Scuba-diving thugs poised for $1B in 'Grand Theft V'

Bloomberg NewsSeptember 17, 2013 

— “Grand Theft Auto V,” the video game featuring gangsters swimming with sharks, is forecast to generate $1 billion in sales in one month, four times the amount Take-Two Interactive Software spent to make it.

The title, five years in the making, cost as much as $250 million to develop and market, according to Sterne Agee & Leach Inc. It hit stores Tuesday and may top the $900 million debut of its record-setting predecessor, estimates Colin Sebastian, an analyst with Robert W. Baird & Co.

“There’s a lot of anticipation for this game,” Sebastian said in an interview. “If the sell-through is disappointing at all, because it doesn’t break records or fit some other point of measurement, then it reflects on the broader industry’s fortunes.”

The pressure is on game publishers to prove that $60 titles that take years to build have a future in an industry shaken by cheap titles for Facebook, tablets and smartphones. Since the last “Grand Theft Auto” broke opening-day records in 2008, developers have cut jobs and slashed the number of titles they make, moving content online as they seek to avoid the fate of weaker players such as THQ Inc., which went bankrupt.

“A lot of kids don’t want $40 games anymore, they want 40 $1 games,” said Nancy MacIntyre, a former executive at “Star Wars” game studio LucasArts, now owned by Walt Disney. She runs a social-gaming network, Fingerprint Digital.

Retail sales of new video-game software fell 15 percent to $2.15 billion in the first half, to make up 33 percent of U.S. consumer spending on games, according to researcher NPD Group. Digital-format sales, including online subscriptions and dowloads, mobile and social titles, rose 10 percent.

As new consoles arrive from Sony and Microsoft, the holiday season is a test for big, packaged-game franchises like “Grand Theft Auto,” Activision Blizzard’s “Call of Duty” and “Battlefield,” from Electronic Arts.

The smaller retail pie has pushed video-game publishers, like movie studios, to place monster financial bets on fewer titles. Developers spend years on a project, relying on high scores from sites like Metacritic, which compiles critics’ reviews, to spur purchases.

Some fall short. Electronic Arts’ “Madden NFL 25” and Ubisoft Entertainment’s “Tom Clancy’s Splinter Cell: Blacklist,” released in August, didn’t sell as well as earlier versions, Michael Olson, an analyst at Piper Jaffray Cos., wrote Sept. 13 in a research note.

Order activity suggests “Grand Theft Auto V” shipments could exceed Wall Street’s estimates for the year ending in March and bode well for holiday releases, said Sebastian, the Baird analyst. “Grand Theft Auto V” probably cost $150 million to make, and Take-Two will spend $50 million to $100 million to market it, said Arvind Bhatia at Sterne, Agree & Leach in Dallas. He projects it will sell 13 million units by year-end and 18 million by April. That would still put it below the up to $300 million analysts estimated Electronic Arts spent on “Star Wars: The Old Republic” in late 2011.

“They’re not putting it out to be just another game,” Bhatia said of the Housers. “They want to do this on a grand scale, making it the best game ever.”

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