Take-Two CEO Strauss Zelnick Addresses GTA 5’s Success And Company Future

Mobile, movies and merchandise

Some time ago gaming industry website MCV released snippets of their recent interview with Strauss Zelnick, CEO of Take-Two Interactive Software, the parent company of Rockstar Games. Take-Two have had quite the busy 2017, with an expansion into mobile gaming and another into motion picture. Now, MCV has released the full interview with further insights into the company that published GTA 5.

News that GTA 5 has hit the 75 million shipped copies mark recently made headlines, and continues to be a hot topic on account of how patently amazing an achievement that is. The best-selling non-bundled game of all time also enjoyed yet another week at the top of the sales charts. Zelnick revealed that while the company had high hopes for the release, these numbers outstripped all expectations. While we’ve written up storms about why the game is so successful, Zelnick believes it comes down to quality. That said, Take-Two avoids setting concrete sales-predictions as a rule.

When we launch a product what we are focused on is whether it will delight consumers and how good it is. We certainly knew that it was a phenomenal title and we had high hopes. But we tend not to have specific expectations because we really are of the view that if you put out something phenomenal people are going to show up to it. That’s been true over and over again for this company. In the case of GTA Online, we were really excited about the opportunity to have a companion title and multiplayer options, and this ability to have a world that could grow and be updated. But we didn’t have specific expectations about how it would perform economically.

GTA 5 still breaking records and selling like hotcakes is pretty impressive, but then again it has been doing this since launch. It may be amazing, but it isn’t exactly new. What’s new was Take-Two’s reversal on its stance regarding mobile gaming and the industry around it. Zelnick was always outspoken about his concerns regarding that segment of the industry.

When it comes to mobile games, you see a market that is insanely oversaturated with little order. Making mobile games is relatively easy, there are countless clones of popular titles, the truly creative games are buried by the drivel and there are only a minuscule amount of major hits. While Zelnick stands by these concerns, he thinks Spanish developer Social Point, whom Take-Two acquired for $250 million, fits in with the company ideology.

The key thing is that we were looking for a way to participate in the fast-growing $40bn mobile free-to-play market. We were looking for an enterprise that has a track record of creating a multiplicity of hits [some of which are pictured, below] – which is very unusual in this space – where they own their IP – also unusual – where they generate meaningful revenue and meaningful cashflow right now – somewhat unusual – and where they’d be a great cultural fit with us. We found all of those things in Social Point. That’s who we’ve been looking for. We also like that Social Point focuses on mid-core titles, games that are deeper, have story and character elements because we think that’s the direction that free-to-play mobile casual games will be heading. I stand by the concerns I had about the space and what we love about Social Point is that we believe it addresses all of our concerns.

While expanding into mobile is new ground for Take-Two, it hardly means they’re turning their back on what they dealt in until now, namely PC and console games – even if things aren’t exactly peachy right now. GTA 5’s success is one thing, but Take-Two took two (no pun intended) hits in the past two years in order to stick to their “one new IP each year” rule.

Evolve and Battleborn were both two failed attempts to revolutionize the multiplayer shooter scene. The former attempted an asymmetrical approach to multiplayer with a paid DLC-centric business model, while the latter tried to break into the MOBA sphere as a potential e-sport hit. Zelnick didn’t mince words when admitting that sometimes things don’t work out, but these defeats won’t keep Take-Two down.

The goal is to try and launch one new successful IP in every fiscal year, but we don’t achieve that in every year. There are the vagaries of development, but there is no question that the strategy of the company remains to bring our beloved franchises to market regularly. We have 11 franchises that have each sold over 5m units in initial release, we have something like 60 that have sold a couple of million units in initial release. New IP is still a big part of our strategy going forward, but we don’t always achieve that each year.

In spite of all this, Take-Two has been closing better and better quarters recently, while many other major publishers haven’t had as much luck with big releases. AAA titles that should have been considerable financial successes – MCV mentioned the latest Call of Duty title, Infinite Warfare, alongside Watch_Dogs 2 and Dishonored – ended up performing worse than expected. Much like when it comes to the success of GTA 5, Zelnick believes it all comes down to quality.

I’m not sure why some publishers struggled. At the end of the day, quality wins and when we or our competitors put out a really high quality title, it sells and usually better than expectations. When we or our competitors miss on quality – to be clear, we do as well now and then – we see that we have sales disappointments. The market is properly, correctly so, unforgiving about quality. That’s my own experience of what’s going on.

We’ve reported on the announcement that Take-Two has licensed some of its IP to be adapted as films, which was taken from this very interview. For more on that, check out our article discussing the story.

Mobile gaming and the silver screen aren’t the only new directions explored by Take-Two. A rising tendency among major publishers is placing greater focus on merchandising. An example of this would be Activision Blizzard’s deal with Mega Brands (unfortunately not The Lego Group…) to create building toy lines for Warcraft, Halo, and Destiny, while EA teamed up with K’NEX to make Titanfall building toys.
While other venues exist for merchandising, most are aimed at children or families. Since most of Take-Two’s IP is aimed at adults, capitalizing on such ventures might prove difficult, though this is one point at which we respectfully disagree with Mr.Zelnick. Whatever their actual audiences may be, the target audiences of Warcraft, Halo, Destiny and Titanfall are also adults, and no-one’s going to convince us that, say, Lego Borderlands or XCOM wouldn’t rank among the coolest things of all time. True, Rockstar properties might be stretching it a tad.

It depends on the property you have. When you have IP that are aimed at adults – as many of our properties are – the merchandising opportunities are more limited. Some of our IP that are aimed at families, like WWE and NBA, we don’t control the merchandise rights for. From our company’s perspective, it’s somewhat less of an opportunity than it may be for some of our competitors.

Closing off the interview, Zelnick touched on the topic that everyone’s dying to know more about. The upcoming title, Red Dead Redemption 2, is still mired in so much mystery in spite of being relatively close to launch that some fans are already predicting that it will be delayed. Nonetheless, Zelnick maintains that we should be expecting news from Rockstar Games, not him.

One of the reasons we’re excited about the remaining titles of 2017 is based on the fact we expect to have another growth year for both bookings and cashflow. We also have other titles coming as well. We’re excited and optimistic. In terms of the title itself, Rockstar will talk more about RDR2 in due time, but if you’re asking whether we’re excited and enthusiastic, that would be an understatement.

Take-Two’s various expansions can mean much for the future of GTA – movies, mobile games – however, it will likely be years before these investments come to fruition. At the very least, it’s clear that the veritable fortune GTA 5’s sales earned Take-Two are being put to good use.

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