Take 2 Puts Brakes on 'GTA IV' Release

In a move sure to disappoint scores of gamers, not to mention Microsoft (Nasdaq: MSFT) and Sony (NYSE: SNE), Take 2 Games announced late Thursday that the release of the latest installation in its hottest gaming property, "Grand Theft Auto IV," will be delayed. The company said its revised plan is to release the game some time after March 2008, six months later than expected.

The company cited difficulties developing the game for two platforms -- the Xbox 360 and PlayStation 3 (PS3).

"We owe it to our millions of fans, to our dedicated development team and to our shareholders to make sure that 'Grand Theft Auto IV' is a groundbreaking gaming experience and is an experience that takes maximum advantage of next-generation technology," Strauss Zelnick, chairman of Take 2, said.

Financial Fiasco

News of the delay came in a revised fiscal year guidance for the year ending October 31, 2007. Take 2 anticipates pulling in US$900 million to $1 billion in revenues with losses of $1.25 to $1.35 per share, excluding stock-option expenses and reorganization charges. Combined, the company forecast loses of $2.10 to $2.20 per share. On hearing the news, Take 2 shares that had hit US$16.91 on Thursday dropped to $14.35, a 15 percent loss, and continued to fall Monday with the latest data putting shares at $13.59, down 4 percent.

"Grand Theft Auto III," released in 2001, sold a combined 10.5 million units worldwide on the PC, PlayStation 2 and Xbox and was the biggest selling game in PS2 history at the time of its release. "GTA: Vice City," which followed in 2002, and "GTA: San Andreas," which hit store shelves in 2004, sold 11.5 million and 12 million copies, respectively, by the end of 2005.

Problems with "GTA IV" come just a month after the company's latest release, "Manhunt 2," was banned in the U.K. and Ireland and effectively banned in the U.S., where it received an "Adults Only" (AO) rating. Originally planned for the PS3 and Nintendo's Wii, both console makers pulled out of their respective deals.

"Coupled with the 'Manhunt 2' problems, there's no way to sugar coat this as anything other than a hit to Take 2's and Rockstar's earnings for this financial year," gaming guide author David Hodgson told TechNewsWorld. "Although the bounce back during 2008 makes the company stronger long-term," he added.

The delay "will negatively impact them as they are already damaged from the 'Manhunt' fiasco, but the 'GTA' franchise is very strong so they will still capture the revenue when it is released," Van Baker, a Gartner (NYSE: IT) research analyst, told TechNewsWorld.

"It is a fairly big blow, for them to miss out on the holiday season, but it is not unusual for games to slip," Michael Gartenberg, a JupiterResearch analyst, told TechNewsWorld.

Collateral Damage

Microsoft and Sony, makers of the consoles for which "GTA IV" was planned, will suffer a bit as well during the fourth quarter holiday sales season, the analysts agreed. Putting out a hot game title often leads to increased console sales as gamers purchase the platform on which the game was released. Sony, whose sales of the PS3 continue to lag behind both the Xbox 360 and Wii, could suffer more from the delay than Microsoft, however.

"It will be a blow to both Sony and Microsoft. Sony needs a major title to push console sales. And Microsoft has been pushing GTA for Xbox 360 for several months," Brian O'Rourke, an Instat analyst, told TechNewsWorld.

"Microsoft has 'Halo 3' coming out, so they will benefit from that spike. Sony really needed a strong title for the fourth quarter and now they don't really have one," Baker said.

"Certainly Microsoft and Sony have strong titles and both would like to have had the title in the fourth quarter, and it will affect both because when done correctly [a hit game] can sell systems," Gartenberg noted.

Zero-Sum Game

The only thing console makers can do, Gartenberg continued, is focus on the titles they do have out there. Delays are par for the course in game software development. Unfortunately, with game titles that have been slated for the fourth quarter holiday season, a slip-up can send consumers to simply spend their money elsewhere rather than save their money and wait.

"According to some investors, it frees up consumers to spend millions of dollars on other products," Hodgson pointed out. "This may be a problem for Sony more than Microsoft, as the PS3 has less 'killer app' software. However, for other software companies, such as Ubisoft with 'Assassin's Creed' and EA with 'Mercenaries 2' -- both games that 'GTA' fans were likely to buy -- this is the best possible news. They can expect stronger sales of their games as a result, as these games fill this gap in the market."

Take 2's mission over the next six months will be to get "GTA IV" out the door, Gartenberg stated. The game industry is fickle, and the hottest game today may not be so sought after if it is delayed to long. Gamers' attention could turn to the next game, and "GTA IV" could very easily be supplanted.

"If you're running a company called 'Rockstar,'" Hodgson concluded, "expect more importance placed on creativity rather than bottom line investor-pleasing plans. 'GTA IV' will be gigantic in 2009, so the company certainly isn't on shaky ground.

"And how many games do you know slated for Spring 2008? With little competition, and more hype and expectancy, and without the holiday rush to worry about, Take 2/Rockstar should have a banner 2008."