Take Two has for over a decade been tied to the release cycles of the Grand Theft Auto franchise. You can find a twelve year run of no return, from 2000 to 2012, even after the market bounce. The swoop upwards is from the consistent monetization of Grand Theft Auto online.
The last year was driven by anticipation of Red Dead Redemption 2. Which came out of the gate with roaring sales: 17 million units, far exceeding expectations. A summary from Dean Takahashi of Venturebeat collecting some of the expectations – even those on the high end, at the end of October is here. TTWO went from 120 to 130 quickly, but Take Two was subsequently caught in the market downdraft.
We do know that the old west open world is appealing across the Herring Pond. RDR2 has been the best selling boxed product in the United Kingdom according to Game Industry.biz.
Now RDR2 is a fantastic game, nearly always on top ten lists for the year. Will it monetize online as well as GTA5? To be determined (though I think there is a good possibility of this given the institutional knowledge from the latter.)
What is remarkable however is the dominance the roughly $60 game has shown throughout the most important holiday season.
At this writing December 27th at 3 pm Eastern, in the days after Christmas, the Amazon charts (updated hourly) show for XBox One game sales the following TTWO products in the top 50, as well as RDR2 being the most wished for game.
- 2.Red Dead Redemption 2 – Xbox One
- 3.Red Dead Redemption 2 – Xbox One [Digital Code]
- 11.Grand Theft Auto V – Xbox One
- 13.Red Dead Redemption 2: Special Edition – Xbox… ($69)
- 23.Grand Theft Auto V – Xbox One [Digital Code]
- 25.Red Dead Redemption 2: Ultimate Edition – Xbox… ($89!)
On the PS4, RDR2 holds the 1st, 10th, 40th, and 57th slots. GTA5 is in 13th and 28th.
Even on the Xbox 360 (the older console), GTA 5 is 3rd and the _original_ Red Dead Redemption is 4th in sales.
GTA5 is on the PC, RDR2 is not. However, GTA5 remained a top seller on Steam this year:
These figures are representative of the ranks the games had prior to Christmas. Though I did no more than spot check the rankings, so it is possible my sampling has all sorts of errors, (Amazon’s rankings change hourly),it was very impressive.
I also didn’t record impressions out of the top 10 – there are plenty of other 2k games floating in and out of the 51-100 slots, and ascertaining how meaningful that is would be hard to measure against expectations.
Was all of this priced into the stock? By investment analysts who haven’t played any of these games, but worried about it going against the fellow open world titles Fallout 76, Assassin’s Creed Odyssey and big budget installments in the Call of Duty and Battlefield franchises? Maybe.
Still I don’t think anyone foresaw this sort of sales dominance. Is Take Two building a moat for immersive open world gaming that has incredibly long monetization? The larger company story is something I’m still immersing myself in, and as a shareholder from $120, I’m down 15% on the trade so far.
This calls for an option trade:
I bought — yesterday, a day early, January 25th expiry 110 calls at $4.20 (I don’t have the confirmation handy, it was very close to that.). This plays with fire: the earnings report that would confirm this thesis comes likely on February 7th. However, a pre-announcement in order would avoid paying for the post-report volatility.
I may also purchase other call options, but haven’t evaluated all of them. The apothesis of this thesis would be to buy something like the January 120 calls, expiring January 11th, now asking $0.70. An earnings pre-announcement would send the stock flying though there remains market risk as well.
NB, another outlier that hangs over this trade: there are also rumors I discount that CBS Board member and Take Two Strauss Zelnick could be the next CEO of CBS. He took himself out of the running, though who knows. That would be a major negative for the stock but an outlier is: could CBS, a $17 billion market cap company, try to acquire a $12 billion market cap company in TTWO? Would not be unheard of.
In the time I wrote this – wrestling to get one of the wonky images up, TTWO has recovered from down $2 to up slightly on the day at $105.