When a video game sells well, why not make it a franchise? That's the game plan for Take-Two Interactive Software (NASDAQ:TTWO), as 2K and Gearbox Software just announced that Borderlands: The Pre-Sequel was going to be released this fall.
Usually, releases of the next iteration of a large franchise gets investors excited. They expect the gamers who played the later versions to rush out and buy the new game (or in this day and age, buy it online.) Shareholders should be warned in this case, though, because past trends aren't quite in Take-Two Interactive Software's favor.
According to VGChartz, the first Borderlands sold 3.24 million copies for the Xbox 360, 1.91 million copies for the PS3, and 0.13 million copies for the PC. Around 0.13 million copies of the Borderlands: Double Game Add-On Pack (which comes with two downloadable content packages) also sold when it came out a year later for the Xbox 360. When you add up all the numbers, Take-Two was able to sell a healthy 5.41 million copies of its first game in the franchise.
To try and keep the momentum going, Take-Two released Borderlands 2 in 2012. This iteration sold 2.68 million copies for the Xbox 360, 1.73 million copies for the PS3, and 0.68 million copies for the PC. This paints a gloomy picture for investors banking on blowout sales of Borderlands: The Pre-Sequel, as the total copies sold for Borderlands 2 fell by 5.9% compared to the first game.
Now keep in mind there could be some discrepancies in these numbers, like how Borderlands came out in 2009 while Borderlands 2 came out in 2012; this gave Borderlands more time to sell more copies. The decline is still there, though, which at the very least makes it hard to be bullish on the upcoming "pre-sequel."
One huge factor that investors have to consider is that Borderlands: The Pre-Sequel isn't available on the Xbox One or PS4. The rational behind this move can easily be sumed up in these two quotes from Gearbox Software president Randy Pitchford.:
It's not free to build a game for next-gen. When you're deciding where you're going to spend your resources, I think we're going to spend all of the attention we can on the game itself.
And if you try to imagine the set of Borderlands players that have already upgraded [to Xbox One and PlayStation 4], that's not 100 percent. The difference in users who own newer consoles but do not have an Xbox 360 or PlayStation 3, is so close to nil that you can't make a business rationalization around that.
The general idea is that most gamers who would want to purchase Borderlands: The Pre-Sequel still have their Xbox 360 or PS3 and therefore would still want to purchase the game. In the short term this does sound like a good idea, as far more Xbox 360/PS3 consoles have been sold than Xbox One/PS4 consoles. It's also cheaper to develop for the older hardware.
In the long term, however, Borderlands: The Pre-Sequel and its downloadable content will be cast off to the side as more games for the next-gen consoles come out and more PS4 and Xbox One consoles are sold. Why would gamers who own a PS4 or Xbox One want something that doesn't utilize the expensive hardware they just bought? This will cause sales to fall off faster than normal, shortening the life cycle of the game.
On a positive note, it does look like the "Borderlands" franchise has a solid fanbase. According to GameSpot, Borderlands was well received with a rating of 8/10 from GameSpot, 81/100 from Metacritic, and an average user rating of 8.5/10. For Borderlands 2, GameSpot's data paints a similar picture. GameSpot gave it a rating of 8/10, Metacritic gave it 89/100, and the average user gave it a 8.5/10.
So even though Borderlands 2 lagged behind Borderlands, maybe all is not lost. At the very least there is a sizable fanbase waiting for the chance to pounce on the newest edition in the series. If this is true, then these gamers are more likely to purchase high-margin digital content like DLC packages that add more to the game.
Another bright spot for Take-Two Interactive Software is that even though unit sales fell for Borderlands 2 versus Borderlands on the Xbox 360 and PS3, it shot up (off a very low base) by over 500% on PCs. If the new "Borderlands" game can hold its own in console sales, then maybe another sharp uptick in PC sales can revive growth.
To be fair to Take-Two, both "Borderlands" games did sell over 5 million copies. This time around, however, Borderlands: The Pre-Sequel won't be able to bank on major sale price cuts down the road to keep up sales a year or so after its released. By that point, many gamers will have moved on to the next generation of gaming. All in all, don't invest in Take-Two expecting blowout sales of the new "Borderlands" game. Look at its other emerging franchises like Evolve.