Take Two Locks Up Rockstar Talent

Ars Technica reports: Rockstar may be a controversial developer, but it sure can bring the rain: Grand Theft Auto IV enjoyed $500 million in first-week sales across the PS3 and Xbox 360. Take-Two simply can't afford to lose that level of success. Sam and Dan Houser, Leslie Benzies, and other core executives have renegotiated their deal with Take-Two. The team will stay with the publisher until 2012.

While Rockstar is wholly owned by Take-Two, the Housers' deal was set to expire in 2009. If they left, the heart of the company would have left with them, and that's a risk Take-Two's board chairman Straus Zelnick is unwilling to take. He'll be paying for the privilege as well: the team will be able to develop its own intellectual property that Take-Two will publish and will retain ownership of this IP. 

It's a sweetheart deal. The Housers get to develop their own games, and if they're hits, they get to enjoy a large slice of the spoils via the new "incentive compensation program." Zelnick was enthusiastic in the press.

"We're delighted with the extension and expansion of Take-Two's relationship with the Rockstar team," he stated. "The talent and creativity at Rockstar are unparalleled in our industry. Their dedication to making extraordinary games has captured the enthusiasm of millions of fans around the world and has contributed enormously to establishing Take-Two as a force in the global video game marketplace and advancing our goal to become the most creative and most innovative company in the industry." 

Take-Two needs those hits; the company has posted a fourth quarter net loss of $15 million. That's not a good sign, especially considering this time last year the company posted a net loss of only $7.1 million. Fiscal year guidance for 2009 has been lowered, and Zelnick claimed on the latest earnings call that sales will be lower than expected this holiday season due to "broad softness" at retail. 

Expect to see Take-Two make a move toward the Wii, perhaps with some of that new Houser IP. Take-Two CEO Ben Feder was blunt on the earnings call. "Even though we think M-rated content is much more appropriate for the PS3 or 360, we have to look at the Wii as a viable platform across all our labels," he stated. "We have to, because we can't ignore the installed base. We just can't."

Grand Theft Auto: Chinatown Wars is coming to the DS, and Carnival Games on the Wii proved to be a big hit. The controversy for Chinatown Wars has already begun, and when it comes to the GTA series, that's always followed by huge sales. 

This is something of a gamble for the embattled Take-Two; Rockstar lives up to its moniker just as often as it provides million-selling games, courting publicity and controversy whenever it can. If the Housers can create more successful games, and if Take-Two expands intelligently into the Wii business, things could be looking up. The executives at Take-Two, however, are more aware than anyone of how many "ifs" that entails. 

As of this writing, Take-Two stock is trading at $8.97. In June, EA offered to pay $25.75 in a bid to control the company. 

Also on Ars Technica

• Number of Landline-Free Households Up 10% in U.S.
• Walmart Memo Offers More Proof of $197 8GB iPhone
• "We Just Link to Videos!" Won't Stave Off M.P.A.A. Lawyers