Kotaku
Record-setting launch numbers for Grand Theft Auto IV had no significant impact on Take-Two's stock price this morning, lending credence to analyst views that the share price already included the expectation of extraordinary first-week sales of the title.
What does this mean for EA's ongoing bid for Take-Two? Cowen and Co. analyst Doug Creutz said this morning that even the GTA IV launch couldn't have elevated the share price from January's 17 dollars per share to its current 26-dollar range, and that right now the elevated price is due to investor eagerness for the sale.
"Take-Two's self-imposed moratorium [on negotiations] is over," said Creutz. "We haven't heard anything out of either company in the last week. They could be talking... I still think the odds that the deal happens that are very high... I don't think GTA changes that at all."
Just how high are those odds? EA continues to point to the ticking clock, and just recently told GamesIndustry.biz that the chances of a deal happening are "now 50/50 at best."
"I think it's more like 80/20," said Creutz.
To understand the likelihood, Creutz cites an example from elsewhere in the market. Adjacent to this ongoing battle, we've seen Microsoft launch a similarly aggressive bid to acquire Yahoo! — and fail. But according to Creutz, the EA-Take-Two bid is an opposite scenario in every way. "EA's shareholders want this deal to happen; they understand how potentially accretive this deal is," he said.
"If you compare this to Microsoft and Yahoo!... Microsoft shareholders didn't really want the deal, and Yahoo!'s management wanted to stay in charge. EA shareholders do want this, and Take-Two management have a lot of incentive to cash out so they can move onto the next project."
A Take-Two spokesperson said today that the Board will do "the right thing" for its stockholders: "Toward that end, we are committed to a process of considering all strategic alternatives to maximize stockholder value, including remaining independent. We have said that we were willing to begin formal discussions with interested parties on April 30th, after the launch of GTA IV, and we have continued to observe that timetable."
The spokesperson also reiterated it had received interest from "various parties" since the EA bid went public, but analysts have repeatedly noted a so-called "white knight" has yet to appear.
Creutz is of the opinion that EA will have to bid a little higher to make the deal happen. "EA can cut a lot of costs [in the event of an acquisition]," he said. "They don't have to have Strauss [Zelnick] and Ben [Feder] around; they can get rid of the corporate overhead. There's a lot of cost synergy with sales and marketing reorganizations and probably on the R & D side. A deal has the potential to add a lot to EA's earnings power; because of that, they can afford to pay more."
So why hasn't EA raised its bid? "You don't go public with your best offer; it's negotiating 101," said Creutz. "I think EA's willing to raise the bid once to get it done, but they have to take a hard line, otherwise Zelnick is going to walk all over them. Zelnick has to play it the same way."
"It's a game of chicken. Neither of them really wants to lose here, and neither of them wants this to blow up."
Are the parties talking? What does Take-Two consider an adequate offer? "We are not going to comment on specific conversations with third parties, nor will we speculate about the 'right' stock price," said the spokesperson.
Creutz also suspects bravado has a big role to play in this "game of chicken" — "If this deal doesn't happen, it's because egos got in the way, and both sides are going to walk away feeling a little stupid that they let this slip through their fingers," he said.
EA's Jeff Brown was unavailable for comment.
Comments
That's how the merger and acquisition game works I imagine, but as I've said, as long as quality doesn't suffer, I'll stay happy.
And even if they try to and buy them out, I'm pretty sure someones going to call Monopoly on it anyways with the Sports titles.
I'm anxious to see if this will have a positive impact on Take-Two, Rockstar and EA.
EA feels more and more like it's out to take on the world. Which makes sense with the growing costs of a triple AAA title's production.
@AndrewG009:
Exactly, the quality won't necessarily suffer any from this.
I can already hear the stampede of the "EA is the devil" crowd coming, though.
Microsoft: Please use the money you saved from buying Yahoo and buy Take-Two.
That is all.
@stupidfanboy:
Exactly, the quality won't necessarily suffer any from this.
I don't think you can guarantee that, just as people can't guarantee the opposite, however, I think there is plenty of evidence that mergers have a tendency to push out good developers, and EA has put out some over hyped stinkers.
Count me as someone who prefers a healthy, intense competition in any market, and a merger like this takes 3rd party game developing one step closer to monopoly.
@RTW: I don't think it's actually illegal to have a monopoly on sports video games. It'd be like saying it's illegal to have a monopoly on fantasy movies or classic punk music. And even if it was, there are still large competitors in the arena such as Tony Hawk, Virtua Tennis, and Mario (Insert Sport Name) which would have to be considered in such a ruling.
