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Take Two On The Take, Too?
March 21st 2002, 04:37 CET by m0nty

Take Two Interactive, publishers of current hits such as State of Emergency, Max Payne and Grand Theft Auto 3 (and of Duke Nukem Forever, when it's done), is being spoken of in the same tones as Enron after it admitted to serious accounting irregularities, including misstated results and suspicious insider trades. Is Take Two the Enron of gaming, or will Duke, Max and the GTA series save the company?

The Securities and Exchange Commission is investigating, and class action shareholder lawsuits have come thick and fast. However, stock analysts have looked at the stellar sales figures for the three aforementioned games - which occupied the top three spots for a week in Feburary - and maintained their Buy ratings, and shareholders have pushed the stock near a 52-week high.

Several Web sites seem to have taken a disliking to Take Two, like Fatbabies, and the TheStreet.com which has a series of negative reports with an increasingly shrill and disbelieving tone, with the latest being this one:

Oh, momma (as Kramer, not Cramer would say.) Take-Two is like the TV show Dallas. It was all a dream. A horrible dream. First, the company was forced to restate seven quarters of earnings for improperly recognizing revenue.

It was such a frightening dream that it even included the company acknowledging it bought product from itself rather than count returns against sales. But it was worse than that, I tell ya, worse!: During this period, when revenues were improperly recognized, the company actually raised cash and insiders sold stock, according to this dream.

(No matter what you may think of the journalist's attitude, the reference to Dallas shows a certain cunning, in reference to Ion Storm.) The "what me worry" attitude of the analysts quoted in that story mirrors the breezy confidence of the company's latest earnings release.

One of the hot topics at analyst briefings after the announcement was the status of Duke Nukem Forever. An analyst quoted in another TSC story was indirectly quoted as saying "the delay of Duke Nukem is actually a positive development because it would enable the company to spread out its blockbuster titles over the course of a couple of years, rather than releasing them all in 2002".  Old skool Crappers who remember the Indrema thread might be interested in this book extract (turn Javascript off in your browser to access), in which 3DRealms' George Broussard and Scott Miller lay down their vision of Duke as a branding phenomenon... which will no doubt cost lots of marketing $$$$ by Take Two to promote.

Someone is going to be very, very wrong here. Who will it be? Will Duke Nukem make TheStreet.com's Herb Greenberg his bitch? Is Scott Miller firing up the shredder as we speak to hide his brilliant marketing plans from the SEC's corporate dicks? Should we even care what the publisher's financial problems are, since it's the developers who make the games anyway?
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Home » Topic: Take Two On The Take, Too?

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#1 by "Colin Kawakami"
2002-03-21 04:38:22
colin_kawakami@nospam.bossgame.com
first post woot biotches
#2 by Bailey
2002-03-21 04:41:05
Does your mom help you post?

Don't got time for shame.
#3 by Charles
2002-03-21 04:41:25
www.bluh.org
What was the question?

#4 by Leslie Nassar
2002-03-21 04:41:26
http://departmentofinternets.com
My tinfoil hat says Microsoft is behind Take-Two's SEC problems.

i like monkeys.  are you a monkey?
#5 by "Colin Kawakami"
2002-03-21 04:44:36
colin_kawakami@nospam.bossgame.com
Turning the dial on the wayback machine back to my days in Brooklyn, when developing games on below poverty level wages and drinking malt liqour was like a dream come true, the way we consoled ourselves when splitting up a pack of ramen between to malnourished geeks was:

"At least we aren't Take 2" A company that was rumored to continually kept alive by infusions of cash from its rich president's trust fund, provided for by his father who provided the paper on which the Wall Street journal was founded.

I have no idea if that was true or not, but we were wrong in finding solace in the fact that weren't take 2, because really we were much, much worse.
#6 by Matthew Gallant
2002-03-21 04:45:14
http://www.truemeaningoflife.com
HERE IT COMES!

Marketing is a crutch for mediocrity and a handicap to excellence.
#7 by JMCDaveL
2002-03-21 04:45:46
Damnit I voted nay on this one. :(

Too many threads :P

And the topic is a lame attempt at andy-style muckraking.

Oh and m0nty is a p00head.

--jmc
#8 by Greg
2002-03-21 04:45:47
I love how companies are being Enron-ized (like supar-sized, but the opposite). Take-Two is the 2nd game-related company to be compared to Enron (Loki was the first) in the past couple weeks. Is it just that Enron did so much wrong that people are taking Enron infractions a la carte and applying them to other companies when they have executive misdealings?

