are the various ways we can get it to the consumer and when
should we start doing that,” he said.
While there’s a lot of talk about 4K at a technical level, business issues, including bandwidth,
have yet to be addressed, Law said. The average Netflix stream across the top 10 ISPs is delivered at
roughly 2.5 Mbps today, while Amazon, Netflix and Comcast have all announced 4K streaming prod-
ucts that deliver OTT content at 15-20 Mbps, or eight times what Netflix is currently delivering, Smith
said. Today, content delivery network operators “have a lot of problems” delivering HD content at 2
Mbps with reliable quality, he said. And on the demand side, Smith said, many post-production facili-
ties that edit medium- and long-form content have said “none of their clients have requested masters of
their shows.” It’s a matter of concern that “people who are editing the content aren’t preserving it in 4K
permanently,” he said.
Online broadcasting company AEG Digital Media is seeing “a lot of marketing dollars around
wanting to be the first to do 4K” among its customers, said Joe Einstein, vice president-operations.
A lot of the streaming AEG is doing is being archived in 4K, including conferences and music
events, Einstein said. Although 4K is “basically the same production and we take a 1080p master
out,” producing content in 4K is “still very hard and really expensive” just to get content to a broad-
caster or theater distribution network, he said. That’s before getting the file to a broadcast center,
compressing it for the Internet and “trying to deliver an 8-10-12 Mbps streaming file,” he said. Get-
ting from point A to point B with 4K content is “many times more expensive than your traditional
HD transmission,” he said.
On content suitability for 4K transmission, Trow said streaming makes much more sense for 4K
early on because cinematic assets can be transcoded offline. Live content, such as sports, is “far, far more
difficult,” he said. Sky Deutschland has been producing Bundesliga soccer transmissions for streaming,
he said, but “there are many, many problems with making that scenario work for true native 4K or UHD
content in a [live] TV environment.”
On a question about whether its production trucks could do a live football broadcast with an unlim-
ited budget, AEG's Einstein said its 3D truck could do 4K by swapping in 4K cameras and routing the sig-
nal, but it wouldn’t be able to do graphics or slow-motion — “the things that make a production.” The
company’s live 4K transmissions have been with opera productions where there are no graphics, he said.
“It’s like the early days of HD,” he said of the relatively primitive content. “There are lots of closeups of
a flower.” — Rebecca Day
HDRadioan'UphillBattle'
TivolitoLaunchFashionWebsiteOfferingCabinetHousingsasAccessories
Tivoli Audio turned to fashion and furniture stores as a way to sell its premium radio prod-
ucts, CEO Tom DeVesto said Wednesday at a news conference in New York where the company
launched a line of fashion cabinets and a portable music system. The fashion cabinets are for the Al-
4. 4—CONSUMER ELECTRONICS DAILY THURSDAY, MAY 15, 2014
bergo wireless music systems that Tivoli had developed for the hospitality market and adapted last
year for the home.
On whether the move to a heavily fashion-based product signals an end to an innovation path in
radio, DeVesto said: “There won’t be many advances in FM radio going forward,” and HD Radio has
been an “uphill battle.” Tivoli has an HD Radio that’s ready to go if the market ever heats up stateside,
“but we haven’t had much of a call for them,” DeVesto said. “We like it, and it can add a lot to the listen-
ing experience, but in the U.S., it’s a long way away from acceptance,” he said.
In Europe, by contrast, digital radio offers content that users can’t get any other way, making it a
compelling purchase option, DeVesto said. Tivoli's digital radio in Europe is a “very big seller.” He be-
lieves HD Radio will gain traction in the U.S. at some point for economic reasons, he said. “It’s unlikely
that radio will be the last analog transmission on earth” because the bandwidth it occupies is too valuable,
he said. “Sooner or later it will be more accepted here,” he said. Tivoli does 30 percent of its business in
the U.S., he said.
