Take-Two Looking To Release One AAA Title Each Year

CEO Strauss Zelnick and 2K Head David Ismailer gave insightful interview

Back during E3, Gamesindustry.biz, one of the most respected outlets focusing on in-depth posts published about the game industry, was making the rounds. Take-Two Interactive, as one of the larger AAA publishers, was clearly on the itinerary.

The Take-Two booth was an odd sight at E3, being one of the more extravagantly equipped booths, but lacking entirely in games. So far in 2017, Take-Two’s two labels, Rockstar Games and 2K haven’t released many games compared to a very busy and successful 2016 which was filled with many major titles from 2K.

Rockstar is known for taking its time between launches, and everyone has heard news of Red Dead Redemption 2’s recent delay, pushing it into 2018. 2K had a really strong year in 2016, but that flurry of releases might be to blame for this year’s sparse schedule, including naught but an expansion for XCOM 2, the standard annual WWE and NBA titles and some ports and re-releases.

On the one hand, it seems like so many projects converged on 2016, that no others have had the time to come to fruition this year considering how volatile AAA development is – just look at Red Dead Redemption 2.

A lengthy interview with Strauss Zelnick and new appointed President of 2K David Ismailer has shed light on what plans the company has for the future and their views regarding the industry as it stands.

We kind of thought we were there in 2015. We had a really good schedule and we began to feel like we were delivering on the promise when we said: ‘We emphatically don’t believe in annualising titles except for sports titles. We want to build a big enough stable of IP so that each season we have a great group of releases

Take-Two has, in the past, expressed a desire to avoid milking franchises into exhaustion. Annual release schedules for the same IP tend to result in dropping sales numbers and negative fan reactions. Two examples are Call of Duty and Assassin’s Creed. As CoD drifted more and more into the sci-fi direction, sales dropped significantly and fans were riled up.

It took the success of Battlefield 1 for Activision to put the franchise into reverse and go back to World War 2. While this IP didn’t break the annual schedule, it has the benefit of multiple development teams working independently of one another.

Assassin’s Creed’s biggest stumble was the absolute catastrophe of Unity’s launch, and while Syndicate redeemed the franchise, it was clear that a break was needed, and after a long stretch of annual releases, with 2 games in 2015 and countless spin-off titles throughout its run, it took a 2 year break to sort things out.

Not wanting to milk franchises is also why we’re all hyped up for Red Dead Redemption 2 and not GTA 6 right now. Even if we’re not talking annual releases, Zelnick doesn’t want back-to-back sequels on the biggest IP, especially if GTA Online’s current iteration hasn’t run its course.

Take-Two has been eager to expand its IP library to have enough sources to draw upon when it comes to setting development schedules. 2K represents the bulk of this, though Rockstar has many acclaimed properties to their name. Nonetheless, Take-Two has been seeking new acquisitions. The company recently added indie hit Kerbal Space Program to their portfolio.

2K had a really good season this past year, but it was, for the company, still relatively thin. And it didn’t help that Battleborn wasn’t a big success. So part of it is the level of success, part of it is the schedule, and part of it is finding the human resources to actually take the intellectual property that we own and bring them to market. Those are an array of challenges, juxtaposed against the uncertainty of how long it takes to make a AAA title, which means we can find ourselves in fiscal 2018 with a much thinner schedule than we’d like

Naturally, Red Dead Redemption 2 would have been the major draw of this year. Both Take-Two and Rockstar like to release games with minimal rivalry and opposition surrounding them, and this extends to announcements as well, hence Rockstar’s sparse E3 appearances.

It’s reasonable to assume they didn’t pack 2017 full of titles in anticipation of Red Dead Redemption 2, but the delay of that title now leaves the year empty, which doesn’t look good for finances.

But it wasn’t intentional, and obviously fiscal 2019 will look much better with the launch of Red Dead 2 and a huge new title from 2K, as well as the 2K Sports titles, catalogue, recurrent consumer spending, NBA2K Online in China, Social Point and the like. We’ve already said that fiscal 2019, which isn’t that far away, is $2.5bn net sales minimum, £700m cash flow from our operations minimum… that’s pretty consequential

Take-Two, like many other developers, is treating the Chinese market significantly differently than the other regions. This is a mix of hugely different trends and expectations, and hugely different laws pertaining to entertainment. The latter tempered the former over the years, too.

