Analyst Michael Pachter with Wedbush Morgan said in a Monday note, "In trying to calculate the sustainable earnings [for Take-Two], we must address the risk of losing key talent. Following a protracted negotiation, Take-Two signed Sam and Dan Houser to a three-year contract in February 2006.
"The brothers are the driving force behind the Grand Theft Auto series, and are intimately involved in game decisions. While neither writes game code, we believe that they are analogous to the director of a Hollywood film, instrumental in determining the final shape of the ultimate games released.
"We expect a bidding war for the Housers’ services in February 2009, and remain convinced that Take-Two faces two equally unpalatable options: either lose the Housers to another bidder, or pay more to retain them."
He said if Sam and Dan--who serve as president and VP of Take-Two label Rockstar Games, respectively--decided to leave the company, sales of future GTA games would suffer.
Pachter referenced the departure of key talent from EA's Medal of Honor franchise, who went on to found Activision-owned Infinity Ward, creators of the hit Call of Duty franchise. Meanwhile, sales for the Medal of Honor series declined 40 percent.
He said if the Housers do stay with Take-Two, future costs of developing GTA will rise. Pachter estimates a current "internal royalty" of 15 percent of sales. New negotiations with the Housers could see that rate rise to 20 percent, he said.
Another analyst, Doug Creutz with Cowen and Company, said that the Houser's upcoming contract renewal may have been a factor in EA walking away from Take-Two talks.
He said "the fundamental outlook for sustained growth and more consistent profitability at Take-Two continues to strengthen," but added, "...The main question mark is the status of Rockstar’s key talent..."
Take-Two had not responded to request for comment regarding the Housers as of press time.