Tivoli announced a customized radio fashion cabinet based for the Albergo system and has built a
website set to launch this month with 16 cabinet styles that can be wrapped around the radio to “dress it
up," DeVesto said. The cabinets are made at a northern Italy furniture company that developed techniques
to bond fabrics to medium-density fiberboard, DeVesto said. The custom cabinets, priced $60-$100, vary
by color, texture and material, he said, and Tivoli hopes to have 200 versions on the website by Christmas.
Dealers selling the radios will get a commission on the cabinets after consumers plug in a code given at
time of purchase, he said. The company is looking to offer more expensive engraved cabinets in the fu-
ture, he said.
Tivoli also launched a portable music system, Music System Three ($299), a Bluetooth-based ste-
reo radio that can run for 20 hours on a full charge and streams music from a Bluetooth-enabled source.
The radio has an auxiliary input, a stereo headphone output, volume knob and dual alarms, the company
said. On whether Tivoli will introduce a radio with Pandora or Spotify in the future, DeVesto said it’s not
necessary with the streaming capability of smartphones. The company also isn’t planning to develop a
multiroom music system because “we already have one,” DeVesto said, noting that the radios are light-
weight enough to carry from room to room and require no setup.
Lamenting the decline in specialty audio stores, DeVesto told us changes in retailing have led the
company to extend distribution to stores including Amazon, CB2, Rooms to Go and boutique furniture
stores. “There are no [audio] dealers left,” he said, an ironic statement from the man who began CE e-
commerce via Cambridge SoundWorks a number of years ago.
Tivoli closed its Natick, Massachusetts, company store, DeVesto said, citing competition from Mi-
crosoft, which wanted Tivoli’s location “one door down from the Apple store.” Tivoli was “outbid for our
own space,” he said.
Tivoli is looking to develop an app to control its radios — for setting an alarm or volume con-
trol, for example — and most Tivoli radios are now Bluetooth-enabled for music streaming, DeVesto
said. Meantime, the portable radio comes with a remote control. Currently, Tivoli offers a content-
based app for iOS and Android devices that links consumers to 100 of the most popular Internet radio
stations worldwide that Tivoli has organized into 10 genres. DeVesto said 85,000 users have
downloaded the app. — Rebecca Day
5. THURSDAY, MAY 15, 2014 CONSUMER ELECTRONICS DAILY—5
BestBuy'GoodPrimaryPartner’
DisplayPortAmongDifferentiatorsPanasonicBankingOnIn4KCompetition
Panasonic is hoping that what it calls a couple of market “firsts” will help the company shore up its
cred as top-tier TV supplier, after its decision last year to abandon plasma TV.
At Panasonic's 2014 LCD TV line review in New York Wednesday, the company touted the flag-
ship AX800 Ultra HD series with its DisplayPort 4K 60p input and a color gamut that covers 98 percent
of professional Digital Cinema Initiatives standards. Another differentiator is the AX800’s THX 4K-
certified display, said Jay Park, senior product manager-display. Panasonic’s current UHD lineup in-
cludes 65- and 58-inch models, and an 85-inch model is due in September, Park said.
On the company’s tricky transition from being plasma's lead cheerleader to a follower of
LED-backlit TV, “I have to say we are concerned about it, but that’s why we’re trying to make a
leap forward, especially in 4K technology,” Henry Hauser, vice president-merchandising group, told
us. Panasonic was “first to launch" with HDMI 2.0, and the first to launch with DisplayPort, Hauser
said. He touted Panasonic’s 60-year heritage in TVs where the company has seen “lots of technolo-
gies evolve,” and said company engineers with “lots of TV experience” have turned their focus to
LCD. Hauser said Panasonic is relying on industry events and digital advertising for getting that
message to consumers.
The DisplayPort connection on UHD TVs is geared toward the gaming community, which Pana-
sonic believes will drive UHD TV sales in the near term as the industry waits for 4K studio content.
Hauser said the “semi-pro feature” is now used in most PC monitors, offering a more responsive gaming
experience. Most high-res PCs have migrated to DisplayPort, he said. Panasonic will have non-theatrical
demo content for dealers available on a thumb drive but won’t offer a licensed 4K content package for
consumers for now, he said. Consumers will have access to streamed 4K content through smart TVs’
apps, he said.
