Take-Two: The Sports StrategyTake-Two has made some interesting announcements in the last few weeks. First, they purchased the Indie Built studio from Microsoft. Indie Built was the developer for Top Spin, Amped 2, and Links, all top-quality sports titles. They also purchased British developer Venom, who was responsible for the Rocky: Legends title.
And if that wasn't enough, it was revealed last week that Take-Two has an option to buy both Visual Concepts and its subsidiary Kush Games, who between them develop all of the ESPN sports titles.
Clearly, Take-Two's distribution agreement with Sega for the ESPN line was just the opening salvo in a long-term realignment of their corporate strategy. Right now, it's a company almost entirely dependent on one franchise: Grand Theft Auto. The company basically bets its future every time it releases a GTA game, and if one ever disappoints, they would be in serious trouble very, very quickly. It's a company whose stock price is based on growth, but beyond GTA they have no growth drivers.
That's not to say that they don't have other good games. They publish the Max Payne series, which is outstanding, as well as PopTop Software (Phil Steinmeyer's company). So they publish some excellent games, but none of them move enough units to maintain the company's growth rate.
Take-Two reported revenue of $1.13 billion last quarter. If they could sell ESPN Football at $39.95 and still move two million units like they did this year, one sports game would be accounting for over 7% of Take-Two's revenue for the biggest quarter of the year. An entire line of sports titles could produce the additional growth driver that Take-Two so desperately needs.
So it appears that Take-Two's strategy was to significantly improve the market share of the ESPN line this year, then purchase Visual Concepts and Kush as part of a larger strategy to become a leading developer and publisher of sports games. The price cut to $19.99 was a brilliant move and hurt Electronic Arts to a degree that I didn't think was possible.
Everything was going just about perfectly until Madden announced the exclusive NFL license. Now Take-Two is in the middle of building a stable of sports games to use as a growth driver for the company--and EA is buying exclusive licenses for the major team sports. Top Spin and Amped, even though they're both outstanding games, aren't part of a viable strategy unless the ESPN team titles are included as well. So this strategy, as well-conceived as it was, might blow up in Take-Two's face.