Pachter On Take-Two's Future
Industry Nostradamus and Wedbush Morgan analyst Michael Pachter has weighed in on the future of Take-Two, now that a fresh contract with Rockstar has been inked that puts the future of the conglomerate squarely in Rockstar's pocket.
Rockstar, which extended its agreement to stay with Take-Two until 2012, took some financial hits by writing in that Rockstar bonuses will be a percentage of profits rather than revenues, but won big in another way: Rockstar employees will now have a controlling interest in a new, unnamed company that will own any new IP that Rockstar creates, while Take-Two will continue to fund and develop the games.
Specifically, Pachter questions Take-Two's long-term survivability in an environment in which new brands will shift the company's value to Rockstar:
"We think that the dramatic year-over-year decline in earnings reflects the difficulty Take-Two faces in sustaining consistent profitability. With the new Rockstar deal, we question whether the company will be able to replicate its past profitability."It is possible that as old brands fade and new brands are created within the new Rockstar-controlled entity, shareholder value will shift to Rockstar employees. Until we have greater visibility, we advise investors to remain on the sidelines."
Pachter continued to speculate that T2 would see revenues in 2009 that are less than half of those in 2008, and that such a decline would necessarily trigger a "substantial decline in earnings."
On the upside, Pachter did predict another installment of GTA in 2010. Yay?
Pachter questions long-term Take-Two profitability [GamesIndustry.biz]
tiny dancer
Posted to Miscellany on 19 December 2008
Other stuff like this: michael pachter, rockstar, take-two
