Take Two Interactive (TTWO) shareholders had cause to celebrate yesterday as the game publisher announced that its latest product, video game western Red Dead Redemption, old over 5 million units less than a month after its release. The game, developed by controversial and popular studio Rockstar Games, has been so successful that Take-Two has raised its forecast for fiscal year 2010, expecting a loss of only 10 to 30 cents where previous forecasts were predicting a loss of up to 60 cents a share. Take-Two shares went up more than 2% following the announcement on Tuesday.
The move is great not just for Take Two stock, but also for competitors Activision (ATVI) and Electronic Arts (ERTS) that are hoping to see stronger video game sales themselves in upcoming releases. Red Dead‘s success indicates that there is still a lucrative market for critically acclaimed but pricey video games. Red Dead sells for as much as $59.99 at certain retailers.
The news is especially encouraging for TTWO stock going into the third quarter. On June 22, Take Two plans to release downloadable content for Red Dead Redemption on both the Microsoft (MSFT) Xbox 360 and Sony (SNE) Playstation 3. While the DLC, entitled Outlaws to the End, will be free to download on both systems, both Take-Two and Rockstar are hoping it will continue to both spur sales of the game itself and keep current owners from selling the game back to used video game outlets such as the monolithic GameStop (GME).
“[Red Dead Redemption is] following an erosion curve that every game will follow. We’re cautiously optimistic… that this game will be attractive to consumers for a long time to come,” said Take-Two CEO Ben Feder during the announcement of the company’s second quarter financials announcement. Feder emphasized the increasing importance of downloadable content in the video game market yesterday. DLC support has been essential to the success of Take-Two’s products in the past year, particularly Rockstar’s ever-popular Grand Theft Auto IV. The GTAIV DLC collection Episodes From Liberty City, previously only available on Xbox 360, was released for the Playstation 3 and PCs on April 13, 2010. Feder cited the collection as pivotal in GTAIV surpassing 17 million units sold. It was announced that Take-Two would release Bioshock 2 DLC later this year. The game, developed by studio 2K Marin, was released in February.
Take Two shareholders would do well to take note of the growing interest in downloadable content. Going into this year’s Electronics Entertainment Expo—the premiere annual video game industry convention which kicks off next week—the theme game publishers and console holders are emphasizing is video games as service, not as product. As an answer to the continuing threats of piracy and the secondary market, game makers are pouring their efforts into creating ways to keep consumers from purchasing brand new, legal copies of their software. DLC stands as the most promising solution.
Take Two stock could see another move following the conference next week, as Rockstar Games is set to show off three new properties including the spy thriller and Playstation 3 exclusive Agent, the mid-20th century detective vehicle LA Noire, and Max Payne 3, the long-awaited sequel to the popular hardboiled cop franchise.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