In the past, Take-Two wasn’t interested in jumping into the mobile market, but with the acquisition of Social Point, a formerly independent mobile developer with a solid portfolio of successful releases, they are looking to expand.

Red Dead Redemption 2 will be the star of any year in which it is released, but we doubt any further delays would push it out of 2018. The game is looking at massive expectations, both from fans and from the publisher, thus it requires polish, but Rockstar has been working on the game for several years now.

We are moving in the direction of that goal, David has outlined his five-year plan that will get us part way there. Obviously we know what Rockstar tends to do. And Rockstar’s activities have been transformed by Grand Theft Auto Online.

Zelnick gave voice to a common assumption, and in some cases, a fear, regarding Rockstar Games. The massive success of GTA Online was bound to change the way the company moves forward, and it’s clear that Red Dead Redemption 2’s development has also been affected by this.

Online’s popularity has also most likely killed story DLC entirely, and many fans are worried that Red Dead Redemption 2’s single player campaign will suffer for it as well.

Ismailer goes on to detail a production plan for 2k.

Our goal is to grow and to continue focusing on a few key areas. We have NBA and WWE, we have our strategy business with Firaxis, we have a triple-A business. We are going to look at mobile and on Asia. Those six buckets are our key focus areas and growth opportunities.

The key takeaway from this is that the acquisition of Social Point as a mobile developer will more likely result in mobile titles based on 2K IP as opposed to Rockstar IP. Rockstar has been busy porting their older titles, such as 3D era GTA games as well a Bully to mobile devices, but based on this, you won’t be playing original Rockstar content on your phones anytime soon. That said, a mobile XCOM spin-off seems all the more likely.

In the past, Take-Two largely stayed away from the mobile market because Zelnick thought that it isn’t a steady enough market with too much risk involved. Those games that become hits tend to become massive hits, however, considering how many countless apps are released every day even, it is an impossibly small percentage.

Even with the kind of brand recognition many Take-Two IPs are packing, success in the mobile markets is almost based on luck more than anything else. How many games would Take-Two need to release before one becomes a hit?

I’m not skeptical about the market, I’m skeptical about one’s ability to participate in the market. The issue is when we tried to do standalone, made-for-mobile titles, we didn’t do very well. We have done very well with WWE and basketball, and we think there’s more opportunity there. The reason we acquired Social Point is so we would have a native presence on mobile through a company that has a track record of creating a multiplicity of hits.

Spin-off games based on the WWE and NBA IPs found success due to the fast-food nature of sports titles in the industry, as products which potentially reach the widest possible audience.

However releasing original content on the mobile market is a massive risk. It’s easy to be swept away in the sea of licensed games and copies. One of the reasons why the mobile market is being dominated by Chinese developers is because IP laws are vastly different there, so infringements are more difficult to defend against, and there is a good chance that the knock-off app will be more successful than the original.

But to be clear, I just said that the hit ratios are super low, which they are. Many companies have had one hit and no more, and the valuation of these companies were high. These were all truths, not opinions. My opinion is that the market is challenging, but we think we now have a way to participate in that market in a way that makes sense

Ismailer sees potential in Social Point becoming the third pillar of Take-Two, becoming a full-fledged label down the line. In addition to mobile, the company is reaching out to indie talent with the intention to help game concepts reach AAA fruition while expanding their own portfolio even further.

While Take-Two is expanding across mobile and indie branches, the company is also looking at venues other than video games to expand along. Some time ago it was revealed that many Take-Two IPs were licensed to be turned into movies, however another venue Zelnick is looking at is e-sports – but how is that not video games?

The way he sees it, e-sports appeals to a wide audience who view tournaments, engage in activities like many sports fans do and follow a league and so on, but many participants may never actually play the game.

The two tournaments that we’ve done already were seen as promotional, testing the waters, and hundreds of thousands of teams played millions of matches, which was great. The launch of the professional competitive gaming league with the NBA is intended to be a meaningful venture, and we will see if it is or not, but it is intended to have sponsorship revenue, advertising revenue, media rights revenue, event revenue through beverage, merchandise, and the like

The key to this train of thought is that he categorizes consumers into four categories when it comes to the consumption of interactive entertainment, which more or less aligns with our own analysis of the divisions within the GTA 5 player base, and the reasons for Online’s success.

