SouthPeak Proud to Have Former "Worst CEO of Year" Join Its Board of Directors

August 4, 2009 -

Video game publisher SouthPeak Interactive announced late yesterday that former Take-Two CEO Paul Eibeler (left) is joining its board of directors.

Judging from the language of its press release, SouthPeak appears to regard the addition of Eibeler, named Worst CEO of 2005 by MarketWatch, as good news:

“As one of the most respected executives in the interactive games industry, we welcome Paul to the Board of Directors,” said Terry Phillips, Chairman of SouthPeak. “His depth of experience will certainly be an asset to SouthPeak growth as a major publisher.”

Paul Eibeler is best known for his leadership at Take-Two Interactive...

Eibeler is indeed best known for his days at Take-Two. It was under his watch that the Hot Coffee scandal rocked the video game industry, with the Grand Theft Auto publisher inexcusably blaming the now well-known sex scenes on the GTA mod community before ultimately 'fessing up that it was original content.

Eibeler's reign was also plagued by securities investigations which led to charges against several past employees (although not against Eibeler). The former CEO was ousted by a 2007 shareholder revolt led by current T2 chairman Strauss Zelnick. Eibeler exited with a $2.5 million golden parachute.

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ESA Sues Chicago Transit Authority over Ban on M-Rated Game Ads

July 22, 2009 -

The Entertainment Software Association has filed a federal lawsuit against the Chicago Transit Authority, challenging a 2009 CTA ordinance which prohibits ads for games rated M (17+) or AO (18+) from appearing on its vehicles and facilities. 

GamePolitics readers may recall that in April, 2008 the CTA ordered ads for Grand Theft Auto IV removed from buses even before the game was released. The CTA action followed local news coverage of a rash of shootings in Chicago.

Shortly thereafter, GTA IV publisher Take-Two Interactive sued the CTA, charging that the agency had broken a $300,000 contract for the campaign. The parties settled the case later in 2008, with the CTA granting T2 a six-week GTA IV ad run. However, CTA officials moved to block future ads for M-rated games by passing the new ordinance, which took effect on January 1st and prompted today's legal action by the ESA.

ESA boss Mike Gallagher commented on the lawsuit in a press release: 

The CTA’s ordinance constitutes a clear violation of the constitutional rights of the entertainment software industry. Courts across the United States, including those in the CTA’s own backyard, have ruled consistently that video games are entitled to the same First Amendment protections as other forms of entertainment. The CTA appears unwilling to recognize this established fact, and has shown a remarkable ignorance of the dynamism, creativity and expressive nature of computer and video games. The ESA will not sit idly by when the creative freedoms of our industry are threatened.

The press release also explains some of the legal rationale behind the suit:

The ESA’s suit contends this new ordinance unconstitutionally “restricts speech in a public forum that is otherwise open to all speakers without a compelling interest for doing so.” In addition, the Complaint argues that the ordinance impermissibly discriminates on the basis of viewpoint and ignores less restrictive means of achieving the supposed ends of the ordinance.  

The ESA also stated that the CTA’s ordinance is unnecessary because game-related marketing is already subject to the Entertainment Software Rating Board’s Advertising Review Council (ARC), which strictly regulates computer and video game advertisements that are seen by the general public.  The Entertainment Software Rating Board (ESRB) assigns content ratings to computer and video games, which, in turn, are displayed on the advertisements for those games.

As GamePolitics has reported, the Massachusetts Bay Transit Authority has a similar ban on M-rated game ads, likening them to X-rated movies. It is unclear at this time whether the ESA will pursue a similar action against the MBTA.

While the lawsuit also encompasses AO-rated games, as a practical matter, such titles are virtually non-existent in the U.S. market.

DOCUMENT DUMP: Grab a copy of the lawsuit here (70-page PDF)...

Investment Blog Bashes Take-Two Boss Zelnick

July 21, 2009 -

Take-Two chairman Strauss Zelnick has absorbed something of a beatdown from investor-oriented website Market Rap.

In an article titled No Regrets, No Responsibility, Zelnick is taken to task for what Market Rap writer Perry Rod views as a string of leadership failures on his part. Most egregious among these would appear to be Zelnick's spurning EA's $25.74 per share acquisition bid in 2008. Take-Two stock (TTWO) currently trades at 8.58 and has dipped under 6 during the current recession. Rod writes:

If you’re keeping score, in a two year period, Mr Zelnick managed to, on three occasions, make vital statements that were within a matter of weeks proven to be either fabricated or just incredibly incompetent (or worse).  Mr. Zelnick managed to resist and reject a buyout offer that was triple the company’s current share price while claiming other interested parties who never emerged.  And Mr. Zelnick, meanwhile, tripled his management company’s compensation for these efforts...

These statements and others strongly suggest that investors should proceed with extreme caution with any investment that involves Strauss Zelnick.  His performance so far as an executive manager of a publicly traded company  is one of the worst I have ever seen in my professional investment experience.

The Market Rap piece is not the first time Zelnick has come in for harsh criticism from the investment crowd. Last October Mad Money host Jim Cramer added Zelnick to his Wall of Shame.

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Pachter: Economist's Claims in Madden Monopoly Case Irresponsible

July 15, 2009 -

Yesterday's GamePolitics report detailing a University of Michigan economist's estimate that EA's exclusive NFL deal cost Madden buyers as much as $926 million raised a number of eyebrows, including those attached to the forehead of Michael Pachter (left).

In an e-mail exchange with GamePolitics, the Wedbush-Morgan analyst scoffed at the monopoly theory offered by Dr. Jeffrey MacKie-Mason in a filing last week with the U.S. District Court in San Francisco. MacKie-Mason was hired as an expert witness for the plaintiffs in a class-action suit filed in 2008 by a pair of gamers who allege that EA exploited its exclusive NFL deal to jack up the price of its popular Madden series.