Panasonic has pared its TV series to six models in 2014 from a dozen last year due to the discon-
tinuance of plasma models, a spokesman told us. In the non-UHD lineup, the company is differentiating
models by refresh rate, sound and 3D. The 55-inch TC-55AS680U, with a native 240-Hz refresh rate, in-
tegrates Panasonic’s Life+Screen personalized user interface with its "My Home Screen" personalization
feature that offers customizable profiles for up to five users. It includes a remote sharing feature, new this
year, that allows users to send content from outside of the home to the TV, Park said.
Appealing to consumers who want better sound from a flat-panel TV, Panasonic is packing a
soundbar in the box with the 60-inch 60AS640U TV. The soundbar is sold only with that TV and only at
Best Buy, along with the 240-Hz model, also exclusive to Best Buy, Hauser said. The AS650 series,
meanwhile, including 50-, 55- and 60-inch models, are 3D TVs — the only non-4K Panasonic TVs to of-
fer 3D, Park said, and exclusive to Panasonic.com.
Panasonic has no TVs in its 2014 lineup that are targeted to the specialty AV channel, Hauser
said. The 530 series — without 240-Hz, 3D or boosted sound — is the only open-distribution line, he
6. 6—CONSUMER ELECTRONICS DAILY THURSDAY, MAY 15, 2014
said, with Best Buy owning several exclusives. “We’re rebuilding after we exited plasma technology so
we thought to secure a wide national showroom-type account would be the best avenue for us at this
time,” Hauser said.
Panasonic drew the ire of specialty AV retailers last year when it placed its highly rated flagship
ZT60 in national distribution after rave reviews and a limited rollout through specialists. The TV business
has been “very tough,” and Panasonic has had to make “a lot of adjustments to our marketing direction
based on the necessity of the business,” Hauser said. “So Best Buy has become a good primary partner for
us in 2014,” he said. — Rebecca Day
TVSpinoffDoneByJuly
'SignificantMeasures'LoomAtSonytoAddress'ProblematicBusinesses'
Sony will speed “reforms” to “revitalize” its mobile, game and imaging sectors, while “taking sig-
nificant measures to deal with its problematic businesses,” the company said Wednesday, releasing finan-
cial results for the year ended March 31. Sony said it plans to “detail” those initiatives May 22 at its cor-
porate strategy meeting in Tokyo.
It’s virtually certain that Sony will use a big portion of that meeting to discuss its beleaguered TV
business, the spinoff of which into a separate subsidiary will be complete by July, the company said
Wednesday. “Cost optimization,” the “agility” to adapt to market changes and “autonomy of manage-
ment” are among the spinoff’s “anticipated benefits,” Sony said.
For the year, in which Sony until February had said repeatedly it was on track to return the TV
business to profitability (CED Feb 7 p1), TV operations had a $249.5 million operating loss ($1 = 103
yen), the company said. The operating loss was 63 percent lower than a year earlier despite LCD TV unit
sales that remained flat at 13.5 million sets. For the fiscal year ending March 2015, Sony thinks sales in
its TV business will rise 17 percent to 880 billion yen on an 18.5 percent unit sales increase to 16 million
sets, the company said.
In Sony’s core AV sector, Home Entertainment & Sound, of which TV is a part, sales jumped
17.5 percent to $11.3 billion, while its operating loss narrowed 70 percent to $248 million. Sony cred-
ited the sales increase to the favorable impact of foreign exchange rates and an improvement in its LCD
TV “product mix reflecting the introduction of high value-added models.” The operating income im-
provement likewise was attributed to the better LCD TV product mix and unspecified cost reductions in
the TV business. Sony gave no new profit forecast for the TV business, but it’s projecting that Home
Entertainment & Sound will swing to a 10-billion-yen operating profit on a 7 percent sales increase to
1.3 trillion yen.
In Sony’s Game & Network Services segment, the PS4's debut drove a 39 percent sales increase to
$10.1 billion, though the sector’s operating loss quadrupled to $182.5 million on higher PS4 launch costs
and $60.2 million in write-offs of certain PC game software titles sold by Sony Online Entertainment.
