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Forums - Microsoft Discussion - GTA IV downloadable content is a sure winner for MS

Nidan on 19 December 2008
KROCALOPOLIS said:

Why would take two have to pay MS or share any of the revenue of the DLC with MS. Take Two is being PAID to make the content only available for MS. Otherwise they could release it on both platforms. MS receives the benefit of increased hardware sales and increased subscriptions. If Take Two had to pay the 50,000,000 dollars back it simply wouldn't have happened.....It wasn't a loan, they have no debt, and good cash flow. IMHO I believe that the biggest winner is Take Two b/c every unit of DLC sold is probably added directly to the bottom line.

Anyways......I will be buying both

And thats why they recorded it in their accounts as two pre-payments??

I thought they were having problems with financing about 18 months ago or am I dreaming?

anyway

heres some old news

Next-Gen contacted Wedbush Morgan Securities analyst Michael Pachter, who further explained the deal. "What Microsoft did was pay a $50 million advance," he said, much in the same way a big-name author receives a payment in advance of his or her next book.

In other words, Microsoft is confident that Take-Two's portion of the revenue generated by GTA IV content downloads will surpass the $50 million advance paid.

"Microsoft basically said that it's happy to pay [Take-Two] in advance $50 million in revenue that [Take-Two] is going to receive from GTA IV downloads," he said.

Microsoft takes about a 30 percent cut from Xbox Live Marketplace content sales, according to Pachter.

Taking that 70/30 split (publisher/Microsoft) and the $50 million advance into account, Microsoft is apparently confident that GTA IV download revenues over Xbox Live will be at least $70 million.

If revenues don't meet that figure, Take-Two will have to return some of the advance, according to Pachter. But he said that there's no reason to believe Take-Two would actually miss that revenue target.

http://www.edge-online.com/news/microsoft-paid-50m-advance-gta-iv-content

 

 



Predictions JAN 08

2008 PS3-19.5M(actual 19.5) XBOX360-23M(actual 27.5) Wii - 37M(actual 45.8M)

End of 2009 PS3-27 25M XBOX360-30 35M Wii - 48 63M (revised DEC 08)

Price Point
Mid 2008 Wii $250 Xbox360$249 Xbox360(HDD)$299 PS3 $399

Mid 2009 Wii $189 Xbox360$199 Xbox360(HDD)$249 PS3 $339

Mid 2010 Wii $ 149 Xbox360$159 Xbox360(HDD)$199 PS3 $289

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freebird4 on 19 December 2008

It was a loan (and anyone who says otherwise knows jack shit about finances). It was a interest-free loan, but a loan nonetheless.



Nidan on 19 December 2008
Qly said:
$50,000,000 / ($30*.7) = 2.3Million units to break even...

Not really, they get 30% so it's .3 not .7, also, it'll be priced at 20 bucks, so:

$50,000,000 / ($20*.3) = 8.3Million units to break even, with an install base of 6.38 million, even with two installments, it'll NEVER break even

another article

http://www.nytimes.com/2007/06/20/arts/20vide.html?fta=y

 

Take-Two executives explained the payment in a conference call with financial analysts last week. The $50 million will come in two $25 million installments as the episodes are released, starting in March 2008.

A Take-Two spokesman declined to elaborate on the conference call. Despite the success of Grand Theft Auto, Take-Two has struggled financially and recently faced a shareholder revolt that ended with Strauss Zelnick, a longtime media executive, taking over as chairman.

Microsoft refused to discuss its financial relationship with Take-Two. In a statement, Microsoft said, “The quality, depth and breadth of our Xbox 360 portfolio is a testament to the great relationships we’ve established over the years with our third-party partners.”

Typically, Microsoft and third-party publishers split the revenue generated when players download games from Xbox Live. Games usually cost $10 or less, but Microsoft could charge $20 or more for the additional Grand Theft Auto IV episodes, depending on how many hours of playing time they offer. So the $50 million for Take-Two appears to be a sort of advance on royalties



Predictions JAN 08

2008 PS3-19.5M(actual 19.5) XBOX360-23M(actual 27.5) Wii - 37M(actual 45.8M)

End of 2009 PS3-27 25M XBOX360-30 35M Wii - 48 63M (revised DEC 08)

Price Point
Mid 2008 Wii $250 Xbox360$249 Xbox360(HDD)$299 PS3 $399

Mid 2009 Wii $189 Xbox360$199 Xbox360(HDD)$249 PS3 $339

Mid 2010 Wii $ 149 Xbox360$159 Xbox360(HDD)$199 PS3 $289

KichiVerde on 19 December 2008
KROCALOPOLIS said:

Why would take two have to pay MS or share any of the revenue of the DLC with MS. Take Two is being PAID to make the content only available for MS. Otherwise they could release it on both platforms. MS receives the benefit of increased hardware sales and increased subscriptions. If Take Two had to pay the 50,000,000 dollars back it simply wouldn't have happened.....It wasn't a loan, they have no debt, and good cash flow. IMHO I believe that the biggest winner is Take Two b/c every unit of DLC sold is probably added directly to the bottom line.

