Great article from yesterday that I didn't see posted, and quite lengthy as well.
http://online.wsj.com/article/SB121055598342284143.html
http://online.wsj.com/article/SB121055598342284143.html
Studio Is Prize in Takeover Duel
Intense 'Grand Theft' Creator
Wows Gamers -- and Electronic Arts
By NICK WINGFIELD
May 12, 2008; Page A1
Sam Houser is one of the leading lights of the videogame era. A secretive, demanding workaholic, he also has a temperament and a budget befitting a Hollywood mogul.
His latest creation, "Grand Theft Auto IV" -- part of the urban-action franchise that lets players roam a gritty virtual world of gangsters and prostitutes -- carried stratospheric production costs. One person familiar with the project recently pegged the figure at roughly $100 million, a range Mr. Houser doesn't dispute.
For the game's publisher, Take-Two Interactive Software Inc., the gamble is paying off in a big way. In the week after GTA IV's release on April 29, the title sold more than six million copies and netted more than $500 million at retail -- a record launch for the industry.
The smash success of GTA IV is playing a role in an even bigger game for Take-Two: its attempt to foil a hostile $2 billion bid from the giant game maker Electronic Arts Inc.
So far, Take-Two has managed to fend off EA in part because it believes it can garner a higher price. Both parties decline to say whether they're in discussions now. EA has set Friday as the deadline for Take-Two investors to tender their shares.
Whizzes like Mr. Houser are a prime reason why EA has its eyes set on Take-Two. But as EA and other major videogame makers grow and mature, Mr. Houser and those of his ilk pose a challenge: How can buttoned-down companies integrate and manage the industry's most volatile and independent creators?
Mr. Houser, 36 years old, sports a scruffy beard that stretches to the top of his chest. In a rare interview, he joked that associates have described him as a "lunatic" -- a reference to his creative intensity. Last year his studio hired a spiritual healer to exorcise bad vibes after the deaths of two fellow employees. He makes a habit of walking the streets of New York to study a hidden underworld of ex-cons, vagrants and other Diane Arbus-worthy subjects. Some of them have inspired characters in his games.
He's also a man of contradictions. "I'm about the most conservative guy you'll ever meet," says Mr. Houser, who lives in Brooklyn with his wife and two young children. "I have a panic attack if I get a parking ticket."
Take-Two has succeeded with Mr. Houser thus far by letting him run an independent unit, called Rockstar Games. It hasn't been easy, but the arrangement has given the company unusual clout in the videogame world.
According to analysts' estimates, Microsoft Corp. paid Rockstar $50 million to create two downloadable "episodes" that expand the story of Grand Theft Auto IV. Rockstar also agreed to release GTA IV for Microsoft's Xbox 360 game console at the same time as the version for Sony Corp.'s PlayStation 3 -- a potentially big boost for Microsoft.
Current and former employees say Rockstar's executives -- including Sam and his brother Dan Houser, Rockstar's vice president of creative -- are mercurial, prone to screaming, insisting on marathon work hours and rarely dispensing praise. Parent Take-Two has also had troubles. Last year, several executives got caught up in the options backdating scandal. Steady churn in upper management has left quirky, insular Rockstar without close supervision for much of its life, analysts say. All that could be problematic for EA.
"These are the kids on the island in 'Lord of the Flies,' " says Michael Pachter, an analyst at Wedbush Morgan Securities. "Are they manageable? No one knows."
EA declined to comment about any plans for Rockstar, a division with roughly 800 employees world-wide. Since he became CEO at EA last year, John Riccitiello has said he hopes to encourage more creative risk-taking by giving game makers more autonomy within independent "labels" at the company, a structure in which the eccentricities of Rockstar might find a suitable home.
Albeit a very different home. EA in recent years has released mature-themed titles, but its specialties are sports games and family-friendly fare like the Sims role-playing franchise.
Rockstar is known for boundary-pushing games, including some that vividly indulge vengeful fantasies. Last year Rockstar modified Manhunt 2, a gruesome horror game, after it received an adults-only classification in the U.S. The new Grand Theft Auto IV has been criticized in the media for scenes that allow players to pay prostitutes for sex. Mothers Against Drunk Driving has attacked the game, which allows characters to drink and drive. Rockstar has said the sex and drunk-driving scenes in GTA IV are logical elements of the world inhabited by its characters.
