16 minute read
Strauss Zelnick
The Grand Tour
It may be the third largest publisher behind EA and Activision Blizzard, but with Grand Theft Auto driving much of its success, Take-Two is very much at the top of its game. In the wake of its last earnings call, for example, it was revealed that Grand Theft Auto V – soon to be released for a third successive console generation – had shifted five million more units in the last quarter, while GTA Online’s player base is 11 per cent larger and spending 33 per cent more. For a game that was birthed on Playstation 3 and Xbox 360, there’s no sign that interest in Rockstar’s open world behemoth is waning, in spite of all the other, newer, diversions that gaming offers.
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However, for all the success that GTA has delivered, Take-Two and the wider gaming industry continue to face a number of challenges, from a global pandemic that is diminished but by no means over, to persistent issues of workplace diversity, and a perceived over reliance on core franchises. Then there is the growing prominence of the “metaverse”, blockchain technology and NFTs, opinions on which continue to divide the industry. On these issues and more we questioned Take-Two’s CEO Strauss Zelnick on where he perceives the organisation to be as the world angles itself to face another challenging year. With millions more copies of GTA sold, a thriving sports label, and a 2022 release schedule that threatens more of the same (with a Marvel title thrown in for good measure), Take-Two are riding high. Richie Shoemaker thumbs down CEO Strauss Zelnick and gets taken for a spin
ON GTA
Clearly the GTA franchise is a huge contributor to Take-Two’s bottom line, but is there a responsibility to sustain the series’ legacy that’s in sync with the desire to profit from it?
“As a part of entertainment culture, Grand Theft Auto, the franchise, is almost certainly the most important and the highest grossing entertainment property of all time, so I don’t think you can overstate its importance. And you know,” Zelnick continues, “we’ve seen with Grand Theft Auto V, which has sold over 155 million units, and with Grand Theft Auto Online, which is still growing and having great results with new content, eight years after its initial release, that Grand Theft Auto continues to feel fresh to consumers, continues to feel exciting, and continues to feel relevant.”
We spoke to Zelnick on the day of the release for the Definitive Edition of Grand Theft Auto: The Trilogy, a release that has endured a number of issues – not least the Rockstar Games launcher being down for three days. Some have likened the GTA Trilogy’s release to that of CD Projekt’s launch of Cyberpunk 2077 last year, in terms of how poorly received both have been. The difference, of course, is that Cyberpunk was next gen, whereas for all their spit and polish, the GTA remasters are very much not.
ON THE PANDEMIC
It’s fair to say that the gaming industry has done rather well out of the ongoing COVID pandemic, especially during 2020 when millions of lapsed and future gamers were trapped in their homes with only digital entertainment to distract them from the news. However, it was always likely that, as vaccines were rolled out and the population returned to some semblance of normality, the growth of the last year might not be sustained.
“You’re right,” says Zelnick. “In the [last] quarter our net bookings were up about 3 per cent year over year, and we had expected a decline. Recurrent consumer spending was up 7 per cent when we had expected an 11 per cent decline. So things certainly are going better than we had anticipated. That’s always good news. You like it when that happens, as opposed to the contrary.”
“However, what’s going on is consistent with what we’ve said during the pandemic: I said that I felt post-pandemic demand - and I think we are post-pandemic, I think we’re in the new normal - would be greater than pre-pandemic demand, but less than the demand we experienced during the pandemic. And I think that is the case. We will hopefully grow from here. That’ll be dependent on the quality of our titles.”
Revenues may be up on pre-pandemic levels, but what about the lessons learned during the pandemic itself?
“The primary lesson is one we already knew, which is to hope for the best and prepare for the worst,” says Zelnick. “And that it’s really important to have a great culture so that when things go awry, you work together as a team with the strongest possible morale to continue to achieve your common goals.”
ON WORKPLACE DIVERSITY
Despite most studios remaining empty for much of the year, the workplace has been a focus for many in the industry of late.