Stocks are never based off a single product it's about the entire value of the company current and long term... I don't want EA in control of Take Two mostly because EA already is too large an influence in Video Gaming. Where they were once large enough that they had their own gravitational pull that sucked developers in, they're slowly turning into a super massive black hole which absorbs everything and from which nothing can escape, not even dreams....
@Manny: I'd prefer it if SONY did it.
Better EA than Activision...I guess.
If this goes through and they accept EA's bid, expect a new GTA every year.
All of them will suck.
I've been riding the "EA are the devil!" band wagon since this whole thing started and I feel its just one of those things that is going to happen.
But when they do buy T2 I just hope they butt the fuck out of developing the games like GTA and Midnight Club, GTA is pretty much one of the only game series I actually feel like playing for long periods of time anymore without getting bored out of my brain.
@AndrewG009: Well, online quality will definitely suffer...EA servers anyone?
@doubtful: EA has put out some over hyped stinkers.
This is undoubtedly true, but at the same time, who hasn't? You don't need to be a big publisher to put out a piece of crap with a lot of hype. See: Eidos and Kane and Lynch.
I think that EA seeking this buyout is a reaction to the Activision-Vivendi merger more than anything. Personally, I think EA has a much better track record than Activision right now, which seems content to pump out Guitar Hero, Call of Duty, and Tony Hawk sequels until the end of time. I can't think of a single publisher with a more uninspiring lineup than the Activision side of the behemoth. The only good-looking stuff they have is the games they picked up from Sierra, like Brutal Legend and Prototype.
Basically, I think EA's gotten a lot better over the last couple of years, but they still get a lot of flak from gamers that they probably don't deserve. Yes, they still shut down Westwood and Origin, but that was years ago now and the company is run by different people. It's weird how one can see the remarkably short attention span of the gaming populace at large, but the one thing that never seems to change is people overreacting to anything that EA does.
Ok, so I need to buy some more TT stocks. I can see this go through as well, perhaps within a month or so.
Show me the moooooney!
@pandasonic: Sony already has a lot of internal developers. Microsoft does not, so they'd be much more likely to buy a studio or a publisher right now.
@RTW:Get this correct people. The US government is not going to move to block this merger, there's not anything remotely 'illegal' about it.
@doubtful:
Couldn't have said it better myself. The main problem as I see it is forcing developers to be "less risky" to keep profits up. After EA's acquisition, Criterion put out only one original IP. It didn't do well commercially, so they're back to making only Burnout.
Oh, and since I'm European, I don't care too much about their different sports franchises merging as I only play soccer games (pro evo/winning eleven series)
Can anybody point out any other negative effects for TT games besides the effects on their sports franchises?
@Import98: Yeah, I can't wait for GTA 2009. The only question is who will be the cover star, and what tragic event will befall them due to the "GTA Curse".
@pandasonic:
I don't think Sony would be interested.
@Stormrider:
Wow,I agree with everything you just said,especially the last paragraph.EA is trying to get rid of the stigma.They aren't holding back companies Pandemic and Bioware.
Pandemic and Bioware have not been under EA long enough to make a judgement on that yet. Wait until a few games are released, then you can throw out those two companies names when making your argument. Im not saying that things havent changed, we just dont know yet
@UnderABox:
We'll see..Nobody has really jumped ship either.The EA hate is going to be strong regardless.
**Personally,I don't care for them either way.
Didn't I say the same exact thing earlier today?
Call me Mr. Analyst, and give me monies.
@Import98: As long as Bioware don't puts out a new Mass Effect every year and other aquitsitions like Pandemic follow suit there's probably no need to be cynical. Even those oooh so stupid airheads over at EA probably know about how the instustry's working, at least I hope so. I pretty much agree with UnderABox on this topic.
@Stormrider: @Stormrider:
Personally, I think EA has a much better track record than Activision right now...
I would guess that the people who aren't happy about EA eating up smaller publishers also aren't big fans of Activision, too.
It's not an either/or situation. Some of us prefer neither.
@SG79:
And that's exactly why. Less competition means less risk, means more rehashed snorefests, and I'm not talking sequels. GTA IV is an example of how a sequel can take a series to the next level.
I don't think we see anything going to the next level with either EA or Activision.
@badasscat:
There has been a new GTA title nearly every year since GTA III came out in 2001 anyway. GTA III, Vice City, San Andreas, Vice City Stories, Liberty City Stories and now GTA IV. You need a new argument to explain how EA will destroy the franchise.
@UnderABox: Mythic has been part of EA for a few years now haven't they? They sure are taking their sweet time w/ warhammer and it doesn't seem like the nasty overlords at EA are cracking the whip to speed things up. I don't know... it just seems like EA has changed.
