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Take-Two:  Mafia II  Seeing 'Great Start', Profitability Expected

Take-Two: Mafia II Seeing 'Great Start', Profitability Expected Exclusive

September 2, 2010 | By Leigh Alexander

September 2, 2010 | By Leigh Alexander
More: Console/PC, Exclusive

Thanks to its mixed critical reception after almost six years in development, Wedbush analyst Michael Pachter recently stated Take-Two's Mafia II is unlikely to ever see a profit. Not so, says Take-Two, speaking on a call to investors following positive third quarter results.

"We're very proud of the game," said CEO Ben Feder, describing developer 2K Czech as an "extremely talented studio." Although the company hasn't revealed any unit sales for Mafia II, Feder said simply that "based upon the initial launch, we expect this to be another profitable title for Take-Two." CFO Lainie Goldstein described the game as "off to a great start."

In an analyst note wherein he correctly forecast the delay of LA Noire, Pachter said he observed waning consumer interest in Mafia II, and that the mixed review scores gave him doubts about the profit potential for the title. He reasoned it likely that its two release delays and several years' development time created high costs.

Elaborating to Gamasutra, Pachter explained the basis of his skepticism: "When [Take-Two] bought 2K Czech [then called Illusion Softworks, in 2008], as I recall, the press release said that the studio had 200 employees," he said.

"I haven't read about any staff cuts there, and am not aware of any other projects they have worked on the last five years, so I think it's reasonable to conclude that it's a huge studio that operates at 50 percent or less of U.S. wages."

"Nonetheless, it's still probably costing them $6-10 million per year to keep the studio operating, so the game's cost had to be $35 million or more," Pachter estimates.

During its discussion today with investors, Take-Two did not comment on any of the analyst's assertions, from development costs to staff size or unit sales. But throughout the call, numerous other analysts peppered Take-Two execs for clarity on its pipeline and timing, and for specifics of its release plans. In its responses the company was careful to describe that its approach to development is not solely beholden to a fixed schedule when it comes at the expense of other factors.

"Red Dead Redemption took down any number of titles that were on budget and on time," noted CEO Ben Feder on the call. He was presenting this example in the context of LA Noire, whose delay was revealed alongside today's results, as he discussed the benefit of investing time and resources in the development of a "groundbreaking" product.

"We always strive for predictability... but if a title needs more time we're willing to give it," said Feder. "We serve no wine before its time."

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