The common analyst criticism of publisher Take-Two is that its long development cycles and frequent title delays challenge the company to demonstrate consistent profitability. In years wherein the company launches a numbered console Grand Theft Auto, financial results delight investors, but the intervening periods have historically been less stable.
But in the company's view, it's been investing over time in the development of new IP -- GTA may remain the company's crown jewel, but Take-Two's strategy has been to slowly and carefully cultivate other properties, like BioShock and Red Dead, that can act as pillars.
At E3 earlier this year, corporate communications VP Alan Lewis told Gamasutra that the company aims for one new IP a year, but asserted the company's position that generating high-quality properties takes a lot of time.
Analysts have been less patient than perhaps the company would prefer. But after two delays, Red Dead Redemption has led Take-Two to two straight profitable quarters -- and put the publisher on track to its first profitable non-GTA year in a decade.
"It is impossible to criticize the company’s success this year," says Wedbush analyst Michael Pachter. Pachter was critical of Take-Two ahead of its third quarter results, expecting to see soft performance of Mafia II (the company says the title will be profitable) and correctly anticipating the delay of yet another game, LA Noire.
For the time being, Pachter commends the company's painstakingly patient approach to title launches: "We think that long development cycles are most certainly justified by phenomenal results, and the performance of Red Dead [Redemption] absolutely justifies the development time taken," he concedes. Adds Kaufman Bros.' Todd Mitchell: "We believe that Mafia [II], released on Aug. 24, is also selling well."
But it'll be challenging to continue the positive trend, Pachter suggests. He sees strong profitability potential for next year's Spec Ops and X-Com and modest potential for LA Noire and Max Payne 3 (both of which have recently received a delay), but says the comparison next year versus Red Dead Redemption's performance this year will be hard.
Despite the positive results for its third quarter, analysts on yesterday's earnings call pressed Take-Two for more specificity on its release timelines, particularly as concerns the next GTA. Perhaps that's because they view it as crucial to a continuing growth trend, says Pachter: "In our view, it is unlikely that Take-Two can grow earnings in [fiscal 2011] without a new installment of GTA, and we believe that the company must allow the key Rockstar North team members to focus on getting that game out by the end of the fiscal year (in October [2011]) in order to ensure earnings growth."
"Should GTA launch in FY:11, we believe that earnings growth will be far easier to achieve in FY:12, with BioShock Infinite and The Agent each likely to be quite profitable," the analyst says.
But while Red Dead may have brought redemption for Take-Two over its past two quarters, "we remain skeptical about the sustainability of long development cycles, particularly if they impact the release of the company’s blockbuster GTA franchise," Pachter warns.
Kaufman Bros' Mitchell also retains reservations, especially should there be a delay for GTA -- he's not counting on seeing the next installment launch next year. "Developer Rockstar has established a solid reputation as a video game hit maker," Mitchell says. "However, we remain concerned about the consistency and sustainability of the company's lineup in fiscal 2011, particularly as we do not think estimates should include GTA V."
It's true Red Dead Redemption is a "sleeper hit," he continues, but that's to be expected given five years and "significant" cost. "LA Noire looks interesting as well, but it is really the last game which got greenlit before the current management arrived and it received an unfettered development budget."
"Take-Two needs to corral its portfolio of valuable franchises to showcase an ability to string together a series of hits and consistent results," Mitchell concludes.
this publisher Is one known for it's monster-hits. I am certain as an investor it is hard to be investor in a company that doesn't always show consistent profitability but this publisher has franchises which are considered by many to be sure returns on investments. of course frequent delays can be frustrating, but I think in a lot of ways those delays are what make take two such a strong publisher to invest in. If the alternative is to have more timely-developed games which are less amazing to the audience it's a lose - lose for investors and take-two. instead of criticizing them for their long developement cycles I think they should be praised for being a reliable entity to invest in.
with that said I know little to nothing of the stock market , however I do know videogames an 'take two has published some of the strongest blockbusters gaming has ever seen.
I think Rockstar has the pedigree to do this now. Alan Wake, Alpha Protocol and WET are three games I can name that were in development for just as long that haven't had the kind of push that a Rockstar game gets based on the time and care taken with each of their releases.
I can't call it luck if its a tactic proven to work. However its troubling to see how this tactic can't be shared with SEGA and friends.
5 years per game is totally unacceptable. Unless they have a blockbuster EVERY year from a different franchise. And their problem is they don't. Better off investing in ATVI that pays dividends. Pachter thinks Black Ops will not sell as much as MW2. This is my challenge to him. I bet it sells more.
It certainly will be the industry focus of the season, but this year, it does have a direct competitor in MoH and me thinks the holiday music games may tick a little higher. For those (and I'm not just including the RB piano controller), folks may need to grab more than just the game, as finding second hand or third party music controllers is now pretty much impossible.
that's a tough challenge to win Gus. With Treyarch at the helm, many CoD players will skip over it just on principal (however vague and prejuidice that principal is). Plus, unlike MW2 last year, no one is getting out of Black Ops way this holiday season.
the biggest threat to call of duty is of course halo. many people jumped between those two flagship fps's and now we have them coming out within 2 months of eachother. I would take pachters side in this bet. MW@ is probably going to be the most popular COD for a long while. and the holiday season seems to be getting awfully crowded with titles. we'll see what happens.
It's not that any publisher wants 5 year developments, things just happen sometimes. The thing about Rockstar is they are very aware of their brand and the quality it represents, so they won't release a half-ass project. They are secure enough, that they'll work it until it meets their standards. Also they have an incredible level of depth and talent, they usually can make it work.
Lets not forget how long the development cycles have been for the Half Life 2 series, or the Final Fantasy series. Long development cycles lead to better gameplay in the end, which often means selling more copies of the software. I originally had no interest in Red Dead Redemption, but I am very happy that a friend let me barrow his copy for a few days. After I gave it back I went and bought it myself. It has solid hits and solid misses, but one would be hard pressed to find a game that only had pure hits. The key thing is that most games that are rushed out feel that way. They often omit fixing every bug, forcing the user to constantly download patches, limited gameplay, and just feel kind of cheap. Five years is a long time, but unless you have a company that is working on a single game at a time it becomes difficult to put something out consistently. The company also has to deal with bringing new people into an already moving project, deal with their nuances in work, try to wrangle everyone into the same direction, hope no one important to the project leaves mid stream, etc. .
Granted I've stopped holding my breathe for the new Half Life as it just seems that Valve is focusing on other projects now and it is something that is just simmering in the background of their developments. I just hope that we aren't kept waiting so long that it loses value in the game world. Orange Box and Portal really helped bring it to the forefront of gamers and I hate to see the interest fading in a great product.
with that said I know little to nothing of the stock market , however I do know videogames an 'take two has published some of the strongest blockbusters gaming has ever seen.
I can't call it luck if its a tactic proven to work. However its troubling to see how this tactic can't be shared with SEGA and friends.
Granted I've stopped holding my breathe for the new Half Life as it just seems that Valve is focusing on other projects now and it is something that is just simmering in the background of their developments. I just hope that we aren't kept waiting so long that it loses value in the game world. Orange Box and Portal really helped bring it to the forefront of gamers and I hate to see the interest fading in a great product.