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[UbiSoftologist]

1. An excerpt from the WSJ article ''Video Game Industry Ripe for Consolidation''

Meanwhile, Microsoft looms with a huge checkbook and an aggressive agenda in games. Since the Redmond, Wash., software giant, which has a market value of about $292 billion, entered the console-videogame market in 2001, its sales have been stifled by a lack of top-tier games for its Xbox game machine. Microsoft got the Xbox titles that have sold well -- both installments of the "Halo" franchise -- through an acquisition of Bungie, a small game-development studio.

Microsoft will come under increasing pressure to fill in the dearth of games as it prepares its next-generation Xbox for sale late next year. One possible target would be Take-Two, the maker of the blockbuster "Grand Theft Auto" series, whose newest versions appear first on Sony's PlayStation 2 game console before they are made available on other machines. The Securities and Exchange Commission a year ago launched an investigation into alleged accounting violations at Take-Two. The company said this month that it made an offer to settle the inquiry. With a market capitalization of $1.54 billion, Take-Two is valued more highly than many investors think Microsoft would be willing to pay for a game maker. But with "Grand Theft Auto" under its own roof, Microsoft could have one of best-selling games of all time for its Xbox and pull the rug from beneath its chief rival, Sony, which has a market capitalization of about $35 billion.

2. Some interesting comments made by the posters ''demotek55'' and ''ttwoisundervalued'' at Yahoo Finance

As the recent WSJ article pointed out MSFT plans to launch XB2 for Xmas 05 while the PS3 won't be in the U.S. till Xmas 06. With GTA to launch the XB2 MSFT would have a commanding lead and even moreso by Sony not having it for their launch. This cycle is far more important to MSFT than the previous one as they plan to make the XB2 the centerpiece for entertainment for the family. It is expected to roll out as just XB2 for Xmas 05, XB2HD (hard drive) a few months later and then XB2 Media Center for Xmas 06. This launch is really for all the marbles so the value of MSFT having GTA and Sony not having it is enormous. Far beyond the intrinsic value of GTA. With an acquisition any deal with Sony for the next GTA is gone and they also pickup an efficient distribution business along with a solid portfolio of IP and studios. With the SEC almost gone and TTWO trading at a forward PE of 15 now is the time for MSFT to make their move. Of course Sony will likely understand this and make a move first. In any case a bidding war is almost certain.

I've had essentially those same thoughts. GTA sells consoles and consoles sell games. Having GTA totally exclusive to your platform would be huge (especially if its paired w/ exclusive Halo). Plus the purchase price of TTWO would be peanuts to MSFT (as well as Sony) no matter what the premium. At a $50 buyout (roughly 42% premium) the purchase price is only 2.25B. Bill Gates probably has that much in spare change in his couch. Microsoft made 2.6B in their last quarter. Hell if they pay 1Q's earnings that would be about $57 per share or a 65% premium. You also have to remember that the acquirer doesn't have to take on any debt and will get a considerable cash balance in the acquisition. If Microsoft were to acquire TTWO they could do away with questionable management and just take the real value of the company - the development teams. Now the downside to an acquisition. Will working for a huge corporation stifle the guys at Rockstar? Would it cause a defection? Of course working at such a large company could put vast resources at their disposal, that possibly aren't available to them at TTWO.

 

[jobber]

screw GTA. I want ESPN sports games.

 

[Gattsu25]

If I were the head of MS, I would send $2,000,000,000 to myself...fuck the industry

 

[Azih]

Sure, ok, why not?

 

[Amir0x]

It's not as easy as simply wanting to aquire the company and then having the money to do so. But no, there's no way they'd be able to aquire Take Two in time to make a new GTA game exclusively for Xbox 2 launch.

If I was Microsoft, or Sony, I'd be looking heavily at expanding my relationship with Take Two until the momentum the GTA series has falls away. More money for advertising the game exclusively for my system. Perhaps help fund some of the upper level development for the company to foster a close relationship. But since Take Two's massive franchise GTA is the best IP they have, I would not consider it a smart move yet to just outright aquire them. Not smart in the long-term, anyway. Even Take Two shareholders acknowledge that TT needs to diversify. Of course, the whole EA NFL thing didn't help.

 

[DaCocoBrova]

They'd just end up like Rare, Shiny and a bunch of other 'used to be hot' devs/pubs.

The GTA thing won't last too much longer w/ all the clones and what not. Without that franchise, they're not holding on to too much IP.

 

[Scrow]

The GTA thing won't last too much longer w/ all the clones and what not.

that is... until the new GTA comes out for PS3.

