Take-Two Interactive Software normally escapes my notice, because I am not a huge fan of the games they release. Except for anything from Firaxis such as Civilization or XCOM. However, the success of some of the games cannot be denied. You have Grand Theft Auto IV, which was an enormous success, and Red Dead Redemption that was a high-quality game as well as a success. You also have BioShock with its quality and critical acclaim, but sales of the sequel leave something to be desired.
Take-Two was the publisher of Elder Scrolls IV: Oblivion, under the 2K Games label, but Bethesda took over publishing for Skyrim. Skyrim crossed the 10M mark at the end of 2011, while Oblivion did less than 4M from the numbers I have seen. That Skyrim number is just shipments to retailers, ignoring digital downloads. Both games were a success, though Skyrim was a major success. However, it seems that BioShock 2 did only as well as BioShock. There was no massive growth for the sequel. Obviously, Elder Scrolls is an older series, but compare Batman: Arkham Asylum to Arkham City. Asylum had a little over 4M sold, while City had over 6M sold.
BioShock did not create the brand necessary to create an iconic franchise. Some would disagree, but I speak from a perspective motivated purely by profit. The game itself may appeal to some hardcore gamers, and the setting might be interesting. It might even have come up with some interesting game play mechanics, but as a series it falls a bit flat. The goal is always to create something like Activision-Blizzard's StarCraft or Call of Duty. Achieving even half the brand success of those two would be impressive, and to a certain extent that is what is needed in the tough market we have now. BioShock Infinite should be aiming for 8M-10M units sold in order for me to consider it a worthwhile flagship title for the company.
The lack of significant growth in BioShock 2's sales compared to the first makes me worry about BioShock Infinite. The game cannot just be a new setting. The key to forecasting the success of BioShock Infinite and the brand as a whole is to look at the reviews. If they complain the game is the same formula but in the sky, then it is probably bad news for Take-Two. Overall, I am cautiously pessimistic on BioShock Infinite from a sales perspective.
Take-Two's stock price has languished for years, which is true for most video game stocks. It was impressive back when Electronic Arts tried to purchase Take-Two for $26 a share. It still makes sense for EA to at least try and acquire 2K Sports and its studios, but not all of Take-Two. The NBA game series of EA has been in a slump and NBA Live 13 has been shelved in favor of a better game next year. EA has $1.3B in cash, and Take-Two's market cap is $1.1B with less than $250M in cash. A good offer for 2K Sports might get a fair hearing. Take-Two has already ended its MLB and NHL series of games and now just has the one NBA title. The attention is on Grand Theft Auto V, which is going to be a success. Take-Two has to make some big changes before I consider it a solid long-term buy. It has to do something to return to profitability for all of its potential to mean something.
Look at the most recent earnings call, it is nice to see the slew of products and the continuing revenue from GTA and Red Dead Redemption, but there are so many projections about expense increases. Management is projecting a 30% increase in marketing expenses for the new releases. I imagine the re-imaging of XCOM the unreleased tactical shooter, would require heavier marketing, but not GTA. BioShock probably requires some solid marketing too, but I do not think it has to be excessive.
Increasing operating expenses due to marketing when you have yet to turn a profit, and then projecting profitability in 2013 concerns me. The company has strong sales for some titles, but I worry that it might put too much into marketing upfront in anticipation of stellar sales. I am surprised Borderlands 2 was a significant reason for higher expenses last quarter. As a sequel to a popular game, I would not think much advertising is necessary. I found out Borderlands 2 was in the works through Wikipedia, and an article on IGN. Neither of those two things should be very expensive, and I am not even interested in Borderlands.