Sony sees the sector swinging to a 20-billion-yen operating profit this year on a 17 percent sales increase
to 1.2 trillion yen.
7. THURSDAY, MAY 15, 2014 CONSUMER ELECTRONICS DAILY—7
Total videogame console unit sales, including PS2, PS3 and PS4, fell 11.5 percent for the year to
14.6 million, Sony said. It's forecasting a 16 percent unit-sales increase to 17 million consoles. The num-
ber of game software units sold jumped 39 percent for the year to 384 million. But Sony's software fore-
cast is for a 1.6 percent unit-sales increase to 390 million. Sony representatives didn't respond to requests
for comment on the reasons for the conservative software forecast.
For the year overall, Sony had a $1.2 billion net loss vs. a year-earlier profit despite a 14.3 percent
sales increase to $75.4 billion. Much of the sales increase was from a weaker yen against the dollar and
the euro, Sony said. The average yen rate for the year ended March 31 was 17 percent weaker against the
dollar and 20 percent weaker against the euro compared with a year earlier, it said.
Sony’s overall operating income fell 88.3 percent for the year to $257 million. That included $890
million in losses from the PC business the company is abandoning, Sony said. Of that, $566 million was
directly attributable to the decision to exit the business, it said. Sony also spent $124 million on restruc-
turing costs for “reducing the scale of sales companies” resulting from the PC exit, it said.
For the year ending March 2015, Sony is forecasting flat sales growth to 7.8 trillion yen, but a 61
percent narrowing of its net loss to 50 billion yen. Sony expects to incur another 80 billion yen in restruc-
turing charges from getting out of the PC business. — Paul Gluckman
'PointsofVictory'
ProSourceTargeting10PercentSalesIncreasethisYear
SAN ANTONIO — Formally combined ProSource is targeting a 10 percent increase this year in
group revenue to $3.3-$3.4 billion, partly due to about 10 exclusive deals it landed with vendors and a
sharpened focus on audio and 4K TVs, Co-President David Workman said at ProSource meeting.
The exclusive vendor pacts take a variety of forms, ranging from events and marketing to product
and brand launches and grew from a series of tests in the last few years, Co-President James Ristow said.
Under the new ProSource structure — formed by combining BrandSource's Home Entertainment Source
(HES) and PRO Group — Workman also has the role of chief operating officer, while Ristow is chief
business officer. ProSource is operating as a BrandSource division.
ProSource signed TV agreements with Sony and LG Electronics, said Workman, declining to dis-
close business terms. ProSource is planning a series of dealer events in major U.S. markets for the fall
keyed to 4K TV that will have vendor backing, he said, but details haven't been nailed down.
Harman's Infinity brand also has given ProSource an exclusive on its new Reference series speak-
ers and was demonstrating them in a private suite during the ProSource meeting, Workman and a Harman
executive confirmed.
ProSource is moving to expand its member ranks. ProSource is split into three groups with a goal
of growing the organization to more than 600 dealers from about 480 within 2-3 years, Ristow said. Its
PRO segment, which consists of retailers with $10 million or more annual revenue, has 20 members with
8. 8—CONSUMER ELECTRONICS DAILY THURSDAY, MAY 15, 2014
the recent addition of IQ Home Entertainment, Music Direct and SoundAdvice, and is targeting having 25.
SoundAdvice is returning to PRO after re-emerging in 2011 with a Fort Lauderdale location. ProSource's
power custom install segment, consisting of dealers with $4 million or more in annual sales, has around 66
members with a goal of reaching 100, Ristow said. And its custom install group, comprised of companies
with $1 million or more in annual revenue, has about 400 members and is aiming for 500, Ristow said. "I
think we are in the unique position that for the last three years we have gotten some things done behind
the scenes and done some things with vendor partners and now we are ready to go to the dealerships and
bring in the right quality ones," Ristow said.
