Take-Two’s Red Dead Redemption 2 Has Smashed Record

Take-Two's (NASDAQ: TTWO) Red Dead Redemption 2 generated more than $700 million at retail in its first three days. The title actually sold more in its first eight days than its predecessor did in eight years. That's only the beginning for the game, which has been many years in development. It will continue to make revenue not just from added sales but also from microtransactions within the game.

A full transcript follows the video.

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This video was recorded on Dec. 14, 2018.

Dylan Lewis: Dan, we've got one more to touch. This is going back to the video game space and Red Dead Redemption. This is, I think, really, the Chinese Democracy of video games. It was this long awaited, a lot of hype --

Dan Kline: Except it's a hit.

Lewis: That's true. It's hard to argue that this is a wildly successful game. For the unfamiliar, Red Dead is from video game company Take-Two in collaboration with Rockstar, one of their subsidiaries. This was released in late October, a little bit before the holiday season. But we got a glimpse of some of the success that it had already in some conference call conversations with management. I'm just going to drop a couple of quotes here, one of them from the most recent call. "The title has set numerous records, including achieving the biggest opening weekend in the history of entertainment with over $700 million in retail sell through during the first three days. Red Dead Redemption 2 sold more in units in its first eight days than the original blockbuster Red Dead Redemption sold in its first eight years." And, just to back that up a little bit more, as of today, the title has sold over 17 million units worldwide. This is a wildly successful game. I think, given the launch time, a lot of the people that are hardcore fans and really wanted it probably already have it. But I imagine that this is something that a lot of people are still asking for for the holidays.

Kline: Just think about where that number would place it on movie releases. It would make it a top five film release this year, and it's going to well surpass that.

I think what's really interesting about Red Dead Redemption -- and I will be honest, I am not capable of playing games like this. I have a 14-year-old, and that's how I know these things. We're starting to see this new genre of games, where the game comes out, and then it continues to develop. What's been very interesting about the Red Dead launch cycle is, there's actually been some pushback from the hardcores on the gameplay, on the money-earning system in the game. And they've actually made some changes. These games are fluid now, where they have a two or three-year lifespan. We know there's paid downloadable content. You can buy Deluxe editions, where you get all of that for a year, things like that. But they're actually making some core changes to the gameplay based on some of the early feedback.

Lewis: Yeah. More and more, we are seeing the video game publishers focus on the micro-transactions that can happen within games and some of these add-ons that happen in the online worlds for these games. I think Red Dead Redemption is a perfect example of that. If you're a Take-Two shareholder, you have to be thrilled, because this was a release that was twice delayed. And this was the next franchise. They really needed to build this up to make sure they could sustain success beyond the GTA franchise that they've had so much success with.

Kline: Let me give Take-Two a lot of credit. One of the complaints about these micro-transactions, and it was a huge complaint with another stumbled big release, when EA put up Battlefront 2, the Star Wars tie-in game, is hardcore players want to be rewarded for playing. If you can pay extra money and get a funny hat that doesn't change the gameplay, but maybe makes you cooler, hardcore players are OK with that. But they don't want someone like me, who's not a hardcore player, who's an adult and maybe has more money than they do, to be able to spend $40 and all of a sudden have a character that's better than the one they've put 10,000 hours into. So, as much as there have been complaints with the monetary system, they are keeping it in favor of people who put in the time. And that's the core audience for take Take-Two and Red Dead Redemption.

Lewis: Yeah. And it's clear the reception has been so strong. This is really the game that Take-Two needed. You look at their financials, in fiscal 2018, the company did bookings of about $2 billion, and revenue just under $1.8 billion. They're guiding for fiscal 2019 bookings of $2.8 billion and revenue of $2.6 billion. That's a real welcome sign, because this is a stock that's priced for growth. After enduring a flat year, basically, investors wanted to see something successful from this franchise. They've totally delivered. You look at the guidance that they're providing, they're expecting some serious growth on the back of not only this franchise, but what they're doing with GTA and what they're also doing with their NBA 2K franchise, as well.

Kline: What's become really exciting is, we talked about the micro-transactions, these games are money makers years into their life cycle. As that dies down, it becomes like a movie franchise. They can put out Red Dead Redemption 3 and have this huge base to build off of that's ready for it. Much like we talk about IP, intellectual property, in the movie business, if you can put together four or five franchises and have that rolling release cycle, you'll have a very strong business. This coming out and working, it's a major pillar for Take-Two.

Lewis: You mention Red Dead 3. I don't think we can seriously talk about that coming out for another five years based on the release calendar so far. But I'm sure there are already people dreaming it up, Dan.

Kline: Actually, to tie our conversation back, the next step for Red Dead Redemption might be, next Christmas, a Switch release.

Lewis: Oh, really?

Kline: It was talked about -- you sent me a Q&A with, I want to say the president of Nintendo. He didn't exactly confirm it, but he said, when Red Dead Redemption 2 was conceived, the Switch did not exist. Now that the game is out there, it's really a matter of porting it over and figuring out how to, I don't want to say Nintendo-tize it, but obviously, there's different violence standards. There are kind of different rules for the Nintendo universe.

Lewis: Oh, got it.

Austin Morgan: I was going to say that I would like to see Red Dead Redemption 2, because it's a prequel to 1, I would like to see them release a remastered 1 that ties directly into Red Dead Redemption 2. The map's set up for it. I just beat it yesterday.

Lewis: 2 or 1?

Morgan: 2.

Lewis: So, you're ready for more.

Morgan: I'm ready for more.

Lewis: We'll see.

Morgan: The online beta just got updated. We'll see. It's a great game!

Lewis: We'll see what happens. I'm glad that out of the three of us, one of us plays the game. It gives us a little bit of credibility here in the studio. [laughs]

Morgan: The amount of detail in the game is absurd.

Lewis: So, your holiday wish is to have a game that's never going to happen.

Morgan: [laughs] Yeah.

Lewis: I'm glad we're setting our expectations pretty reasonably.

Kline: Good news, Austin, when it comes out, I'm buying it for you!

Lewis: Perfect. Dan, what's on your wish list?

Kline: See, I've been married for 18 years. We have a 14-year-old. Most of our effort goes into buying gifts for our child. So, usually, I just tell my wife what I want. This year, I just bought it for myself. As you know, I bought an Oculus Go headset, which has been a mild bit of fun. It's really cool virtual reality, but there's not much software for it. And, I bought myself an espresso coffee maker.

Lewis: Nice!

Kline: The house is full of gadgets. The espresso maker makes a very strong cup of coffee. I like it a lot more than the Keurig, which we've talked about on many an Industry Focus.

Lewis: So, you'll be hopped up on caffeine and playing virtual reality video games during the holidays.

Kline: Exactly! And all the games are the same. You jump out of a plane and control your descent using your head like. Very much, we're in the early stages of content. There is no Red Dead Redemption equivalent, or something that you would go "Oh, wow, I really want to sit with this headset." But, it's still sort of cool.

Lewis: Maybe we'll get there someday. Thanks for hopping on, Dan!

Kline: Well, Dylan, what do you want?

Lewis: Oh! Thank you for asking! I appreciate you asking! I've requested a bike rack, something that I can put on the back of my bike, so I can get some bags on the back and do some longer rides, get out into the city and have some fun. I could try to keep it simple. I also just buy stuff for myself. So, I make it hard for people to give me gifts. But, that's first and foremost on my list. A lot of gear-type stuff, that kind of thing.

Daniel B. Kline has no position in any of the stocks mentioned. Dylan Lewis has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Take-Two Interactive. The Motley Fool has a disclosure policy.