SAN FRANCISCO -- Few on the Street thought video-game publisher Take-Two's ( TTWO) bleeding sports business was a good idea. The fate of its latest football game, All-Pro Football 2K8, proves the point. Take-Two's sports division, 2K Sports, which also makes hockey and baseball games, is not
expected to be profitable until 2008, the company says. But lackluster sales of All-Pro Football 2K8 and attempts to stick with the series are likely to only mean more affliction. One analyst estimates that only 500,000 copies of that game will be shipped to stores by Oct. 31, the end of Take-Two's fiscal year 2007. Over the game's lifetime, Take-Two could ship about 733,000 copies, says Jesse Divnich, an analyst with The simExchange, an online site that aims to act as a video games prediction market. Compare that with more than 5 million copies sold at the end of 2006 of Electronic Arts' ( ERTS) Madden NFL 07, the industry leader. Sales of the Madden NFL 08 game, released this week, are expected to be even higher. Though Take-Two had hoped to turn All-Pro Football into a franchise that could take on the Madden juggernaut, so far, its efforts haven't paid off. The company, says Divnich, would be better off pulling the plug on its next football game. By Divnich's estimates, Take-Two could earn between $28 million and $35 million on All-Pro Football 2K8 -- barely enough to cover the production and marketing costs.
"They should probably stay off the entire football genre and use their resources elsewhere," he says. " All-Pro Football was a nice attempt from Take-Two to take back some of the market share it lost," says Divnich. He was referring to Take-Two's bid to gain some traction in the football games genre after it lost the five-year exclusive license for the NFL games to EA two years ago. "But, at the end of the day, the title definitely did not sell to a point where we can see another version," Divnich says. The tepid reception to All-Pro Football and the delay of Grand Theft Auto IV has left Take-Two in tough spot as it nears the all-important holiday season. Earlier this month, Take-Two said it
will push the release of Grand Theft Auto IV to 2008, resulting in a 14% price drop and leading the company to cut its financial forecast for the fourth quarter and the guidance for the year. The stock is now trading down 32% in the three months since May 15. Shares were off 4.7%, to $12.01 in recent trading Thursday. Take-Two's struggle to prove itself in the highly profitable, cutthroat, sports business seems more like bad decision-making than bad timing. The company released All-Pro Football 2K8, featuring 240 of football's greatest players, such as Joe Montana, Jerry Rice and Reggie White, in July, two months before the release of EA's Madden NFL 08.
The Madden game, according to ratings aggregation site, Metacritic, received 89% "favorable" reviews, compared with 74% "mixed or average" for the Take-Two game. " Madden is more than a game for many gamers," says Bryan Wiedey, who specializes in sports video-game coverage through his site, Pastapadre.com. "It is a lifestyle for a lot of people, and there's no question that if" given a choice, they'll buy Madden for their football game, he says. At $59.99, All-Pro Football 2K8, is also expensive for a game that's -- at best -- a second choice for most sports fans. And unlike Madden, All-Pro Football 2K8 is not available for the hot-selling Nintendo Wii console. Even if Take-Two discounted All-Pro Football 2K8, it may be a case of "too little, too late." Wiedey, for one, doesn't see a silver lining. "Generally a good portion of the sales with sports game come early on in the cycle," says. "With the release of Madden, it is unlikely that many gamers will go for All-Pro Football." Take-Two CEO Ben Feder has already acknowledged the benched-like status of All-Pro Football 2K8. "I'd say we are not terribly pleased, and we're not disappointed," the CEO told analysts on a conference call earlier this month. "I'd say we are just about even-keeled with it." In addition, All-Pro Football 2K8 has been in the spotlight for
its inclusion of O.J. Simpson in the game and a third-party-created clip that showed a hooded mascot with a large knife after a touchdown by Simpson.
Last week, a Los Angeles court ordered Simpson to
turn over any royalties and licensing fees earned from the use of his likeness in the game to the estate of murder victim Ron Goldman. The game, because of its customization feature that allows gamers to create likenesses of NFL players who are licensed to be a part of EA's game, may also see some legal action from both EA and the NFL, if both deem the game a big enough threat for the money. Take-Two declined to definitively say if it has started work on the next title in the All-Pro series. "Competition is healthy, and our experience clearly shows that there is a strong market for multiple well-crafted, exciting football titles that provide terrific game-play experience," a Take-Two representative said in a statement. "Going forward, we will continue to deliver great products that build on 2K Sports' creativity, technology and development expertise in football." But sticking with the All-Pro Football series would be foolhardy. If there's a ray of hope for Take-Two, it lies outside the sports division. The company's upcoming first-person shooter game, BioShock, for PCs and Microsoft's ( MSFT) Xbox 360 consoles, has gathered tremendous buzz among gamers. That might give Take-Two something to get it through the holiday season.