Reheating Hot Coffee: Take-Two Reaches $20M Settlement with Investors

September 2, 2009 -

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.

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New Book Probes Link Between Video Games, Capitalism, Militarism & Social Control

August 27, 2009 -

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.

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You Too Can Run the Federal Reserve

August 18, 2009 -

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

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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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As E3 Opens, The Motley Fool Is High on Video Game Stocks

June 1, 2009 -

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.

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Nice Work If You Can Get It: EA's Riccitiello, Moore Earn Big Bucks in Bad Year

May 29, 2009 -

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.

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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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Social Game Lets Mobile Phone Users Try Bernie Madoff-Style Scams

May 19, 2009 -

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...

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Are Video Game Sales An Economic Indicator?

May 16, 2009 -

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%...

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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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Richard Garriott Sues NC Soft Over Millions in Stock Options

May 6, 2009 -

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.

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Apple Aiming to Take a Big Bite of EA?

May 5, 2009 -

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.

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Ian Bogost Critiques Bailout Bonanza for the iPhone

April 22, 2009 -

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.

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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.

 


Online Game: Bailout Bonus Beatdown

March 24, 2009 -

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...

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Hated AIG Kicks It in Konami's Pro Evolution Soccer 2009

March 23, 2009 -

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.

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AIG Exec UFO Catcher - Coin-Op Solution to a Wall Street Scandal

March 18, 2009 -

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

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Layoff: The Game

March 17, 2009 -

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

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Crashteroids Game Caps Off Horrible Week for MSNBC's Jim Cramer

March 14, 2009 -

It has been a rough week for frenetic financial guru Jim Cramer, host of MSNBC's Mad Money program.

Having been pilloried on several recent episodes of The Daily Show, Cramer opted to appear as a guest, apparently in an attempt to explain himself to host Jon Stewart. Bad idea: Cramer's Daily Show appearance was a disaster.

Financial site The Big Money lampoons Cramer's media woes with Crashteroids, a fun little Asteroids knock-off:

Avenge Cramer’s disgrace at the hands of Jon Stewart by blasting his smug grin into space dust. Defeat Business Insider’s Henry Blodget, a man who once called Cramer “a chair-throwing, self-aggrandizing clown.”

 

Protect Cramer from Fox Business, a network that sneered, “[T]he last thing you need is Jim Cramer.” Shred Barron’s magazine, a publication that has tried to prove Cramer gives crappy investment advice. And, of course, keep the grizzly hordes of bear-market economists at bay.

Via: The Business Insider

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Can You Save the Economy? Play The Bailout Game

January 14, 2009 -

While the current state of the economy isn't much fun, The Bailout Game offers a somewhat entertaining look at the financial mess wrought by the ugly marriage of Wall Street greed and governmental ineptitude.

The web-based offering uses board game-style interface and challenges the player to selectively bailout financial institutions and the auto industry, all the while trying to keep one step ahead of recession.

Although we found the game worth a try, Ian Bogost of Water Cooler Games was less enthusiastic:

The game itself is a repetitive and seemingly meaningless trudge from square to square (bank to bank), each offering the same basic question: Do you bail out: YES or NO? No matter your answer, you'll get an animation or video with some vaguely related news bit or textual riff...

 

I was never able to determine why or how the game wanted me to chose to bail out specific banks or to let them fail, save for invoking the "Ask a Greenspan" button or following obvious hints on the playing cards. It's games like this that make me wonder if I should give up tracking them entirely.

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"Sacred Cow Slayings" Rumored at Sony... Is PlayStation In Jeopardy?

January 5, 2009 -

UK newspaper The Times reports today that radical corporate upheaval is coming to Sony.

Long-overdue cost-cutting moves will, according to company sources, result in "sacred cow-slaying measures" that will "will abolish or fundamentally alter many of Sony's long-established business practices."

The reorganization will likely be made public following CES in Las Vegas. The massive trade show ends on January 11th.

Could the PlayStation hardware business get the chop?

That's hard to say, but the PS3 has been bleeding money since it launched in November, 2006 and the PSP is struggling as well. One ominous sign: there is talk of a shift that would turn Sony from a manufacturing to a content-driven business model.

