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NBA Lockout May Prove Damaging to Take Two Interactive Bottom Line

By Perry Rod, Published: October 10th, 2011 8:07 AM CDT

While Take Two Interactive (NASDAQ:TTWO) CEO Strauss Zelnick reiterated on his company’s last conference call that the implications of an NBA lockout were unknown and would not affect company guidance for their related NBA title, NBA 2K12 has quietly hit the market this week.  The only problem is it has been a little too quiet with sales appearing to be less robust than last year, when Take Two made a splash by having NBA legend Michael Jordon appear on the game’s cover for the first time.  Now, Michael Jordon is making his second appearance as the cover athlete.  However the title, which was listed at #5 and #6 on the overall bestselling chart last year, debuts at #11 and #13 during the same weekly period this year.  This may be surprising for some, since the pre-order bestselling placement of the title on in September 2011 ranked similar to its September 2010 pre-order sales.  Yet, today, the title appears to be falling fast on the Amazon chart, quickly sinking below the top 30.

Company guidance for the quarter is highly dependent on the NBA title, as analysts expect a healthy non-GAAP profit of .34 per share during the quarter.  Last year, the company posted a .52 profit during the period mainly from a profitable 2K Games title called Mafia, as well as the NBA title, which was the top selling overall title in October 2010 according to the NPD Group.  When asked about the potential impact of an NBA lockout this year, CEO Zelnick suggested Take Two would wait and see if the potential lockout would have any impact on game sales.  "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."

Some analysts have previously stated words of caution about the NBA lockout's impact.  Arvind Bhatia of Sterne Agee said, “Lockouts, historically speaking, have negatively impacted interactive entertainment products for the underlying sport.”  Take Two appears to want to wait and see before cautioning Wall Street.  Investors may not want to wait around for quite as long if reflects overall sales of the title.

Disclosure: author holds no position in Take Two Interactive


Related: TTWO

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