 

[SHOCKIE]

It would be a smart move if Mircosoft did this,as a new Halo every three years won't win them the console war's.

 

[D-Back]

Short term-yes I would
Long term- no I wouldn't

Regardless I would buy them if it meant having a exclusive GTA game at Xenon launch or around the time of the PS3 launch

 

[sonycowboy]

$2 Billion dollars+ for GTA?

As big as GTA is, it's not worth it.

 

[SuperPac]

At some point, GTA is going to burn out and wear out its welcome with the public. It's just a matter of time. To buy Take-Two just to get one good game and a bunch of Smuggler's Runs... not important.

 

[DJPS2]

At some point, GTA is going to burn out and wear out its welcome with the public. It's just a matter of time.

I'm not so sure...

GTA, regardless of how I feel about it, has become an elite franchise. Whispers of a new GTA game stop traffic. It's kinda like Madden in my book, minus the annoying fat guy that has little to offer but to yell, "BOOM!". Madden's shown no signs of slowing down... it's a perennial top-seller (for some reason) and has become synonymous with gaming. We've been waiting for the Madden series to finally crap out (other than in 1995), but it hasn't after nearly 15 years.

With legions of wannabe criminals out there, I see the same fate for this franchise. It's going to be here for a long while... as will the stories about crime being linked to it.

 

[border]

Seems like the better deal would just be to offer them some very sweet money hats and royalty deals. Buying an entire company for a single franchise seems a little insane, and I think Microsoft is trying to produce a profit on the next generation.

 

[DopeyFish]

Even then... MS would be buying back their SLC studio for a higher price too :/

Take2 also has max payne and duke forever (2 other big hits) but as I've said before... Publishers don't like buying other publishers. Because they're paying for something they won't need, and they'll have to pay more just to dismantle it (the publishing aspect of the company they are buying)

 

[belgurdo]

At some point, GTA is going to burn out and wear out its welcome with the public. It's just a matter of time.

I remember when people were saying that about Final Fantasy, Mario, Sonic (stfu they're still selling well, despite quality,) MMORPGs, etc.

 

[Do The Mario]

I would buy Sony, this would mean the GTA game would have to be on my console coz Nintendo will not have them.

 

[FitzOfRage]

The time to buy Take 2 was 5 years ago. MS should have picked them up when they bought Bungie . At this point, I think they're a lot closer to the end of their time in the lime light.

I mean this reminds me of all the rumors/speculation about MS buying out Square at the start of the current generation.

 

[UbiSoftologist]

I remember when people were saying that about Final Fantasy, Mario, Sonic (stfu they're still selling well, despite quality,) MMORPGs, etc.

You hit the nail on the head.

 

[Nerevar]

The time to buy Take 2 was 5 years ago. MS should have picked them up when they bought Bungie . At this point, I think they're a lot closer to the end of their time in the lime light.

I mean this reminds me of all the rumors/speculation about MS buying out Square at the start of the current generation.

IAWTP.

Take-Two isn't worth it at all. Sure, exclusive GTA might be good for a couple more games, but they haven't really done anything else overly impressive. Plus, by taking in the developers of GTA you're saddling yourself with the very negative image that comes with the company. Not a good thing IMO.

 

[FitzOfRage]

I remember when people were saying that about Final Fantasy, Mario, Sonic (stfu they're still selling well, despite quality,) MMORPGs, etc.

I remember when it happened to them. Yeah, they sell "well", but they're not untouchable blockbusters like they used to be (especially Sonic).

And that's the thing, if you want games that do "well" you don't need to spend a couple billion to get that kind of performance.

 

[Link316]

MS would be better off just paying for some GTA exclusivity than buying the entire company

 

[Azih]

It's too early to see where GTA lies.

It could be a Resident Evil, or worse yet, a Tomb Raider.

 

[DSN2K]

GTA series has peaked, sales will only drop next gen.

 

[SolidSnakex]

GTA series has peaked, sales will only drop next gen.

:lol

 

[sonycowboy]

GTA series has peaked, sales will only drop next gen.

Well, it's really a matter of growth potential.

With GTA 3 hitting 12 million, GTA:VC hitting 15 million, and GTA:SA trending to over 20 million units sold, I don't see how they can top that. I don' t think it means the series has peaked, but getting sales beyond those numbers is incredibly difficult and requires a very large installed base.

Much like Madden, Final Fantasy, GT, etc the sales will mature and level off to an extent.

 

[open_mouth_]

Just imagine a truly next-gen GTA game in the series with upped graphics, upped possibilities, and a huge, almost real world and you've got a game that will attract almost every gamer that has played the GTA series this gen.

