Take-Two May Take Sega

Take-Two Interactive (TTWO Quote) is reportedly considering buying the developer behind its ESPN line of sports titles, despite a recent setback with its football game.

Under its agreement with Sega, which copublishes the ESPN line, Take-Two has the right to acquire Visual Concepts and Kush Games, a subsidiary of Visual Concepts, which developed Sega's sports games. Take-Two is negotiating the price it would pay for the game developers, the company said in its annual report filed Wednesday.

"We are continuing to evaluate potential opportunities in the market for sports titles," the company said in its report.

A Take-Two representative declined to comment on the negotiations.

Take-Two is best known for its Grand Theft Auto game franchise, which provides the lion's share of its revenue and earnings. But the company has been attempting to diversify its lineup beyond violent and adult-themed games.

In May, the company signed a three-year deal with Sega to co-publish the ESPN line of games. Under the deal, Take-Two agreed to pay the development and marketing costs of the ESPN titles in exchange for all of the revenue and profits generated from them, according to the its annual report.

The ESPN titles, which include games based on the National Football League, the National Hockey League and the National Basketball Association, had received critical acclaim in the past. But like similar games from other companies, they had struggled against the rival titles offered by industry leader Electronic Arts (ERTS Quote).

Take-Two's plan was to offer the ESPN games at the discount price of about $20, or less than half the cost of the comparable games from EA. In terms of units sold, the strategy was a success. The company's football title alone has sold more than 2 million copies. And the effort forced EA to discount its own titles.