Analysts Calculate Grand Theft Auto's Worth

In a report released today by the Susquehanna Financial Group, analysts Jason Kraft and Chris Kwak ask, "What is GTA worth?" Or more specifically, what exactly is the Grand Theft Auto franchise worth to Take-Two investors? The answer? Kraft and Kwak estimate that the franchise is worth approximately $10-13 of Take-Two's $16.23 market value, and that "investors are getting the rest of the company for $1.71-$4.71 per share," insinuating that the future of the company could be in jeopardy if Take-Two continues to rely on the franchise to this extent. The duo say they remain neutral on whether or not shares of Take-Two Interactive are a solid investment, but may reconsider if either the gap between GTA's value and the market cap narrows, or if Take-Two demonstrates "improved, sustainable profitability with other parts of its publishing business." Going into the future, Kwak and Kraft estimate that only two Grand Theft Auto titles will appear on next-generation home consoles, and that the first will not appear until Christmas season 2007, with only Liberty City Stories for the PSP (and later, PS2) sustaining the franchise until that time. Furthermore, the duo predict that PSP iterations of the franchise - either new titles or ports of older console versions - will continue to thrive, going as far as to estimate a new PSP entry into the series every year through 2010. "Shorter development cycles on the PSP enable Take-Two to release PSP titles more frequently," they clarified. "The regularity with which Take-Two releases GTA titles on PSP will be critical to the franchise's revenue growth in the next-gen cycle and underlies our revenue growth forecast." The analysts go on to predict that GTA console sales will decline 36% in the time period of 2006-2010. "However, the PSP will more than compensate for lower GTA console sales," they said. They also expect Take-Two to not assign exclusivity to the franchise - that is, they expect next-gen iterations of Grand Theft Auto to launch simultaneously on more than one platform. This comes despire their prediction that Xbox GTA attach rates will remain at 50-60% of those for the PS2.