Take-Two Interactive announced yesterday that it has reached a $20 million settlement in a class-action lawsuit filed over the 2005 Hot Coffee scandal.

Although T2's press release is regrettably light on details, securities are mentioned, indicating that  this case is related to loss of equity value caused by Hot Coffee and its fallout.

Venture Beat has dug up a link to the complaint, Feninger vs. Take-Two. Kotaku offers an explanation of the details:

The nut of the allegations contained in the 34-page suit, is that Take-Two was spending more than it was bringing in and couldn't survive until the next Grand Theft Auto. So, the suit alleges, the company pushed Grand Theft Auto: San Andreas out the door knowing that there was pornographic material in the game because delays would have cost the company too much. If the material was known to be in the, the suit continues, major retailers wouldn't have sold it.

The outcome, according to the suit, was inflated stock prices based on bad or uninformed information from the company and a plunge in stock values when the truth came out.

The suit also alleges that Take-Two lied about the included sex scenes, nicknamed Hot Coffee, when they first came to light, with the company the scenes were "the work of a determined group of hackers who have gone to significant trouble to alter scenes.'"

GP: We should point out that, as the record shows, the notion that Take-Two lied about the origin of the Hot Coffee scenes is a fact, not merely an allegation. In one the sleaziest moves ever seen in the game biz, Take-Two tried to pin the rap for the hidden sex scenes on its biggest fans, the GTA mod community. To be fair, there was a different management team in place back then.

We haven't read this one yet, but we plan to.

Games of Empire: Global Capitalism and Video Games, a new book by Prof. Nick Dyer-Witheford of the University of Western Ontario and Greig de Peuter, a PhD candidate at Simon Fraser University, digs into some territory that should prove fascinating to GamePolitics readers.

From the press release:

Games of Empire forcefully connects video games to real-world concerns about globalization, militarism, and exploitation, from the horrors of African mines and Indian e-waste sites that underlie the entire industry, the role of labor in commercial game development, and the synergy between military simulation software and the battlefields of Iraq and Afghanistan... the urban neoliberalism made playable in Grand Theft Auto, and the emergence of an alternative game culture through activist games and open-source game development.

Rejecting both moral panic and glib enthusiasm, Games of Empire demonstrates how virtual games crystallize the cultural, political, and economic forces of global capital, while also providing a means of resisting them.

The paperback edition is available for $19.95.

Tired of playing a virtual orc, shaman or infantry team leader?

How about stepping into the polished wingtips of Federal Reserve Board Chairman Ben Bernanke?

You can, sort of. The Federal Reserve Bank of San Francisco has posted Fed Chairman, an online game which challenges players to keep both unemployment and inflation in check by tinkering with the federal funds rate.

Okay, so Call of Duty 4 it's not. Still, it's a short, interesting lesson on the relationship between the Fed and the economy at large.

UPDATE: The game seems to be down at the moment...

Via: Crossing Wall Street

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.

At the intersection of Wall Street and E3 2009, financial website The Motley Fool has given the video game business a big wet kiss, naming it "The One Industry You Must Own."

Stock Pickers at TMF - some of whom are attending E3, by the way - like the industry's low debt, high margins and 5-year growth projections:

The average video game company is growing faster, is more profitable, has a cleaner balance sheet (only a handful of video game stocks have any debt whatsoever), and actually trades at a lower forward earnings multiple than the S&P 500...

pure gaming outfits like Activision Blizzard are just the tip of the iceberg. Component makers like NVIDIA (Nasdaq: NVDA), Logitech, and Sony (NYSE: SNE) are all hard at work developing next generation gaming platforms, graphics, and accessories...

Sales of games designed for mobile devices are going to surge...

So, which stocks, specifically, does TFM recommend? Unfortunately, they want to you to subscribe to their newsletter to find out.

Personally, I prefer the blindfolded chimp/dartboard method of picking stocks, but to each his own.

