Analyst: GTA IV Can't Be Judged on Sales

In his latest research note on Take-Two Interactive, UBS analyst Ben Schachter noted that Grand Theft Auto IV is already receiving "very positive early positive buzz." He said, "A review from the official Xbox magazine was apparently leaked on the internet w/a perfect 10 score – our discussions with other reviewers indicate it will likely not be the only one." Schachter estimates that the game will sell at least six million copies this year in the U.S. alone. He also believes sales of the game in the U.S. will represent roughly 60 percent of the worldwide total.

Importantly, Schachter pointed out that GTA IV's success ultimately can't be judged on its sales total, but instead investors should look to the game's attach rate as a proper measure of how it's faring compared to prior iterations. "Investors cannot define success of the game in terms of units of GTA IV sold compared with prior GTA titles. This is because the game can only be sold to consumers who own a console capable of playing the game. To that end, the success of the game is defined by the attach rate (or tie ratio) which equals the number of units sold / the installed base of applicable consoles (in this case Xbox 360 and PS3)," he explained.

Circling back to the positive early buzz and the importance of reviews, Schachter stated that there is definitely some upside in his six million units estimate. "Should Metacritic scores come in above 95, attach rates could rise to 30%+, implying potential U.S. sales of 7-8mm units (scores for the past three GTA titles were 95, 95, and 97). Any attach rate above 26% would beat expectations in our view," he said.

On a worldwide basis, Schachter believes the game could reach about 10.5 million unit sales by the end of this year. "At 6mm units in the U.S., the game would generate ~$360 million in total retail sales (assuming a $60 retail price), at 8mm units, the game would generate $480 million of sales in the U.S., or about 33% upside from current expectations," he added. "Additionally, we expect the game could do similar numbers in Europe, almost doubling our U.S. totals."

Finally, regarding the much talked about pursuit of Take-Two by Electronic Arts, Schachter said that "while the assumed success of GTA helps TTWO's negotiating position, at the end of the day, we continue to believe that ERTS will be able to buy TTWO in the $26-$28 range." The tender offer is set to expire this Friday at midnight. Also, contrary to statements from Wedbush analyst Michael Pachter, who suggested that an EA buyout could potentially lead to a delay to the release of GTA IV, Schachter commented that any delay would be "extremely unlikely." He said, "GTA IV will almost certainly launch on time (Apr. 29) and meet/possibly exceed expectations."