There is continued upheaval at Ubisoft, as employees seek meaningful change amidst an exodus of high profile leads. Meanwhile, Activision Blizzard continues to face a charge sheet that includes endemic sexual harassment, a culture of bullying, and a lack of diversity. Given that Take-Two’s Rockstar Studios endured issues of its own prior to the release of Red Dead Redemption 2, specifically with regards to enforced overtime, it begs the question as to where Zelnick sees Tale-Two right now in terms of the group offering a healthy working environment. “We think we’re in a very good place, and we think we can do better. And I think you have to look at it that way,” he says. “We have a gender diverse company across the board, including at the very highest levels, and that’s been true for a very long time.
“We can be more diverse from an ethnic background point of view. We are encouraging more diversity in our hiring practices. And we’re investing through non-profits in bringing more diverse audiences into STEM education, and hopefully into this industry – even if it doesn’t benefit our company, we’re happy to benefit the industry.” Zelnick insists Take-Two’s company culture is one that values eccentricity without accepting the bad behaviour that often accompanies it. “Our culture has been consistent for a very long time. It’s a culture of inclusion. It’s a culture of diversity of thought and background. It’s a culture of mutual respect, ambition, creativity, and kindness. And everyone knows that it works.”
As for the controversies that surrounded the launch of Red Dead Redemption 2, “First [they] are long in the rearview mirror. And second, were not related to a lack of diversity or harassment. Thankfully we haven’t had those problems and we aim not to in the future.”
ON UNIONISATION
Unsurprisingly, Zelnick does not appear keen for unionisation to become widespread within gaming but understands that without sustainable change in the industry as a whole, it might become inevitable.
“I think if you have great relationships with your colleagues, I think if you take care of people appropriately, you reward them for their great work, then you’re less likely to have a union involved in your organisation” he says. “We pay at the highest level of the industry and we have a unique culture. And that’s reflected in the fact that we have the lowest attrition rate among all of the big companies – less than 50 per cent of the average in our business. But we don’t take any of that for granted. We need to do better, we can do better, I hope we will do better, in terms of making this place a great place to work: culturally, personally, professionally, and economically.” If Take-Two can accomplish that, then Zelnick believes there’d be no value in having a union involved in the business. “But to be clear,” he adds, “we will work with the union if there is any.”
ON INNOVATION
On the face of it Take-Two has offered up a busy product release schedule during 2021, but when you discount updates and “definitive”, “enhanced” or physical editions of previously available games, there has been only really been one major new release in 2021, that of NBA 2K22, which some would argue is more of a franchise update rather than a wholly new game. That being the case, Take-Two wouldn’t be the only major publisher seemingly consolidating efforts around core franchises, arguably at the expense of innovation.
“It’s specifically not the case here” he says emphatically. “We have more than 60 titles planned for the market in the next three years. 56 per cent of them are new intellectual properties, more than half of the release schedule. So we’re trying really hard to bring new intellectual properties to market.” Zelnick points to Tiny Tina’s Wonderlands, from Borderlands developer Gearbox, with WWE 2K22, Marvel’s Midnight Suns and OlliOlli World (whose creator, Roll7, was announced as the latest Take-Two acquisition days after we spoke) announced for release in 2022. “We have many other new titles coming, both for mobile as well as console,” adds Zelnick, “so I think even though we hope that our franchises are highly durable, very long lasting – and so far, they’ve proven to be – you always need to be creating new because nothing is permanent.”
Take-Two has a healthy stable of sports titles, which put the company among the imagined suitors when there was talk in October of the FIFA licence no longer being exclusive to EA. The wishful thinking had been heightening in the wake of Take-Two acquiring Top Eleven developer Nordeus in June, suggestive that Take-Two might be keen to widen its portfolio of 2K sports titles, with FIFA very much the marquee midseason signing.
