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Uphill Battle

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The mighty Herb Greenberg is offering his always-must-read thoughts on Take-Two (TTWO) in a world without NFL football today over on CBSMarketwatch (MKTW). Herb's had Take-Two on his radar for ages and, like me, is of the opinion that the Electronic Arts (ERTS) exclusive with the NFL is trouble for TTWO.

Why does it matter to Take-Two both long term and right now, this quarter? Imagine, hypothetically, that you are the CEO of a major consumer electronics chain. You've got Grand Theft Auto: San Andreas inventory coming out your wazoo and you've got Wal-Mart (WMT) smacking the teeth out of your mouth on pricing. You want to drive some traffic to your store and you think you could do it by cutting prices on a high-profile, high in-stock title like GTA: SA.

Now, someone is going to eat that price cut. It can either be you, as the CEO of a major consumer electronics merchant, or you can push some of this sewage downstream by getting concessions from TTWO.

Take-Two wouldn't like it but what are they going to do about it? Their leverage is gone. The PS2 is dying and, ironically, in limited supply. TTWO's only lever is GTA for the as-yet unreleased new consoles and maybe NBA or NHL games. In other words, Take-Two has nothing save for the ability to take the Gooey end of the stick with a smile.
position in erts, ttwo

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