Yes, Electronic Arts may have laid off 10% of its workforce and posted a billion dollar loss in recent months, but rank has its privileges, after all.

And ranking execs at EA are clearly among the privileged, based on a preliminary proxy statement filed by EA this week which lists compensation for its top officials. CEO John Riccitiello's fiscal 2009 package, which included salary, stock awards, option awards, benefits and a performance-based cash bonus, is valued at $6,365,823.

EA Sports President Peter Moore won't be brown bagging his lunch, either. EA lists Moore compensation package at $4,284,366. Here's the breakdown for Riccitiello (right) and Moore (left), EA's two most high-profile execs:

Here are Riccitiello's numbers:

• Salary - $793,749  
• Bonus -
• Stock Awards - $1,055,461
• Option Awards - $4,115,305
• Non Equity Incentive Plan Compensation - $400,000 
• All Other Compensation - $1,308
• TOTAL - $6,365,823

And here are Moore's (cost of game launch tattoos not included):

• Salary - $564,624 
• Bonus -
• Stock Awards - $1,443,741
• Option Awards - $1,589,290
• Non Equity Incentive Plan Compensation - $200,000
• All Other Compensation - $486,711
• TOTAL - $4,284,366

The Associated Press notes that Riccitiello's incentive bonus dropped from $625,000 in fiscal 2008 to the $400,000 figure listed above. In contrast to EA's filing, the AP estimates Riccitiello's total compensation at $11.1 million, using a $9.9 million valuation on stock options.

Not bad for a crappy year.           

UPDATE:  gamesindustry.biz reports that an unnamed EA spokesman has taken umbrage at the Associated Press claim that Riccitiello's options are worth $11.1 million:

Their calculation is inaccurate. It includes value of performance-based shares that will vest over several years - and only if high performance hurdles are met.

As reported, it appears as though those shares are compensation for this year, which they are not. Accurately, they are an opportunity to earn shares over the coming years if company objectives are met.

The spirit of those shares is to link executive compensation to the achievement of long term financial objectives. That programme, which is in place for all of EA's top executives, is designed to align interests of shareholders and management.

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.

A social game for web-capable mobile phones parodies rogue financier Bernie Madoff's long-running Ponzi scheme, reports CNNmoney.

Made Off, available from publisher Cellufun, allows players to create virtual scams of their owns, promising other players investment returns of up to 20%. Player need to continually attract new "investors" in order to pay back the older ones, lest their Ponzi scheme collapse. No real money is involved. Instead, players trade "cellupoints."

Cellufun CEO Neil Edwards, who says his game pokes fun at the jailed Madoff, not his victims, told CNN/money that Made Off has an educational component:

When your fund goes broke, you go, 'Holy crap, I didn't invite enough people... There is a lot of misconception and confusion on what happened. People don't really understand a Ponzi scheme."

A blurb on the game's website describes the action:

Play as a slimy Fund Manager, a savvy Investor, or both. The game will end without warning when the Feds finally crack down on the Cellufun community, and people managing Funds will get to keep all the Cellupoints invested in them. Investors will keep all the Cellupoints they've acquired through interest payments as well. And we'll give trophies to those who have "made off" with the most profits...

Douglas McIntyre of 24/7 Wall Street writes that video games are an excellent economic indicator. And - given their lousy recent sales numbers - the indications aren't good:

 Video games... [are] inexpensive enough so that they should be a reasonable proxy for consumer discretionary spending.

The signals from the video game industry in April were troubling. Sales of games dropped 23% and game console sales were down over 40%...

The slide in console sales is so extreme that it is a clear sign that sales of consumer electronics are in a flat spin. When people cannot spend $300 on a console or $50 on a game which can be used for hours and played over and over again, the money for discretionary spending has dried up.

TIME thought enough of McIntyre's analysis to repost on their site.

