The house that built Grand Theft Auto or more accurately the house that founded the studio that built Grand Theft Auto. Take Two is one of the largest publically traded video game companies. They are right up there behind EA and Activision Blizzard (ATVI). As the gaming landscape continues to evolve the big question is do the big companies get bigger or does it create a market for lots of micro publishers and game companies.

State of TTWO

Currently the stock is trading around the mid 90’s and that up around 800% in the last ten years and up about 350 percent in the last five years. In fact in the last five years it’s pretty much been on a steady upswing. The stock hit a fever pitch of almost 138 in September 2018 right before the release of one of the biggest games from one of their biggest studios and that would of course be the long in development Red Dead Redemption 2 from Rockstar Games. It was right then that the stock dropped from the high 130’s in September to the mid 80’s in February. Without a doubt, Red Dead Redemption has sold incredibly well but a few things probably concern investors and that is Fortnite and Red Dead Online. Investors are not gamers and this leads to investors thinking everyone needs a free to play battle royale to be successful. Take Two is a company with a lot of employees and studios and if they thought that the best plan of action would be a F2P then they would have one. Single player blockbusters can still make sense even in todays gaming climate and proofed by massive successful releases of 2018 including God of War, SpiderMan, Red Dead Redemption 2. RDR2 has sold over 23 million by the end of 2018, God of War sold over 5 million in its first month and SpiderMan sold over 3.3 million copies in the first few days on the market so its clear there is still a huge market for single player blockbusters. According to the NPD the video game market had sales of 43.4 billion in 2018, and to my understanding NPD doesnt track digital sales so I have to imagine this figure is around 40 percent higher. From my perspective 6 of the top 20 selling games from 2018 were hard core single player focused which include God of War, SpiderMan, RDR2, AC:Odyssey, Super Mario Odyssey, Breath of the Wild. Whether or not this continues to be a trend of single player games do go away, TTWO is in a good position to pivot studios to new projects that are more trending.

Studios

TTWO has a lot of studios under their umbrella, but you could easily make the argument that all the need would be Rockstar. Im sure if they took every employee working for TTWO and dedicated all resources to Rockstar it would still be a financially smart decision. I am not suggesting that they start doing annual GTA releases but they could increase the frequency of the games that Rockstar releases as well as indulge Rockstar with some creative endeavours. GTA V has been pretty much in the top ten monthly sales since it was released 2013. Its hard to believe this game is almost 6 years old but since then it has been able to amass over 95 million copies sold and we don’t even have any way to track all the in game sales for GTA Online that has been a smashing success.

2K games is the other huge part of TTWO outside of Rockstar and they have multiple studios that focus on multiple genres with some of the biggest hits being WWE, NBA2K, Sid Meier’s, XCom and Bioshock to name a few of the more higher profile 2K developed games.

Another strong suit for TTWO is their ability to publish games. TTWO has been publishing for Gearbox for a while and their partnership is solid. The upcoming Borderlands 3, due to be released this September, looks like it will be a huge success. It doesn’t look to be reinventing the wheel but instead looks to be refining what made the Borderlands games popular in the first place. It is also trying to please everyone. You can play online with friends, you can play solo or you can play co-op locally meaning the market for this game is quite large especially considering it seems to be doubling down on the RPG elements to this looter shooter.

Fortnite Future

The bigger worry for isn’t whether or not the future of gaming is Free To Play Battle Royale’s but its whether or not the future goes all digital

Looking ahead into the future what does TTWO have to offer. Thanks to their size they have options to adjust to the changing market by reallocating teams. They also have the funds available to expand and acquire new studios. They also have the resources to start new studios, including a new 2K studio being led by Micheal Condrey who joined as president who will build a lead a new team on an unannounced project. Condrey is best known for co founding Sledgehammer games with Glen Schofield. They are responsible for a few of the more well received Call of Duty games including Modern Warfare 3, WW2 and Advanced Warfare. Before forming Sledgehammer, Condrey was COO of Visceral games where he also worked alongside industry veteran Glen Schofield and are the main two people responsible for Dead Space.

Another expansion they have recently made that makes a lot of sense is by adding a third publishing label to go alongside Rockstar and TakeTwo. The new label is called Private Division Games and it was formed in 2017. This is a move that helps the company stay relevant by not just publishing blockbusters but instead allows them to focus on smaller scale games.

Keep it Simple

TTWO doesnt need to reinvent the wheel as they already have plenty of highly respected IP to their name. They could put a majority of their resources either reviving dormant franchises or by adding to the ones that they already have on the market such as RDR2. Red Dead Online has not gotten off to a great start just yet similar to how GTA Online launched but with support, patches and updates it is a force to be reckoned with. Red Dead Online has large potential to be just as big especially with the amount of sales in the first few months.

There is also a lot of opportunity to revive dormant franchises such as Max Payne from Rockstar who could really do a gritty reboot featuring the realism of living in America today. I think Rockstar also has the ability to bring back some of the more top down GTA including Chinatown Wars. Games like this would be perfect on the Nintendo Switch as they don’t need to be the most graphically demanding.

The Switch as a avenue for success makes a lot of sense for TTWO as the attach rate for games on the Switch is high and the audience is starving for high quality mature games. GTA Spinoffs or something along the lines of XCom with touch capability.

I think overall the future looks bright for TTWO as we are entering the final phase of the current generation of consoles which means that new games and new technology are right around the corner. Its also a little scary to think that its possible that this generation didn’t get a GTA unless there is one in the next year or so which seems highly unlikely. Yet without a brand new GTA for this generation, TTWO has still seen their stock price rise. It will be interesting to see what happens with new consoles and new autos to theft.