Take-Two CEO on unannounced games, buying studios, WWE and the power of GTA Online

For years, Take-Two’s business has been built on the boxed games market. Yet, with the arrival of Grand Theft Auto Online and the firm’s efforts in Asia, the company has become a digital powerhouse. What does this transition mean for retail? We ask Take-Two CEO Strauss Zelnick

Your latest financial results shows huge digital growth. What are your targets in this area?

I suppose it sounds a little corny, but the goal really is to delight consumers: to give them what they want, make it available on whatever platform they want and use whatever business model they want.We definitely are trying to build ongoing engagement with our titles in-between releases; that is reflective in our recurrent consumer spending.

If we do a good job of keeping consumers engaged, then that will be reflected in increased digitally-delivered revenue.

Apart from that, whether it is digitally delivered or physically delivered, we just want to be where the consumer is. We have said we will look to deliver digital add-on content for the bulk of our releases going forward. The only instance where we would be unlikely to do that is if something disappointed us, and consumers didn’t want any more. Generally speaking, we have the highest level of quality in the business and people want more of what we provide.

GTA Online is clearly a big component of your revenue.

It continues to exceed our expectations in terms of how Grand Theft Auto Online is doing, and consumer engagement remains very strong and powerful. We see that continuing. We are delighted with the results and are seeing the consumers come back.

Has the popularity of GTA Online and similar titles changed how you view the physical retail space?

Physical distribution still represents the lion share of our results, making physical retail partners very important to us. Retail is also very important in terms of marketing. Point-of-purchase still remains very significant to us. We respect that relationship we have with retail.

You are heavily invested in PS4 and Xbox One, which have both been selling fast. Are you confident Microsoft and Sony can maintain this rate of growth? Or do you anticipate a drop off?
Well, the install base is not going to decline. It’s 29m units worldwide, and it is what it is.

If your question is whether we will see a front-loading of software sales early into the install base, I have no reason to think that will be the case.

If anything, there haven’t actually been that many releases, which is great for the people who put out high quality titles, not just ourselves.

You have a busy few months, but, beyond that, visibility on your 2015/2016 line-up is limited. What can we expect from Take-Two’s next financial year in terms of product?

We don’t usually give colour around a lack of announcements, so please forgive me. What I will say is that we will be profitable for the foreseeable future.

We have proven that we are not trying to be shy about providing information; we always provide our financial guidance later in the financial year, we never provide it early, and we always provide information about our titles as we get into the marketing season.

Our track record shows that when we say we feel good about what is coming up, we actually mean it.
I know the analyst community criticises us for that, but our view is that we provide the information accurately when it is appropriate for the marketplace.

I stand behind the belief that we are heading into another profitable year, and for this company to be able to say that… We have announced Battleborn, and we have our annual releases like WWE and NBA 2K but, outside of that, I’m feeling very good about the year we’re heading into. That’s all I can say at this point.

You recently invested in the Hanger13 development studio, led by former LucasArts veteran Haden Blackman. What is your view on your development resource? You have a large number of cash reserves, are there more acquisitions on the cards?
We have something like 2,000 creative folks across both of our labels and in all of our studios worldwide.
We are in judicious growth mode. We always want to engage with the best talent and are proud of our track record of attracting the best talent in the business. We have to be very smart and selective. But we are growing our development resource.

Last year, EA started its Access subscription service, offering gamers access to a lot of the company’s back catalogue for a monthly fee. Considering your strong catalogue of titles, would you ever look into offering a similar subscription option?
We are open minded and flexible, but we don’t have anything to announce right now.
Any service for which people pay an overall amount of money is very difficult for any one company to pull that off. I think you have to do it in aggregation with other companies, which is why EA has found their offering challenging.

So far that subscription model hasn’t played very well because the economics don’t bear out. But if that’s what consumers want, then we will find a way to participate. You don’t argue with the consumer.

You acquired the rights to WWE in 2013. How have you found the brand so far?
It’s been great. This year’s release did 40 per cent better year-over-year compared with our first release, and we believe we are just scratching the surface of what is possible.
The whole WWE area is growing, consumers love it, it’s a great offering and we are thrilled to be in business with them.

You’ve invested a lot in the Asian games sector. Why invest here? What are your goals?
We have something like 24m registered users for NBA 2K Online in China. It was the big untapped market, and we were able to enter in a low-risk way. It is now a major revenue and profit contributor to our business.
We will be launching Civilization Online in Korea during the coming fiscal year, and possibly in other areas in the Far East and elsewhere. We can also bring NBA 2K Online to other territories. For massive multiplayer titles, the US is a very unfriendly market but Asia is pretty open – and we go where the consumer is. We are an international company; a little bit more than half our revenue comes from the US and the rest from outside. We play in a worldwide playing field and we need to be local wherever we go – and we try to be.

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