NEW YORK (CNN/Money) – How much would you pay to get into some of Hollywood's biggest studios? Take Two Interactive Software's willing to pony up nearly $23 million.
The video game publisher tossed out a few surprises in its third quarter earnings this morning, the most notable of which was its acquisition of fellow publisher TDK Mediactive. At first glance, it's a pretty minor deal. The money's chump change to Take Two, which saw net sales of $155.6 million in its third quarter. And the fit doesn't make immediate sense, either. Take Two's best known for its "Grand Theft Auto" series, while TDK's biggest claim to fame has been the "Shrek" video games.
Look a little closer, though, and things start to make more sense. TDK has spent its short history establishing strong relationships with major entertainment companies. Its portfolio includes games based on a number of well-known licenses, including Shrek, the Muppets, The Land Before Time, Pirates of the Caribbean and Masters of the Universe.
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"It propels them further down the path that everybody else is already on," said P.J. McNealy, an analyst with American Technology Research. "For $23 million, they've gotten a foothold in Hollywood and what's become a rapidly emerging theme - the expansion of movies and TV-based franchises into video games."
It also delivers Take Two an audience it hasn't actively courted before: families.
Family and children are "a large and expanding audience that Take Two has only recently begun to explore," said Jeff Lapin, Take Two's CEO, during an analyst conference call.
While the accountants hammer out the nuances of the deal (including how many of TDK's 35 employees will be asked to stay with the company), Take Two will begin publishing TDK games almost immediately, starting with November's "The Haunted Mansion", a video game based on the Eddie Murphy film, which itself is based on the Disney theme park ride.
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| Despite the TDK acquisition, Take Two will still publish more mature fare, such as "Manhunt". |
But don't think the purchase of TDK means Take Two is turning its back on its grittier titles, though. Xbox owners will finally get the chance to play both "Grand Theft Auto 3" and "Grand Theft Auto: Vice City" this holiday season, with a combo pack of the games going on sale in November. PC gamers will get their hands on the third-person shooter "Max Payne 2" on Oct. 15. And later this fall, Rockstar Games (the studio behind "Grand Theft Auto") will release "Manhunt" for the PlayStation 2 – a "brutal" stealth/survival game that has been called "unapologetically cruel in tone and subject matter" in previews.
Still up in the air is the long-awaited "Duke Nukem Forever". Asked about its status, Lapin said "We're hopeful [developer 3D Realms] will complete it in 2004. However, it's not in our guidance."
Take Two, officially, has a general audience division, known as Gotham Games. And while its titles – which include "Conflict: Desert Storm", "MTV Celebrity Deathmatch" and the upcoming "Starsky & Hutch" - may appeal to more casual gamers, they're still not the sort of games that attract families.
TDK initially won't make a big dent in Take Two's earnings. But it will help the company mature and diversify its various streams of revenue. In the past, investors have viewed the company as a one-trick pony, rising to the position of the industry's number two publisher solely on the strength of the "Grand Theft Auto" franchise.
That's probably true. But by adding TDK to its arsenal, Take Two (TTWO: Research, Estimates) is finally taking steps to become a broader based company – and perhaps one that might eventually present a serious challenge to Electronic Arts (ERTS: Research, Estimates) for the industry's top spot.
Morris is Director of Content Development for CNN/Money. He can be emailed at chris.morris@turner.com
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