If you work in games retail, it will be hard to forget September 2013.
Grand Theft Auto V launched to phenomenal critical acclaim, resulting in snaking queues outside stores and a level of commercial success that no other boxed game has attained before or since.
A few weeks after the game launched, Rockstar released a dedicated online mode called GTA Online. The open-world experience had some initial launch issues, but has since gone on to big success. The mode has been regularly updated and subsequently ported across to PS4, Xbox One and PC.
According to SuperData, in September 2015, GTA still had 712,000 active UK players, who collectively spent 843,000 on microtransactions within that game mode. That's just in one month, in one territory.
It's no surprise that Take-Two has continued, quarter after quarter, to beat its own sales estimations.
We do try to guide for what we believe is going to happen,” says CEO Strauss Zelnick. Higher-quality products drive the market and our releases continue to perform. We have definitely benefited from the growth in new-gen hardware. But there's no question that the interest in staying engaged with high-quality titles after release benefits us. When people stay engaged, there are revenue opportunities, as well.”
"It's potentially damaging to put out a big array of moderate-quality titles."
Strauss Zelnick, Take-Two
‘Engagement' sounds like such a corporate word. When publishers release statistics on ‘engagement' rather than unit sales, there's a healthy amount of scepticism over what they're hiding.
But the truth is, keeping players playing (which is what engagement means) has become a vital part of triple-A games development. The most lucrative aspect of Call of Duty isn't in how many unit sales Activision manages on day one, but rather how many of those players download the DLC one, three and six months later.
This model isn't new (the entire MMO genre is built on it), but there has been a rise in the number of games trying it. Today, these titles are not just trying to keep people playing for months, but years. Just look at Dota 2, League of Legends, Destiny and the aforementioned GTA Online.
It may be lucrative, but is it not damaging to the business overall? If gamers are happy playing the same title over and over, what's to keep them buying new ones?
It's potentially damaging if your strategy is to put out a big array of moderate-quality titles and there are companies who have that strategy,” insists Zelnick.
Our strategy, ever since we took over the company, has been a limited number of the highest-quality releases - and if achieving that quality means we need to postpone putting something out, even though we don't like to, then we will do that every time.
We put out somewhere between five and ten big releases a year and, in doing so, we've been able to launch one new hit IP every year since 2007. Today we have 11 individual franchises that have each had at least one 5m-unit-selling release. We have over 40 franchises that have sold over 1m units. That's pretty extraordinary and we believe it's the best collection of owned IP in the interactive entertainment business.”
We've heard that last part from Zelnick a few times. It's to remind people that there's a lot more to Take-Two than just Grand Theft Auto.
He's not wrong, but is there any point to having all these hit franchises when all the company has to do is release a handful of games that engage players for years on end? To put it another way: do Take-Two and Rockstar even need to make another Grand Theft Auto?
We need to be there for the consumers; we need to meet their interest and exceed their expectations,” he answers. World of Warcraft shows that there are certain titles with a persistent world that can generate interest, engagement and, therefore, revenue for long periods of time. But that's a very different model to ours. We aren't blessed by having that IP here, and we are still operating based on building very significant, exciting high-quality releases and then continuing to engage with them after their launch.
I wouldn't rule out a change in that business model over time. It has changed materially in the last five years. We have to be where the consumer is. But right now, it seems like making new iterations of existing IP and creating new hit franchises will continue to be our model for some time to come”
Our interview with Zelnick coincided with the news that Activision was planning to acquire King for almost $6bn. Like Activision, Take-Two isn't particularly strong in the mobile space and, also like Activision, it has some spending money in the bank.
We are already in the so-called mobile market,” Zelnick says. What you're really talking about is the smartphone gamer or tablet-orientated gamer – one that is on a smaller screen, playing a shallower experience and is engaged for a much shorter period of time.
Our engagement in what we prefer to call the casual gaming space has been limited to apps like our NBA 2K companion or WWE Supercard. These are very successful add-ons to our core business. We haven't released many standalone experiences, and it's not really our strategy, because that business is one where the hit ratios are very, very low indeed.
We know what we know, we believe we're quite good at making very deep console experiences, and it's been shown that we're very good at making companion apps that are lighter and free-to-play. A standalone IP that focuses only on being a casual title is less of a focus for us. We're not ruling out the possibility that we'll do it in the future, but it's been less of a focus.”
Indeed, Take-Two is cautious when it comes to investing in areas outside of its core business. Its rivals (namely Activision and Ubisoft) have launched movie divisions, but Take-Two has no intention of investing capital in Hollywood – instead teaming up with Lionsgate to develop a Borderlands film.
And although the firm has flirted with eSports (the upcoming Battleborn looks ideal for that sector), Zelnick and his team are not expecting pro-gaming to become a major revenue-driver.
We have had a couple of our titles in eSports competitions,” he says. Typically that hasn't been a big profit. For us, it's been more marketing. But it is an exciting area, and one we'll be happy to participate in.”
There's a trend to all of Zelnick's answers. For all our questions about new business – whether that's online microtransactions via GTA Online, eSports, VR, mobile, movies and so on – he always brings it back to Take-Two's core focus: big triple-A games.
Next year, Take-Two has XCOM 2, Battle