My latest Armchair Analysis column is live over at Popzara Press, covering Take-Two’s 2012 fiscal year earnings conference call. Topics included the financial effect of game release delays and the reasons why, the likely end of Take-Two’s license partnership with Major League Baseball, and a surprisingly strong defense of consoles in light of weakening sales in that sector. I really hope that you’ll give the piece a look if time allows.
The most interesting part of the call covers what was– and what wasn’t– said regarding Grand Theft Auto V.
A press release, containing Take-Two’s highlights and financial results from the 2012 fiscal year, was issued about 20 minutes prior to the earnings call. On the earnings release, Grand Theft Auto V is listed as a TBA (To Be Announced) release. Curiously, it’s listed in the 2013 fiscal year lineup despite the unknown date. If you take the release schedule to be chronological as it’s listed, then TBA could be inferred as March of 2013. I thought that to be a bit of a stretch before the call took place, given the announcement that XCOM: Enemy Unknown would hit retail in October and thus closing the window that the BioShock Infinite delay left open.
My opinion changed during the call, when revenue projections for the 2013 fiscal year were shared. Take-Two is expecting revenues for this fiscal year to be more than double what was taken in last year, to between $1.75 billion and $1.85 billion. That’s also more than Take-Two made in the 2011 fiscal year, when Red Dead Redemption was such a big success. Take-Two CFO Lainie Goldstein also said this during the call:
Our expected revenue range assumes the on-time release of the titles we have announced to date, as well as other titles yet to be announced for release during fiscal 2013. We expect the revenue breakdown from our labels to be roughly 60% from Rockstar and 40% from 2K.
Now, if you look at the earnings projection of $1.75 billion dollars, it’s estimated that over $1.05 billion is set to come from Rockstar. Even if Max Payne 3 sells 10 million units, that’s only about 60% of the projected revenue that Rockstar is expected to bring in during this fiscal year. Something else needs to be released to close that gap.
The plot thickened further when Eric Handler from MKM Partners asked about how projected guidance could be hit without Grand Theft Auto V. Take-Two Chairman and CEO Strauss Zelnick responded with this answer:
We’ve announced that Grand Theft Auto V is in full development. We haven’t announced a release date yet. What we have said about the year is that we have some titles that we expect to release that are not announced yet and we have a terrific slate coming up.
It’s a sidestep answer, as Zelnick obviously doesn’t want to tip his hand, but there is absolutely no certainty one way or another in this instance. There are two scenarios that come to mind. Either Grand Theft Auto V is the “unannounced” title or Rockstar has another project going that we don’t know much (if anything) about. What’s more, if you listen to the replay of the call (located via a link on this page) starting at the 39:53 mark, Zelnick’s tone in response to Handler’s question doesn’t lead you to believe that he’s denying anything. It didn’t sound like a denial to me, at all.
I am thinking that Grand Theft Auto V is on track for a release during this fiscal year, ending March 31, 2013. I believe that it’s possible that the game could ship during the fourth quarter of this calendar year, between October 1st and December 31st. I’d even go so far as to say that the October 23 date that Michael Pachter mentioned last month has a real shot at verifying. It makes some sense, given that it’s two weeks after another Take-Two release (XCOM: Enemy Unknown) and two weeks before November’s big guns like Halo 4, Call of Duty: Black Ops II, and the potential release of the WiiU. There’s some concern how sales of Assassin’s Creed III may affect Grand Theft Auto V, but given the strength of the Grand Theft Auto IP, UbiSoft could be the loser in this battle if a late October date materializes.
I’m not sure how much of a presence– if any– that Grand Theft Auto V has at E3, but news could come after the event. If after-hours trading and the spike of Take-Two stock is any indicator, then I believe that investors agree with me: Grand Theft Auto V will be here a lot sooner than many expected just a few weeks ago.
The announcement of the Bioshock Infinite delay to late February of 2013 doesn’t surprise me in the slightest.
The original October 2012 release date seemed a bit risky, given the already-impressive lineup of software that is slated to ship near the same time. Assassin’s Creed III, Halo 4, Black Ops II, WiiU hardware, and other games would likely have eaten into potential sales for Bioshock Infinite. Would these other software releases have led to disappointing sales for Infinite? Possibly, but after a 2+ year hiatus for the IP, I think that Infinite would have held its own.
Let’s look at some potential causes for the delay.
1. Multiplayer addition:
Ken Levine notes in his explanation of the delay that Irrational Games had “uncovered opportunities to make Infinite into something even more extraordinary.” I firmly believe those “opportunities” are multiplayer options. Multiplayer has become fastened to almost every major game experience, and we even saw it with Bioshock 2 in 2010. Job postings from within Irrational Games for Network Programmers seem to suggest that multiplayer is going to be added or tweaked in the coming months. From a personal perspective, I’m not too excited about more multiplayer, as I’ve had more enjoyment playing these games solo. From a business perspective, though, multiplayer is an easier avenue to additional revenue per user (ARPU). I can see why the decision may have been made.
2. Something else is coming:
Analysts have been hinting that Grand Theft Auto V, which is another release under the Take Two umbrella, could hit stores in October. Wedbush Morgan analyst Michael Pachter said in a note that the Infinite delay “opens the window” for the game to see a release this year. He remarked that we could see some news about Grand Theft Auto V during the Take Two quarterly results presentation on May 22nd, or during E3. During some communication on Twitter, it also appears that Blockbuster put a preliminary date on Grand Theft Auto V of October 26th in the UK, which would likely mean October 23rd here in the US. I think that there’s a bit of coincidence here, and am starting to lean a bit towards the conclusion that we do see Grand Theft Auto V this year. If not, the hole left by Infinite‘s delay will lead to revenue projections being revised downward for the holiday quarter– perhaps considerably so.
3. It’ll be done when it’s done.
It’s entirely possible that Ken Levine and the team at Irrational Games are working beyond deadlines and more time is needed to complete the product. Perhaps there’s some extra fine-tuning needed for certain portions of the game. Maybe a few late-term additions (aside from multiplayer) were added. From what we’ve seen of the game so far, it’s a pretty huge undertaking and projects like these do take some time. While not necessarily good for Take Two’s near-term bottom line, improving on and making sure that Bioshock Infinite is the best game that it can be should pay dividends to consumers when it finally does hit stores… hopefully early next year.
With Infinite being pulled from trade shows for the immediate future, we can look to the next few weeks to see if signs of Grand Theft Auto V arise. If they do, as I suspect, then I think we’ll have our cause identified. It’s a good thing for Infinite if this bears out, however; more time to polish a long-awaited piece of software is a positive. If we hear nothing during E3 (or before), then analyst speculation– and investor fear– over the delay will worsen. In either case, I think that speculation over Infinite becoming another Duke Nukem Forever or Final Fantasy Versus XIII scenario will prove false and we will see it hit stores in 2013.