Read Dead Redemption will help power Take-Two past revenue estimates when it reports its third fiscal quarter this week -- which is a good thing, says Wedbush analyst Michael Pachter, given the underperformance of Mafia II and the possible delays of two games.
Rockstar's critically-acclaimed open world Western is still selling strongly enough to cover for Mafia II's weakness -- which is significant, according to Pachter.
"Mafia II’s average Metacritic score of 74 is well below expectations, and consumer interest appears to be waning, as the game’s position has dropped in many best-seller lists in its first week," he says. "With six years in development, we believe the game is unlikely to achieve profitability."
A Metacritic score of 74 is considered "mixed or average"; Mafia II's user score on both Xbox 360 and PlayStation 3, at 7.5 to 7.7, is a bit better, categorized by Metacritic as "generally favorable."
Take-Two's approach to development has always been to permit long development cycles, even title delays -- "We have a pretty stern policy at Take-Two about serving no wine before its time," CEO Ben Feder said once regarding the company's decision to twice hold back Mafia II and Red Dead Redemption from their planned release windows.
The company has credited Red Dead Redemption's commercial success in part to its patient cycle -- that title, too, saw delays before launch. But analysts have long suggested the company could benefit from more discipline surrounding release dates if it wants to show more consistent profitability outside of years containing main Grand Theft Auto launches.
"Game delays have become the norm at Take-Two, and we expect the company to announce a shift in release dates for LA Noire out of 2010 and into 2011," says Pachter -- noting that last quarter, the company also announced a delay, that time for Max Payne 3.
"It is important to note that both games have been in development for longer than five years, making their break-even hurdles significantly higher than a typical game," says Pachter. And he suggests it's not likely the company will yet announce a new GTA -- although he says one may still appear by holiday 2011.
"With longer development cycles, Take-Two has a profitability threshold higher than its peers," says the analyst. "We believe that the company must focus on streamlining its development process and providing better visibility on future game releases."