Take-Two's Steamy Scenes: a Wash?

A sex-scene controversy has tarnished Take-Two Interactive's (TTWO Quote) reputation and threatens to sully current-quarter earnings, but investors differ on the longer-term meaning for the company -- and its stock price.

An assortment of major retailers on Wednesday and Thursday said they would pull the game from shelves in reaction to a change in the rating of Grand Theft Auto: San Andreas from "mature" to "adults only." While this crimping of distribution could hit sales, the company might actually benefit from the publicity, ameliorating some of the effect.

With Take-Two shares already trading at a discount to those of the company's peers (the stock was recently at $25.53), the downside may be limited. But the news certainly didn't help, and the upside for the stock might be limited as well, thanks to broader issues.

"I think this is just really a neutral event. I don't look at it as a bad thing or a buying opportunity," says Norm Conley, a portfolio manager for JAG Advisors and a contributor to TheStreet.com's sister site, RealMoney.com. Noting that Take-Two is no stranger to controversy, thanks to its "edgy" games, Conley, whose firm is long Take-Two, adds, "This is part of being a shareholder in Take-Two, this sort of thing."

The sort of thing that got Take-Two in trouble is a series of sexually explicit scenes found within San Andreas, the top-selling game last year. Players don't see the scenes in the game as shipped, but they can unlock them by using software code available over the Internet.

After an investigation into the matter, the Entertainment Software Rating Board changed its rating on the game. As a result, Take-Two will stop producing the game, recall any copies of the current version that retailers wanted to return, and ship a new version later this year that blocks access to the sex scenes.