March 19th, 2006

Take-Two Financials Show Both Problems and Promise

Lowered net incomes, lawsuits up the wazoo, an SEC investigation, cash flow problems, a devastating product recall, horrendous P.R., negative political attention, key resignations, and a stockholder named Jack. For a publicly traded company, such indicators usually mean that your share price is headed for a swirly.

The latest round of bad news for Take-Two began on January 27th, when an SEC filing revealed the resignation of board member Barbara Kaczynski. T2 (NASDQ: TTWO) stock hit an all-time low of $14.69 at that point, a far cry from its June, 2005 pre-Hot Coffee peak of $27.81.

Take-Two had losses of $29.1 million (about 41 cents a share), and revenues were only half of what they were during the GTA: San Andreas sales peak. Surprisingly, the decaf version of GTA: San Andreas, was listed alongside GTA: Liberty City Stories as T2's best selling products for the quarter. Other top-selling titles included Civ IV and NBA 2K6. Three Xbox360 launch titles (including NBA 2K6) were rushed through production to try to cash in on the holiday market, although a shortage of Xbox360's hampered software sales for T2 and everyone else in the business.

According to GameSpot, analysts went into ho-hum mode, most erring on the side of pessimism about the company's future performance. While revenues exceeded expectations, so did losses. Most analysts slashed their earnings-per-share estimates, and predicted that Take-Two had a rough year ahead.

Morgan Securities' Michael Pachter was skeptical about the company's efforts with regards to sports titles (especially Rockstar's upcoming title Table Tennis), and expects Bully to be "a mediocre title at best." He did note that, as a franchise. GTA was still going strong, accounting for 25% of revenues, and is "a key announcement away from providing a catalyst for rapid share appreciation." (CM: A possible GTA sequel? Read on...)
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IGDA Lists 2006 Board Candidates

The International Game Developers Association (IGDA) has released a list of 13 members who are running for four slots on the organization's board. They are:

- Michael Capps, Epic Games
- Dustin Clingman, Zeitgeist Games
- Christopher Crowell, Ubisoft Montreal
- Rodney Gibbs, Amaze Entertainment - Austin
- Michelle Hinn, University of Illinois
- Joe Kreiner, Logitech
- Gaurav Mathur, Factor 5
- Mitzi McGilvray, TikGames
- Marc Mencher,
- Clarinda Merripen, Cryptic Studios
- Tobi Saulnier, 1st Playable Productions
- Coray Seifert, THQ Inc., Kaos Studios
- Mark Warner, Nexus Entertainment

Each candidate has sumitted a statement about their candidacy. View them here. Voting is limited to IGDA membership. (full disclosure alert: GP is an IGDA member).

Retailers React Sharply to Mich. Guv's Support of 25 to Life Boycott

Michigan has been a hotbed of politically-oriented gaming news of late. In recent days, GP has reported on a 25 to Life boycott proposed by Democrats in the statehouse as well as Gov. Jennifer Granholm's support of the boycott resolution.

GP has now heard from Hal Halpin, president of the Interactive Entertainment Merchants Association (IEMA), the trade organization which represents video game retailers. In a sharply-worded response, Halpin stops just short of calling Gov. Granholm's support of the 25 to Life boycott a publicity stunt. Here is Halpin's statement:

"We first learned about Governor Granholm's supposed letter campaign to Michigan retailers this morning via our lobbyists, who themselves only caught wind of it through a local press report. To the best of our knowledge, none of the IEMA member companies (who collectively account for about 75% of the market) have received her letter."

"It's also worthy of mention that in a recent interview regarding the game's controversy, the president of the publishing company, Eidos' Bill Gardner, stated that he believes that 25 to Life would not be selling at all if it were not for the negative publicity given it by politicians. Given that public notification, I'm not sure I understand the reasoning behind further publicizing a non-issue other than headline grabbing - an event which has become far too common related to the violent video games debate, and is ultimately counter-productive."

Sunday Editorial Roundup

Josh Korr (left), games columnist for the St. Petersburg Times has an excellent recap on game legislation and First Amendment issues. Korr's section on aggression research methodology is enlightening:

"In his Dec. 2 ruling striking down Illinois' game laws, Judge Matthew F. Kennelly said of government attempts to show a compelling interest in preventing minors' violent behavior: 'Defendants have come nowhere near making the necessary showing in this case.'"

"Kennelly's 53-page ruling reveals some tenuous research. One study had participants play a violent or nonviolent video game, then compete in a task and administer a 'noise blast' when they won. Tiny differences in the length of beeps were considered evidence of video games' increasing aggressive behavior."

"In another study, college students played violent or nonviolent video games, then were given a list of partial words they had to complete. Players of the violent games were more likely to form an aggressive word."

"There you have it: Word association and horn honks prove Grand Theft Auto turns kids into cop-killing sociopaths."