The now-infamous "Hot Coffee" scandal boiled over way back in July, when Grand Theft Auto: San Andreas was rerated Adults Only and pulled from shelves by most retailers. However, three months later, the controversy surrounding the game continues to burn its maker.
Today, Take-Two Interactive, parent of San Andreas publisher Rockstar Games, held a conference call in which it lowered estimates for its full-year finances. The company's 2005 fiscal year ended today.
Based on preliminary estimates, the company now expects $1.180 to $1.185 billion in net sales and $0.53 to $0.56 in diluted net income per share. In September, Take-Two forecast revenue of $1.22 billion to $1.27 billion and net income of 85 to 90 cents a share for the year.
Paul Eibeler, Take-Two's President and CEO, said a major reason for the readjustment was "less-than-anticipated demand for some of our catalogue products, including Grand Theft Auto San Andreas." Presumably, Eibler's words mean new M-rated versions of the game failed to generate as much interest as the company had hoped.
San Andreas was rereleased for the PC and Xbox in mid-September and for the PlayStation 2 in late October.
Take-Two also announced that the Japanese release of San Andreas has suffered a major delay. Originally slated for the November 2005 to January 2006 quarter, the game's transpacific debut has now been removed from the company's 2005 fiscal year altogether. "At this point, we are moving it out of the fiscal year, until we get greater visibility from our Japanese partner about the [Japanese] rating system," said Eibeler. Over the past few months, a number of prefectural government bodies in Japan have imposed bans on the sale of Grand Theft Auto III in 2005.
Another Grand Theft Auto game also contributed to Take-Two's lowering expectations for its current fiscal year. "Delays in final product testing and submission have caused the launch of Grand Theft Auto: Liberty City Stories to the PSP in certain European territories to move from the fourth quarter of fiscal '05 into the first quarter of fiscal '06," said Eibeler. The game has already been released in the United Kingdom.
Though Take-Two's FY2005 is likely to end poorly, the company can expect strong holiday sales to boost its bottom line, right? Wrong, apparently. Take-Two also announced it was lowering its estimates for the 2006 fiscal year as a whole and its first fiscal quarter in particular. For the fiscal year ending October 31, 2006, Take-Two now says it will see $1.35 to $1.45 billion in net sales and $1.15 to $1.45 in diluted net income per share.
For the first quarter ending January 31, 2006, the company now forecasts $300-$350 million in net sales and $0.04 to $0.10 in diluted net income per share. The primary reason for the adjustment is due to a delay in one of Take-Two's biggest games for the quarter: Elder Scrolls IV: Oblivion for the PC and Xbox 360. Those games have now been pushed back to the February-April 2006 quarter. The title had been originally slated to be the sole Xbox 360 role-playing game when the console went on sale November 22.
Last but not least, Take-Two blamed a cooler US game-retail climate for its predicted woes. "We are seeing a cautious North American retail market and movement to more of a replenishment-purchasing pattern--with smaller upfront orders and a greater reliance on reorders," said Eibeler.
Luckily for Take-Two, the news was not all bad. Eibeler used the conference call to reveal that the publisher will release another Grand Theft Auto game for the PSP in its forthcoming fiscal year. He said the company would release "numerous" titles for Sony's handheld in FY2006, but declined to identify any by name.
Eibeler also used the forum to underline the strength of several recent releases--The Warriors (PS2, Xbox), Sid Meier's Civilization IV (PC), and Grand Theft Auto: Liberty City Stories (PSP). The CEO also reminded analysts of the company's still-solid Xbox 360 launch lineup, which will include NBA 2K6 , NHL 2K6, Amped 3, Top Spin 2, and College Hoops 2K6.
Eibeler also rubbished recent rumors that Bully, Rockstar's controversial high-school-mischief game, has been canceled. "In terms of Bully, we took a step back," he said. "We feel that game is somewhat misrepresented or mischaracterized in the marketplace. We think it's a real opportunity for...great storytelling [from] the creative side of our Rockstar team." He also assured an analyst calling from Colorado that the game was not a Columbine-massacre simulator, as has been alleged by one of the game industry's most vociferous critics, Miami attorney Jack Thompson. "Nowhere should anyone in Colorado be worried about the Bully product," he said.
However, Eibeler's words of encouragement did little to stop Take-Two's stock from plummeting in after-hours trading. As of press time, the stock was trading at $18.95, down $1.70--8.23 percent--from its market-close price of $20.65.