Take-Two Gains Ground on Electronic Arts
"I think people have to readjust and understand that the sports market isn't 100% theirs," said Joe Spiegel, a fund manager and managing member of Dalek Capital. "There's a viable competitor out there with a product that's just as good, if not better." (Spiegel has no position in EA or Take-Two).
Take-Two, which signed its co-publishing deal with Sega on the ESPN titles in June, juiced sales of NFL 2K5 by cutting the price on the title. The company is offering its line of ESPN games, which include NFL football, NBA basketball and NHL hockey, at a retail price of $19.99. In contrast, EA's suggested retail price for Madden for PlayStation2 and Xbox is $49.95. And the company charged $59.95 for a special-edition version of Madden this year.
To some extent, consumers who bought NFL 2K5 simply may be bargain hunters who purchased Madden because it was on sale. "We believe the ESPN title is driving a more casual gaming customer into the sports genre, which is healthy for the overall market," Shawn Milne, an analyst with Friedman Billing Ramsey, wrote in a research note issued Tuesday. (Neither Take-Two nor EA are investment banking clients of Friedman Billings Ramsey, and Milne does not own shares in either company.)
Other analysts worry that NFL 2K5 will soon cut into EA's sales. Some consumers who have bought Take-Two's game might otherwise have waited until the football postseason to purchase Madden, when EA typically cuts the game's price.The big problem for EA, however, may arrive during the holiday season when, analysts note, a large number of games are bought by parents. To them, according to Pachter, ESPN's brand name is probably as recognizable as John Madden's, if not more so. And at half the price of EA's game, it may be hard to pass up.
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