Take-Two pays out to Rockstar

"Certain Rockstar employees" stand to make $25 million in stock incentives from their parent company through February of 2009.

While the company publishes a wide array of products through labels like 2K Sports and 2K Games, it's no secret that Take-Two Interactive's fortunes of late have been made on the trials and triumphs of its Grand Theft Auto series. But how much is it worth to Take-Two to keep the brains behind the series content and under contract? The company's latest quarterly report suggests it was worth $25 million.

In Take-Two's annual report (issued in late January), it listed a dependence on key personnel as a risk factor that could hurt its financial performance in the future.

"In particular, we are highly dependent on the expertise, skills, and knowledge of certain of our Rockstar employees responsible for content creation and development of Grand Theft Auto and other titles," the company's filing read, before noting that the publisher had reached a three-year incentive agreement in principle with those Rockstar employees to keep them around.

In the company's latest quarterly report, filed with the Securities and Exchange Commission yesterday, that statement of risk had changed to indicate that the agreement was a done deal, "but there can be no assurance that we will be able to continue to retain these personnel at current compensation levels, or at all."

The quarterly report also makes mention in a separate section of $25 million in restricted common stock to be granted "to certain Rockstar employees responsible for product development," $14.8 million now and an extra $10.2 million to be issued over the next three years.

In a note to investors this morning, Wedbush Morgan Securities analyst Michael Pachter suggests the deal could come back to hurt Take-Two. He suggests that the next two console versions of the series will debut in fall of 2007 and fall of 2009, meaning the three-year agreement will only see one true console sequel to the series through to completion. Between $25 million in increased expenses plus whatever increase was made to Rockstar's royalties on the series (Pachter assumes the new agreement includes a higher royalty rate), Pachter thinks the company will have a harder time meeting expectations for its 2007 and 2008 fiscal year.

Take-Two has not announced a name or release date for its next console sequel in the Grand Theft Auto franchise, but it has said that in fiscal year 2007 it "anticipates a strong next-generation lineup from Rockstar Games, including sequels to several of Rockstar's most successful franchises."

A Take-Two representative did not immediately return requests for comment on this story.

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Discussion

25 comments
XanderKage
XanderKage

Housers are geniouses. They deserve it.

sam20vt
sam20vt

its nice to see that someone is appreciating the often neglected developer. and i can't wait to see the fruits of there labor an next gen consoles.

NeoJedi
NeoJedi

GTA needs to thrive... pay da man!

NightRain
NightRain

Well... they sure are like real ROCKSTARS. :P

vicsrealms
vicsrealms

They didn't lose money because of their employees. The lost money because some prick went way over board over a crack for the game. If the Hot Coffee Mod hadn't been made for the game, they would have made alot of money. Those idiots like Clinton and that other dude ruined it for them. Those are the people who should be shafted. Keep up the good work Rockstar!!!

Fallout_red
Fallout_red

I think its good. Take-Two is a nice publisher who values their developers and this is a positive action which will be good for developers and in time for all gamers (Better games?).

Kfoss
Kfoss

WOW thats allot of money...hope its worth it...

lageasy311
lageasy311

I don't care as long as gta gets too see next-gen

rdo
rdo

did rockstar tell ttw they would only make ping pong games unless they got alot more money?

j14rk1n
j14rk1n

They're not being greedy- they deserve it! Rockstar's games are mostly awesome, and it's good that Take-Two is rewarding them.

macacd
macacd

thats a good investment.

hmsmichaelot
hmsmichaelot

Take-Two's lost enough money. Greedy Employees should be shafted. The Winning formula for GTA could easily be taken up by others.

shooks20
shooks20

they need the GTA franchise to continue, making sure these people stayed in the company was a good move.

Donkeljohn
Donkeljohn

They needed to pay those people to keep them on.

QualityJeverage
QualityJeverage

Hah, if I worked at Rockstar, I'd quit and go buy a mansion, then start my own development company!

tatu2004
tatu2004

next gen GTA will be hoter than ever.....

man-of-mystery2
man-of-mystery2

At last, Sam and Dan Houser and Leslie Benzies get the recognition they deserve. Congratulations!

monsteronthego
monsteronthego

[This message was deleted at the request of a moderator or administrator]

roadifer
roadifer

Man, those "key people" must be happy with the gratitude that TakeTwo is showing them

roadifer
roadifer

[This message was deleted at the request of a moderator or administrator]