After "Grand Theft" revs up, how much in its tank?

By David Ward

SAN DIEGO (Hollywood Reporter) - While there's little doubt about the power of this week's launch of "Grand Theft Auto IV," there is some question about the video game's legs.

The latest chapter in the wildly popular and controversial criminal action franchise will likely smash the $300 million global first-week sales figure for Microsoft's "Halo 3" in September, but how the game will fare by year's end is subject to debate.

"I think all the preorder programs now in place for these top titles really end up taking the long-term sales out of many games," said Michael Goodman, director of digital entertainment at Yankee Group. "So I don't think 'Grand Theft Auto IV' is going to have those kind of legs."

Many stores are opening up at midnight Monday to accommodate eager customers.

Take-Two Interactive Software Inc, parent company of developer Rockstar Games, even suggested that worldwide actual game sales could reach 6 million, generating $400 million for the publisher as it battles a hostile takeover attempt from rival Electronic Arts.

"Halo 3," for example, exhausted 67% of its total U.S. sales-to-date in its first month, and though NPD games analyst Anita Frazier said the game still is selling 100,000 copies a month, it no longer is in the tracking firm's top 10 monthly charts.

But David Cole, president of market research firm DFC Intelligence, stressed that "Grand Theft Auto IV" always has been a different type of franchise. "If you look at 'Halo' titles historically, they've always been the type of games that everybody rushed out to buy, but the 'Auto' titles have always had lots of legs," he said.

Because "Grand Theft Auto" depicts carjacking, murder and other questionable content that has upset parents, Cole noted many people forget that the games are very accessible and have real mass-market appeal, despite their M (for Mature) rating. Cole said "Grand Theft Auto 3" not only was the best-selling title of 2001 but also the second-best-selling tile of 2002 -- right behind "Grand Theft Auto: Vice City."

From Take-Two's standpoint, Goodman said the expected massive sales for the new title will at the very least give it some breathing room in its efforts to fend off Electronic Arts' $2 billion hostile takeover offer.

"EA is going to have to either up their bid significantly or pull back for six months to a year and hope the 'Grand Theft Auto' hoopla dies down, keeping their fingers crossed that Take-Two is not on a winning streak," he added.

Reuters/Hollywood Reporter

Take Two is offered by EA ( Electronic Arts )

SAN FRANCISCO (Reuters) - Electronic Arts Inc (ERTS.O: Quote, Profile, Research) on Thursday launched a tender offer for rival video game maker Take-Two Interactive Software Inc (TTWO.O: Quote, Profile, Research) at $26 a share, indicating its $2 billion bid is turning hostile.

Take-Two, publisher of the popular "Grand Theft Auto" video games, last month rejected EA's unsolicited all-cash offer at the same price. The bid represents a 64 percent premium over Take-Two's closing stock price on February 15, the last trading day before EA sent the proposal to the company.

"We believe Take-Two investors will see our tender offer as the best way to maximize the value of their investment in Take-Two," EA Chief Executive John Riccitiello said in a statement.

Take-Two Chairman Strauss Zelnick has said the bid was "the wrong price and the wrong time," arguing that EA was trying to buy his company on the cheap just before the April 29 launch of "Grand Theft Auto 4."

Take-Two this week forecast quarterly earnings above Wall Street estimates, saying orders for "Grand Theft Auto 4" were better than expected.

Earlier this week, Take-Two's two biggest shareholders disclosed that they had drastically cut their stakes, potentially undermining management's stance that the $1.9 billion buyout offer was too low.

U.S. mutual fund company Oppenheimer Funds, Take-Two's biggest shareholder, halved its holdings to 8.8 million shares, reducing its stake to 11.5 percent from 23 percent, according to U.S. regulatory filings.

FMR LLC, the parent company for the Fidelity mutual funds and the second-largest owner of Take-Two shares, reported that it had slashed its stake to 2.75 percent from 14.7 percent.

But Zelnick said earlier in the week that the big stock sales did not cause executives to reconsider their rejection of EA's offer.

"It certainly doesn't put any pressure on us," Zelnick said. "Who owns your shares isn't really the issue; after all, we're here for all the shareholders."

Take-Two shares closed up 1 percent at $24.91 on Wednesday, but have fallen from a high of $27.61 set on February 28, shortly after EA announced its offer.

EA's tender offer will expire at midnight on April 11, but could be extended. Take-Two's annual meeting is scheduled for April 10.

Morgan Stanley & Co Inc is dealer manager for the tender offer, for which Georgeson Inc is information agent.