Here's what Pachter had to say:

What kind of fool is this U of Michigan economics professor? ...Madden (according to NPD) sold 23 million units in 2006 - 2009, not the 30 million that Dr. MacKie-Mason claims... The total retail sales were $1.034 billion, meaning that EA's cut was around $800 million (retail margin is 20%).  How in the world does [MacKie-Mason] conclude that EA overcharged by more than they generated?

For the four year period, EA's average retail price was $44. For the period 1995 - 2005 (when either Sega or Take-Two provided [NFL 2K series] competition), EA generated $1.548 billion of sales on 36 million units, for an average price of $43. In other words, WITH competition, the price was $43, and WITHOUT competition, the price was $44.18...

I rarely read anything that gets me so incensed... They may have some odd estimates I'm not aware of, but based on what you printed, they should be embarrassed. You can quote me.

Here's more: Take-Two discounted [NFL 2K5] to $19.99 to gain market share, and lost their butts in the process. It's the same as a dollar menu at McDonald's that is a loss leader in order to gain share, and McDonald's hopes people buy the high-margin soft drink. There is no "right" among consumers to receive a perpetual discount just because one retailer decides to discount below cost... 

It strikes me as irresponsible that the professor would focus on the NFL exclusive as if there is some god-given right for consumers to have all intellectual property available for exploitation by any business that chooses to do so in the name of competition... 

The ONLY I/P that has ever been licensed to multiple video game parties is team sports.  The NFL, Major League Baseball, FIFA, and NCAA Basketball have all chosen to go the exclusive route for games, similar to the contracts for all movie-based games.

GP: As GamePolitics reported yesterday, MacKie-Mason acknowledges that his analysis is based on incomplete data. In a response filing, attorneys for EA (who were similarly contemptuous of MacKie-Mason's theory) agreed to furnish available documentation dating back to 2001.

Economist: EA's Madden Monopoly Cost Gamers Up To $926 Million

July 14, 2009 -

A University of Michigan economics professor estimates that Electronic Arts collectively overcharged Madden buyers between $701 million and $926 million during the years 2006 through 2009.

Dr. Jeffrey MacKie-Mason made his claim in a document filed last week with the U.S. District Court in San Francisco. Mackie-Mason was brought into the case as an expert witness by attorneys representing Geoffrey Pecover and Jeffrey Lawrence. The pair of gamers are named plaintiffs in a class-action suit alleging that EA used its exclusive licensing deal with the NFL to eliminate Take Two Interactive's competing NFL 2K series. The suit charges that EA then exploited the resulting competitive vacuum to dramatically raise the retail price of Madden.

While MacKie-Mason acknowledges that his estimates are based on incomplete data, he writes:

I provide this information for the limited purpose of allowing the Court to assess in rough terms the burden on Electronic Arts in relation to the magnitude of potential damages... Under California's antitrust statute, it is my understanding that these damages would be trebled.

MacKie-Mason arrived at the eye-popping figures using an estimated overcharge percentage that ranged from 50% to 66% for the 30.04 million units of Madden sold during the 2006-2009. He writes:

When Take-Two was able to compete unhindered, Madden NFL's competitive price was in the range of $19.95 to $29.95. I assume for this exercise that these would have been Madden's prices but for the alleged [monopolistic] acts.

Based on Mackie-Mason's estimate, attorneys for the plaintiffs have requested additional data for Madden sales going back to 2001. In a response, attorneys for EA agreed to supply as many of the requested documents as they could locate, but were unsparing in their assessment of Mackie-Mason's analysis:

EA respectfully submits that Dr. MacKie-Mason's analysis is fundamentally flawed on multiple levels. Indeed, Dr. MacKie-Mason's estimated magnitude of damages is nothing more than pure fiction - it has no basis in fact or law...

As GamePolitics reported last month, U.S. District Court Judge Vaughn Walker ruled that the plaintiffs' monopoly suit could go forward, but limited the scope of the case to claims arising in California and Washington, D.C. where Pecover and Lawrence reside.

DOCUMENT DUMP: Read Dr. MacKie-Mason's estimate here... Read EA's response here...

T2 CEO: Government Should Not Determine the Games You Buy

June 24, 2009 -

Eurogamer caught up with Take-Two Interactive CEO Ben Feder for a wide-ranging interview which is now available on the site.

While much of the conversation deals with various T2 games, Feder did touch upon the Manhunt 2 controversy and the notion of government censorship of games:

We firmly believe that games are art. A), we have the right to produce art. B), the consumer should have the right to make their own choices, providing the labelling on the package is clear about the content of the game.

Apart from that, I don't think it's the role of governments to determine what you or any of your readers can, or should, buy. They should be able to make their own choices. Government has no role in that at all...

Asked whether the interactive nature of games requires them to be viewed apart from, say, movies, Feder said:

It's not a difference with distinction... It's as if to say art as a painting is different than art as a sculpture. For sure they're different art forms and they use different mediums, but they're art nonetheless - they're forms of expression.

That, at least in the United States, is something that's guaranteed by the constitution, and in democracies in Western Europe there are very similar concepts about the ability for individuals to express themselves. If you stifle that, then society and the economy pay a pretty heavy toll.

Of particular interest given the ongoing RapeLay controversy, Feder was asked whether T2 might theoretically permit edgy developer Rockstar to create a game featuring sexual violence or abuse of children, Feder commented:

Look, I suppose there's a line somewhere. I don't think we've even come close to it. At the end of the day, we're also a commercial enterprise and we do intend to turn a profit with our games. That, in and of itself, provides a certain boundary beyond which we won't go.

I suppose there are more lines [beyond] which we'd be uncomfortable, but I don't think any of our games in the past, or any of our games that I've seen in development, come even close to that.

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2K Sports Takes NBA Game to Chinese Market

June 23, 2009 -

Basketball is wildly popular in China and so are online games.

Seeing big revenue in that combination, 2K Sports announced today that it will create an online version of pro hoops game NBA 2K for the Chinese market. Chinese Internet portal Tencent Holdings will partner with 2K Sports on the deal.