While PRO members initially were reluctant to join forces with HES, the combination took on
added importance as PRO's ranks thinned with the closings of Tweeter and Ultimate Electronics, dealers
told us. The ProSource board has eight members, split equally between HES and PRO. "I don't think we
had a lot of options initially" because of the loss of some larger PRO members, Modia Home Theater
CEO Mihir Modia said. But during the last three years, the members have resolved any differences, deal-
ers said. "Even though the focuses of the businesses are sometimes different, we really now have one sin-
gle mindset" when it comes to working with vendors, said Rick Souder, a newly appointed ProSource
board member and executive vice president-merchandising at Crutchfield.
ProSourceMeetingNotebook
ProSource dealers suffered "mid-to-high"-single-digit declines in same-store sales in January and
February, said Workman, blaming brutal winter weather across much of the U.S. But the downturn re-
versed itself in March and April on strong sales in audio and "pockets" of the TV category, including 4K,
Workman said. ProSource also will post increased TV sales this year, reversing the 10-15 percent decline
it suffered in 2013, Workman said.
——
Crutchfield will move its 20,000-square-foot Harrisonburg, Virginia, store to a smaller, 5,000-
square-foot location within the next 12 months as it builds on the interactive store format it debuted in
Charlottesville, Virginia, last fall (CED Jan 6 p1), Souder said. The shift to the smaller format comes as
Crutchfield dispenses with traditional AV merchandising of TV walls and rows of products, replacing
them with 15 fixtures and 67 display stations that link products together so Bluetooth and Airplay-
equipped devices can be demonstrated with smartphones. Crutchfield will update the software at the
Charlottesville store in the coming weeks to add several features, including allowing customers to take
pictures with Wi-Fi-capable digital cameras and have them displayed on a monitor near the product,
Souder said. "We're still trying to figure out what is the dialogue" between sales staff and customers "with
this very different shopping experience," Souder said. "The whole point of this is, there isn't much of a
future for traditional audio video bricks-and-mortar stores and once you make that conclusion you have to
see how much space you need."
——
Modia Home Theater will open a new 12,000-square-foot store in Houston this fall that promises
to deliver "a new shopping experience," said CEO Modia, declining to give details. The store will be the
chain's sixth, including locations in the Houston and Dallas markets. Modia closed its Arlington, Texas,
store last year after deciding the market's demographics weren't conducive to the sale of ultra-premium
audio gear from brands like McIntosh and Rotel, Modia said.
——
Bjorn's Audio Video is revamping a demonstration room at its San Antonio store to better display
wireless audio products, building on the Sonos store-within-a-store enterprise it formally opened in April,
President Bjorn Dybdahl said. Bjorn's also is reconfiguring its high-end home theater room, replacing
9. THURSDAY, MAY 15, 2014 CONSUMER ELECTRONICS DAILY—9
M&K speakers with speakers from Klipsch, he said. The retailer put its 25,000-square-foot warehouse
and former store up for sale, but hasn't landed a buyer yet, Dybdahl said. Bjorn's, which owns the prop-
erty, moved to its current 25,000-square-foot location in 2000 and will seek a smaller warehouse, Dybdahl
said. — Mark Seavy
FewReleaseSlateDetails
‘RemainsToBeSeen’IfPlatformExclusivityGathersSteam,SaysTake-Two
Take-Two Interactive isn’t overly concerned about the competitive videogame market that’s ex-
pected this fall or whether there'll be a major shift to game exclusivity on iOS, Android and possibly other
platforms, said executives on an earnings call Tuesday.
"It remains to be seen" if there will be an increasing trend to wider game exclusivity in light of
published reports claiming Apple and Google are offering promotional placement to game developers in
exchange for exclusivity on their platforms, said Take-Two CEO Strauss Zelnick. Apple and Google
didn’t comment.
Regardless of what happens, Take-Two’s "stated strategy is to make our products widely avail-
able" on "whatever platforms consumers are using and we're flexible about the nature of the platform, the
size of the screen as well as the business model," said Zelnick. "If for some reason the business evolved
differently then we would evolve with it," but "I doubt that it's going to become a business" of widespread
platform exclusivity, he said. "That would be costly and it's hard to imagine that would really benefit con-
sumers." Zelnick compared it to the early days of pay TV, when there were an "awful lot of exclusive
content and exclusive deals, and pretty quickly the pay-television services determined that didn't make a
whole lot of sense."