Greg

-Swallow it all and be glad, for a shilling I've paid and a shilling's worth I'll be having!
#9 by Bailey
2002-03-21 04:47:26
MattG

Whoooo! Everybody into the pool!

Don't got time for shame.
#10 by JMCDaveL
2002-03-21 04:47:43
It's the new slang baybee! Get with the program! Up your nose with a rubber hose! Sit on it! Your mama, Osama!

re:matt's pic - ROFL - I too predict imminent Smartian invasion. :P

--jmc
#11 by Matthew Gallant
2002-03-21 04:49:00
http://www.truemeaningoflife.com
ASS FIRST.

Marketing is a crutch for mediocrity and a handicap to excellence.
#12 by "Tom Cleghorn"
2002-03-21 05:33:00
tc10@SPAMMEANDDIEMORNYOUGERMANBITCH!st-andrews.ac.
Now really... does anyone honestly still believe we're EVER going to see Duke Nukem Forever in shops? I've kinda given it up for lost by now.

Pretty new 'crap, mr0n :) I might stick around for a while again :)
#13 by Tom Cleghorn
2002-03-21 05:37:44
Ah... I note we still have the 'woot first post biatches' crowd...

Hit me - I'm wasting valuable time.
#14 by Colin Kawakami
2002-03-21 05:53:56
colin_kawakami@bossgame.com
Hey I'm not a crowd damnit... don't begrudge my mom and I my first first post.
#15 by LPMiller
2002-03-21 06:02:32
lpmiller@gotapex.com http://www.gotapex.com
First post is a right of passage every boy must go through to truly become a man. That, you must battle jokers wang to the death using only a tweezers and some duct tape.

The Suns rays are made up of many atoms.
#16 by "MDB"
2002-03-21 06:31:49
I don't think "the TV show Dallas" was a reference to Ion Storm.
#17 by crash
2002-03-21 06:35:47
T2's been dancin with the SEC for what, almost two years now? we hear this same story at the end of every damned quarter, seems like. wonder why it's getting serious all of a sudden. (and m0nty, not sure how up you are on 80s trivia, but the "dream season and a half" of the TV show named is probably exactly what it seems.)

what puzzles me is why, if it's so obvious that we're hearing about it all the time, they haven't been smacked down or left alone by now. i mean, christ, after the second or third consecutive quarter, you'd think the SEC would hire some temps to work in T2's friggin accounting division or something.

i just wonder when they're gonna run out of magical mystery cash to keep themselves afloat. and i also wonder how much pressure T2's puttin on 3DR to get DNF out the fucking door already... cos i dunno, from those links above, they seem to be hangin a lot of hope on that thing shipping, don't they?

on the other side of the coin, i seriously doubt, myself, that the thrashings of T2 are going to bother 3DR all that much. from the cornucopia of DN spinoffs and shit, and the marketability of the DN franchise, if T2 dies, 3DR'll have a signed contract from another publisher before the corpse gets cold.

- if you can laugh at it, you can live with it.
- "Hey, how 'bout this: fuck you." -LPMiller
#18 by JMCDaveL
2002-03-21 06:41:17
BUT WHAT DOES THIS HAVE TO DO WITH SHADOWBANE?

--jmc
#19 by Matthew Gallant
2002-03-21 06:59:20
http://www.truemeaningoflife.com
3D Realms owes Take 2 nothing!

Marketing is a crutch for mediocrity and a handicap to excellence.
#20 by m0nty
2002-03-21 07:08:12
http://tinfinger.blogspot.com
MDB (#16):
I don't think "the TV show Dallas" was a reference to Ion Storm.

Maybe not, but it would be nice to think so. If I was in the habit of giving shout-outs, which I am not, I would give w3rd out to Herg Greenberg and his phat homeez. And his mother.
#21 by m0nty
2002-03-21 08:14:36
http://tinfinger.blogspot.com
This is an interesting analysis of Take Two (register with email addy only to access).
The brainchild behind Take 2 Interactive Software Inc. is its 29-year-old chairman Ryan Brant, who founded the company in 1993 shortly after graduating from the University of Pennsylvania's Wharton School of Business with a BA in economics. Brant enjoys a salary and benefits package of $1.8 million annually and owns $5.2 million in company stock, although he sold a great deal of it while the stock was declining in the first half of 2001, prior to the release of GTA3.

