The decision by Take-Two Interactive Software Inc. (TTWO) to suspend distribution of the violent video game "Manhunt 2" could actually end up boosting demand from curious gamers, industry analysts said Friday.
Analysts do not believe the move will harm the company's long-term bottom line. And if the game ever sees the light of day, the current controversy could give the title "a lot more exposure that would actually benefit game sales in the long run," said Colin Sebastian, senior research analyst at Lazard Capital Markets.
"Manhunt 2," initially slated for a July release on Nintendo Co.'s Wii and Sony Corp.'s (SNE) PlayStation 2, depicts the escape of an amnesiac scientist and a psychotic killer from an asylum and their subsequent epic killing sprees.
Following bans by Britain and Ireland, as well as a ratings flap in the United States, Take-Two said last week it was reviewing its options.
"We believe in freedom of creative expression, as well as responsible marketing, both of which are essential to our business of making great entertainment," the company said.
The game received a preliminary "Adults Only" rating in the United States from the industry's self-governed ratings body, the Entertainment Software Rating Board, restricting sales to customers 18 and older.
More importantly, such titles aren't stocked by large retailers such as Wal-Mart Stores Inc. (WMT), and all three home-console makers — Microsoft Corp. (MSFT), Nintendo and Sony — do not allow "AO" games on their systems.
Take-Two still could appeal the rating or craft a toned-down version that meets the less-stringent "Mature" rating for players 17 and older.
It's a move anticipated by analysts, but no indication was given on the fate of the title as of Friday.
Telephone messages left with a Take-Two company spokesman were not returned, and a spokesman for its Rockstar Games division, which created "Manhunt 2," declined comment.
"It's free publicity," Sebastian said. "Consumer backlash is a risk, but at the end of the day if it's rated 'M' the retailers will take it."
Added Rick Munarriz, a senior analyst with The Motely Fool: "If anything, with this suspension there's going to be a demand for it because of the controversy."
Investors also seemed unfazed as Take-Two shares rose 21 cents, or 1 percent, to $20.82 in trading Friday.
Take-Two and Rockstar still have a marquee franchise on tap for a fall release.
Previous versions have been top-sellers, and Sebastian said any financial hit from "Manhunt 2" would be more than offset by the new "GTA" game.
"Relative to 'Grand Theft Auto,' it's a lot less significant," Sebastian said of "Manhunt 2." "'Grand Theft Auto' is the key driver. This is a second-tier title."
The previous game in the series, "Grand Theft Auto: San Andreas," was at the center of a ratings controversy two years ago that sparked a Congressional inquiry.
Rockstar was forced to replace its first edition of "San Andreas" after a hacker discovered a password-protected game inside it that involved a sexual encounter.
This year has already been a turbulent one for Take-Two, which recently underwent a shareholder coup that ousted its chief executive and nearly all of its board.
The company said earlier this month that layoffs were likely as part of a restructuring effort designed to cut costs by about $25 million a year by 2008. Specific numbers haven't been released. Take-Two has about 2,100 employees.
It's not clear what effect the "San Andreas" controversy had on sales, as the title had already been available for months by the time the hack was discovered.
In 2004, the year it was released, "San Andreas" was the top seller, with more than 5.1 million copies sold in the U.S., according to market analyst NPD Group.
Controversies like "Manhunt 2" are to be expected for a company with a reputation for publishing edgy content, said Munarriz, the analyst.
"You have a company that's always lived in the gray area," he said. "These games are controversial, and that's part of the allure."