GTA 5 Multiplayer: Is Online the Future of the Series?

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?

Notice a trend? They're all free!

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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Read/Post Comments (5) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 03, 2013, at 11:56 AM, nenhob wrote:

    there seems to be a conflict....

    'superdata' assumes lifetime sales of only 20 million. You yourself state sales can easily exceed 30 million. S&P has sales of 26 million in FY 14. Considering GTAV has already nearly eclipsed the 20 million mark, I really don't know how much weight I would give 'superdata'. Needless to say, I think it's fair to state superdata's comment "it would mean that 100% of the 20 million people that will buy the game over its lifetime will spend another $50 on in-game credits" Is fairly naive and very simplistic.

    Given superdata's mundane math (20 million X $50 = one billion), the numbers could be adjusted rather easily to get to this billion dollar mark. If we use your 30 million plus estimate we are looking at just over $30 per player to eclipse the billion dollar mark. $30 in DLC and microtransactions is not that far fetched.

    Furthermore, the fact that superdata states borderlands dlc accounted for only 10 million is laughable. Last quarter alone, TTWO stated that revenues from digital represented over 50% or over 70 million in revenues, and the key drivers were DLC from borderlands. Keep in mind borderlands launched a variety of DLC before q1FY14 as well.

    You may side with 'superdata' over the WSJ, but in my opinion it does look like GTA online is turning into the next billion dollar idea at TTWO that pads the income statement until the next rendition.

  • Report this Comment On October 03, 2013, at 1:10 PM, ThePfo wrote:

    Once again, another article from the investor's perspective. There's nothing wrong with investing money, but you guys are looking at this the wrong way. The success of a video game is determined by its fans, not by how much investors make. No fans = no profits. Stop trying to ruin great series like GTA by only looking at the almighty dollar. Go out and buy an Xbox 360 or a PS3, fire it up and try it out. It might not make as much money as COD, but it's making billions, it's not going to put you in the poorhouse if you invested int it.

    R* chose a safe cash-for-advantage program, mark my words if they made it pay to win you would see lots of fans stay away. We don't like that.

  • Report this Comment On October 03, 2013, at 7:22 PM, Bunnyking77 wrote:

    I think the article writer meant XBOX360 not XBOXone. That console isn't out yet.

    I agree with ThePfo whole heartedly. When I invest I don't always expect a return, as long as what I invested in is something I want to see flourish.

    Look at the excuses for dumping Telsa stock were. People dropped it's shares out of panic for no apparent reason.

    The same goes for video games. Recently there has been a push by the commercial media for the XBOXone even though it is an inferior product in every way.

    Not only that, there has been a lot of negative speculation about gaming up until the release of GTAV. There have been so many doom and gloom video game industry articles just on Motley Fools, that it's hard to take this site seriously.

    As always, invest with both your heart and your brains. Don't just go for a gut feeling off something you've seen on TV or the internet, make an effort to understand everything about your future investment.

  • Report this Comment On October 04, 2013, at 1:09 PM, TMFRhino wrote:

    Hey Bunny,

    Corrected that... Guess I'm getting ahead of myself.

  • Report this Comment On October 11, 2013, at 7:59 PM, JoshTorgerson wrote:

    As a holder of TTWO in my RL portfolio, I would like to see them advance the micro store to include unattainable through game play, cosmetic only, items.League of legends makes a boatload on skins alone and with beautiful world R has created I am sure they could come up with some really cool ideas that people would want to buy. I would also like to hear what they have planned for GTA Online on the PC version. Right now the PS3 / XBOX version is rampant with kids who have found ways to farm huge sums of money through glitches, etc. If you want a truly fair playing field, persistent world feel this has to be taken care of quickly or it will completely negate the need to buy any cash-card micro-transactions.

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