Licensing for the game includes all NBA team along with current and retired players. 2K Sports president Christoph Hartmann is quoted in a press release issued this morning:

The incredible popularity of basketball in Asia combined with the love of online games in that region makes this a very exciting project for 2K. For the first time, 2K is developing an online game combining our expertise in making the best-selling and top-rated NBA 2K video game franchise with the proven ability of Tencent for developing and operating highly successful online game communities in China.

Online gaming was a $2.75 billion business in China in 2008 and more than a billion Chinese viewed NBA programming during the just-completed season.

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Court Filing: 2KGames Developing "Duke Begins"

June 22, 2009 -

Digging deeper into a court document filed on Friday by Duke Nukem developer Apogee Software reveals that - at least according to Apogee's attorneys - 2K Games is creating a new Duke Nukem property with the working title Duke Begins.

The following passage appears in Apogee's response to a suit filed against it last month by publisher Take-Two Interactive:

On October 22, 2007, Apogee, Take-Two, and 2K Games entered into an agreement in which Apogee granted 2K Games the exclusive right to develop and publish a new videogame based upon Apogee's Duke Nukem franchise... The new game was given the working title of "Duke Begins" and is not the same game as the DNF game...

 

The original development schedule for the Duke Begins game provided that the game was to be completed and commercially released by mid-2010...

 

Take Two and/or its subsidiary 2K Games halted or otherwise cancelled all development work by the third-party game developer on the Duke Begins game in April 2009... without Apogee's approval or consent...

 

When Apogee confronted Take-Two and 2K Games about the... cancellation of the Duke Begins development work... Take-Two and 2K Games simply denied it... Take-Two and 2K Games are taking such actions with a goal of pressuring Apogee to sell the Duke Nukem franchise rights to Take-Two for less than their true value.

DOCUMENT DUMP: Read Apogee's court filing here (20-page pdf).

UPDATE: GP spoke with a Take-Two representative who declined to comment, citing pending litigation.

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Secret Duke Nukem Game in Development?

June 22, 2009 -

While the video game community knows all too well that the long-awaited Duke Nukem Forever project is stalled (and currently being litigated), GamePolitics has learned that a Duke Nukem game is in development by a "well-known" developer under contract with publisher Take-Two Interactive.

This juicy, new detail is contained in a court document filed on Friday by DNF developer Apogee Software. Responding to a lawsuit filed against it last month by Take-Two, attorneys for Apogee told the U.S. District Court in Manhattan:

As part of the October 2007 Agreement, Take-Two agreed to pay Apogee $2,500,000 as an advance to help fund the development of the DNF game, but only after Take-Two visited Apogee to review the status of the development of the DNF game within Apogee.

 

Repayment of the $2,500,000 advance was to come from royalties generated by sales of the DNF game and/or a new Duke Nukem-based game being developed in parallel by a separate well-known game developer under contract with Take-Two.

 

The October 2007 agreement did not provide for a completion deadline for DNF. However, the development agreement for the new Duke Nukem-based game (not to be confused with the DNF game) being developed by the separate game developer scheduled the new Duke Nukem-based game to be completed by mid-2010.

 

In the event the DNF game was not commercially released before October 22, 2012, then and only then, the $2,500,000 advance became due and payable to Take-Two, but only to the extent this advance had not already been recouped from royalties from sales of the new Duke Nukem-based game.

GamePolitics has requested comment from Take-Two.

UPDATE: Aside from DNF, the only publicly-named but unpublished Duke game is Duke Nukem Trilogy for the DS/PSP,which was shown at E3 2008. Take-Two, however, has not been publicly mentioned as its publisher. A recent report on GameSpot mentions DNT as a joint project between Apogee and Deep Silver. There is no mention of any involvement by Take-Two.

Also, given that DNT is a known quantity, if that is the game referred to in the court filing, why wouldn't Apogee just name it and its developer?

UPDATE 2: The game mentioned by Apogee is Duke Begins and is in the hands of 2K Games, a Take-Two subsidiary. See follow-up GP coverage for more details.

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Take-Two's Zelnick Passes on Newspaper Purchase

May 29, 2009 -

Take-Two Interactive Chairman Strauss Zelnick seems like a pretty smart guy, so we were surprised to learn that he was actually considering buying a newspaper. In the end, he wised up, however.

Reuters reports that Zelnick decided to pass on acquiring the Austin American-Statesman. The Texas paper had a daily circulation of 152,691 as of March.

Zelnick's private equity firm ZelnickMedia Corp. never made a formal bid and decided to pull out of negotiations as the sorry state of the newspaper business continued to worsen.

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Fun Facts From EA's Annual Report

May 22, 2009 -

The annual report of game publishing giant Electronic Arts landed in GP's inbox this morning. Typically, reading through these things is a surefire remedy for insomnia, but EA's contains a few tidbits worth mentioning.

1.) EA's failed bid to gobble up Take-Two cost the company $21 million:

As a result of the terminated discussions [with T2], we recognized $21 million in related costs consisting of legal, banking and other consulting fees...

2.) EA uses DRM (you knew that) and is watching for piracy online:

We typically distribute our PC products using copy protection technology, digital rights management technology or other technological protection measures to prevent piracy... We are actively engaged in enforcement and other activities to protect against unauthorized copying and piracy, including monitoring online channels for distribution of pirated copies, and participating in various industry-wide enforcement initiatives, education programs and legislative activity around the world.

3.) Only 3% of EA employees are unionized, and they all work for DICE:

As of March 31, 2009, we had approximately 9,100 regular, full-time employees, of whom over 5,100 were outside the United States... Approximately 3 percent of our employees, all of whom work for DICE, our Swedish development studio, are represented by a union, guild or other collective bargaining organization.

4.) GameStop and Wal-Mart are EA's biggest customers; each accounts for 14% of EA sales:

Worldwide, we had direct sales to two customers, GameStop Corp. and Wal-Mart Stores Inc., which each represented approximately 14 percent of total net revenue for the fiscal year... the concentration of our sales in one, or a few, large customers could lead to a short-term disruption in our sales if one or more of these customers significantly reduced their purchases or ceased to carry our products...