There will be "a lot" of games released around when Take-Two ships Evolve this fall for the PS4,
Xbox One and PCs, said President Karl Slatoff. The game is a new shooter that combines cooperative and
competitive multiplayer gameplay, and was developed for Take-Two’s 2K label by Turtle Rock Studios,
the creators of Left 4 Dead. Slatoff believes this will be a "really great year for the entire industry," and
that's a "really good thing because a lot of people will be in the stores and they’ll be talking about games
and they'll be buying a lot of games," he said. Take-Two is convinced Evolve is "so different and unique
that the game will stand on its own," he said.
The results that Take-Two reported Tuesday for fiscal Q4 ended March 31 exceeded analysts’ ex-
pectations, but were still weaker than Q4 the prior year. Revenue tumbled about 35 percent to $195.2 mil-
lion. It reported a loss from continuing operations of $30.8 million, or 40 cents a share, after a profit from
continuing operations of $21.2 million, or 23 cents, in Q4 the prior year. Take-Two shares closed 8 per-
cent lower Wednesday at $18.99.
Take-Two expects revenue of about $1.4 billion-$1.5 billion and earnings per share of 80 cents to
$1.05 for this fiscal year, it said. That "requires a leap of faith" because of the few details that Take-Two
has provided about its game release slate for this year, said Wedbush Securities analyst Michael Pachter.
Take-Two’s Q1 forecast of $120 million-$135 million and a loss per share of 25-35 cents was also weaker
than he and other analysts had projected, he said. Pachter is also "pessimistic" that Take-Two’s Grand
10. 10—CONSUMER ELECTRONICS DAILY THURSDAY, MAY 15, 2014
Theft Auto Online will "contribute meaningful" profit this fiscal year, he said. BMO Capital Markets ana-
lyst Edward Williams expects Take-Two will "sustain profitability for the foreseeable future," he said.
Take-Two has "more than 10 unique" next-generation console titles in development, including un-
announced releases planned for this fiscal year, said Zelnick. All those titles are from 2K rather than its
Rockstar Games studio, maker of Grand Theft Auto. All that Zelnick said about Rockstar’s plans were
that the studio was "hard at work on their lineup and there is news to come for this fiscal year," and that
Take-Two expects Rockstar to account for about 45 percent of the company’s revenue this fiscal year.
Although 2K will have a "large presence" at E3 in Los Angeles next month, Rockstar hadn’t indicated that
it would be attending the show, said Slatoff.
Take-Two’s Q4 revenue declined because it released the game BioShock Infinite in Q4 the prior
year, but had no significant releases in Q4 this time, said Chief Financial Officer Lainie Goldstein. Q4
revenue came in higher than its $170 million-$200 million forecast, mainly due to the continued strong
performance of the Grand Theft Auto series, she said. Digital revenue grew 51 percent to $122.3 million
of total revenue, she said. The largest contributor to digital sales were the Grand Theft Auto series, the
NBA 2K franchise and content offerings for Borderlands 2, she said. Catalog sales were $75.7 million, led
by Borderlands 2, BioShock Infinite, the Grand Theft Auto series and Civilization V, she said.
Grand Theft Auto V reached $1 billion in sales, "faster than any entertainment release," said Zel-
nick. Take-Two has shipped more than 33 million units of the game, he said. NBA 2K14 was Take-Two’s
first title for the PS4 and Xbox One and had the basketball franchise’s strongest launch to date, he said. It
has already passed NBA 2K13 as the top-selling title in that series, with more than 6.5 million units of
NBA 2K14 shipped, he said. NBA 2K14 has also "dominated next-generation" console sports games, pass-
ing FIFA and Madden from Electronic Arts to become the third highest-selling title of any genre on the
PS4 and Xbox One in the U.S., he said, citing NPD data. Borderlands 2 became 2K's top-selling title and
more than 9 million units have shipped, he said. BioShock Infinite cumulative shipments passed 6 million
units, while Civilization V cumulative shipments passed 5 million, he said.
