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Analyst Lowers Expectations for ‘Grand Theft Auto’ Publisher

16 Jul, 2009 By: Erik Gruenwedel

This week’s announced delayed release of video game Bioshock 2 to 2010 coupled with ongoing recessionary concerns prompted MKM Partners analyst Eric Handler to downsize projected second-half fiscal year 2009 revenue projections for Take-Two Interactive, publisher of the infamous Grand Theft Auto franchise.

The first edition of Bioshock, a popular action-adventure, survival horror first-person shooter game, reportedly sold more than 3 million units, with Take-Two executives projecting upwards of 5 million units sales for the sequel.

Then the video game industry took a tumble with software sales falling 29% in June, compared to the same month of 2008, while hardware plummeted a whopping 38%. Accessory sales fell 22%., according to data from The NPD Group. And a planned Bioshock feature film, directed by Pirates of the Caribbean helmer Gore Verbinski, was reportedly halted by Universal Pictures after its budget soared to $160 million.

MKM’s Handler said the delay and concurrent weak release slate for Take-Two would result in third-quarter and fourth-quarter FY2009 revenue of $125 million and $375 million, down 22% and 20%, respectively, from previous projections.

“The delay of Bioshock 2 until FY10 is very disappointing and will likely once again bring up execution issues,” Handler wrote in a note.

The analyst said 2010 would see a reversal of fortune for Take-Two with the publisher also releasing sequel games Mafia II, Max Payne 3 and Red Dead Redemption, in addition to another 400,000 units of Bioshock 2 (now estimated at 4 million units).

“[This should] provide a compelling lineup of AAA titles … in a year without the expected release of a new Grand Theft Auto console title,” Handler wrote.

Spurred by the recession, consumers are also increasingly opting for cheaper entertainment alternatives, including used and online video games. The latter category attracted 87 million U.S. visitors in May, up 22% from the same period last year, according to comScore.

The Reston, Va.-based digital data measurement company said the growth was due in part to the increased availability of free games on third-party content platforms, including widgets and applications, which can reach audiences of a size comparable to pure online gaming destination sites.

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