Take-Two Interactive's (NASDAQ: TTWO ) Grand Theft Auto 5 is already a billion-dollar property, hitting that milestone in just three days. However, the game wasn't fully complete when it was released on Sept. 17. While millions playing GTA 5 had access to its single-player quest, the more ambitious addition to the Grand Theft Auto franchise was the creation of a persistent online world, Grand Theft Auto Online, which was released Oct. 1.
With the release of GTA Online, developer Rockstar is moving into one of the more fashionable trends in video games: micro-transactions. The game runs on a currency called GTA$, which can be bought with real-world cash. Like other popular games applying a similar micro-transaction model, GTA$ can be earned through completing missions, but impatient players can also buy GTA$ if they want to get expensive items like cars or weapons faster.
The creation GTA's multiplayer format is intriguing in that it could help solve a major sales problem for GTA's parent company Take-Two. Grand Theft Auto is a huge hit, but it only comes out roughly once every four to five years. Compare that to its larger video gaming peer Activision-Blizzard (NASDAQ: ATVI ) , which collects monthly revenue from World of Warcraft and has yearly releases of Call of Duty that rake in more than $1 billion dollars each.
In large part because Activision more frequently releases games in its most popular franchises and collects valuable recurring revenue from World of Warcraft, its stock is up almost 2,000% in the past decade. In the same time frame, Take-Two has seen its shares fall 23%.
Ironically, as Grand Theft Auto has grown in popularity, the fortunes of its parent company have faded. The reason is that while GTA games are selling more, full-game releases are becoming fewer and farther between. Between 2001 and 2004, three GTA games were released. Since 2004, we've seen only two major releases.
Let's take a look at whether GTA 5 multiplayer can create more sales between major releases in the series, and whether fears that micro-transactions will tarnish the quality of the series are well-founded.
Into the online wild
GTA Online was first shown off to the world in a gameplay trailer on Aug. 15.
While buyers get GTA Online with the purchase of GTA 5, the game is actually a different game, set in the same Los Santos world as GTA 5. Missions and storylines are unique and can be played with a group of 16 players in the same world.
With the game only having come out Tuesday and experiencing the usual server issues associated with hugely popular multiplayer games, not much is known about the depth of GTA Online. However, Rockstar has already said it plans on releasing continued downloadable content for GTA Online. Rockstar has released additional downloadable content, or DLC, in the past; GTA 4 launched two different expansion packs -- The Lost and Damned and The Ballad of Gay Tony.
What makes the release of additional content in GTA Online especially interesting is that players will still be engaged in a persistent online world across the releases. It's far easier to sell a player a $10 download pack for a game they play daily every 90 days instead of a $20 expansion pack for a game most players finished a year ago.
Will GTA turn into a micro-transaction nightmare?
Micro-transactions are somewhat of a four-letter word in video games right now. They are hated by the gaming public, but adored by video game companies desperate to find a way to increase revenue, especially on mobile devices.
When Apple's App Store first hit on iOS, games like Angry Birds, which cost $0.99 to a few dollars, dominated sales charts. However, over time, the top grossing app chart has shifted to games that are free to download but feature in-game purchases. Whether it costs money to speed up tasks, or even to play the game a set number of times, this "freemium" model is a gold mine for gaming companies when it works.
Yet, for gamers, "freemium" can be a huge headache when implemented wrong. At its extremes, freemium rewards players willing to open their wallets, rendering skill nearly irrelevant. For players unwilling to pay on a continuing basis, it can make games far more mundane as players need to grind out a series of repetitive tasks to "earn" in-game currency.
Grand Theft Auto is a series known for uncompromising devotion to quality. (GTA 5 is by far the best-ranked game of the year thus far.) So, you can see why the inclusion of micro-transactions in GTA Online is the cause of so much concern. The fear is that micro-transactions open the door to compromising a quality experience at the hands of forcing players to open up their wallets over and over.
However, for all the focus on micro-transactions, it doesn't appear to be the dominant revenue driver for the series. Instead, researcher SuperData approximated that across the five-year lifetime of GTA 5, downloadable content will bring in $344 million for Take-Two while micro-transactions will account for just $93 million in sales.
Obviously, you don't want to take the estimates of third-party researchers as a given. Five years ago, smartphone researchers were saying Nokia would have the dominant mobile operating system in 2014. Three years later, Nokia abandoned its mobile OS and shortly after sold its smartphone business to Microsoft. The point is a lot can change in a few years, and Rockstar will likely tweak how GTA$ affect the world of GTA Online dramatically across the coming years.
All that being said, early evidence points to GTA$s not having a huge effect on gameplay. In one of the first reviews of GTA Online, IGN's Keza MacDonald played down the gameplay effects of GTA$:
I can definitely see how spending actual, real money on GTA dollars via either PSN or Xbox Live could be tempting. You can't pay to unlock things, however, so paying real money can't give you a gameplay advantage. It can only shortcut your path to buying something expensive like a boat, plane or house once you've reached the required rank.
Look to the future
By the end of its run, GTA 5 could lead to roughly $2 billion in sales. In reaching a billion in sales in just three days, the game likely sold close to 17 million copies. In its first three years of release, GTA 4 sold 22 million copies. With GTA 5 getting out to such a stronger start and the Xbox 360 and PS3 install base having grown throughout the trailing three years, it's hard to image GTA 5 won't crack 30 million in sales.
Approximating the lifetime sales of the game at closer to $2 billion, SuperData's estimate of follow-on sales from GTA Online at $437 million ($93 million micro-transactions and $344 million in DLC) would constitute less than 20% of sales for Grand Theft Auto 5 across the next half-decade. Indeed, $400 million-plus is nothing to scoff at, but it also doesn't close much of the gap in how much money Grand Theft Auto brings in compared to other gaming franchises like Call of Duty that see more frequent releases.
What might be more interesting is that this is Rockstar's first test-run at pushing Grand Theft Auto into a persistent multiplayer world that forgoes sales bonanzas every five years for more consistent revenue. With Grand Theft Auto 5 selling beyond expectations, the team at Rockstar can test out a mix between micro-transactions and downloadable content and apply it to a future multiplayer release in the series that's more ambitious.
Across the next five years, GTA Online won't be the billion-dollar opportunity some have made it out to be. However, Rockstar's willingness to start testing out new revenue models with the game and pushing it online shows that bigger things are planned. I mean, look at that picture of GTA 5's Los Santos above. How could that world not be a dream setting for a game that's designed from the ground up to be massively multiplayer? GTA Online looks to be the first step into something much bigger.
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