If Microsoft acquired Take Two, they could get Rockstar started on the Xenon version of GTA to coincide with the PS3 launch and they could go ahead and release Halo 2.5 or whatever for Xenon launch to ensure a solid early install base. Those games along with a probable Perfect Dark, a next-gen DOA, a next-gen PGR and early EA support will do wonders for Xenon's N/A launch. Microsoft could placate EA by holding off next-gen installments of Take Two's sports games for 2006 as well, so EA essentially gets one round to itself.

Microsoft could consolidate Take Two's talent along with it's own first/second parties to create a Microsoft Games Studio (for Xenon and PC) that could rival any in the world and one that would ensure must have games for its platforms in nearly every genre. You got mature games, you got sports, you got killer FPS games, you've got kiddy games (Rare), you've got racers and you've got RPG's. I know it's all a fanboy dream, but it does certainly seem like Microsoft's best course of action. They could top it off by bringing Tecmo and From software even closer and 2nd parties and maybe even partner with one more Japanese RPG maker. The key is Microsoft has to spend wisely (to increase chances of profits next-gen) and only buy/partner those dev houses that actually want to work exclusively on Xenon games. That's the kicker. Plus you got Sony, EA, and Nintendo all with large cash reserves ready for bidding wars.

 

[sonycowboy]

Microsoft could consolidate Take Two's talent along with it's own first/second parties to create a Microsoft Games Studio (for Xenon and PC) that could rival any in the world

:lol

MGS + Rare + Bungie + Rockstar(s) <<< Sony, EA, Nintendo

 

[element]

Yeah, the time to buy Take 2 would have been 5 or 6 years ago. They could have been aquired for $100m or so. They were desperate for cash at one point.

 

[snapty00]

The thing about that division of Rockstar is that I have faith that they can create something big after GTA. Will it be as big as GTA? Probably not. But I don't think they'll just become deadweight like a lot of developers do, either.

 

[Legal Step]

Speculation is the lifeblood of the interweb.

 

[kard]

Well, it's really a matter of growth potential.

With GTA 3 hitting 12 million, GTA:VC hitting 15 million, and GTA:SA trending to over 20 million units sold, I don't see how they can top that. I don' t think it means the series has peaked, but getting sales beyond those numbers is incredibly difficult and requires a very large installed base.

Much like Madden, Final Fantasy, GT, etc the sales will mature and level off to an extent.

With broadband reaching over 50% penetration, the next GTA may be online and those 20 million gamers that love the game will pay monthly/yearly fees to play it. What other game can generate instant move to online gaming than GTA? Those who think GTA has peaked still think of last generation context.

Microsoft doesn't need to buy TakeTwo, just make a strategic investment in the company. TakeTwo will soon have a sports linup that rivals EA's lineup. If I was Sony or Microsoft, I would want access to that lineup to keep EA in check.

 

[Any1]

I think the most important thing that the purchase would do is to keep Sony from having it. I honestly hope no one believes that the GTA series is not one of the biggest system sellers in the world, even today. Whoever has this game exclusive to their system next gen will have an advantage, over the other consoles, of viagran proportions.

This series sells consoles, it's as simple as that.

 

[sonycowboy]

I think the most important thing that the purchase would do is to keep Sony from having it. I honestly hope no one believes that the GTA series is not one of the biggest system sellers in the world, even today. Whoever has this game exclusive to their system next gen will have an advantage, over the other consoles, of viagran proportions.

This series sells consoles, it's as simple as that.

And consoles sell series. It's certainly an advantage to have the series exclusive, but Take-Two knew what they were doing when they decided to choose the PS2 as their GTA platform. It wasn't for Sony's sake

The big issue isn't would M$ love to have Take-2 exclusively (they would), the point is you'd absorb a huge publishing infrastructure, a distribution company, some developers you don't want, all of which would be hard to monetize sepearately. It's alot to pay for a single developer and a single franchise.

 

[element]

Don't forget that Dave Jones left DMA a long time ago and started up Realtime Worlds. DMA/Rockstar North have just been doing 'refresh' games ever since he left. Not to say that GTA haven't been fun games, but they really haven't shown anything else then the GTA formula.
So it is possible that Rockstar North might have a difficult time with a 'true' GTA sequal, then next step in the series if you will.

 

[Xellos]

Microsoft doesn't need to buy TakeTwo, they just need to get a simultaneous release of GTA 4 (and other games). If Sony gets a 8-12 month window on GTA 4, then that alone will sell millions of PS3s.