Take-Two Interactive Software, Inc. (TTWO), Electronic Arts Inc. (EA): The $250 Million “Grand Theft Auto” Gamble

Source: Rockstar Games.

Cheap just won’t cut it for tentpole video game titles. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is rumored to be spending more than $250 million on development and marketing costs for the new chapter in its Grand Theft Auto franchise. That massive budget would make GTA V one of the most expensive video games ever produced, rivaling the total spent on many blockbuster movies.

And it should be worth every penny. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) has already sold close to 130 million units in the Grand Theft Auto brand, and accumulated enough awards to make it one of the industry’s biggest critical hits as well. Analysts expect the winning streak to continue with this week’s launch, with as many as 25 million copies of GTA V set to sell this year. That should power a 50% spike in revenue for Take-Two over last year’s numbers.

Hits are becoming all-important to developers, so it makes sense for them to focus their limited budgets on a small number of games. Electronic Arts Inc. (NASDAQ:EA), for example, is aiming to launch 11 major titles this year, versus the 36 it published in 2011.

But Take-Two Interactive Software, Inc. (NASDAQ:TTWO) isn’t the only company betting on a Grand Theft Auto V hit. GameStop Corp. (NYSE:GME) expects major revenue growth this quarter, reversing a brutal nine-quarter slide in comparable sales. After enduring years of shrinking, the retailer is feeling optimistic again thanks to the stacked game calendar this fall that features big new titles from The Walt Disney Company (NYSE:DIS), Electronic Arts Inc. (NASDAQ:EA), and Activision Blizzard, Inc. (NASDAQ:ATVI) — in addition to this week’s GTA V launch.