Revenue from Grand Theft Auto Online topped Take-Two’s expectations in Q4 and was the largest
contributor to digital revenue for the fiscal year, said Zelnick. More than 70 percent of people who played
Grand Theft Auto V while connected to the Internet played Grand Theft Auto Online, he said.
GameStop remained Take-Two’s largest customer in the past fiscal year, at 18.4 percent of reve-
nue, the publisher said in a 10-K SEC filing Wednesday. That was down from 23.8 percent the prior year.
No other retailer was more than 10 percent of Take-Two’s revenue for both years, it said. Sales to Take-
11. THURSDAY, MAY 15, 2014 CONSUMER ELECTRONICS DAILY—11
Two’s five largest customers were about 39.4 percent of total revenue in the past fiscal year, down from
about 52.5 percent the prior year, it said. It had about 2,530 full-time employees March 31, of which
about 1,190 were employed outside the U.S. as of March 31, it said. That was up from 2,440 full-time
employees, including 1,238 outside the U.S., the prior year, it said. — Jeff Berman
IndustryNotes
CEA and the Aerospace Industries Association (AIA) reacted positively Wednesday to the dis-
closure that the Federal Aviation Administration is working with several industries to expedite allowing
limited commercial operation of drones before federal rules are in place (CED May 14 p7). The associa-
tions teamed up in March to write the FAA a letter urging the “expedited consideration and approval” of a
long-delayed rulemaking regulating the safe use of small commercial drones in U.S. airspace (CED March
28 p5). AIA views the disclosure that the FAA will expedite limited commercial unmanned aircraft sys-
tem (UAS) operations as “a positive development,” Ali Bahrami, AIA vice president-civil aviation, told us
by email. “The market potential for commercial operations is huge, and this constitutes a good first step.
That said, a permanent final rule regulating small UAS is a critical requirement for safe commercial opera-
tions, and we look forward to the FAA publishing the proposed small UAS rule as scheduled, in Novem-
ber of this year.” Much like the rest of the aviation industry, AIA members “have been anxiously waiting
for the release of the proposed rule and been urging the FAA to expedite the rulemaking,” Bahrami said.
The joint letter that AIA and CEA sent the FAA in March “was not the only communication with the
FAA,” he said. “In fact we are in constant communication with FAA staff and feel that our concerns re-
garding the delayed rulemaking have been taken into consideration.” At CEA, “we commend the FAA for
its commitment to work with industry to allow limited commercial use of drones,” President Gary Shapiro
said in a separate email. “This is an important first step to allow productive drone use to transform indus-
tries and create jobs. As the most innovative country in the world, we should be a leader not a laggard in
adopting new technology. We look forward to working with the FAA to create clear rules and a clear pol-
icy framework that unleash the explosive innovation this promising technology will bring.” — PG
E-Commerce
U.S. consumers spent $63.4 billion on e-commerce retail in Q1, said a comScore news release
Tuesday (http://bit.ly/1iT4oex). Consumers spent $56.1 billion at e-commerce retail on their desktops, a
12 percent increase from Q1 a year earlier, it said. Such spending accounted for 11.7 percent of consum-
ers’ "discretionary spending, the highest first quarter share on record,” it said. Mobile and tablet spending
at e-commerce retail rose 23 percent to $7.3 billion. Desktop and mobile spending in Q1 had "a modest
acceleration versus the fourth quarter, which is a positive sign in light of overall softness in consumer dis-
cretionary spending across the broader U.S. economy during the early part of the year,” said Gian Fulgoni,
comScore chairman emeritus.
Broadband
Snapchat generated the most mobile network traffic volume of any messaging app in North
America over the last six months, said a report released Wednesday by network traffic analyst Sandvine
(http://bit.ly/1jHpsW5). Its preeminence was mostly “due to the fact it only allows subscribers to send