5.) EA worries about game content legislation and its potential effect on sales:

Legislation is continually being introduced in the United States... for the establishment of government mandated rating requirements or restrictions on distribution of entertainment software based on content... Other countries have adopted or are considering laws regulating or mandating ratings requirements...  Adoption of government ratings system or restrictions... could harm our business by limiting the products we are able to offer to our customers...

6.) EA worries about falling victim to a Hot Coffee incident but has taken steps to prevent it from happening:

If one or more of our titles were found to contain hidden, objectionable content, our business could suffer... Retailers have on occasion reacted to the discovery of such hidden content by removing these games from their shelves, refusing to sell them, and demanding that their publishers accept them as product returns.

We have implemented preventative measures designed to reduce the possibility of hidden, objectionable content from appearing in the video games we publish. Nonetheless, these preventative measures are subject to human error, circumvention, overriding, and reasonable resource constraints.

Icahn Has Take-Two Shares?

May 15, 2009 -

Investor - and famed corporate raider - Carl Icahn (left) is accumulating a stake in Take-Two Interactive, according to financial site Barrons.

Tech Trader blogger Eric Savitz writes that Icahn reported to the SEC that he owns more than two million shares of TTWO, up significantly from the 541,000 he reported at the end of 2008. With his newly-acquired shares, Icahn owns a 2.5% chunk of the Grand Theft Auto publisher. Savitz writes:

The expanded stake is clearly fueling new speculation about the potential for an acquisition of the company, which last fall rejected a $25.74-a-share bid from Electronic Arts (ERTS) as too low. TTWO today is up 60 cents, or 7.3%, to $8.79.

Uh, let me say it again, for effect: the company last year rejected a bid roughly triple yesterday’s closing price as being too low.

UPDATE: Wedbush-Morgan analyst Michael Pachter commented on Icahn and Take-Two:

He obviously reads my research.  I upgraded Take-Two on March 6 at $5.63, and it's been up ever since.  I'd say that two million shares, while a sizeable position, hardly reflects an intention to take the company over.

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PETA Snarls at Upcoming 2K Circus Games

May 13, 2009 -

Animal rights group PETA, which long ago mastered the art of using video game criticism to garner publicity for its cause, is at it again.

Kotaku reports today that PETA has targeted an upcoming 2K series based on the Ringling Bros. and Barnum & Bailey Circus. A new campaign urges PETA supporters to petition publisher Take-Two to cancel planned circus games for the DS and Wii.

We've told Take-Two about Ringling Bros.' real-life, lengthy history of animal abuse and neglect and shown it undercover video footage of a standard industry training session, in which animal handlers used electric prods and bullhooks to gouge elephants in the most sensitive parts of their bodies.

Even though it knows that circuses are no fun for animals, Take-Two is still moving forward with its plan to create a Ringling Bros. Wii game. Please send a message to Take-Two CEO Ben Feder urging him to sever ties with Ringling Bros. Let him know that you'd rather play a game featuring a circus that does not beat animals for "entertainment."

In a follow-up report, Kotaku offers comment from Take-Two exec Alan Lewis:

As a matter of company policy, we don't comment on the business affairs of our licensors. We fully stand behind all of our products.

A Ringling Bros. spokesman contested PETA's allegations of animal abuse.

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GTA Chinatown Wars Sales Are a Major Disappointment

April 17, 2009 -

Sales of Grand Theft Auto: Chinatown Wars have been a major disappointment, according to Silicon Alley Insider.

Citing data released yesterday by NPD group, SAI reports that only 88,704 units of the critically-acclaimed DS game were purchased in March. Published estimates by video game industry analysts had suggested that GTA: Chinatown Wars would sell in the 200,000 - 450,000 range:

So how did Take-Two flub a sure thing? Chinatown Wars was built for the wrong console. The title -- whose gameplay centers around drug dealing, cold-blooded murder, and sex -- is only available on the Nintendo DS, who's primary audience is children. Parents refused to let their kids play, and the adult DS audience just isn't that big...

 

Chinatown Wars may yet find life down the road, but all in all a rare misstep from Take-Two. And the winner here might actually be Sony (SNE): The Chinatown Wars disaster will likely scare other publishers away from making new adult-themed games for the Nintendo DS. Some may redirect efforts towards Sony's PSP, which targets a somewhat older crowd.

Reacting to the poor numbers put up by GTA:CW, Cowen & Co. analyst Doug Creutz reduced earnings estimates for Publisher Take-Two Interactive:

What Happened? Take-Two exported their most valuable IP onto the most widely distributed gaming platform, and created the most highly-rated title in the history of that platform...

 

The disappointing first month sales reinforce our view that achieving meaningful success on Nintendo platforms remains a very difficult proposition for third party publishers.

Take-Two Buyout Rumors Return

April 13, 2009 -

Take-Two, which managed to avoid being assimilated by Electronic Arts in last year's long-running takeover saga, may be the target of a new buyout, according to Barron's.

The financial news service attributes a recent rise in the share price of TTWO to takeover rumors:

Take-Two Interactive (TTWO) shares are up sharply for the second straight session on a revival of rumors that the video game company might be a takeover target... Last Thursday, the stock was hopping on what TheFlyOnTheWall.com [subscription req.] described as “renewed takeover chatter.” That apparently continues today.

As I post this, TTWO is up to 9.45, even though Wall Street itself is down.

UPDATE: Reached for comment by GamePolitics, Wedbush-Morgan financial analyst Michael Pachter pooh-poohed T2 takeover rumors:

I don’t see anyone making a move, given that management rejected EA’s $26 offer [last year]. It’s hard to see how anyone would pay more in this market, and I don’t know that Take-Two management would entertain an offer lower than $26 given their rejection of EA’s offer.

