What The 'Red Dead Redemption 2' Delay Means For Take-Two Investors

“A delayed game is eventually good, but a rushed game is forever bad,” Shigeru Miyamoto, co-representative director of Nintendo Co., Ltd (ADR) (OTC: NTDOY) once said when he delayed the launch of the Nintendo 64.

It may be disappointing, but the "Red Dead Redemption 2" delay is nothing unusual in the video game industry, especially for Rockstar Games.

Strauss Zelnick, chairman and CEO of Take Two Interactive Software Inc (NASDAQ: TTWO) said at its latest earning call, “'Red Dead Redemption 2' will be their first game created from the ground up for the latest generation of console hardware, and some extra time is necessary to ensure that they deliver the best experience possible. Such decisions are not made lightly, and are driven by our team’s unwavering commitment to unparalleled quality.”

A Common Practice

Take-Two has made similar moves in the past, which have paid off extremely well. The practice started when "Grand Theft Auto (GTA) 3" was delayed three weeks following the 9/11 terrorist attacks due to obvious unforeseen circumstances. Additionally, the company delayed "Grand Theft Auto 5" because “we want the game to be as good as it needs to be,” said Zelnick. "Grand Theft Auto: Vice City" and "San Andreas" were also delayed due to “technological problems.”

All of the games in the "Grand Theft Auto" series went on to receive great praise and have experienced strong success. Specifically, "GTA 5" has now generated over $2 billion in revenue.

One of the most memorable delays in the industry was the original "BioShock," which took three years to create. It then took five years to develop "BioShock Infinite." However, the series has since been deemed as “the greatest series ever” by the Gamer Scene blog and has generated over 500 million in revenue.

Other Rockstar games such as "Bully" (an action-adventure game), "Midnight Club: Los Angeles" (a racing game), "L.A. Noire" (an action-adventure game) and "Max Payne 3" (a third-person shooter game) all experienced notable delays. Yet, these games ended up reviewing extremely well (all receiving 9/10 on Steam) and each sold millions of copies.

That leads to "Red Dead Redemption 1," which did not even release a trailer until four years after its first tech demonstration. The title ended up officially being delayed one month but still sold over 14 million copies.

What Does This Delay Mean?

For fans, it means users are going to receive a higher-quality game next spring. Rockstar has always delivered immaculate quality games and it previewed this by releasing what the Game Debate Blog described as “a gallery of absolute stunning new in-engine screenshots.”

As for investors interested in Take-Two, Jefferies analyst Timothy O'Shea believes the 8-percent plunge that occurred after the announcement to delay the release Monday evening was a huge overreaction and sees it as a buying opportunity. MKM Partners raised its price target to $80 (16-percent upside) Tuesday morning.

Take-Two’s Zelnick highlighted:

“We (Take-Two) still expect fiscal 2018 to be a year of strong earnings and cash provided by operating activities for Take-Two, despite an unusually light release slate, driven by new releases of 'NBA 2K' and 'WWE 2K,' our robust catalog led by 'Grand Theft Auto,' and innovative offerings designed to drive engagement and recurrent consumer spending. Looking ahead to fiscal 2019, we expect to deliver both record Net Sales and record net cash provided by operating activities, in excess of $2.5 billion and $700 million, respectively, led by the launches of Rockstar Games’ 'Red Dead Redemption 2' and a highly anticipated new title from one of 2K’s biggest franchises.”

At Tuesday's close, shares of Take-Two were up 5.49 percent at $72.83.

Related Links:

Why Take-Two's Initial Slide Didn't Make Sense

Take Two: Volatility Extraordinaire After Game Delay, Q4 Report
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Image Credit: By Rockstar Games [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons