Take-Two

Grand Theft Auto V targets $1.5 billion video game bounty

September 17, 2013: 11:15 AM ET

The latest installment in the crime game franchise could make Take-Two Interactive very profitable even as it courts controversy.

By John Gaudiosi

130917083353-grand-theft-auto-v-620xaFORTUNE -- With all the hype surrounding the next generation of gaming and the November launches of Sony's PlayStation 4 and Microsoft's Xbox One, Rockstar Games is showing the strength of PlayStation 3 and Xbox 360 with Tuesday's launch of Grand Theft Auto V (GTA V). The latest game in the bestselling franchise is expected to generate more than $1.5 billion for parent company Take-Two Interactive (TTWO).

Michael Pachter, video game analyst for Wedbush Securities, forecasts sales of 12 million units worldwide relatively quickly. He expects the game to ultimately top out at 20-25 million copies sold around the world, which would generate up to $1.57 billion for the company.

"GTA V is going to drive Take-Two from relatively break-even to very profitable," said Pachter. "The stock has doubled this year, primarily because of GTA anticipation."

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Despite not releasing games annually like Activision's (ATVICall of Duty or Electronic Arts' (EA) FIFA franchises, Grand Theft Auto remains one of the biggest franchises in the world, especially in the U.S. and Europe where consoles are commonplace. GTA IV shipped in 2008. Former GTA developer Brian Baglow, who heads up the Scottish Games Network, told The Scotsman that the GTA franchise has sold approximately 135 million copies worldwide.

"In the U.S., GTA takes third place with just over 50 million Americans stating they play the franchise on PC or console, just behind Call of Duty and Mario," said Peter Warman, founder of video game research firm Newzoo. "I do not expect all 50 million will run to the store to buy GTA V on day one because at least half of these players hardly ever buy new boxed games. In Europe, GTA remains ahead of franchises like Microsoft's Halo (MSFT), Ubisoft's Assassins Creed and Electronic Arts' The Sims."

GTA V, which has been in development at Rockstar North in Scotland for five years, introduces gamers to a trio of criminals: Michael, Trevor, and Franklin. Players can seamlessly jump from character to character as they explore the open world of Los Santos. Each of these ruthless characters has special abilities that gamers can exploit as they orchestrate a series of elaborate multi-stage heists. Franklin is a born wheelman, while Michael can slow down time in firefights for "bullet time" accuracy, and Trevor excels at melee combat.

In addition to heists, the open world nature of the game allows players to do just about anything. Gameplay includes everything from skydiving to competitive cycling to tennis. The world's also filled with cars to jack, or purchase, and planes and helicopters to fly. And every aspect of the game, from characters to vehicles, is completely customizable.

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On Oct. 1, Rockstar releases GTA Online, an online extension of GTA V that's free to anyone who purchased the game. Taking place after the storyline of GTA V, this game introduces female playable characters and offers over 500 new missions to play involving everything from races to robberies to golf. The majority of this gameplay will revolve around multiplayer experiences, encouraging players to team up.

"We've always prided ourselves on making games that are accessible, where there was a certain difficulty in them, but where people could be having fun in them very quickly," said Dan Houser, who co-founded Rockstar Games with his brother Sam, Terry Donovan, Jamie King, and Gary Foreman back in 1998. He serves as the vice president of creative at the game studio. "In a driving game you want the car to be easy to control, fun, and rewarding. You want the character to be great and fun to control and be appealing to the very hardcore audience, but we also want more casual users to be able to enjoy it."

Rockstar has been able to impress both game critics and consumers with its meticulous approach to game development. The studio doesn't rush new games to meet financial quarterly goals, and that has resulted in open world experiences that keep players coming back for more.

"Rockstar are perfectionists, and their management allows them to finish games when they feel like it," said Pachter. "That's not the normal way that for-profit companies behave, as other companies make trade-offs between quality and profitability. There are no trade-offs at Rockstar."

Consistency has been a trademark of the GTA franchise since GTA III launched in 2002. (GTA III marked a shift in the franchise from a top-down overhead perspective gameplay experience to a 3-D open world filled with characters and environments.) The company has retained the key creative personnel behind the franchise.

"We've had the same executive producer, the same producer, the same art director, the same lead programmer, and a bunch of the same designers and the same sound guys who all are very, very good," said Houser. "They all take their work very seriously. You have this great commitment to excellence and to innovation that means we made a great game with GTA III. Then we made sure all of the sequels built on that and expanded that, rather than just feeling like they were catching up. That's really been the key to the longevity, just constantly making good products."

Rockstar has also proven that quality gameplay will trump negative publicity from mainstream press. Over the years, the game has been criticized in the mainstream media and by politicians for its violence, language and mature content. The games are rated Mature and have been designed for players 17 or older in the U.S., according to the ESRB. GTA V allows players to smoke virtual marijuana and visit strip clubs, in addition to the gun play, robberies, and carjacking that have been staples of the franchise. Rockstar even hired real gang members to voice virtual gang characters in the game.

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"Rockstar invented open world games and perfected them, and I think their attention to detail and storytelling is really compelling for most gamers," said Pachter. "I don't think they will get bad press and am certain there won't be any killing of kids in the game, so I don't think they'll receive any more scrutiny than other games with violence."

"As for whether any of this negative media coverage is going to affect GTA V sales, we've been there with other GTAs and other games, and I haven't seen the cause and effect," said Meelad Sadat, editorial director, A List Daily. "Actually, this time around I'm going to say, 'Follow the money.' Since January, Take-Two stock has jumped from about $11 to over $18, and if you read the financial media, much of that is on anticipation for GTA V sales. I think it'll do well."

Houser said that Rockstar has always made the types of games that they want to play, given that they're over 17 and can play Mature-rated games.

"After 10 years of GTA, I don't think society is close to collapse," said Houser. "We were, to some extent, vindicated in that regard. Our point was that if the game industry makes games for children, makes games for teenagers, makes games for adults, makes games for all kinds of demographics, the industry will be healthy. That's what we've always tried to do. What we are offering (at Rockstar) is to make games that we want to play and hope that other people would do likewise, and you get a nice range of products."

According to Warman, gamers see Rockstar as the inventors of the sandbox genre, which introduced unprecedented freedom to gaming.

"Gamers feel Rockstar is not driven by money as much as others because they release games less frequently," said Warman. "Although not having GTA V on PC at launch for the first time has disappointed some of their fans, I think Rockstar is cooking up something special for PC for later. Next-gen versions of GTA V will come along down the line as well, but they have a lot to do before that, and they will choose their own moment."

For now, the world is focused on GTA V, a game that Rockstar has said feels "next-gen" in size, scope and appearance.

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