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Grand Theft Auto Publisher Coughs Up $3.3M to Settle Old Cases

April 2, 2009 -

Aside from the often controversial nature of its best-selling Grand Theft Auto series, Take-Two Interactive has spruced up its corporate image significantly since Strauss Zelnick and his crew seized control in 2007.

Despite that, some legal baggage lingered from the reigns of past CEOs Ryan Brant and Paul Eibeler.

The New York Times reports that T2 has settled those cases with the Securities and Exchange Commission and the Manhattan District Attorney's Office, respectively.

The GTA publisher paid $3M to the SEC in an an investigation of backdated stock options. In 2007 Brant pleaded guilty to criminal charges in the case. SEC attorney Christopher Conte commented on the charges in a statement:

Take-Two’s seven-year backdating scheme was egregious and pervasive, and caused the company to materially misrepresent its financial condition to investors.

The company also paid the $300,000 cost of the Manhattan  D.A.'s investigation into related matters. A Take-Two press release contains a statement from Zelnick:

We are pleased to have reached a settlement with both the SEC and District Attorney with respect to the Company's historical stock option granting practices. Resolving this issue has been a key objective for Take-Two since the current management team took office in early 2007, and we are gratified to have put this matter behind us.

 


Supreme Court Case May Impact EA's NFL Exclusive

March 5, 2009 -

A non-gaming case currently before the United States Supreme Court stands to have a massive impact on the video game industry.

The case is American Needle vs New Orleans Saints, et al. Should the Supreme Court find in favor of plaintiff American Needle, an apparel manufacturer, EA's exclusive NFL licensing deal and Take-Two's third-party exclusive with Major League Baseball could be found in violation of federal antitrust (i.e., monopoly) statutes. Such a determination would free other publishers to make games based on the NFL and MLB.

SCOTUSblog, which tracks happenings before the Supreme Court, reports on the case:

The NFL used to license American Needle to sell hats that bore the logos, the names or other insignia of pro football teams... But, in 2000, the NFL opted to solicit bids for an exclusive license to produce caps and other headwear.  Reebok won the bidding, and in 2001 got an exclusive ten-year license.  American Needle’s license was not renewed. So it sued the NFL, all of its teams, NFL Properties, and Reebok.

American Needle’s case was thrown out by lower courts... “The [Supreme] Court has stated, on more than one occasion,” American Needle asserted, “that application of the Sherman Act to professional sports teams is wholly consistent with Congressional inent...”

What happened to American Needle in relation to apparel is essentially what happened to Take-Two in regard to its excellent NFL2K series when EA scored its exclusive license with the NFL in 2004.

Attorneys for EA are clearly tracking the American Needle case. The phrase "American Needle" appears nine times in a transcript of arguments made by attorneys last November in Pecover vs. Electronic Arts, a class-action suit which alleges that consumers were hurt by EA's NFL exclusive (see: Spirited Courtroom Argument Highlights Madden Monopoly Case).

SCOTUSblog reports that the Supreme Court has requested government lawyers to weigh in on the case.

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Toys R Us, Best Buy, Amazon Entering Used Game Market

March 5, 2009 -

GameStop CEO Dan DeMatteo can't be happy with the news that his firm, which has owned the used game space for years, suddenly has not one, but three major competitors.

Indeed, financial website The Motley Fool reports that the entry of Toys R Us into the used market will hurt GameStop and likely force the retailer to give consumers a better deal - and we're all for that.

On the publishing side, used game sales hater Ben Feder, President of Take-Two Interactive, must be absolutely frothy now that four major retailers - not just one - will be pushing pre-owned copies of GTA IV.

While the news that Toys R Us, Best Buy and Amazon are all - rather suddenly - entering the used game market is terrific for consumers, the timing seems a bit... odd. How do all three happen to get into used games in the same week?

GamePolitics put the question to Entertainment Consumers Association President Hal Halpin, who, in a past life, founded a trade group for game retailers. In other words, he knows the retail side of the business quite well. Here's what Hal told us:

Toys R Us and Best Buy getting into the used games business makes sense because they really serve very different markets than GameStop, demographically speaking. Amazon getting in is especially bright because of their model - they're positioned really well to cut the market wide open.

 

For Toys R Us and Best Buy, it's likely just coincidence [that news of both came this week]. They're victims of the same economic turmoil as everyone else and looking for growth areas. They have examined the used business before, but [then] it was likely too far astray from their core. Now, it's a matter of exploiting high-margin business extensions, of which Used clearly is one.

 

For Amazon, my guess is that it's much more organic a move. I'm excited to see them invest so heavily in games and with gamers. Overall, it'll be really interesting to see how the landscape is changed by the news. And the bottom line is that it's great news for consumers.

Meanwhile, analyst Michael Pachter of Wedbush-Morgan offered his take on the developing situation and agreed that used games are a smart move for Amazon.

It's obviously a great business.
 
Amazon is the only one that matters. The sweet spot of consumers who trade in games are 13 - 18 year-old boys, and they don't typically shop at Toys R Us or Best Buy, but they most definitely frequent Amazon.
 
It seems to me that the Amazon offer is pretty compelling, insofar as there is no cost to ship games to Amazon, and there is an opportunity for gamers to trade in games and purchase other stuff on Amazon.
 
With that said, Amazon's market share of NEW games is only 2 - 3% (around $200 - 300 million annually), and GameStop's USED game business is over $2 billion.  That means it will take a LONG time for Amazon to make a dent in GameStop's business

GP: Going forward, the developer/publisher response will be something to watch. Will a quartet of major retailers selling used games cause the industry to stop rattling their sabers (as they have been doing toward GameStop of late)? Or will it motivate them to fight harder?

FULL DISCLOSURE DEPT: The ECA is the parent company of GamePolitics.

Common Sense Media Criticizes Full Frontal Nudity in GTA IV Expansion

February 20, 2009 -

The mainstream is beginning to react to the news that GTA IV add-on The Lost and Damned features a moment of full frontal male nudity.