PS3 manufacturing costs have generated huge losses for Sony over the past two years. Content would include games, of course, but Sony also has a stake in movies and music. If the company judges its console business as too costly to continue, it could decide to pursue a system-agnostic approach like the one adopted by Sega after it abandoned the Dreamcast in 2001. Ironically, back then it was Sony's PlayStation 2 which steamrolled the well-regared Sega console.

Alternately, the PlayStation business might be salvaged in whole or in part  and manufacturing cuts could be made on the consumer electronics side of Sony's house.

In any case, we should know more next week. In the meantime, PlayStation 3 fanboys may suffer a few sleepless nights as they worry about the future of their system.


 

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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.
 

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.

Disney Might Buy EA, Says Wall Street Journal

December 11, 2008 -

Has the hunter become the hunted?

Electronic Arts, which pursued GTA publisher Take-Two Interactive for much of 2008, may now be an acquisition target of Disney.

According to financial website The Motley Fool, the Wall Street Journal's Heard on the Street column suggested yesterday that Disney might be eyeing EA. The WSJ apparently based their speculation on comments made by Disney's Chief Financial Officer during a conference call on Tuesday. From the Fool:

Asked if Disney's focus would be on developing in-house games over buying more developers, [CFO Tom] Staggs responded, "I don't want you to conclude that those are in the long term mutually exclusive." He went on to say that a "strategic and attractive" purchase would be "a possibility" for the family entertainment giant.

Did he say Electronic Arts (Nasdaq: ERTS)? No. However, a combination of EA's battered share price and Disney's desire to ramp up its gaming presence dovetail nicely in the rumor mill.

The Motley Fool offers five reasons why a Disney takeover of EA makes sense:

  • Disney has acquired game companies before (Avalanche Studios, Club Penguin)
  • EA Sports and Disney's ESPN would have synergy
  • Disney's MMOs haven't worked out so far, but EA has Warhammer
  • Racing is a major theme is Disney's films and parks; EA has Need For Speed
  • Convergence of Disney's theme parks with EA's strong IP

Still, The Motley Fool views the chances of a Disney-EA deal as slim. And, it's pretty clear that, when it talks about acquisitions, family-friendly Disney isn't thinking of Take-Two and GTA.

49 comments

Will Riccitiello Survive EA Slump? We Ask Pachter

December 11, 2008 -

On Tuesday afternoon, Electronic Arts CEO John Riccitiello (left) announced that the publisher would not meet its revenue projections for the 2009 fiscal year.

Personnel cuts and cancellation of some underperforming projects will follow.

Yesterday, Wedbush-Morgan analyst Michael Pachter took EA to task in a note to investors:

After market close on Tuesday, EA significantly lowered its guidance due to weaker than expected sales...  Management stated that it will not be able to achieve its previously issued FY:09 guidance...

 

With the stock hovering near a seven-year low, management continued its recent history of disappointment. We are no longer confident that EA is taking the steps necessary to achieve its FY:11 goals of $6 billion in revenue and $1.5 billion in operating profit. 

Ouch! Pretty strong stuff from Pachter, so we asked him point-blank: Is John Riccitiello's job in jeopardy? After all, in addition to missing his projected numbers, Riccitiello also led EA through a protracted - some would say, embarrassing - and ultimately failed attempt to acquire Grand Theft Auto publisher Take-Two Interactive this year. Here's what Pachter told us:

Does Riccitiello survive is a function of a lot of things… He’s probably not in trouble yet. He’s probably in trouble in eight months or a year if this new strategy shows no traction…

 

You really just have to be prudent in your spending. Don’t spend ahead of revenues. So don’t spend $500 million chasing casual online games until you have $500 million in profit from them.  So you just scale that stuff back, a hundred million here and a hundred million there and you’re talking real money [saved].

 

[EA is] being punished by trying to do too much at once. They’re too ambitious. They’re launching way too many games at once, so it's crazy to believe they’re all going to work. And it's too early to give up on any of them. And then they launched in kind a holiday window that’s really tough.

 

I think everything's performing fine. It's not like Mirrors Edge is selling zero units; it's selling two million. And Dead Space is selling two million or three million. It's crazy that these guys would think that they couldn’t maybe make these games again. Mirror's Edge is more of a victim of just coming out in the midst of Far Cry, Gears, Fallout. How could you expect that game to fly? It got lost. I don’t think its an indictment of what they were doing...

What about Riccitiello's comments to the effect that EA needs to revise its Wii strategy? Hit the jump for the rest of Pachter's thoughts on EA.

