Analysts Not As Confident As Take-Two On NBA 2K12

Despite a potential league lockout looking more and more likely, Take-Two is confident that its retro-focused NBA 2K12 will continue the series' healthy sales. Analysts are not so sure.
Despite a potential league lockout looking more and more likely, Take-Two is confident that its retro-focused NBA 2K12 will continue the series' healthy sales. Analysts are not so sure. For two quarters in a row now, Take-Two has refused to adjust its fiscal guidance based on the possibility of there being no NBA season this year: last quarter the company said it was because it didn't know how to quantify the impact of a lockout, but when the company again maintained its guidance on Tuesday (despite many saying it would have had a "free pass" to lower expectations), it seemed to shrug off whatever impact there might be. "Given how lifelike our games are, we think it's possible we can fill a need in the case of the lockout and offer consumers an opportunity to participate in basketball," CEO Strauss Zelnick told Reuters. By comparison, Take-Two's biggest (and only) pro sports competitor, Electronic Arts, has already factored in lockouts for both the NFL and the NBA in its guidance, and is assuming the worst. According to its CEO, John Riccitiello, its next Madden NFL game would see a revenue hit of "about a third, $85, 90 million bucks" without an NFL season to help promote the game. Take-Two is marketing NBA 2K12 safely: it is largely focused on stars from the NBA's past, with a retro theme which continues that started by last year's Michael Jordan-centric NBA 2K11, which saw sales more than double those of 2K10. The company thinks the series has the same legs with or without a season to excite fans into buying the game, but analysts are not so sure. Despite Take-Two's guidance remaining unchanged, Sterne Agee has lowered its fiscal EPS guidance from $0.24 a share to $0.18: partially because of its weak Q1, but also because of the possible league lockout. "Lockouts, historically speaking, have negatively impacted interactive entertainment products for the underlying sport," Sterne Agee analyst Arvind Bhatia said. If the lockout persists and there is no season, Sterne Agee estimates a 1 million unit sales hit, lowering its expectations to 4.5 million sold (by comparison, 2K11 has sold 5.5 million to date). Janco Partners is estimating drastically fewer sales than that: 3.2 million units, down from initial estimates of 4.5 million. This sales hit is the basis of Janco's reduced financial guidance for the company: while Take-Two is estimating $1 to $1.1 billion in sales for the fiscal year, Janco analyst Mike Hickey is projecting $955 million. For better or for worse, Monday's filings were the company's last chance to adjust its guidance for a league lockout. NBA 2K12 will be released for the PlayStation 3, Xbox 360, PC, Wii, PlayStation 2 and PSP on October 4. Other titles currently projected for the reaminder of this fiscal year include The Darkness II and XCOM, with the possibility of Irrational Games' BioShock Infinite.

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