On the other hand, analyst Doug Creutz of Cowen and Company pointed out this week in an investors' note that year-over-year April sales comparisons were negatively impacted by the April, 2008 release of two blockbusters, Grand Theft Auto IV and Mario Kart Wii. That was a tough act for April, 2009 to follow. Creutz also notes that most U.S. game publishers did well in April:

Three of the four major U.S. third party publishers saw significant sales increases in April. [Activision] saw a total game sales (incl. PC) increase of roughly +21%... Electronic Arts... saw total game sales increase +26%... THQ's... total sales increased +23%...

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.

The once-happy business union of Ultima series creator Richard Garriott and Korea-based MMO publisher NCsoft turned vicious at its end, according to documents filed by Garriott with U.S. District Court in Texas.

Kotaku broke the news of the lawsuit yesterday, but GamePolitics has the details - and they're ugly.

Garriott, best known for the Ultima RPG series, alleges that he lost millions when NCsoft manipulated him into cashing out stock options earlier this year after firing him late in 2008. Garriott's dismissal is news in itself, as his departure from the company was presented to the gaming community by NCsoft as voluntary.

From the complaint:

In... November 2008, Chris Chung, President of NCSoft's North American operations, informed Mr. Garriott that NCSoft has decided to "part company." Although Mr. Garriott objected to his dismissal, Mr. Chung insisted that the decision was final - Mr. Garriott had to go.

 

As Mr. Garriott prepared to leave NCSoft, however, Mr. Garriott learned that NCsoft had internally re-characterized his termination by Mr. Chung as a "voluntary" resignation... This mischaracterization had profound and detrimental effects on Mr. Garriott's stock options: if NCsoft terminated Mr. Garriott's employment (which it did) then the options - worth tens of millions of dollars - would remain in effect until 2011; but if Mr. Garriott resigned voluntarily (which he did not), then NCsoft might have terminated those options... within ninety days of his departure...

 

NCsoft forced Mr. Garriott into a Hobson's choice of exercising his options... and forced him to sell into one of the worst equity markets in modern history...

Garriott claims that he not only lost millions by prematurely selling his options, but also incurred hundreds of thousands of dollars in tax liability associated with the unwanted deal.

Garriott's well-publicized turn as a space tourist also comes up in the suit:

Following the lauch of the Tabula Rasa game, Mr. Garriott took a leave of absence... to pursue a different kind of launch... Mr. Garriott used the considerable media coverage surrounding his space-launch to publicize and promote Tabula Rasa for NCsoft. For example, Mr. Garriott send a coded message to the Tabula Rasa player base during his space launch...

 

NCsoft terminated Mr. Garriott's employment while he was still in quarantine from his space flight...

 

Despite Mr. Garriott's repeated objections, NCsoft refused to retract its misstatements regarding the nature of Mr. Garriott's departure and the cancellation of his stock options...

In his lawsuit, Garriott alleges breach of contract, fraud and negligent misrepresentation on the part of NCsoft. He clams to have suffered "more than $27,000,000 in actual damages."

DOCUMENT DUMP: Grab a copy of Garriott's complaint here.

A brief item on TheStreet.com mentions that there are rumors afoot that Apple may be fueling a major move into gaming by attempting to acquire publishing giant Electronic Arts.

Commenting on the speculation, Edge Online notes that Apple has recently hired some execs with game biz background.

TechNewsWorld has more speculation on Apple's gaming ambitions.

UPDATE: VG247 reports that Wedbush-Morgan analyst Michael Pachter pulled no punches in his assessment of the Apple-EA rumor:

To say that it is idiotic would be an insult to all idiots.

Pachter was also blunt in comments to Gamasutra:

Sounds retarded to me.

Apple could buy Warner Music for around $3 billion, and control 20 percent of all recorded music. That makes more sense to their current business model than buying EA for more than twice that, doesn't it?

I don't want to start a rumor, but want to point out that Apple doesn't own any entertainment content, so I don't know why they would feel compelled to enter a new business unrelated to their current product slate.

