Will Video Game Delays Hurt Take-Two Interactive's Earnings?

| About: Take-Two Interactive (TTWO)

Take-Two Interactive (NASDAQ:TTWO) is video game maker best known for its Grand Theft Auto franchise. To date, the franchise has sold more than 100 million copies and has produced four sequels, numerous series spin-offs and created a devoted fan base. Its style of play and even its game engine were the basis for Take-Two's other open world games like Red Dead Redemption. The next installment, Grand Theft Auto V, is the most anticipated game not only in the series, but possibly of 2013. Originally, it was set to be released almost a year ago, but now it looks like it won't be in stores until September 17th.

In the past few years, this wouldn't have been material to game sales, as fans of the series don't mind waiting, as long as the company gets it right. However this year is unique in the fact that both Sony (NYSE:SNE) and Microsoft (NASDAQ:MSFT) have announced their next generation consoles, the Playstation 4 and the Xbox One, which the companies plan to release in time for the holidays. This puts the release of Grand Theft Auto 5 (A Playstation 3 game) less than two months from the hottest new console releases. Neither the Playstation 4, nor the Xbox One are going to be backwards compatible, so GTA 5 will not work on them.

Of course most gamers are unlikely to immediately sell their old consoles in favor of the new ones and will probably keep them even if they buy the next generation systems. After this extended console cycle (seventh generation consoles have been around for more than seven years), users have amassed a large collection of games and won't let go of them easily. That being said, Take-Two has not announced when or if versions of the game will be available on the PS4 or Xbox One. It is likely the market will have to wait for Grand Theft Auto 6 to play the franchise on the new consoles, which may be a long time, as this installment of the game has been five years in the making.

There is actually a pretty small list of games that will be released upon the launch of the new consoles. Take-Two Interactive is publishing only one of them, the next installment in its basketball franchise, NBA 2K14. This will have to compete directly with a trio of sports titles from EA Games (NASDAQ:EA), including its blockbuster Madden NFL, FIFA 14, and its own entry into basketball games, NBA Live 14. Microsoft is also entering the sports gaming arena through its Rare LTD. label, releasing Kinect Sports Rivals exclusively on Xbox One.

Bioshock, one of Take-Two's popular franchises, released another installment in March. Called Bioshock Infinite, it was also delayed from its original release date of October of 2012. In spite of that, the game has shipped more than 3.7 million copies as of May 13th. Adding to the increase in video game sales, Borderlands 2, which was released last September, has shipped over 6 million units. Take-Two also sells full games and bonus content that is downloadable not only on consoles, but on Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG) and Microsoft tablets and smartphones. Revenues for those digital products have grown 192 percent year-over-year. The company's digital products, Bioshock Infinite, Borderlands 2, NBA 2k13, which has shipped 5 million units and sales of older games like Max Payne 3 and GTA IV, have boosted the company's revenue 47% higher year-over-year.

The game maker is still in the red, posting a net loss of over $29 million, which is still far better than the year before in which it lost nearly $110 million. Take-Two also expects to earn $2.05 to $2.30 net income per share for the fiscal year. Those projections assume healthy sales of Grand Theft Auto V, which may be very possible despite the delay. One company, which looks at the video game market and the pre-sale numbers, is estimating GTA V to ship more than 18 million units in its first year of release. By comparison, Grand Theft Auto IV was released in 2008 and has sold just over 20 million copies. So 18 million in its first year would break all kinds of records and would become one of the best selling games of all time.

Take-Two is going to report earnings for its last quarter on July 30th. The average estimate is for the company to lose 70 cents a share, however, with the better than expected shipments, the company will probably come closer to the higher estimates of around a 66 cent loss. March was one of the best months for video game sales in general with 14 titles shipping over 100,000 units. Other video game maker's stocks like Electronic Arts , Activision (NASDAQ:ATVI) and Ubisoft (UBI) have all been on the rise, as this year is expected to be the best in years for the sector. Take-Two Interactive stock itself has nearly doubled in the past year. So while of the good news has already been priced in, it doesn't look like the delay in releasing Bioshock Infinite has hurt sales. Even with its launch still a couple months away, it looks like delaying the release of GTA V not only won't hurt revenues, but the game may even help Take-Two beat its full year estimates.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

About this article:

Author payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500. Become a contributor »
Tagged: , , , Multimedia & Graphics Software
Problem with this article? Please tell us. Disagree with this article? .