Watchdog group Common Sense Media has now weighed in on the controversy:

It is even more controversial than its predecessors because this game has full frontal male nudity. The game lets you lead a life of crime as part of a motorcycle gang with plenty of gang violence... relentless foul language, drugs and alcohol, and sexual references...

Families can talk about why Rockstar likes to push the envelope and garner controversy over its games? Why did they have to put full-frontal nudity in the game if it's not integral to the story? Do they correlate media outrage with extraordinary game sales? Do players expect Rockstar to stir up controversy with each of its titles, including the Manhunt and Bully series?...

 

56 comments

Report: Australian Rating Board Under Fire Over GTA IV Lost & Damned

February 18, 2009 -

According to Edge Online, the Australian Board of Classification is "under heavy fire from critics" over the MA15+ rating granted to GTA IV expansion The Lost and Damned.

EO describes the situation Down Under:

Critics say that the strong similarities between GTAIV and The Lost and Damned add-on casts light on the disparity at the Australian classification group,‭ ‬a body which had initially refused classification for a number of high profile games such as Silent Hill:‭ ‬Homecoming and Fallout‭ ‬3.

Yet the Board's handling of the matter may be advocated by the fact that its GTA IV‭ ‬information page clearly shows that the title hasn't ever been refused classification.‭ ‬Rockstar had censored the content before showing it to the classification board,‭ ‬and the game was granted submission on its first attempt.‭

13 comments

Full Frontal in GTA IV Lost & Damned

February 16, 2009 -

When I ponder the things that I'd like to see in video games someday, a fully nekkid Congressman is not high on the list.

Nonetheless, Kotaku reports that a cut scene in GTA IV: The Lost and Damned, scheduled to release tomorrow, features a male character displayed with full frontal nudity:

[Congressman] Stubbs, in his first meeting with lead character Johnny Klebbitz, is receiving a massage at the private gentleman's club Jousters when we meet him. The Congressman, dressed in nothing but a towel, quickly becomes pretty comfortable with his new biker friend, choosing to deliver his monologue in the buff...

The ESRB rating for the game—which is "M" for Mature—does make mention of the gratuitous digital d*ck on display, noting that the game has "Nudity" in its content. The original Grand Theft Auto IV is listed as having only "Partial nudity."

Federal Court Dismisses Former Take-Two Exec's $50 Million Lawsuit

February 10, 2009 -

In October GamePolitics broke the news that a former executive of Take-Two Interactive was suing the Grand Theft Auto publisher for $50 million.

The ex-T2 exec, Robert Alexander, claimed that former CEO Ryan Brant agreed to pay him $240,000 in annual salary with 20% annual raises, a $25,000 monthly expense allowance, 50,000 shares of T2 stock plus options and $.50 per game handled by Alexander's distribution company.

That was, of course, before the Securities and Exchange Commission and the Manhattan District Attorney's Office busted Brant for fraud.

In a strange turn of events, Alexander failed to respond to T2's November 10th motion to dismiss the case. Nor did the Nevada resident exercise his option to respond to the federal court's dismissal order, filed on December 10th.

Given the lack of response from the plaintiff, the case was officially dismissed on January 23rd.

1 comment

T2 Whines About Used Games - a Day After Industry Touts Record Sales

January 29, 2009 -

Can someone explain this to me?

Wasn't it just yesterday that video game industry trade group the Entertainment Software Association issued a press release high-fiving itself over record sales of game software in 2008?

Why then, today, do we learn that GTA publisher Take-Two Interactive is griping about used game sales?

Here's what the ESA said yesterday about its record-breaking year:

Overall computer and video game industry hardware, software and peripheral sales climbed to $22 billion in 2008, with entertainment software sales comprising $11.7 billion of that total figure—a 22.9% jump over the previous year— the Entertainment Software Association (ESA) announced today... on the strength of a December sales month in which industry revenue ($5.3 billion) topped $5 billion for the first time in any single month. By comparison, as recently as 1997, the industry generated $5.1 billion over the entire year...

And here's T2 CEO Ben Feder (left) whining (via Cowen analyst Doug Creutz) today:

"GameStop continues to aggressively push their used game business, which is having a meaningful negative impact on sales of new games," noted analyst Doug Creutz, following a meeting with Take-Two CEO Ben Feder this week.

"Management is frustrated with this trend and is examining ways to ameliorate the problem, which includes strategies around online play and downloadable content which extend the lifespan of AAA titles."

GP: We have to ask: how "meaningful" can the supposed "negative impact" of used game sales be with game publishers having just completed their best year ever?

Or, is this another case of a greedy media corporation trying to squeeze every last nickel out of its customers?

UPDATE: I should make it clear that "whining" is my characterization of Ben Feder's position. Doug Creutz merely reports on Feder's concerns in an investor's note detailing his Tuesday meeting with the T2 CEO.

PC Version of GTA IV Installs Resource Draining App

January 17, 2009 -

It seems that the PC version of Grand Theft Auto IV not only installs SecuROM, but loads the resource-hungry Rockstar Social Club app as well.

Kieron Gillen runs this issue down in the current PC Gamer:

Playing GTA IV's excellent multiplayer means suffering a certain level of upfront irritation.You'll first need a Games for Windows Live account. If you don't have one, the web-forms for creating this are almost incomprehensible, and the site often breaks.

 

Then, that account must be linked to Rockstar Social Club account. Annoyingly, the resource-hungry Rockstar Social Club application runs in your task bar, even when you're not playing (though it can be disabled) for no discernable reason.

There's more discussion on how to deal with the vagaries of the Rockstar Social Club app on GTAforums.

27 comments

GTA Chinatown Wars Rated 18 For British Market

January 9, 2009 -

No surprise here.

The British Board of Film Classification has assigned an 18 rating to the upcoming Grand Theft Auto: Chinatown Wars.

No edits to the game were required, although the BBFC issued warnings that GTA Chinatown Wars "contains very strong language and drug references".

The game is scheduled for a March 20th release in the UK.