39 comments | Read more

Wall Street Journal Compares Crooked Ill Guv's Mistakes to Failed EA-T2 Deal

December 10, 2008 -

Yesterday, GamePolitics pointed out the hypocrisy of indicted Illinois Gov. Rod Blagojevich, who publicly fretted about Grand Theft Auto's cartoon crime but himself managed to carry out what the U.S. Attorney alleges was a political corruption crime spree.

The Wall Street Journal's Deal Journal blog has come up with a different video game angle on the Blagojevich affair, remarking that the disgraved Guv should have paid more attention to this year's failed EA-Take-Two merger:

Before Illinois Gov. Blagojevich allegedly tried to auction off President-elect Barack Obama’s vacated Senate seat to the highest bidder, he might have taken a closer look at the state of deal making this year–which would have told him it never would have worked.

 

Deal Journal compiled some lessons from this year’s M&A market that might have kept Blogajevich from following temptation into a federal indictment.

Don’t assume you are the only game in town: If prosecutors are right, Blagojevich, accused of looking for either lucre or favors in return for Obama’s Senate seat, made an oft-seen mistake: he believed he had more leverage than he did. Take-Two Interactive Software–maker of the Grand Theft Auto videogame–made the same mistake when it pushed rival Electronic Arts to bid up, up, up for the company. But EA tired of being toyed with and walked away.

The WSJ also jokingly relates Blagojevich's relentless pursuit of graft to several other non-game biz deals.

 
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prh99Steam has added a curator system. You can follow your favorites and see their recommendations http://store.steampowered.com/curators/09/22/2014 - 9:07pm
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MonteIndeed. Their wallet system, the lack of sales, applying tax, the lack of price cuts, the eshop is pretty terrible. Only use it for indie games.09/22/2014 - 8:29pm
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Andrew EisenOooh, Atlus sale in the 3DS eShop. I might have to bust open my piggy bank. http://www.siliconera.com/2014/09/22/shin-megami-tensei-iv-atlus-games-sale/09/22/2014 - 7:21pm
Matthew Wilsonhttp://www.pcgamer.com/2014/09/23/steam-update/ steam finally adds content Curation. I like that the user can pick which peoples recommendations they want to see.09/22/2014 - 7:16pm
MaskedPixelanteNintendo put three dual-gendered characters in Smash Bros 4.09/22/2014 - 7:13pm
Andrew EisenWhat did Nintendo do thrice in one game?09/22/2014 - 6:48pm
MaskedPixelanteYou know it's a bogus defense when Nintendo of all companies does it THREE TIMES in one game.09/22/2014 - 6:29pm
E. Zachary KnightIt is stupid that they went with the "It would be too much work to add a woman assassin" defense rather than just being honest and admiting they didn't think about it until it was brought up.09/22/2014 - 6:06pm
E. Zachary KnightYeah, this is a different game and it is not out of the ordinary for them. THey did the same for the pirate one.09/22/2014 - 6:05pm
MaskedPixelanteTurns out it's less "impossible", more "part of the season pass, but only in an exclusive game that's separate from ACU proper".09/22/2014 - 6:01pm
MaskedPixelantehttp://www.joystiq.com/2014/09/22/assassins-creed-unitys-season-pass-includes-game-set-in-china/ Remember how Ubisoft said it was impossible to have playable females in Assassin's Creed Unity?09/22/2014 - 5:59pm
ZippyDSMleeIf publishers didn't play the region lock game then it would not be an issue.Tho I have seen more russian/chec games than asia ones on ebay.If they do not like it then mabye lower thier region prices to make alitte vrs none.09/22/2014 - 9:54am
MaskedPixelantehttp://hexus.net/gaming/news/industry/74981-pc-game-code-stripping-widespread-says-report/ Thievery, or perhaps the very idea of capitalism? You decide!09/22/2014 - 9:47am
MaskedPixelantehttps://www.youtube.com/watch?v=oDPCmmZifE8 John Oliver exposes Miss America.09/22/2014 - 9:00am
james_fudgeI reiterate now - not one email to-date.09/22/2014 - 8:37am
james_fudgeAnd this: https://archive.today/uIjwE09/22/2014 - 8:37am
james_fudgeLet me put this here: https://archive.today/hbtQJ09/22/2014 - 8:35am
 

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