You have the hardcore gamer, which is a natural audience for us. Then we have the ‘I really like games but I’m not a core consumer’ group, and in almost all instances we want to get to them. Then we have the ‘I maybe buy one game occasionally when it really speaks to me’. Finally, we have the ‘I just want a pure entertainment experience, and I don’t care if it’s a video game’… that’s Grand Theft Auto

E-sports, however, takes these four categories and wipes away the boundaries. When you don’t actually have to do anything, merely view a sporting event, accessibility reaches a maximum and anyone can become engaged in the entertainment without having to actually interact with it. This aligns with many of the conventions of cross-media strategy, which dictates that ease of access is the most direct avenue to reaching the widest audience, even if the majority of the viewers will not be loyal.

It also exemplifies exactly what niche GTA appeals to – none and all. It isn’t a niche, it is about mainstream as any video game can ever become. This is a game that has maximized its audience in a way no other game could.

We have gone from a company that focuses on hardcore gamers, to an entertainment enterprise that is expressed through interactive entertainment primarily, but there may be other areas that has nothing to do with games. I would argue that the league really has nothing to do with interactive entertainment, because it will be linear entertainment for most of the people involved. They’re watching it, they’re not interacting with it. We’re not calling it a different market, but that is what it is

It’s clear that Take-Two knows exactly the kind of changes it has gone through, and that the majority of these changes were catalyzed by GTA 5. Whether these changes appeal to the core gamer is another question, but the truth is that it doesn’t really matter because the core gamer is a tiny fraction of the audience at this point.

GTA 5’s success is, by all means, a double edged sword. On the one hand, the studio is provided with more than enough fund to produce high-quality products going forward – like Red Dead Redemption 2 – and good games are what gamers thrive on. Additionally, GTA Online has been getting steady free content support for years, which is truly unprecedented.

On the other hand, you have the effects of catering to the wider audience, which results in less depth, less focus on single player content and more thought put into the development of the monetization infrastructure within games.

Where Rockstar has almost completely focused on creating content for the widest possible audience, there are still elements in the 2K hierarchy looking to the core gamers, such as Firaxis.

We have different titles that speak to each of these concentric circles, and our goal is to widen that as much as possible. Sometimes it won’t happen. Civilization is not going to go out to that fourth circle, but GTA can, Red Dead Redemption can, one could argue that Borderlands gets to the third circle, probably not the fourth

We don’t see Red Dead Redemption 2 reaching the same breadth of potential consumers as GTA 5 did and Zelnick goes on to express similar views later in the interview. Additionally, analysts have predicted that though successful, Red Dead Redemption 2 won’t hit the same level as GTA 5 did.

[…] the reason, in my opinion, why GTA V has sold 80m units, and GTA Online had another record year 3-and-a-half years since its release, is because it stands alone in the generation. In every prior generation, there have been other titles that have clustered around GTA from a quality point-of-view. That’s clearly not the case now. If you are over 17 and you have a new generation console, you have GTA. Otherwise we wouldn’t have shipped 80m units. Can any other title achieve that? It seems unlikely. Do we have incredibly high hopes for Red Dead? We do. But we are not putting it in the context of GTA

We’ve written often about what factors contributed to the success of GTA 5, and the fact is that many of those factors are missing with Red Dead Redemption 2. Marketing and hype count for a lot, but they can only get you so far. Don’t get us wrong, the game will be an immense hit, but not an 80 million copies shipped hit.

So what does all of this mean for the future? You can expect most of the changes aimed at reaching the goal of one AAA title annually to affect 2K, which has been the Take-Two label that releases the most games until now. This won’t be changing, and there won’t be pressure put on Rockstar to churn out titles quicker.

The kind of recognition Rockstar has in the wider entertainment industry has given them a sort of “free-pass”. Think of it like a hotshot movie director – Hollywood companies rarely give their directors complete creative control over projects, but there are some whose names carry enough weight to grant them this privilege. Rockstar is that but in the game industry.

The fact that Red Dead Redemption 2 is coming early in 2018 means we won’t be seeing a new GTA game for a few years at least, which, considering Take-Two plans on Online chugging along until at least 2020, lines up with their schedule perfectly.

The question that remains is, that if Rockstar is working on Red Dead Redemption 2 until Spring 2018, GTA 6 (presumably) for years after that, when, if ever, will they bring a new IP to the market?


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