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'San Andreas' Fault

21 Jul, 2005 By: Holly J. Wagner

Scores of retailers were pulling copies of Grand Theft Auto: San Andreas from their shelves today after the Entertainment Software Ratings Board (ESRB) changed the game's rating from ‘M' (mature) to ‘AO' (adult-only) because of controversial explicit sex scenes users could unlock with a downloaded key.

“After a thorough investigation, we have concluded that sexually explicit material exists in a fully rendered, unmodified form on the final discs of all three platform versions of the game (PC CD-ROM, Xbox and PS2),” said Patricia Vance, president of the ESRB. “However, the material was programmed by Rockstar to be inaccessible to the player, and they have stated that it was never intended to be made accessible. The material can only be accessed by downloading a software patch, created by an independent third party, without Rockstar's permission, which is now freely available on the Internet and through console accessories. Considering the existence of the undisclosed and highly pertinent content on the final discs, compounded by the broad distribution of the third-party modification, the credibility and utility of the initial ESRB rating has been seriously undermined.”

The ESRB changed its policy on new games as a result of the scandal and will require all game publishers to submit “any pertinent content shipped in final product even if is not intended to ever be accessed during gameplay,” or remove it from the final disc.

By midday Thursday, retailers Best Buy, Target, Wal-Mart, Circuit City, Musicland Stores (which includes Sam Goody, Suncoast, Media Play) and Blockbuster Video had confirmed they were removing the game from their stores and Web sites. Companies that did not respond to inquiries by press time included Movie Gallery, Trans World, GameStop and EB Games, eBay and Amazon.com.

However, Web site searches at GameStop.com and EBgames.com did not offer the game for any platform. The game was still offered for all three platforms on Amazon.com and copies were selling briskly on eBay.

GTA producer Rockstar Games, which initially said the raunchy content was the result of a spreading third-party modification, later issued a statement that was widely taken as an admission the content was programmed into the factory versions of the game for PC, Xbox and PlayStation 2.

“We are disappointed by comments that misrepresent Grand Theft Auto, detracting from the innovative and artistic merits of the game. Unfortunately, the recent confusion only serves to suggest that games do not deserve the same treatment as other forms of creative expression. By promoting awareness, we can avoid propagating the fear and mistrust of a new entertainment medium,” the statement said.

The company said it would provide “AO” stickers for retailers who wish to continue to sell the current version of the title.

Rockstar and its parent company Take-Two Interactive noted that the explicit scenes are not playable in the retail version of the game unless the user downloads and/or installs software that unlocks the content.Rockstar also said it has stopped manufacturing that version of the title and will begin working on a new version of the game. The new version will retain the original ESRB ‘M' rating and is expected to be available during Take-Two Interactive's fourth fiscal quarter.

In the meantime, Take-Two lowered its guidance for the third fiscal quarter ending July 31 to $160 million to $170 million in net sales and a net loss per share of 40 cents to 45 cents to provide reserves for the value of the title's current North American retail inventory. It also lowered guidance for the fiscal year ending Oct. 31 to $1.26 billion to $1.31 billion in net.

The fiasco triggered a slide in Take-Two's stock price, from a close at $27.07 July 20 to closing down almost 5 percent, at $25.74.

Wedbush Morgan Securities analysts Michael Pachter and Edward Woo lowered their estimates for the company based on the problems.

“We are disappointed that this type of content was included in the game in the first place,” they wrote. “While it's true that the sex minigames are only playable with an unauthorized third-party modification, we believe that Take-Two's management should have placed limits on its developers, ensuring that such content was never included in the game.”

As for the developers themselves, the pair wrote, “We question the judgment of the development team in taking such a risk with the crown jewel of the Take-Two empire. … This recall and fix comes at a significant cost, with approximately $40 million in revenue and $28 million net income impact in fiscal-year 2005 (although the impact may be less depending on retailers' decision to return product and no change in consumers' demand for the game).

Pachter noted the game had already reached 90 percent of his lifetime sales projections for it before the minigames surfaced.

Wal-Mart stores removed the game from shelves and Web sites and put a “stop sale” on the title in case some copies were missed.

Best Buy policy is not to carry ‘AO'-rated games. The chain pulled the game from its store shelves and its virtual shelves on bestbuy.com, bestbuy.ca and futureshop.ca Web sites. The decision applies to all the console and PC formats.

“Our decision reflects the commitment we have to our customers to help them make informed decisions,” a spokesperson said. “Best Buy is a strong proponent of the ESRB ratings system. We will continue to work with them to ensure that the ratings system is a meaningful way to help customers make educated video game purchases.”

The spokesperson said the chain “hopes to send a strong message to game developers encouraging full cooperation with the ESRB.”

Musicland stores were pulling the game from shelves as “misrated,” but the chain was still working on a policy for the title's future, a spokesperson said.

“We have temporarily pulled GTA: San Andreas from our shelves, as it is now misrated,” she said. “Currently, we have no adult-only games in our product mix and are developing a strategy for the future of this specific title in our stores.”

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