UPDATE: GameSpot notes that the 18 rating assigned to GTA Chinatown Wars is the first ever assigned to a DS game by the BBFC. The game's rating for the North American market is not yet listed on the website of the ESRB.

Thompson: God is Behind Take-Two Stock Slide

December 30, 2008 -

Is God behind the recent plunge of Take-Two Interactive's stock price?

When it comes to business, should one's religious beliefs even matter?

For the controversial, disbarred attorney Jack Thompson, the answer to these questions would seem to be yes.

On Friday, GamePolitics reported on Thompson's claim that he planned to lead a stockholder revolt aimed at ousting Take-Two chairman Strauss Zelnick.

While Thompson says that he wants to hold Zelnick accountable for T2's tumbling share price, his comments must be weighed in light of the disbarred attorney's oft-expressed distaste for Take-Two and its chairman.

As to the would-be shareholder revolt, it brought to mind a recent e-mail exchange between GP and  Thompson which may shed some light on the anti-game activist's apparent belief that divine retribution of the Christian deity is behind Take-Two's depressed stock price. Those e-mails follow:

--------------------------

From: Jack Thompson
Sent: Thursday, December 18, 2008 6:44 AM
To: Dennis McCauley
Subject: Spin this, Strauss...


GOD STRIKES TAKE-TWO DOWN

Take-Two dropped $2.35 to $9.72 in extended trading after the announcement and fell as low as $9.60. The shares... have declined 35 percent this year. The results contrast with comments Zelnick made in an interview on Nov. 3, when he said sales of the company’s video games hadn’t been hurt by the recession...

-------------------------

From: Dennis McCauley
To: 'Jack Thompson'
Sent: Thursday, December 18, 2008 6:52 AM
Subject: RE: Spin this, Strauss...


So, if T2’s business reverse was God’s vengeance, does that mean that God struck you down too when you were disbarred?...

--------------------------

From: Jack Thompson
Sent: Thursday, December 18, 2008 9:10 AM
To: Dennis McCauley
Subject: Re: Spin this, Strauss...


...If you had any understanding of the Bible and of God you would understand that persecution comes Christians' way, and we are blessed by it.  There is no blessing for Zelnick, who is not a Christian, when he gets what he deserves...

---------------------------

From: Dennis McCauley
To: 'Jack Thompson'
Sent: Monday, December 29, 2008 6:54 AM
Subject: in relation to your Take-Two shareholder revolt...


...Are you saying that problems for Christians are blessings, while problems for non-Christians are vengeance from the Almighty? Also, how do you know what Zelnick’s religion is?

---------------------------

From: Jack Thompson
Sent: Monday, December 29, 2008 7:11 AM
To: Dennis McCauley
Subject: Re: in relation to your Take-Two shareholder revolt...


Here's another passage of Scripture that you don't understand and never read:  "All things work to the good for those who love the Lord and are called according to His purpose."  That group would include me and not Zelnick.  Zelnick is not a believer in the Gospel.  How do I know?  Because the man who got us together [secretly, in Manhattan in 2007] is a Christian, with a massive ministry in Hollywood and the rest of the entertainment industry.  It was because of the spiritual aspect of this struggle that he got the two of us together, and Zelnick failed the test. 

If you knew anything about the Gospel, you would understand further that Paul, whose writings are considered part of the canon, tells Christians, not unbelievers, that we are to "count it all joy" when trials and tribulations come our way. 

I have been persecuted for my faith, not because I did anything wrong, by those committed to evil.  Glad to clear it up for you.  And as it now stands, Mr. Zelnick's problems at Take-Two are minuscule [sic] compared to the eternity of punishment that is coming his way unless he repents and accepts Christ as I did 32 years ago this month.  You might do well to read the Gospel of John yourself.  Come to think of it, I'll write Strauss about all this and send you a copy...

---------------------------

Thompson did not respond to GP's request to name the man who supposedly brokered the 2007 meeting with Zelnick. The letter to Zelnick which Thompson mentions can be viewed here.

GP: Serious consideration was given as to whether to publish this story as I realize that some will  find Thompson's comments about non-Christians offensive. Ultimately, in deciding to publish, the opportunity to provide an insight into Thompson's mindset outweighed the other issues.

Jack Thompson Says He Will Lead Shareholder Revolt to Oust T2's Strauss Zelnick

December 26, 2008 -

Disbarred attorney Jack Thompson says that he plans to lead a shareholder revolt against Take-Two Interactive chairman Strauss Zelnick.

Of course, disbarred attorney Jack Thompson says a lot of things...

In this case, Thompson claims in an e-mail that he just scooped up some T2 shares at their current, distressed price:

TTWO is today trading at about $7 per share.  Zelnick blew it.  Thompson today bought a bunch of Take-Two stock at the $7 figure.

The reason Thompson has done this is to lead the effort by Take-Two shareholders to dump Zelnick.  It is long overdue, and there are already rumblings that Zelnick’s tenure at Take-Two has been a disaster, as anyone still holding stock that could have been sold at $26 and is now worth $7 and falling, can attest.

In the letter, Thompson refers to the Z-man as an "incompetent, reckless goofball," which is pretty funny, coming from someone with Thompson's track record.
 

2K Holiday Card

December 23, 2008 -

In our continuing quest to share game biz holiday spirit, here's a nice card from the folks at 2K...

4 comments

What if the EA - T2 Merger Had Gone Through? We Ask Pachter

December 22, 2008 -

As GamePolitics readers know, Electronic Arts pursued the acquisition of Grand Theft Auto publisher Take-Two Interactive for the better part of 2008.

Timing, as they say, is everything.

The deal ultimately fell through when EA walked away from the table in mid-September.  Since then the global economy has gone into the toilet and the supposedly recession-proof video game industry has shown that it really isn't.

But when EA made its offer to acquire T2 at $25.74 per share, the economy had not yet tanked. No one even dreamed of a Wall Street bailout, much less a potential bailout of the U.S. auto industry.