The "talent" at Rockstar, as they're called internally, make star-caliber money and might find EA's more traditional pay structure jarring. In 2005, a particularly strong year, Take-Two paid royalties of $84 million, according to company filings. The bulk of funds, say people familiar with the matter, went to Mr. Houser and other Rockstar executives. If EA succeeds in acquiring Take-Two, some analysts believe EA's star developers might demand a bigger share of game proceeds.
Another possible kink: Rockstar's history of autonomy. If EA ends up with Take-Two, Mr. Houser says it's unlikely that he would go so far as to seek EA's approval for game content. Still, he calls Mr. Riccitiello "the real deal" and sees some appeal in an EA alliance, which he says would make Rockstar a "much smaller fish in much bigger pond."
"I'm not someone who has any kind of problem with that," says Mr. Houser, who says EA turned him down for a job in the late 1990s.
The DNA of Rockstar traces to Mr. Houser, a British-born pop-culture aficionado. He remains close to his parents and to his brother Dan. Their father, Walter, is a lawyer who was part-owner of a well-known London nightclub, Ronnie Scott's, where young Sam met jazz legends. When trumpeter Dizzy Gillespie asked the boy what he wanted to be when he grew up, Mr. Houser says he replied, "a bank robber!"
In 1999, he established the Rockstar group at Take-Two. He modeled the unit, which he calls a "label," after DefJam records, the pioneering hip-hop record label that launched the careers of Run DMC and the Beastie Boys. He wanted the Rockstar brand to connote a certain coolness to consumers.
Both Houser brothers have strong tempers, people who have worked with them say. When game-industry publications give less-than-stellar ratings to Rockstar titles, say former employees, Sam has his staff to "go war" with offending publications to demand a better review or score.
Mr. Houser denies using those words, but says he has often felt the sentiment they imply. "That's an area I've grown up in, definitely," he says.
Last year, Jeff Williams, a former online producer for Rockstar, posted an essay on his blog detailing the often-explosive atmosphere at Rockstar. In the post, which he has since removed, Mr. Williams wrote about clashes between Rockstar executives over even minor issues such as the promotion of games.
"And when I say 'argument,' I mean 'screaming at the top of your lungs and throwing objects around the office' type of argument," wrote Mr. Williams, who says in an email that he removed his blog posting to avoid the possibility of legal action by Rockstar.
Mr. Houser says he doesn't think he ever heard Mr. Williams speak during his employment at Rockstar. "He's writing things I can't remember," Mr. Houser says.
"What Rockstar does...is a very intense and creative-driven process," says Gary Dale, the chief operating officer of Take-Two who has long known the Housers. "At times there will be tension based on people discussing creative ideas."
Both Mr. Houser and Mr. Dale strenuously deny other accounts, including one that had Mr. Houser allegedly wielding a baseball bat at the office. ("I would tell you if I did," says Mr. Houser.) Mr. Dale says he has heard of a similar incident involving a former employee.
EA CEO Mr. Riccitiello has made his admiration for Sam Houser clear. People familiar with the matter say the EA chief sought unsuccessfully to acquire Take-Two while he was a partner at Silicon Valley private-equity firm Elevation Partners, prior to becoming EA CEO. In an interview in November, before EA made its bid for Take-Two, Mr. Riccitiello said he was amazed by Mr. Houser's knowledge of pop culture when he introduced him to Bono, the lead singer of the band U2 and an Elevation partner.
That meeting took place at the storied Chateau Marmont hotel in Hollywood. Mr. Houser and Bono riffed on pop-culture topics, from "who the second drummer was on bands from 25 years ago to who the second camera was on 'Godfather,' " Mr. Riccitiello recalls. "Spend two hours with [Sam] and come away and tell me you don't think he's as smart as Steven Spielberg or Bono."
The original version of "Grand Theft Auto" was a modest hit when it was released in 1997 by the former games division of German media company Bertelsmann AG. Take-Two acquired BMG's videogames business in 1998, and Sam Houser joined Take-Two as part of that deal.
