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Microsoft Takes Two From Take-Two

So this is how you weaken the enemy. In a coup for both Take-Two Interactive (Nasdaq: TTWO  ) and Microsoft (Nasdaq: MSFT  ) , The New York Times is reporting that Mr. Softy will pay $50 million to the controversy-courting game publisher for a pair of exclusive Grand Theft Auto IV downloadable episodes for the Xbox 360.

It's a big deal. The next installment in Take-Two's blockbuster franchise hits stores in October. It will be available for Microsoft's video game console as well as Sony's (NYSE: SNE  ) PlayStation 3. With diehard gamers now fully aware of the extra episodes that can be purchased only through Xbox Live's online service in 2008, which version do you think will be the better seller?

It's an important question because PS3 sales have been disappointing so far. Grand Theft Auto IV is the kind of marquee title that would normally stir upgrade interest from players still tethered to their PS2 systems. In one fell swoop, Microsoft is burying the PS3 platform a little deeper while pushing its own box, as well as the lucrative Xbox Live platform that will be necessary to download the episodes.

We knew that episodes were coming. Take-Two said so back in March. Periodic Grand Theft Auto IV installments that take advantage of high-margin digital delivery will help offset the lull that takes place at Take-Two between physical releases.

Take-Two has other games in its arsenal. It is carving a niche as a small player in sports titles, though obviously it is just a poor man's Electronic Arts (Nasdaq: ERTS  ) on the playing field. It just released a game licensed through Marvel (NYSE: MVL  ) tied to the new Fantastic Four flick, though few expect it to have the dramatic Marvel-fueled punch that Activision (Nasdaq: ATVI  ) had with its first wave of Spider-Man games.  

Take-Two also kept its thirst for notoriety well quenched earlier this week, when Britain censored the company's Manhunt 2. It's the first time that a video game has been banned in that country in 10 years. However, all of the other titles in the Take-Two library take a backseat to the Grand Theft Auto franchise that drives the company. With the exclusive Xbox Live deal, I guess one can say that Mr. Softy just called shotgun.

Microsoft has made the cut as anInside Value stock pick. Marvel, Activision, and EA are Stock Advisor recommendations. You don't need to steal a car to test-drive either newsletter service. We'll give you the keys to either with free 30-day trial subscriptions. Drive safely and enjoy the ride.

Longtime Fool contributor Rick Munarriz has played a few of the Grand Theft Auto games, though he's never been much of a carjacker. He does not own shares in any of the companies in this story. Rick is also part of theRule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

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