What if the deal had gone through, obligating EA to lay out huge piles of cash? Would it be like burning your savings on a new car and finding out the next day that your hours were being cut back at your job? Since the merger fell apart, EA has definitely hit a rough patch, laying off a thousand workers and shuttering some of its game development studios.

As for Take-Two, their stock will open south of $9 this morning. Since EA bailed on the merger, TTWO has plummeted, losing about 2/3 of its equity value in 90 days.

From here it seems like T2 would have been better off if the deal had gone through, but EA would have been in worse shape. But we're not experts, so we put the question to Wedbush-Morgan analyst Michael Pachter. Here's what Pachter told us:

[My answer is] totally speculative.  Had EA completed the deal, the TTWO shareholders at the time would have benefited, but other than Oppenheimer (who has been listed as a large shareholder the entire time), it's hard to say that there are many of those other shareholders still around.  I think that many of the shareholders who bought to take advantage of EA's offer were sellers when the offer was withdrawn, so only a small number of current shareholders, including Oppenheimer, were actually involved in the stock back then.

EA would be a mess had it completed the deal.  In addition to its own restructuring (which is just getting underway), the company would have been faced with re-signing the Housers and with cutting significant costs out of Take-Two in order to fully achieve synergies from the deal. 

I don't think a low cash balance [due to the T2 purchase] would be particularly relevant, since EA has a line of credit and is not burning significant cash, but it would have forced decisive action.

Notwithstanding, this is purely speculative.  I think EA would be a stronger company if combined with Take-Two, as the latter company has several valuable franchises and a combination would have given EA a near monopoly in sports.  Had they signed the Housers, EA would have been well-positioned to develop incremental new IP, and would have had one of the strongest franchises around in GTA.

But it didn't happen, and doesn't look like it will over the near term

EA's Bid to Buy T2 Figures in Wall Street Insider Trading Charges

December 18, 2008 -

According to the Dow-Jones Newswire, federal investigators charged four men with today insider stock trading. One of the transactions named in the indictments was EA's bid to acquire T2 earlier this year.

No one from either Take-Two Interactive or Electronic Arts has been charged and there is no indication that the publishers had any inkling of the illegal stock trades. If government regulators are correct, however, information leaks from the Brunswick Group, a P.R. firm working on behalf of Take-Two, contributed to the crime. From the Dow-Jones report:

Four people were charged criminally Thursday in an insider trading scheme involving information about mergers or stock buybacks obtained from a Lehman Brothers Holdings Inc. broker's wife who worked at communications firm Brunswick Group LLC...

 

According to court documents, they were among a group of clients and friends tipped by Matthew C. Devlin, a Lehman Brothers broker, about 12 planned deals before their public announcements between 2005 and 2008...

 

Devlin allegedly obtained the information from his wife, who worked at communications firm Brunswick Group, according to court filings. The deals included... Electronic Arts Inc.'s (ERTS) hostile bid earlier this year for Take-Two Interactive Software Inc. (TTWO)...

 

Devlin has been charged criminally and in the SEC case... [other defendants]... referred to Devlin or his wife as the "golden goose," according to court documents.

The Guardian reports that there is no suggestion that Devlin's wife, Nina, a partner at Brunswick, knew of her husband's alleged stock market manipulations.

 
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E. Zachary KnightGot that same recommendation on Twitter. So I guess that is a good sign.09/15/2014 - 8:39pm
prh99Portlandia, though I don't watch a lot of sitcoms. Heard it was good though.09/15/2014 - 8:02pm
E. Zachary KnightSitcom recommendations for someone who like Parks and Rec but hates The Office: Go.09/15/2014 - 6:08pm
NeenekoEven if they do change their policy, they can only do it moving forward and I could see the mod/pack community simply branching.09/15/2014 - 12:50pm
Michael ChandraAs for take the money and run, the guy must have a networth of 8~9 digits already.09/15/2014 - 10:33am
Michael ChandraMe, I'm more betting on some form of mod API where servers must run donations/payments through them and they take a cut.09/15/2014 - 10:32am
Michael ChandraEspecially since they want it for promoting their phones. Killing user interest is the dumbest move to make.09/15/2014 - 10:32am
Michael ChandraGiven how the EULA actively allows for LPs, I'm not sure Microsoft is ready for the backlash of disallowing that.09/15/2014 - 10:31am
Matthew Wilsonthey wont do that, the backlash would be too big.09/15/2014 - 10:25am
ConsterSleaker: how is that a flipside? Sounds to me like that's basically what Notch himself said, except rudely.09/15/2014 - 10:18am
MaskedPixelanteOn the plus side, no more lazy Minecraft LPs, since iirc Microsoft has a strict "no monetization period" policy when it comes to their stuff.09/15/2014 - 10:13am
james_fudgeBut it continues to sell on every platform it is on, so there's that09/15/2014 - 10:09am
james_fudgeOh, well that's another matter :)09/15/2014 - 10:08am
E. Zachary KnightNothing against Notch here. I think it is great that he made something so cool. I just can't understand how it is worth $2.5 bil09/15/2014 - 9:59am
InfophileWhat a world we live in: Becoming a billionaire was the easy way out for Notch.09/15/2014 - 9:42am
james_fudgelots of hate for Notch here. I don't get it. Sorry he made a game everyone loved. What a monster he is!09/15/2014 - 9:37am
SleakerOn the flipside, Notch has been a horrible CEO for Mojang, and the company has grown on sheer inertia, DESPITE being mishandled over and over.09/15/2014 - 9:33am
SleakerI can understand Notch's statements he made to Kotaku about growing bigger than he intended, and getting hate for EULA changes he didn't enact.09/15/2014 - 9:32am
MaskedPixelantehttp://pastebin.com/n1qTeikM Notch's statement about the MS acquisition. He wanted out for a long time and this was the easiest way.09/15/2014 - 9:08am
ConsterEh, I can't blame him.09/15/2014 - 9:01am
 

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