Take-Two Stays in the Game

As part of Take-Two's deal with Sega, the two companies will work together to develop arcade games based on Visual Concepts' sports titles. The two companies are also working on a separate deal whereby Sega will publish and distribute the sports titles in Japan and other areas of Asia.

In a regulatory filing last month, Take-Two acknowledged that it was mulling buying Visual Concepts and Kush. But many analysts questioned whether Take-Two would go ahead with the acquisition after EA's deals with the NFL and ESPN.

Take-Two jumped into the sports ring with EA last year, teaming up with Sega to market Sega's line of ESPN games. Although those games had received critical success in the past, their sales were a fraction of those of EA's rival titles.

But Take-Two was able to land some punches early by offering the ESPN line for less than half the price of EA's games. Within the first two months of its debut, sales of the ESPN NFL game outstripped sales of all the other non-EA NFL games from the previous year.

That price war forced EA to slash the prices of its own titles. That move helped shore up EA's market share, but many analysts fear it also resulted in a disappointing holiday quarter for EA.

Many analysts have viewed Take-Two's efforts in the sports arena as a crucial step toward diversifying away from its core products of violent, adult-themed games such as Grand Theft Auto: San Andreas. While the sports games have added to the company's revenue, they have done little for its bottom line because of their discount prices. But analysts believed that the company would eventually be able to raise prices after drawing customers to its products.

In recent trading, shares of both EA and Take-Two were on the rise. EA's stock was up 72 cents, or 1.3%, to $58.39, while Take-Two's was up 83 cents, or 2.5%, to $34.28.