New Consoles, GTA5 to Boost Video Game Industry

New Consoles, GTA5 to Boost Video Game Industry
GTA 5 Heists--the belated DLC that's been promised for nearly a year--could be coming soon. Grand Theft Auto V, coming for the PC, PS4, and Xbox One in the fall, will finally allow users to use mods for the PC. The console game “Grand Theft Auto V” at a HMV music store in London, England, Sept. 17. (LEON NEAL/AFP/Getty Images)
9/17/2013
Updated:
9/17/2013

A $250 million blockbuster title released this week is expected to lift the financial fortunes of an entertainment company and it’s not based in Hollywood.

It’s not a big-budget movie. It’s the big-budget video game “Grand Theft Auto V” (GTA5), which cost $250 million to develop and was five years in the making. The most anticipated gaming title in years, coincides with the fourth-quarter release of a new generation of gaming consoles. Good news for New York-based Take-Two Interactive Software Inc. (Nasdaq: TTWO), which hasn’t really seen a lot of sales growth recently.

Financially, the company has struggled during the past quarters. Revenues and operating income for TTWO were down in Q1 and Q2 2013. Revenues were down 28 percent and 52 percent, respectively.

The stock market however, is looking into the future. Interest in TTWO’s stock has increased over the last 30 days, with average daily trading volume up 150 percent since early August. The upcoming two quarters, which include the 2013 holiday shopping season and launch of new consoles, should provide the company with a major boost in revenues.

Shares of TTWO, the parent company of GTA5 publisher Rockstar Games, are up more than 7 percent in the last three months.

Popularity and Controversy
With most of TTOW’s fortune resting on GTA5, the game was released with a heavy marketing blitz on Tuesday, Sept. 17, for PlayStation 3 and Xbox 360 consoles. 

GTA5 is the fifth title in the long-running Grand Theft Auto series, which was first released in 1997. Over the years, the game has evolved into a 3-D “sandbox” genre with players taking control of protagonists who can freely roam the virtual game world, partaking in various activities and carrying out various missions.

The series has received criticism for perceived violence, sex, and other glamorization of vice. Over its life TTWO has been the target of several lawsuits filed by activist organizations, most notably lawyer Jack Thompson.

Despite the controversy, the game series has been a commercial success, selling more than 125 million copies in total. The last iteration of the game, “Grand Theft Auto IV,” sold 25 million copies and generated up to $900 million in revenues.

Brighter Outlook

Overall, the video-gaming industry has been battered in recent years due to the advent of mobile and casual gaming. Due to high technical requirements in terms of graphics, writing, and production, video game production costs have soared and sales haven’t kept up. At the retail level, sales of video games have declined in each of the last 12 months.

But it’s not time to write off the industry yet. According to market research firm NPD Group, August video game hardware and software sales were up 1 percent to around $521 million. August saw releases of two major titles, including Electronic Arts Inc.’s “Madden 25” and “Saints Row IV,” published by Germany’s Koch Media GmbH.

While retail sales are slowing, online and mobile game sales were a bright spot, which grew over 50 percent during the first half of 2013. Many large publishers, including EA, have invested heavily in this segment.

The new generation of consoles, Sony Corp.’s PlayStation 4 and Microsoft Corp.’s Xbox One, will come out in Q4, just in time for the holiday shopping season. Shares of companies in the gaming industry have rallied in 2013 in anticipation. Electronic Arts shares have gained 85 percent year to date, Activision-Blizzard Inc. have gained 62 percent, while retailer GameStop Corp. saw its shares rally 109 percent since Jan. 1.

When asked about the declining sales across the industry, Sony Americas executive Jack Tretton replied, “We’re talking about the seventh year of a console and I guess if you used a TV analogy, you might say, boy, the re-runs of a show we released seven years ago aren’t doing as well as before,” according to Fox Business.

“The new console war is going to reinvigorate the industry,” he added.

S&P Capital IQ believes that TTWO will outperform competitors due to the popularity and success of its content franchises. “We think strength in key game franchises will offset a decline in the overall video game industry due to a shift toward mobile games,” S&P said in a research note. Grand Theft Auto and the Bioshock series are two of the most popular series for the company. 

Frank Yu is a contributor to the Epoch Times.