Take-Two Pays Up to Rockstar

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A quarterly SEC filing by Take-Two has revealed an interesting business expense on the part of the publisher. It appears the company has allotted for a total of $25M to be paid to certain key Rockstar employees involved with the Grand Theft Auto series. Early on in the report, Take-Two notes that it is "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." Later on, the document describes the particular incentive intended to keep those key personnel working for Take-Two. "Shares of restricted stock having a value of approximately $14.8 million (950,000 shares) were immediately granted principally to certain Rockstar employees responsible for product development, and the balance of the shares with a value of $10.2 million will be issued to certain Rockstar employees [upon board approval.]" Even further on in the report, it notes that Take-Two could be "seriously harmed" if these employees were to leave.
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. Although we recently entered into three-year employment agreements with such Rockstar employees, ... there can be no assurance that we will be able to continue to retain these personnel at current compensation levels, or at all. ... If one or more of these individuals leave the company, we may lose additional personnel, experience material interruptions in product development and delays in bringing products to market, which could have a material adverse effect on our operating results.

The situation shows a clear focus on the creative and technical talent behind the games, which are among the most successful titles in modern gaming. Today's game industry is almost astonishingly franchise-driven, but many times once a publisher acquires a franchise it does not necessarily continue to produce sequels developed by the property's original team. In many cases, key members of that team will leave to work elsewhere or found a new company, or the publisher will simply divert the project elsewhere. For example, with nearly all of its major franchises--Prince of Persia, Far Cry, any number of Tom Clancy properties--Ubisoft shifts the game around to different teams from sequel to sequel. In this case, Take-Two is operating starkly differently; the company clearly recognizes the inherent value of the GTA brand, but it also places significant importance to the specific talent behind that brand. It is certain that a GTA game would sell well under practically any conditions, but as many politicians still fail to realize, the games have maintained the momentum they do because at their core they are extremely well designed. Take-Two is expending a vast sum of money to back up that realization, and it's certainly not one many publishers would make for lesser-selling franchises, but the general attitude is one that perhaps other publishers could take to heart.

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From The Chatty
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    March 15, 2006 1:33 PM

    That's a pretty cool move by Take Two. I could definitely see that helping out. I'm curious to see how that works out.

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