Red Dead vs. Red Ink

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Zelnick counters that he supports the Houser brothers' creative viewpoint. Still, he says, "You never, ever want to say we do such a great job [that] we don't have to have discipline."

In 2009, after four years without a release, Red Dead appeared to be one of those inspired projects that never gets finished, like Duke Nukem Forever, also in the Take-Two stable, a much-anticipated game that has been in development for 13 years. Then last November, Leslie Benzies, president of Rockstar's Scotland studio, which leads development on the Grand Theft Auto franchise, arrived in San Diego to take charge in an office off the production floor, from which he oversaw 200 employees.

Months later, in January, people calling themselves spouses of Rockstar employees in San Diego complained of terrible working conditions. A blog posting on the gaming website Gamasutra described how employees toiled away in their cubicles for 12 hours a day, with mandatory Saturdays; a response compared the New York offices to the Eye of Sauron that dominates Middle Earth in the Lord of the Rings trilogy.

At the time, Rockstar made light of the allegations by creating three downloadable computer screen wallpapers depicting an all-seeing eye with the Rockstar logo. "This was someone lobbing a grenade over the wall and posting it publicly," Zelnick says. "Lord knows, we make mistakes now and then. In this particular instance, we couldn't come up with any mistakes that had been made."

Red Dead's release continued to be pushed back, while Rockstar worked to fix more than 200,000 bugs, some of them as minor as the color of dust. Apr. 27 came and went, but the Manhattan billboard with that date on it—a three-story high advertisement depicting Marston with a bandolier around his chest, aiming a revolver—remained.

Janco analyst Hickey estimates that Red Dead Redemption will break even at 4 million copies. Supporting the development of the next major epic is another matter. The gaming industry, as analyst Pachtel suggests, is moving toward less ambitious projects. With thinner wallets, even hard-core gamers are getting choosy. Facebook and other platforms are sapping available dollars, and hours, with more "casual" games selling for $1.99. Then there's the increasing payday that celebrity developers like the Housers command. In 2008 the Housers signed a new deal with Take-Two that, in addition to licensing rights, gives them a share of profits generated from each game they release. That deal expires in January 2012, and Take-Two likely will have to cough up even more to keep the Housers from bolting to a rival.

Zelnick won't say whether he's already opened contract negotiations with the Housers, though even the possibility of their defection should be frightening. In 2003, when Electronic Arts, the maker of Madden NFL, saw its Medal of Honor development teams jump ship, sales of that franchise tumbled 40 percent. Those teams then produced the Call of Duty franchise, which has consistently outsold Medal of Honor since their departure. During E3, the industry buzzed with reports that Activision CEO Bobby Kotick had hosted the Housers in his box at a concert. Kotick and the Housers did not respond to requests for comment.

"I do pride myself on creating environments that attract and keep the best and brightest in the industry," says Zelnick. "You can never underestimate the blood, sweat, and tears that the creative team put in to make it happen. No one would have congratulated us on releasing Red Dead three months earlier."

Edwards is a correspondent in Bloomberg Businessweek's San Francisco bureau.

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