Hey,
Thanks for the interesting post. Most posters here are interested only in intraday fluctuations, and it is refreshing to find someone with a broad view of the company and industry.

My three biggest positions (by a very wide margin) are TTWO, ATVI and ERTS. I think that this industry was pushed down this year by a retrenchment of casual gamers and by lack of solid content for hard-core gamers. I think a lot of this is going to change next year, and I am positioned to capitalize majorly. The change will start with the hard core gamers, as a huge stream of AAA titles are coming. CoD MW2 is the first of these great titles. Hardcore gamers buy such games with their last $. Next year we will see Main Street economy improving, and casual gamers will start buying games again.

I agree with you that TTWO is likely to be bought out, sometime next year. It is my largest position, and it is VERY large by most standards. TTWO has improved so much, and now has 2 proven AAA franchises (GTA and BioShock), and I think more are coming. Next year Mafia II is going to be released, and this game will make heads spin. Watch the trailers to get an idea how big this game is going to be. Also, Red Dead Revolver comes out H1 2010, and it is also going to be big. BioShock 2 drops on Feb 2010, and is very likely to be sensational. They are working on a PS3 exclusive called Agent, which many predict is going to do to the PS3 what GTA did to the PS2. And sometime at the end of 2010 we are going to see GTA V, which is likely to dwarf even sales figures from CoD MW2. TTWO is selling at a ridiculous forward multiple, as 2010 and 2011 are going to be their best years EVER. For this Q they have an unexpected success with Borderlands. What is so nice about TTWO is that all of their major titles are internally owned IP, and they invest in really high quality content - what really brings home the revenues, and lots of it. Being that focused is what is going to make them so successful moving forward.

I am very bullish on ATVI (my second largest position). With regards to the business models you outlined, I think that digital distribution and premium services hold big opportunities. With digital distribution they can cut-out the retailers or 3rd party digital distributors, and increase their margins quite a bit (how much - anyone knows?).

With premium services, they bring in easy additional high-margin revenues. I think that there are many ways to get creative here and drive more revenues from their huge fanatic installed based of WoW (and potentially all other PC and Console games they have). These are one-time non-recurring transactions - but there can be many virtual items or services that can be sold this way to each players. This increases players financial commitment to the game and keeps them interested for the long run. Handled properly, this venue can contribute some more future upside to ATVIs bottom line.

With regards to subscription services - I think they actually alluded to this in the call. Getting great customer service and matchmaking for PC and Console games alike. Couple of $ for Battle.net is not a big deal if you play ATVIs games online all the time. This is a huge opportunity to own the entire distribution chain and increase the size of the crowd that pays subscription fees. And think about the scale that Battle.net was designed to support. They may offer the same infrastructure to other game developers, and milk extra $ across the industry. The possibilities are endless.

I think you need to be blind not to see how large is the opportunity for ATVI. As usual, Wall Street analysts will point it out only when it's too late. I feel awesome for being able to catch TTWO and ATVI after such a massive crash, and before the huge run-up begins. It is a great time to buy and hold these names, and accumulate on any meaningful dip.

Thanks for the intelligent post. Would love to hear more from you.

MT7