Confirming the troubled publisher's heavy reliance on its controversial Grand Theft Auto series, Take-Two's latest 10-Q filing includes mention of a three-year, USD 25 million deal to secure and safeguard the creative team behind its flagship franchise.
Despite promising a revised strategy that includes product diversification and an expansion of titles from its 2K Games subsidiary, the publisher is keenly aware that the bulk of its profit (and, ironically, the main catalyst for its seemingly endless run of litigation woes) in recent years has been directly attributed to the GTA franchise.
Having recently slumped to a net loss of USD 29 million for the first quarter of 2006, the 10-Q filing discusses risk assessment for the publisher, suggesting that a failure to maintain its key creative staff for the series could seriously damage the company in future months.
"We rely on our management and other key personnel for the successful operation of our business. In particular, 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," the filing states.
According to the filing, the deal grants "certain Rockstar employees" USD 14.8 million in restricted common stock, with a further USD 10.2 million over the next three years, although the company admits that "there can be no assurance that we will be able to retain these personnel at current compensation levels, or at all."
Analysts remain cautious however, hinting that Take-Two's efforts to mop up Hot Coffee with USD 25 million in stock might not be the best way forward for the publisher, and could back-fire, adversely affecting its ability to meet financial guidance for the 2007/2008 fiscal period.