The US giant is riding high thanks to Grand Theft Auto V and its lucrative digital business. But after delaying its big new IP Evolve into 2015, is it still brimming with confidence? Christopher Dring speaks to CEO and president Strauss Zelnick
Your Q1 revenues beat expectations, despite not releasing any new games. What do you hope people take away from your figures?
The company has really been transformed from a publisher that was over-reliant on one massive franchise to one that’s vastly more diverse. A company that was reliant on one business model when we launched a big title, to a company that now has a multiplicity of new business models, including recurrent consumer spending – whether from virtual currency, online gaming or the sale of virtual goods in games.
Our consumer engagement is broader, deeper and longer lasting.
Finally, we have 10 fantastic 5m-plus selling franchises, and 40 multi-million-selling franchises overall.
Has the success of your recurrent consumer spending changed your strategy in terms of how you approach your upcoming games?
It’s an evolution more than a change. Our starting point has always been trying to delight consumers; we were the first company to put out a downloadable content pack for GTA IV, so we have clearly been trying to think of ways to delight consumers and keep them engaged for some time.
I have to admit, our starting point is always: ‘make the consumer happy. Give him or her more than they paid for. Then, and only then, think about monetisation.’ But it is gratifying that we can sort of do both: we can delight the consumer, maintain engagement, extend the lifecycle of the initial release and also enhance our revenue and profitability.
I am excited to be able to reiterate guidance for a highly profitable year, even though it is not a year in which we have a new Grand Theft Auto – although we are obviously bringing Grand Theft Auto V to PS4, Xbox One and PC.
The one disappointment is the delay to Evolve. Is this due to the congested Q4?
No, it was the primary belief that polish pays off.
When we give a title that is looking so promising, having won best of show at E3, a bit more time to make sure it is just as good as it can be, historically that has always been a good move.
"The smartphone obviously has some limitations,
due to screen size and the need for it to be a touch
interface. I’m more excited for tablets with an
outside controller, and as tablets become more
powerful, combined with a controller, you can
certainly imagine them being a just as high quality
game experience as the PC is now."
Strauss Zelnick - CEO, Take-Two
Equally, I do like the February release date, I have to tell you. If you look at our history since we took over the company seven years ago, we have largely stayed out of the Holiday period and gone into what our competitors consider ‘non-traditional’ release windows. That has served us very well. In February we are going to get the benefit of this new install base that is put into place over Christmas for next-gen platforms, and February will be wide open.
You did have five games out in October. Which is unusual, as you typically like to spread out your releases...
We still have a pretty busy schedule in October.
With regards to NBA and WWE, they belong in October; they are annualised releases. The rest we think are well positioned; Civilization: Beyond Earth is a title that typically sells over a very long period of time, so that initial release date is not super-relevant, and Borderlands: The Pre-Sequel is being offered for current-gen, so it is arguably going to be seen amongst a different competitive set.
You’ve recently announced BioShock on iOS. Is there really a market for core games like that on smartphones?
It remains to be seen. The smartphone obviously has some limitations, due to screen size and the need for it to be a touch interface. I’m more excited for tablets with an outside controller, and as tablets become more powerful, combined with a controller, you can certainly imagine them being a just as high quality game experience as the PC is now.
BioShock on mobile does look the part. How far away are we from mobile visual technology catching up with consoles?
We are getting closer. I actually received an opportunity to play BioShock on an iPad, and I was really impressed.
When we can take one of our frontline offerings, whether it is Civilization Revolution 2 or XCOM: Enemy Unknown, and offer a really good experience on a small screen, I think it will attract
BioShock on smartphones is a premium release. Why go down this route rather than free-to-play, which most of your competitors seem to be doing?
We essentially have a free-to-play offering in Grand Theft Auto Online – but obviously that’s a companion title with Grand Theft Auto V.
We are flexible with business models. NBA 2K Online in China has a free-to-play business model. But generally, if we give the consumer a really high quality release, then we think the consumer is prepared to pay for it, and perhaps we will have add-on offerings and there’s an opportunity for recurrent consumer spending. But generally thinking, we believe a high quality game should be paid for.
The maths part of it is very simple: in a free-to-play environment less than ten per cent of your consumers pay you anything, so 90 per cent are free riders. And in a full-pay environment, 100 per cent have to pay you.
"Well 34 million copies [of GTA V] have been sold, and
yet the truth is: no, not everyone has bought it. One way
to look at it is that 34m copies have been sold, the other
way to look at it is that there’s 7bn people on Earth. So
we have over 6.9bn people left to address. It’s a massive
market and an amazing title. And with people buying
next-gen consoles, GTA is the standard bearer in the
industry. How can you buy a next-gen console and
not want to play GTA on it?"
Strauss Zelnick - CEO, Take-Two
The implication with a free-to-play game is, generally speaking, that it is a lower quality experience. I don’t think it has to be, but generally speaking it is, and we try to make the highest quality experiences. But we are flexible, and if consumers demand that as the business model that ultimately makes the most sense, then that is what we will do.
What are your expectations for GTA V for PS4, Xbox One and PC? Hasn’t everyone bought it already?
Well 34 million copies have been sold, and yet the truth is: no, not everyone has bought it.
One way to look at it is that 34m copies have been sold, the other way to look at it is that there’s 7bn people on Earth. So we have over 6.9bn people left to address.
It’s a massive market and an amazing title. And with people buying next-gen consoles, GTA is the standard bearer in the industry. How can you buy a next-gen console and not want to play GTA on it?
A lot of games that have moved from Xbox 360/PS3 to Xbox One/PS4 have only offered slight improvements and updates. But GTA V looks significantly better this time than it did last year. Why put so much time, money and effort into doing that, when your competitors haven’t felt the need to?
We really are driven by our passion for the business. I know it sounds hard to believe from capitalists, which we also are, but what keeps us up at night and gets us here early in the morning and makes us excited, is that we pride ourselves on making the best interactive entertainment in the business. Metactitic says that we do and have done for years. And our revenue and profits reflect that as well.
We are not trying to deliver the minimum acceptable quality and monetise it. We are trying to delight consumers and monetise it.
In the case of Grand Theft Auto V, nothing will satisfy Rockstar, nothing except the very, very best. They want to blow consumers away; whatever the expectation is, they want to exceed it.
When you see GTA V for next-gen, I want you to call me and tell me whether it is or isn’t better than your expectation. I can guarantee it will be better.