Will Take-Two's WWE Pact be the Firm's Kiss of Death?
As the publisher of Grand Theft Auto, BioShock and NBA 2K, Take-Two Interactive (NASDAQ: TTWO) is one of the most popular publishers in the world.
The company's market cap may be small -- $1.25 billion versus Electronic Arts' (NASDAQ: EA) $5.4 billion and Activision's (NASDAQ: ATVI) $16 billion -- but its success is not to be underestimated. Year-to-date, shares of Take-Two are up more than 27 percent -- a bit higher than EA's 20 percent gains, but a bit lower than Activision's 30 percent rally.
Given how well the firm is performing, investors may not have been surprised when Take-Two agreed to take the World Wrestling Entertainment (WWE) license from THQ, which filed for bankruptcy late last year.
Not that long ago, THQ used to the WWE license to add millions of dollars to its bottom line. Acclaim did the same thing in the '80s and '90s with the WWF WrestleMania franchise and other World Wrestling Federation properties. Midway also released a few video games -- WWF WrestleMania: The Arcade Game and TNA Impact, the latter of which sold more than one million copies across multiple platforms.
In addition to wrestling games, there is one thing these corporations have in common: they all went bankrupt.
To be fair, these publishers had far greater problems than any one license could provide, least of all WWF or WWE. Even so, there is a distinct trend between wrestling games and the death of game publishers.
LJN Toys, a lesser known player in the game industry, worked on a number of wrestling titles in the '80s and '90s. The company was sold to Acclaim after sales of its previous owner, MCA, plunged 79.5 percent.
Electronic Arts (NASDAQ: EA), which published the WCW Mayhem and WCW Backstage Assault games, is the only notable publisher to escape the wrestling game curse. According to IGN, EA was forced to cancel the WCW Mayhem sequel after World Championship Wrestling was sold to the World Wrestling Federation, negating the former license agreement.
That may have been a blessing in disguise. While some wrestling games have been very successful, they seem to become a crutch for publishers that are in trouble or simply have no idea what to do next.
Acclaim and THQ both had wrestling games long before their sales plunged. By the time they filed for bankruptcy, however, wrestling licenses were nearly all they had left. Some may argue that THQ was in a better position than Acclaim (thanks entirely to the Saints Row series), but the end result was the same.
Between the Grand Theft Auto, Max Payne and Red Dead series, Take-Two should be able to overcome the wrestling game curse. Even so, the company would be wise to approach its new license with the utmost caution. Wrestling games can be very profitable, but they can also be very deadly.
Follow me @LouisBedigianBZ
(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.