Over at Water Cooler Games, Georgia Tech prof and noted game designer Ian Bogost offers some thoughts on Bailout Bonanza, an iPhone game released in late March.

Bailout Bonanza is essentially a clone of the classic Activision game Kaboom! -- the player moves or tilts the iPhone to maneuver a bucket at the bottom of the screen, which catches money bags dropped by a Wall Street banker out of a neoclassical financial building...

 

The problem is, this game doesn't really satirize or comment upon the bailout. If anything, the Kaboom! gameplay feels backwards... The game also points to the issue of timeliness in editorial games. Creating an iPhone game like this one is relatively easy, but it still takes more time than making the equivalent Flash game... the bailout of the financial sector is, in a way, old news.

Bogost notes that Bailout Bonanza is just one of several bailout-themed games available on the AppStore.

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, 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.

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.

Sure, those AIG bonuses were maddening, but punching out execs isn't the solution that most rational people have in mind.

Still, Kewlbox has posted Bailout Bonus Beatdown, an online game in which players have 15 seconds to throw punches (read: click their mouse) at a greedy yet defenseless exec from the "P.I.G. Insurance Company."

GP: We'd like to think that the state of games as political commentary has advanced beyond the tired whack-a-mole, punchout and first-person shooter genres. But, apparently not...

If you haven't yet gotten your fill of AIG news, Stephen Totilo of MTV Multiplayer reports that the controversial, troubled insurance company shows up unexpectedly in Konami's Pro Evolution Soccer 2009.

Stephen was checking out the Wii version and reports that AIG's now-infamous logo appears on the jerseys of Manchester United:

For those who recognize AIG as one of the most hated three-letter combinations in America these days, be warned about Konami’s new Wii soccer game “Pro Evolution Soccer 2009.”

The game’s opening cinematic has a bunch of guys wearing the company’s logo...

I discovered through “PES 2009″ that Manchester United... is sponsored by AIG. (Or, to be precise, used to be sponsored, as reports, like this one from Forbes, indicate that the U.S. government has nixed any renewal of this Manchester United AIG deal.)

After reading Stephen's piece I tossed my copy into the PS3, and found AIG there, as well.

Sen. Chuck Grassley (R-IA) may have suggested that executives of public money sink AIG commit ritual suicide, but animation artist Joaqin Baldwin's approach to the new icon of corporate greed is far more diabolical. More fun, too.

AIG Exec UFO Catcher is Baldwin's AIG-themed take on those coin-op claw machines that one finds in arcades and the lobbies of greasy spoon diners. You know, maneuver the claw to grab a small stuffed animal.

In Baldwin's vision, however, players use the claw to collect AIG execs who are partying on the taxpayers' dime. Trillions of dimes, actually...

Entertainingly, things just don't work out so well with the claw feature.

Although the game is a bit NSFW, AIG hate is so rampant at the moment that even the most prudish of bosses will probably look the other way. After all, the boss is a taxpayer, too.

Via: GameCulture

If you've been laid off, you'll have plenty of time on your hands to play the Layoff game - at least until your PC is repo'd.

The new, Bejeweled-like offering from tiltfactor satirizes the plight of worker bees who are paying the price for the incompetent Wall Street types behind the economic meltdown.

A company press release describes the game, which was developed by Prof. Mary Flanagan, Dartmouth’s Digital Humanities Chair in partnership with the Rochester Institute of Technology (RIT) Game Design and Development program:

Players play from the side of management needing to cut jobs, and match types of workers in groups in order to lay the workers off and increase workforce efficiency... Players eliminating many workers in a row find financiers and bankers taking the place of working class jobs. The financiers in this game cannot face layoffs.

Prof. Flanagan comments on Layoff:

The game has an unsettling feeling. It is cute and fun to play, but when you realize how frightening the situation is, the game in fact functions as a very dark portent.

Via: Kotaku