Broadband Solutions LLC, a corporate shareholder, has notably been acquiring a large amount of Take 2's stock. One might wonder if this could this mean a possible takeover. It's not likely anytime soon. The executive board and inside investors still own quite a large percentage of the stock, and with the recent increase in revenues due primarily to the success of GTA3's release and subsequent success, they are not likely to sell anytime soon. In fact, many of Take 2's executive officers have also been buying a large number of shares.

This page shows the insider trades on TTWO stock recently. You might notice the listing of Apogee Software, which garnered an estimated US$1,290,600 for selling 60,000 shares last June. Apogee has/had Scott Miller as CEO.
#22 by m0nty
2002-03-21 09:00:41
http://tinfinger.blogspot.com
Going through TTWO's SEC filings is in some ways a pointless exercise, as there is every chance what you are reading is not strictly kosher, but these tidbits from the March filing bear repeating:

 Grand Theft Auto 3, PS2.......................................           41.3%                    -
     Max Payne, PS2................................................           11.4                     -
     Max Payne, Xbox...............................................            4.5

So the same product is selling well over twice as well on the PS2 as the Xbox. Interesting.

In connection with the Company's acquisition of the franchise of Duke Nukem' PC and video games in December 2000, the Company is contingently obligated to pay $6 million in cash upon delivery of the final PC version of Duke Nukem' Forever. The payable will be recorded when the contingency is resolved.

So let me get this straight. 3DRealms, whom I presume will be the recipient of this bonus, gets $6 million just for delivering a product? What sort of deal is that? Is this a normal fee for a game of this type? WTF?
#23 by m0nty
2002-03-21 09:16:59
http://tinfinger.blogspot.com
Let me say that in big letters:

... the Company is contingently obligated to pay $6 million in cash upon delivery of the final PC version of Duke Nukem' Forever.

I hereby christen Scott Miller as the Six Million Dollar Man.
#24 by godZero
2002-03-21 09:25:19
godzero@gmx.de
#22 m0nty:

That's because there are much more PS2 owners than XBox owners out there, I suppose.
#25 by crash
2002-03-21 09:30:25
m0nty:

So the same product is selling well over twice as well on the PS2 as the Xbox. Interesting.

actually, the same product is making over twice as much gross revenue on the ps2 than the xbox, which doesn't necessarily equate to "selling twice as well." in fact, given the significantly larger number of installed units of ps2 than xbox, from a certain perspective, it's actually selling less well (?) on ps2 than xbox.

but it's clearly more profitable by any measure.

In connection with the Company's acquisition of the franchise of Duke Nukem' PC and video games in December 2000, the Company is contingently obligated to pay $6 million in cash upon delivery of the final PC version of Duke Nukem' Forever. The payable will be recorded when the contingency is resolved.

So let me get this straight. 3DRealms, whom I presume will be the recipient of this bonus, gets $6 million just for delivering a product?

note the word "contingent" appearing not once but twice. that's gotta be significant, but i'll be dipped in shit if i can figure out why. $6m is chump change if T2 owns the franchise, which is what that looks a whole lot like. which means i don't believe it--i can't see Scott Miller lettin that go for any amount of money. unless franchise means something different in that context than i think it does. and hell, who knows what that contract looked like. or what the whole thing does. maybe that $6m is like "you guys missed too many milestones" money--"We'll kick down $20m--$14m in regular milestone payments, and the rest "when it's done"."

- if you can laugh at it, you can live with it.
- "Hey, how 'bout this: fuck you." -LPMiller
#26 by godZero
2002-03-21 09:30:35
godzero@gmx.de
Yup. I just did some search and found out that there are over 20 million PS2 in heavy use out there.
#27 by Terata
2002-03-21 09:41:09
I'm surprised it's only twice as well, though admittedly there's a lot less competition on the XBox.
#28 by m0nty
2002-03-21 09:48:16
http://tinfinger.blogspot.com
The Enron analogy holds for several reasons, laid out in their annual report:
In connection with an informal and voluntary request from the SEC to provide documents, we engaged counsel to conduct an investigation into our accounting treatment of certain transactions in fiscal 200 and 2001. Counsel retained advisors to perform a forensic accounting investigation. As a result of the investigation, we restated our previously issued consolidated financial statements for fiscal 2000 to eliminate $15,367,000 of net sales made to certain independent third-party distributors and related cost of sales of $8,702,000, which were improperly recognized as revenue and later returned or repurchased by us.