The game became a blockbuster in 2001, when the third version launched. Simulating a three-dimensional experience, it was set in a criminal underworld resembling that of "Goodfellas" and other mafia movies. Players could commit crimes of their choosing, including hijacking cars, shooting cops and robbing prostitutes.
Despite jabs from politicians and other critics of videogame violence, the Grand Theft Auto series is a runaway success, with more than 76 million copies sold to date.
Take-Two grew so dependent on Grand Theft Auto that Mr. Houser became one of the most powerful executives within Take-Two, say people familiar with the company
Mr. Houser's influence also soared amid persistent churn within Take-Two, which has had six CEOs in the past seven years. Last year, former CEO Ryan Brant and two other top executives pled guilty in New York County supreme court to improper record-keeping and backdating of millions of dollars worth of stock options. They each received fines ranging from $50,000 to $7.3 million.
Rockstar's exposed-brick loft offices in downtown Manhattan house an intense crew of about 120 employees, mostly in their twenties and thirties. An eclectic blend of bossa nova, hip-hop and other kinds of music greets visitors at reception.
The studio's teams include a full-time research group of five people, who study everything from street slang to architecture to ensure the authenticity of Grand Theft Auto's urban environments. Grand Theft Auto IV takes place in a New York-like metropolis called Liberty City. Researchers grilled New York's taxi and limousine commission in order to accurately depict the ratio of cabs to private vehicles.
Although Mr. Houser himself isn't a game programmer, he describes his role at Rockstar as the "high-concept" guy in charge of the "vibe of the game." His brother Dan oversees other important aspects of the title, including script writing. Other key technical work is performed by a staff in Edinburgh, Scotland.
Mr. Houser says he made regular forays to the heavily-Russian New York neighborhood Brighton Beach while developing GTA IV, whose lead character hails from an unnamed Eastern European country. "I fell in love with it," says Mr. Houser. "I would just walk around and listen and look."
Former employees say they sometimes saw firearms around the office, including sniper rifles, AK-47s and other weapons depicted in Grand Theft Auto. One former Rockstar employee says he witnessed an art director walking around Rockstar's offices pretending to fire a shotgun as a joke.
Mr. Dale says Rockstar uses real weapons in an off-site motion capture studio, but only toy guns are kept in the offices. "They may be good replicas, but they are replicas," Mr. Dale says.
Last year, after two Rockstar employees committed suicide within months of each other -- the incidents appear to be unrelated to work -- a pall seemed to hang over the New York headquarters.
So, a spiritual healer was called in to perform a type of exorcism ritual during office hours. Wearing a long, flowing garment, with an assistant in tow, the woman strode through the office swinging crystals from a string as she moved from desk to desk, according to several people who witnessed her visit. At one point, the woman paused at an empty desk where she said she was getting "pretty strong readings."
A Rockstar spokeswoman says the woman was summoned at the behest of Rockstar employees, and that the game maker also hired traditional grief counselors.
EA has had great success at games ginned up in partnership with pro sports leagues and Hollywood studios, such as Madden NFL football, a game made under agreement with the pro league. Rockstar could inject verve into another area where EA needs help: wholly owned games that don't depend on a licensing deal. EA, still the largest games publisher by sales, has seen profits and revenue suffer in recent years due to tepid performance by some of its most-important titles.
Rockstar might also bring heightened scrutiny to EA. Mr. Houser is still smarting from a crisis several years ago that followed the discovery of interactive sex scenes hidden in Grand Theft Auto: San Andreas.
Mr. Houser says he ordered the scenes removed from the game, but Rockstar technicians instead made changes intended to hide the material. The changes didn't work.
Lawsuits and investigations against Take-Two followed, some of which have since been settled. Investigators from the Federal Trade Commission grilled Mr. Houser for hours in Washington.
Asked what he did during the period following the controversy, Mr. Houser says, "Therapy." But the episode, he says, eventually helped restore his energy, prompting him to begin work on Grand Theft Auto IV.
Write to Nick Wingfield at nick.wingfield@wsj.com
