The Fallout of EA and Take-Two's Falling Out

By Blake Ellison, Sep 15, 2008 12:42pm PDT Over the weekend, publisher Electronic Arts announced that it was ending its attempted merger with Take-Two. With Take-Two's stock diving by roughly 25 percent, the financial world is buzzing with the news that Take-Two may be in some trouble after the closed-door negotiations collapsed.

Chris Morris of Forbes points out that in a five-month timespan, 2004's Grand Theft Auto: San Andreas actually outsold this year's blockbuster Grand Theft Auto 4 by a margin of 5.5 million to 4.8 million. A margin of less than one million copies may sound insignificant, but the greatly increased production costs involved in GTA4 mean that its premature sales slowdown isn't good news for Take-Two's profits.

Analyst Michael Pachter has another number to add to Take-Two's headaches: the Houser brothers have five months left on their contracts. As relayed by GamesIndustry, Sam and Dan Houser, producers of the GTA series, can expect to command more pay in their new contracts in February 2009. According to Pachter, Take-Two faces two options, both bad: the brothers either take a high bid from a competing publisher, leaving the GTA series without its rockstar auteurs, or they stay with the publisher but cost more money, eating into the company's profits.

If it seems odd to a gamer that news about a publisher centers on one game, it's deeply unsettling to investors. "What worries me is [Electronic Arts] saw everything [Take-Two] has in the pipeline and weren't impressed enough to make an upgraded offer," wrote Morris on a Shacknews comment predicting the stock plunge.

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