Viacom to take games to ‘next level'

"Viacom's Nickelodeon division has pledged to take its games business to ‘the next level' this year following a new partnership with Take 2's casual 2K Play label.

The company has signed a three-year worldwide deal with the publisher - an extension of a current agreement between the two firms - which will see DS, PS2 and Wii titles released across North America, Asia and Europe.

The contract covers four Nickelodeon pre-school properties: Dora the Explorer, Go, Diego, Go!, Wonder Pets, and The Backyardigans.

Arwed-Ralf Grenzbach, VP of video games, music and special products for Nickelodeon and Viacom's Consumer Products division, told MCV:

"Our relationship with Take 2 is very solid and we have been steadily building upon our partnership since entering into an agreement to licence our pre-school shows in the United States. "

In other words, the buyout rumor that I mentioned in an earlier post was indeed false (as we already know), but like many rumors, there often is/was some grain of truth to the news. 

I like this news. I think Viacom has seriously considered buying TTWO, despite their denial. It shows a good relationship between TTWO and Viacom, which could lead to an eventual buyout. (But like I've said, never buy a stock based on buyout rumors alone.)

The market must like the news also, because the stock was in the red today.  After the news, it's in the green.

I may buy/sell TTWO here in the short term, but I'd suggest buying and holding during late March. 

Grand Theft Auto IV is coming out, and it is going to have incredible sales figures.

Per Wikipedia: http://en.wikipedia.org/wiki/List_of_best-selling_video_games#Top_20_console_games_of_all_time

Grand Theft Auto - Vice City (15 million copies sold)

Grand Theft Auto III  (12 million copies sold)

Grand Theft Auto: San Andreas (12 million copies sold)

To put this in perspective, Halo 3 sold 8.3 million copies world wide from late September 2007 to early January 2008.  Halo 3 is a console exclusive and did in three months, what it's predecessor, Halo 2 took three years to do (reach 8 million units in sales).  Halo 3 was a console exclusive - in other words, only Xbox owners can play it.  GTA will run on PC, PS3, and Xbox 360. 

I'm not an analyst, but I'm guessing that GTA IV is going to move at least 8 million units in it's first 3-6 months on the market.  So, 8,000,000 x $59 = $472,000,000.  And that doesn't include special edition versions of the game that go for $10 more.  Of course, the retailer and the developer will get their cut of the profits, but TT will still have income from other games as well.  

Anyways, I still think TTWO is a good stock, especially for the long haul.  There will be a bounce when GTA IV is released, then some profit taking, then another bounce when the GTA sales figures are announced, then some profit taking, etc.  We might be looking at $20 by May, and I'll hopefully get to ride the wave up and down.  

Edit: I just sold off my TTWO position on this bounce.  However, I have complete confidence the stock will dip again, probably down to $15.60-$15.80, at which point I will buy it back up.

Gaming stocks tend to revolve completely around when the major games are being released.  Most major games are released in the Christmas season.  However, many of the more high quality games often get delayed.  Such is the case with GTA IV.  With big games often getting delayed, the stocks often fluctuate greatly.  When the GTA IV delay was announced, TTWO stock got hammered.  When the GTA IV release date was announced, the stock bounced.  I tend to follow individual publishers based on the game release schedule.  I'm not sure if the "gaming" sector follows a pattern or not, but I would imagine it does, based generally on a big Christmas season and a slow spring/summer.  I say this because there is usually a drought of good games in the Spring and Summer.  However, this year, there appears to be a few good games coming early in the year, which tends to buck the trend.  Anyways, I'm not an expert on gaming stocks, but I follow the industry and know when a company has a hot product coming out.  Upcoming game releases vs. price of stock is how I make my buying decisions in regards the value of gaming stocks.  There are certain new intellectual properties that don't have the name of "GTA" or "Halo" but have lots of hype behind them.  I'll invest in those "under the radar" situations too.  I've never looked into the ETF situation. 

I'ts too bad I sold TTWO too early.  I made $15 and planned on getting back in at a lower price.  They had been languising for a few days, and I sold too soon.  Now they've popped to $17.00.  However, I still think they will drop to below $16 before the GTA launch, and I'll be buying back in at $15.80 or below.