The practice of wrongly counting sales to related companies as revenue is a signature Enron tactic. Wiping out US $21.4 million from the bottom line of stockholder equity is the reason for the SEC investigations and the lawsuits. In particular, the GOD acquisition seems to have been the subject of some problems.

In fiscal 2000, in accordance with EITF 99-10, we incurred a charge of $19,969,000 for our share of losses incurred by Gathering of Developers prior to our acquisition of the then remaining interest in Gathering of Developers. The increase over fiscal 1999 is the result of increased losses at Gathering of Developers coupled with the implementation of EITF 99-10.
#29 by godZero
2002-03-21 11:10:49
godzero@gmx.de
Off topic:

PS1 sales: over 80 million
PS2 sales: over 20 million and still running

Every owner bought at least two games(probably rather five).

Damn, that's a lot of money Sony has made!
#30 by Morn
2002-03-21 13:26:00
morn@planetcrap.com http://hmans.net
Test

Hendrik "Morn" Mans • morn@planetcrap.com • admin/coder/lover/kraut
Support PlanetCrap with a small monthly donation!
#31 by Darkseid-D
2002-03-21 14:32:12
rogerboal@hotmail.com
goodness, Tom C IS still alive

huzzah, more irreverant posts eminating from St Andrews

Yay, Yay and thrice yay!


Ds

(summons Smartian +3 to bludgeon Cleggy)

Never argue with an idiot, theyll drag you down onto their level, then beat you with experience.
#32 by Martin
2002-03-21 14:54:23
http://www.mocol.nu
I have to give m0nty mad props for a funny twist of words in the topic though. But that's as far as my mad propagation goes.

-- Martin
"Burger me!"
#33 by Neale
2002-03-21 14:54:46
neale@pimurho.co.uk www.pimurho.co.uk
I was looking for textures t'other day and I came across Tom Cleghorn's name on a site. I wondered what had happened to him, and then he returns! It's like a miracle...or something...er.

/me wanders off, with coat

Eradicators! - www.eradicators.co.uk
#34 by godZero
2002-03-21 14:56:06
godzero@gmx.de
Tom who?  
:-)
#35 by JMCDaveL
2002-03-21 15:28:29
You guys frighten me

--jmc
#36 by Whisp
2002-03-21 15:33:05
Tom Cleghorn.  You know, that loudmouthed rooster from the Warner Brother cartoons.  That's Tom.
#37 by Scott Miller
2002-03-21 15:39:38
scottmi11er@hotmail.com
FYI, if you read the company's annual report, you'll see that Take2 paid a $12 million fee to acquire the publishing rights to DNF, and the first half was paid upon signing, with the second half due upon the game's release.  This is an unrecoupable fee, not a recoupable advance.  This fee does not affect royalties.  And 3DR still owns the franchise.

Under our advice, Take2 is not pinning down a release date for investors for DNF.

BTW, Take2 is a great investment now, IMO.  When trading was halted, I advised several people in the game industry to buy up as much Take2 stock as they could afford as soon as it begin trading again, which it did at $15-$16 on the opening day.  Some people made a lot of money doing this, because within a few weeks the stock hit $23.  I still think the stock will hit $30 this year, once the SEC stuff is cleared up and investor confidence comes back, because at that time Take2's stock will get a value multiplier like the other top publishers, THQ, EA and Activision.

Anyone following Activision stock knows that it was recently downgrading by brokers, and Take2 was cited as a better investment for the long-term.

Take2 is in awesome shape, and with the products they have coming out, they are only going to get better.  Most publishers are lucky to have one or maybe two star brands (e.g., Activision has Tony Hawk, and Eidos has Tomb Raider), but Take2 has 2-4 legit star brands (GTA3, Max, Duke, SOE, Mafia, Railroad Tycoon, and even Sam does really well for them).  I would not be surprised at if their stock doesn't soar like THQ has in the last two years, doubling in price.
#38 by Whisp
2002-03-21 15:55:36
Careful, Scott....
#39 by Neale
2002-03-21 15:56:21
neale@pimurho.co.uk www.pimurho.co.uk
Damnit Scott, get an amusing picture! (and not one of Duke)

Eradicators! - www.eradicators.co.uk
#40 by Matt Perkins
2002-03-21 16:10:46
wizardque@yahoo.com http://whatwouldmattdo.com/
Not that you actually do have inside information, but doesn't pimping the company you have a publishing deal with show a conflict of interests?  Meaning, you are helping yourself and your future ventures by helping Take2...

game designer.  RTS lover.  Herbert owner.  Bullshit artist.  Not so humble anymore.
#41 by jjohnsen
2002-03-21 16:16:46
http://www.johnsenclan.com
Did Scott Really say SOE is a star brand?  Has he played that load of crap?  I would never mention it in the same catagory as Duke, Max Payne or GTA3.

#42 by Martin
2002-03-21 16:26:53
http://www.mocol.nu
Well, as long as it sells I guess it's a star brand.

-- Martin
Hunkalicious since 1972!
#43 by Matthew Gallant
2002-03-21 16:39:50
http://www.truemeaningoflife.com
You heard it here. The X-Box will fail and Take Two will make you a ton of money.

Marketing is a crutch for mediocrity and a handicap to excellence.
#44 by jafd
2002-03-21 16:40:03
I'm sure Scott was very careful to take "dancing right up, but not over the line" lessons before talking about it.

If a law is broken in an empty forest, does it make a sound?

No glot! Clum Flyday!
#45 by jjz
2002-03-21 17:04:10
http://www.sec.gov/answers/pumpdump.htm
#46 by Scott Miller
2002-03-21 17:09:34
scottmi11er@hotmail.com
Heh, I didn't relay any inside information -- and it's not like I have any.  But, I do pay attention to the games that most big publishers are coming out with and Take2 has the most impressive line-up, other than EA and Nintendo.  But EA is already fully valued, while Take2 is way undervalued with a lot of upside.

I'm not recommending the stock, just pointing out that this company is by no means in bad shape, quite the opposite.  Meanwhile, 3DO, Interplay and Eidos are hanging on to life by their fingernails.  All are facing delisting from Nasdaq, and in serious financial trouble (except Eidos, which, though their stocks has plummeted, still has a good cash reserve, but they're eating away at it fast because they cannot seem to make a non-TR related hit).

SOE is definitely a hit, even with average reviews.  Keep in mind, GTA1 and GTA2 where only okay, and they finally got it perfect with GTA3.  I expect SOE2 to be much improved.  One thing going for the guys at Rockstar is that they have real gamers in key management positions, unlike any other publisher I've worked with or am aware of, other than Nintendo.  Take2/Rockstar makes good decisions, and they pick good projects to develop.  Plus, they are positioning themselves as a mature label, giving them an edge that is perfect for the market today, which is on average in the 20's, and not the teens anymore.
#47 by jafd
2002-03-21 17:10:37
Shooting at your feet, watching you dance.

The only thing about the law that I have forgotten is my faith in it.
#48 by Marsh Davies
2002-03-21 17:17:00
www.verbalchilli.com
Scott Miller:
BTW, Take2 is a great investment now, IMO.

And you tell us this because you love us? Or because you own a bucketload of shares in the company?

-- ex Spatula Man --
#49 by m0nty
2002-03-21 17:19:55
http://tinfinger.blogspot.com
Scott, thank you for filling out the details of what I was posting above. I thank you for not criticising my half-finished research. *grin*

Scott Miller (#37):
FYI, if you read the company's annual report, you'll see that Take2 paid a $12 million fee to acquire the publishing rights to DNF, and the first half was paid upon signing, with the second half due upon the game's release.  This is an unrecoupable fee, not a recoupable advance.  This fee does not affect royalties.  And 3DR still owns the franchise.

I trust that this means that when the TTWO annual report for FY01 mentions "the Company's acquisition of the franchise of Duke Nukem' PC and video games in December 2000", this is merely a confusing wording relating to acquiring publishing rights, not a statement that it actually owns the entirety of the franchise.
#50 by "flamethrower"
2002-03-21 17:20:54
I like SOE. It's not GTA3, but it's got great combat compared to GTA3. Weapon wise, punch, kick, tackle, and destruction wise, SOE is fun.


And yes, I had GTA1 and yes, it was a fucking classic miles above SOE.




Who am I kidding? As soon as I snag MGS my SOE days are over. ;D
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