@Argyle: Mmmm tasty space anaolgy! You got my vote.
@houkah: That may very well be true, im not that familar with Mythic though i have heard positive things about warhammer. Im just saying that EA's track record doesnt help their argument. Talk is cheap, they have to show us that they are dedicated to making great games and not wholly concerned with the bottom line. Make good games and the dollars will come.
@doubtful:
Where did I guarantee anything in my post? I said "neccessarily."
I hope they reject the deal.
EA might in fact be the devil. EA may also not be the devil. However, all the people crying about the inevitable pimping of GTA need to cut it out. San Andreas was released in late 2004, and in the slightly more than three and a half years since, we've seen Liberty City Stories and Vice City Stories (twice each, to be fair-- has EA ever ported a PSP title to the PS2?) and now GTA IV. That's three titles in less than four whole years-- and I'd call it five titles, myself.
I am not sure it's fair to roast EA in advance for something T2 are already doing.
@Foxstar Sixtail: Actually, EA themselves are sort of doing something illegal: creating a monopoly in the sports games market, if they go through with the buyout. I'm pretty sure that we have some laws and federal agencies that will look into this sort of thing, because of the amount of cash this genre alone brings in for sales. Of course, since I'm not a lawyer, I could be totally wrong about this.
@wild homes:
Except if it was EA, stories series would be on DS, PS3, Xbox360, Wii besides the PS2 and PSP, and done by one team, instead of properly devoted teams like the multiple branches of Rockstar. And thus, it'd be sub-par, I'm just going by the typical EA tactics.
@Argyle:
I like the analogy too, but I'd say Trapper keeper is more threatening, as a blackhole isn't close enough to threaten the planet.
""EA can cut a lot of costs [in the event of an acquisition]," he said. "They don't have to have Strauss [Zelnick] and Ben [Feder] around; they can get rid of the corporate overhead. There's a lot of cost synergy with sales and marketing reorganizations and probably on the R & D side."
So the potential here is that EA should get rid of Take-Two's management. And that the marketing department behind the launch of GTA IV will get cut down and replaced by EA's people.
And R&D? How much is really R&D spending in comparison to other costs for a game company? Will that synergy really make an impact?
Most importantly, those who look at the monster budget used for GTA IV and see nothing more than a profit opportunity lost don't get it. At all. It's about passion, drive and got damn perfectionism. It's the Apple model, and I reckon EA will mess it up in no time.
no, just no! Sony (or MS) should buy T2.
Don't tamper with my GTA.
Unless your tampering adds RPG elements back in and gives me another countryside to romp through while listening to hickish country twang, then that'd be okay.
@Grimmjow Jeagerjaques:
QFT. My vote is for Microsoft. I'd love to see them buy Take 2. Then Sony would be f-u-d-g-e-d.
Yeah, yeah, Take-Two, great . . . I'm more considered about Rockstar as a developer. What would happen to them if EA acquired Take-Two?
I guess the inevitable PC port, if Take-Two is purchased by EA, will be featuring that same retarded bullshit DRM scheme from Mass Effect and Spore that takes liberties away from users.
@Manny:
"Microsoft: Please use the money you saved from buying Yahoo and buy Take-Two.
That is all."
That will be the day I quit playing video games altogether. I don't want Microsoft getting their grubby little hands on GTA exclusivity.
I'd much rather EA gets TT than MS!
@Paladin58:
It isn't a monopoly. Anyone can make any sort of sports game, and while EA has the exclusive license to FIFA, NFL, and NASCAR, it is just that... A license. It's like complaining about a monopoly on James Bond games...
Not only that, but in a supposed buyout of Take-Two, EA is contractually obligated to keep 2K Sports alive if it wants to use the MLB and World Series of Poker license, until the exclusive license for each of them expires, which means 2K Sports would most likely integrate with EA Sports, rather than being closed wholesale.
@stupidfanboy: Just look at the securom bullshit with Mass Effect and tell me the quality of one of EA's brand new studios isn't suffering.
Now if I was a consipracy theorist, I would say that EA is intentionally putting securom in Mass Effect, not to boost sales, but to decrease them, so that they can justify removing some of the talent at BioWare and insert some cheaper EA talent. EA has gutted studios before and will continue to do it, do not think they won't do the same to Rockstar or T2.
I hope MS buys T2 I love my ps3 but those Japanese only like school girls and cute cuddly things. Considering their game choses.
God no! lets see, first they will replace the fake ads with real ads in the GTA series, then expect them too tone the series down to get a teen rating for more sales, a new gta cheap clone every year, a non skippable EA logo and ads, For the PC, the same DRM SH*T that is coming out for spore/mass effect..etc..etc.
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