For the last couple weeks, Take Two's Red Dead Redemption titles for the Xbox 360 and PlayStation 3 have showed considerable pre-order interest on the Amazon bestseller video game chart as well as other online charts.  GameStop stores also appear to be involved in a heavy marketing campaign for the title.  This has come as a surprise for those who closely follow the company since the previous title in the series, 2004's Red Dead Revolver, scored ratings of around 75% and may have not even produced an operating profit for the company.  Moreover, the title is still one month away from release.

Indeed, Rockstar Games, the developer behind the Grand Theft Auto series, has had limited success in the last few years outside of the popular GTA series.  Their last non-GTA release, Midnight Club, scored well but failed to capture a relatively large number of sales.  The marketing campaign behind Red Dead Redemption, however, seems to suggest that Rockstar believes they have something special here.  Critics seem to agree and are beside themselves with excitement as the game is being touted as on par or perhaps even better than GTA.

Investors remain skeptical, and rightfully so.  In 2005 Activision released a similar themed Western open world title, Gun, which sold well below expectations.  In fact, the video game Western genre has not seen a mega hit title in over a decade.  Take Two's management may have considered this when they reset expectations for 2010 in December of 2009, causing the stock to plunge 30%.  They recently beat their reset guidance in February and appear to still have low expectations for the year.

So some investors are beginning to speculate and hope for the possibility that Red Dead Redemption becomes a surprise hit of 2010.  Let's take a close look at what that would mean for the company's results this year.

First, let's assume that company guidance for the title is somewhere around the point where the company ships and sells just enough to break even and make up for development and marketing costs.  That would not be far-fetched considering guidance for the year is around a .50 per share loss overall.  That would likely mean guidance for Red Dead Redemption is somewhere around  1.5-2 million copies shipped and sold, considering how long it took for Rockstar to develop and ship this product.  Sales above the breakeven point turn into the wholesale price minus the cost of goods sold and royalties.

Some notes: it was reported last year that Rockstar executives received a new incentive plan that included more stock and less royalty percentage.  Also, unlike GTA, a Western title does not license expensive music.  One last thing to keep in mind: TTWO is not a taxpayer in 2010. Putting it all together, let's assume that the average wholesale price around the world isa copnservative $40 with COGs of 33% and royalties at 5%.  That results in an extra $25 per copy shipped and sold above the company's expectations.  Here are some scenarios of how a single game like this can be a game changer for the company's shareholders, with sell-side analysts currently expecting a loss of .44 for the year:

1M higher than expectations = 25M or .30/EPS above guidance
3M higher than expectations = 75M or .89/EPS above guidance
5M higher than expectations = 125M or $1.49/EPS above guidance
7M higher than expectations = 175M or $2.08/EPS above guidance

Given the current interest in the title, it would be a good bet to say that the title will be 1M higher than expectations.  This level of interest one month prior to launch is almost always reserved for 3M+ sellers.  TTWO guidance also proved conservative in February, making it possible that the company's current guidance and analyst expectations are too low.

More important for shareholders is the upside this single game can produce if ratings and reaction are high enough.  A game with this much talk receiving a 90% score could make it leap 3M or more above expectations.  That would turn this into a healthy profitable year for the company in a year prior to a mega GTA release (which previously produced over $2 earnings).  It would be a redemptive year indeed for Take Two Interactive if that story played out, so it would be a good idea to pay close attention to the previews, ratings and reviews this game receives.  That's because if it were to score in the very high GTA category, then it would be the only open world third person sandbox title aside from GTA to ever score in that range.  If it achieves that, look out.