Anyways......I will be buying both

 

 

I think MS went to Take Two and said something like the following to set up the agreement,

 

Mr. Microsoft Gaming CEO: "Mr. Take Two CEO,  we are confident your subsidiary Rockstar North's GTA 4 will be a financial success on our platform.  To further capitalize on the success of the game we would like to bank roll some exclusive downloadable content for the Xbox 360.  We will give you 50 million dollars. Use the money to make the DLC long and enjoyable. If it is up to Rockstar North's usual standards I am sure it will be just that and the public will respond well to the content, thus generating more revenue for both our companies.  However, should you guys skimp on the quality and produce crap, we will have to hold you accountable, and that means we will expect some of our money back if losses are incurred.  Do you feel you guys are up to the challenge?"

 

Mr. Take Two CEO: "Yes. Our company will make some great DLC and the masses will rejoice."

 

Mr. MS Gaming CEO: "Excellent. We have a deal."

 





madskillz on 19 December 2008

Excellent point, Kichi



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numonex on 19 December 2008

It is a good investment for MS and the DLC for GTA IV is exclusive to XBox 360 owners.



rhisc on 19 December 2008
Dodece said:
The first installment of the two expansions will retail for $20. At least that is what one retailer has the price listed at. You can find the link on these forums. That said this is the math. For each expansion.

Assuming your math is correct. The formula would be 50,000,000/($20x.7)=3.6 mil

Which given that both expansions are priced the same equals out to 1.8 mil per expansion. That in turn given this sites numbers which says the game has sold currently 6.38 mil means that each expansion must have an attach rate of 28%. Factoring in additional sales given that last tracked week in North America the game sold 30,000 copies it is safe to assume the game may have sold seven million copies of the game by the launch of the first expansion. That would equate to perhaps 25%.

Honestly I am unsure as to whether it can actually do that. Given that the shivering aisles sold only 7% according to this site. However it is probably safe to say that the map packs for Halo are probably a better qualifier. That said it may be a near run thing. This is not a guaranteed winner, but as always that is dependent on the quality. If the expansion is closer to a Vice City in scope, and nuance. The expansion could very well sell closer to a 40% attach rate especially if the expansion package comes in a physical format.

So much is an unknown. We really need to know more about the expansion before we can judge. If it is closer to a full fledged Grand Theft Auto game it should succeed. However if it is short of ten hours of content it could really end up being a bragging right.

 

Your numbers seem fair.  The 1.8 million per expansion is not out of the question.  The COD4 Map packs sold over a million in 9 days on Xbox Live.  That was with a smaller user base at the time.   The $20 price isn't unreasonable as people have no problems paying $15 for Portal on XBLA.  You can guarantee that this will get a big advertising campaign from Microsoft while no other DLC or digital downloads for that matter has had much advertising.  Even if this doesn't pay off they are planting the seeds for what is possible with digital downloads.





Comrade Tovya on 19 December 2008

I made it to 49.6%, but have started playing it again recently... so I will probably buy the DLC as well.

But I do wish more people would have taken advantage of the online versus mode features. I think it really is a lot more fun to play online than it is in campaign/story mode.



MarioKart:

Wii Code:

2278-0348-4368

1697-4391-7093-9431
XBOX LIVE: Comrade Tovya 2
PSN ID:

Comrade_Tovya
JaggedSac on 19 December 2008
Nidan said:
KROCALOPOLIS said:

Why would take two have to pay MS or share any of the revenue of the DLC with MS. Take Two is being PAID to make the content only available for MS. Otherwise they could release it on both platforms. MS receives the benefit of increased hardware sales and increased subscriptions. If Take Two had to pay the 50,000,000 dollars back it simply wouldn't have happened.....It wasn't a loan, they have no debt, and good cash flow. IMHO I believe that the biggest winner is Take Two b/c every unit of DLC sold is probably added directly to the bottom line.

Anyways......I will be buying both

And thats why they recorded it in their accounts as two pre-payments??

I thought they were having problems with financing about 18 months ago or am I dreaming?

anyway

heres some old news

Next-Gen contacted Wedbush Morgan Securities analyst Michael Pachter, who further explained the deal. "What Microsoft did was pay a $50 million advance," he said, much in the same way a big-name author receives a payment in advance of his or her next book.

In other words, Microsoft is confident that Take-Two's portion of the revenue generated by GTA IV content downloads will surpass the $50 million advance paid.

"Microsoft basically said that it's happy to pay [Take-Two] in advance $50 million in revenue that [Take-Two] is going to receive from GTA IV downloads," he said.

Microsoft takes about a 30 percent cut from Xbox Live Marketplace content sales, according to Pachter.

Taking that 70/30 split (publisher/Microsoft) and the $50 million advance into account, Microsoft is apparently confident that GTA IV download revenues over Xbox Live will be at least $70 million.

If revenues don't meet that figure, Take-Two will have to return some of the advance, according to Pachter. But he said that there's no reason to believe Take-Two would actually miss that revenue target.

http://www.edge-online.com/news/microsoft-paid-50m-advance-gta-iv-content

 

 

Nice post.  Win Win for Microsoft.  They are guaranteed at least most of their money back.

 



numonex on 19 December 2008

GTA IV DLC ensures looong legs of GTA IV in the long run on XBox 360. GTA IV becomes reduced in price or bundled with console more copies of that game will have been sold on XBox 360.