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The $250 Million "Grand Theft Auto" Gamble

By Demitri Kalogeropoulos - Sep 9, 2013 at 7:45PM

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When you're in a hit-driven business, you have to bet heavy on your biggest franchises.

Source: Rockstar Games.

Cheap just won't cut it for tentpole video game titles. Take-Two Interactive (TTWO 2.03%) is rumored to be spending more than $250 million on development and marketing costs for the new chapter in its Grand Theft Auto franchise. That massive budget would make GTA V one of the most expensive video games ever produced, rivaling the total spent on many blockbuster movies.

And it should be worth every penny. Take-Two has already sold close to 130 million units in the Grand Theft Auto brand, and accumulated enough awards to make it one of the industry's biggest critical hits as well. Analysts expect the winning streak to continue with this week's launch, with as many as 25 million copies of GTA V set to sell this year. That should power a 50% spike in revenue for Take-Two over last year's numbers.

Hits are becoming all-important to developers, so it makes sense for them to focus their limited budgets on a small number of games. Electronic Arts (NASDAQ: EA), for example, is aiming to launch 11 major titles this year, versus the 36 it published in 2011.

But Take-Two isn't the only company betting on a Grand Theft Auto V hit. GameStop (GME 6.81%) expects major revenue growth this quarter, reversing a brutal nine-quarter slide in comparable sales. After enduring years of shrinking, the retailer is feeling optimistic again thanks to the stacked game calendar this fall that features big new titles from Disney, Electronic Arts, and Activision Blizzard -- in addition to this week's GTA V launch.

And console makers are hoping the game will help the current-generation systems go out with a bang. While all the attention is on the PS4 and Xbox One, Sony and Microsoft (MSFT 2.76%) actually intend to sell and support their current hardware for several more years. Microsoft even has plans for 100 new games for the Xbox 360 through 2016.

These systems are very profitable at the tail end of the hardware cycle, and a highly anticipated game like Grand Theft Auto V should give console makers a nice boost heading into the next-generation launch in November.

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Stocks Mentioned

Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$273.24 (2.76%) $7.34
Sony Corporation Stock Quote
Sony Corporation
SONY
$92.26 (1.90%) $1.72
Take-Two Interactive Software, Inc. Stock Quote
Take-Two Interactive Software, Inc.
TTWO
$125.78 (2.03%) $2.50
GameStop Corp. Stock Quote
GameStop Corp.
GME
$137.21 (6.81%) $8.75

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