Take-Two's `Grand Theft Auto' May Break Game Records (Update1)

April 28 (Bloomberg) -- ``Grand Theft Auto IV,'' the latest version of Take-Two Interactive Software Inc.'s top-selling video game, is forecast to break industry sales records after it arrives in U.S. stores tomorrow.

First-week revenue may reach $360 million, surpassing the $300 million by Microsoft Corp.'s ``Halo 3'' last September, according to Mike Hickey, an analyst with Janco Partners in Greenwood Village, Colorado.

Take-Two is depending on ``Grand Theft Auto'' sales to stiffen shareholder resistance to a $2 billion hostile takeover bid from Electronic Arts Inc., the largest game publisher. New York-based Take-Two predicts revenue may more than double to as much as $500 million this quarter on demand for the new title and end more than two years of losses.

``April 29 has been a key date with respect to discussions'' with Electronic Arts, Take-Two Chief Executive Officer Benjamin Feder, 44, said in an interview. ``We've repeatedly said that the full commercial potential of `GTA IV' will only be evident after the launch.''

New features include additional episodes for sale on Microsoft's Xbox Live service, and options that let gamers depart from the story line, said Brian Crecente, managing editor of Kotaku.com, a game Web site. Players go on a date, visit a bar and pretend to surf the Internet within the game.

``It's the most anticipated game on anybody's radar,'' said Crecente, who is based in Denver. ``GTA has an amazing pedigree. It has never failed to deliver.''

Game Is Afoot

In ``Grand Theft Auto IV,'' former soldier Niko Bellic is lured to the U.S. from Eastern Europe by a cousin who brags of great wealth. On arrival, Bellic discovers his cousin lied and actually is deep in debt to gangsters. He reluctantly takes on assignments from the mob to save his relative.

The game is set in a fictional metropolis, Liberty City, that resembles New York. Mobs battle for control of the drug trade in a game that combines two popular genres, driving and shooting.

``Grand Theft Auto IV'' has a ``Mature'' rating in the U.S. from an industry council, which says it's appropriate only for players ages 17 and older because of graphic violence and partial nudity. In previous versions, characters cavort with prostitutes and shoot passersby during chases.

The Parents Television Council, an organization devoted to limiting sex, violence and profanity in media, called the game ``brutally violent'' in a statement last week, and warned retailers to keep the product away from children.

Prices, Editions

``Grand Theft Auto IV'' costs $59.99, or $89.99 for a special edition. It's being produced for Microsoft's Xbox 360 console and Sony Corp.'s PlayStation 3. Game companies typically keep about 80 percent of retail sales, according to Hickey, who says Take-Two shares should perform in line with the broader stock market.

Take-Two rose 17 cents to $26.37 at 9:48 a.m. New York time in Nasdaq Stock Market trading. Before today, the shares had gained 42 percent this year, compared with a 3.4 percent drop in the S&P Smallcap 600 Index and a 12 percent decline in Electronic Arts. Of 16 analysts who follow the company, four recommend buying the shares, 10 say hold and two say sell.

Redwood City, California-based Electronic Arts began a $26-a-share tender offer on March 13, after Take-Two refused to negotiate in February. The offer expires May 16.

Electronic Arts, which makes the ``Madden'' football games, dropped the bid to $25.74 after Take-Two investors approved an incentive plan granting more stock to Take-Two executives, increasing the shares it would have to buy.

Hot Coffee Buzz

Take-Two sold more than 66 million copies of past versions. The 2004 ``Grand Theft Auto: San Andreas'' gained notoriety because of hidden sex scenes triggered when a character invites a woman to have ``hot coffee.'' Take-Two pulled copies from stores and shipped new versions without the scenes.

The publicity expanded awareness of the game and may have lifted sales, Crecente said.

```San Andreas' was the first time it hit the mainstream, and I think that probably was because of hot coffee,'' Crecente said.

Expectations for sales are already reflected in Take-Two's share price, said Michael Pachter, a Wedbush Morgan Securities analyst in Los Angeles, who rates the shares ``hold.''

``I'm not advising investors to buy,'' Pachter said in an interview. ``This will be the fastest-selling game of all time, and it still doesn't make any difference.''

Projections

First-day revenue may total $170 million, according to Hickey. He projects first-week sales of 5.8 million copies, or a total of $360 million, including a $122 million operating profit. The game cost $45 million to develop, he estimated.

``Grand Theft Auto IV'' will probably boost sales of both Sony and Microsoft consoles, Feder said. The game has an edge over ``Halo 3,'' which can be played only on the Xbox 360.

Kotaku.com reported on April 23 that a pirated version may have been posted on the Web for download. Take-Two was investigating the reports, and hadn't confirmed whether they were true, Feder said.

``We take our intellectual property very seriously and we take theft very seriously,'' Feder said. ``We do intend to protect our rights.''

Piracy probably won't affect sales, Hickey said. Illegal downloads often don't provide the same quality as games purchased from retailers, he said. Players will want to own the game to get the box and a guide, he said.

``People are going to buy this game,'' Hickey said. ``Buzz is buzz. If anything this could be a catalyst for sales.''

To contact the reporter on this story: Michael White in Los Angeles at mwhite8@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net.