Monday, June 25, 2007

Microsoft, Take-Two, and GTA IV Episodic Content

Thanks to Steve Smith for correctly pointing out that the $50M Microsoft is paying Take-Two for episodic GTA IV content is an advance, not a free bag of money.

See the details here.

I find that somewhat odd, and a sense of that oddness can be found in the analogy that Michael Pachter used to describe the arrangement:
Next-Gen contacted Wedbush Morgan Securities analyst Michael Pachter, who further explained the deal. "What Microsoft did was pay a $50 million advance," he said, much in the same way a big-name author receives a payment in advance of his or her next book.

Yes, but this isn't the book industry, is it? In the gaming industry, this looks like a unique deal, and the question is why was it used?

Besides the obvious implication (that Take-Two is in desperate need of cash, which wouldn't surprise anyone), I think there's more going on here.

[Update: I've been thinking about this, and here's a potential scenario--and please note that this is 100% speculation on my part.

Remember, Rockstar never debuted any version of Grand Theft Auto III on more than one platform. So now they're trying to ship a brand-new generation of Grand Theft Auto on BOTH next-gen systems at the same time.

So if Take-Two went to Microsoft and said they were falling behind and couldn't afford to add any resources, what would Microsoft do? They'd figure out a way to get them some cash. That would also ensure that the 360 version has priority.

Like I said, that's speculation on my part, but I think it's a reasonable scenario.]

[Second Update: yes, I understand that publishers give advances to developers all the time. But I still find the timing and the publicity around this particular deal to be strange.]

[Third Update: good grief, I finally figured it out. Take-Two could have gone to Microsoft and given them a time-limited exclusive on downloadable content in exchange for a cash payment, not an advance. So they could have gotten a multi-million dollar check that would have been pure profit. Instead, they negotiated a much larger payment that is essentially nothing more than a loan. Why would you do that unless you were starving for cash?]

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