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From the Take Two Interactive Software (NASDAQ:TTWO) conference call held on Thursday evening -- Karl Winters, CFO of TTWO:

We have secured long-term license agreements with the NBA, NHL, NCAA, and an exclusive third-party deal with Major League Baseball. Our NBA X-Box 360 title has been selling well against the competing product at comparable retail pricing, so we are clearly executing on the strategy that we outlined to you when we entered the sports business.

The next critical step in leveraging our sports investment is capturing the opportunity of next-gen, which we always said was our sweet spot in sports, when we expect to leverage the benefits of both premium software pricing and increased hardware penetration.

To give you an idea of the leverage provided by higher software pricing and higher unit sales, let me walk through a few numbers from NPB for our U.S. sales. In fiscal 2005, if you exclude the NFL title which we no longer offer, in the U.S. alone we sold just under 3 million units of sports titles at an average retail price of about $20. Year-to-date in fiscal 2006, we sold close to 2 million units at an average retail price of about $35, as estimated by NPB. Based on our current model, and expected release schedule, we expect to sell more than 5 million units of sports titles in the U.S. in 2007, at an average retail price of $45.

Assuming these levels of sales in the U.S., and additional international sales, our sports business should become profitable and a much more meaningful business for us next year.

In addition to higher pricing and greater hardware penetration, we expect to see increasing levels of in-game advertising in our sports titles. We already have advertising in several of our sports games, and given the attractive demographics of sports video game players and the amount of time they spend playing video games, we expect advertising within our sports titles to increase significantly.

Source: Take Two Interactive Comments on Its Sports Unit (TTWO)