“We are really thrilled to have Nordeus inside the Take-Two family and their title Top Eleven is doing just great. And they just brought out a new iteration, which is performing incredibly well. That is our approach to the soccer market.” Curiously, Zelnick doesn’t discount the notion of a 2K FIFA game sometime down the line: “So far, we’re in business with the NFL, in business with the PGA, obviously the NBA, and from a sports entertainment point of view, WWE. So we have a panoply of sports entertainment titles. I hope that we’ll have more, but we’re not making any announcements in today’s discussion.”
ON THE FIFA LICENSE
ON MODS
At times Take-Two has appeared ambivalent and casual about mods for its games, and at others, usually around the time of a release, quite keen for mods not to exist. One of the most famous episodes in the history of the GTA franchise was when modders unearthed a previously inaccessible minigame in San Andreas called Hot Coffee that had been buried in the code. The resulting legal action by way of the Federal Trade Commission cost $20m for Take-Two to settle.
“We love that people are engaged and love our intellectual property. However, we don’t love copyright infringement of ours or anyone else’s intellectual property,” says Zelnick. “And we don’t accept bad behaviour – harassing behaviour, inappropriate behaviour, inside of our titles. So, we’re excited about what modders can do and want to do. And we would very much like to be a part of it, we need to find a way to be a part of it, that protects intellectual property, and that protects participants. And that’s proving to be a little bit difficult.” Ripples from Hot Coffee resurfaced again in the recent release of the GTA Trilogy Definitive Edition, which was taken down on PC for three days due to “files unintentionally included” in the games, according to a Take-Two statement.
Despite the issues Take-Two has faced from modders keen to excavate files that should perhaps have remained buried, Zelnick is keen to accommodate fan efforts where appropriate: “There is a subset of the population that does want to create, does want to modify, and we should find a place for them. And I know we will over time.”
ON CANCELLING GAMES
“It’s terribly disappointing when we and a powerful creative team work on something that ultimately we don’t feel should be completed,” says Zelnick, referring to the recent decision to cancel a game that had reportedly been in development. “There’s not much more to cancellation than that,” he adds. “It pains us, but we take great risk and we push our colleagues to take great risk, and sometimes it doesn’t pan out the way one hopes.”
Subsequent to the $53m write-off, it was reported that the game, codenamed Volt, was in development at Hangar 13, the studio previously behind Mafia III and Mafia: Definitive Edition. Just a few days prior to the announcement, Hangar 13 were out in force at Develop Brighton, looking to expand the team.
ON THE METAVERSE
With Facebook rebranding itself Meta, talk around the so-called “metaverse” has increased both in volume and intensity in recent months. Curiously, it’s a development that Zelnick has appeared quite skeptical about. However, he insists that his views on the subject haven’t so much been dismissive as misrepresented.
“I’ve maybe been a little tongue-in-cheek about some people’s views about the metaverse,” he admits. “Where I am sceptical is a that I don’t think people want to inhabit digital worlds for mundane tasks. I think it’s goofy to put on a headset and become an avatar and go to a digital location and get a digital cup of coffee and sit down at a digital conference table and interact that way. It’s just very unlikely that that’s how business will be conducted. I’ll stand by that. Where I’m not at all sceptical is the possibility of having numerous digital environments that allow us to do any kind of any number of things. Whether that’s entertainment – as I said, that already exists. I don’t know what GTA Online is, if not a metaverse in most people’s description. I mean, we are, from a user point of view, the biggest metaverse company on Earth right now.”
So what is Strauss Zelnick’s idea of the metaverse? Is it an unnecessary layer above the internet? “Well, since it doesn’t exist in that form yet, I don’t have to be further sceptical. Lord knows I’ve been wrong before and maybe I’ll be wrong here. And if I am wrong, then you know, we’ll quickly figure out what our role should be and will innovate in that way. You know, this company is not driven by one person’s opinions – mine or anyone else’s. But, if some overlay owned by one massively powerful company orders our daily existence digitally, I’ll be mighty surprised.” After a pause he adds, “But, we’ll continue to make entertainment for that community.”
ON NFTS
“The problem is that right now it’s a speculation,” says Zelnick when asked about his comparative enthusiasm for NFT (comparative to the metaverse, that is). “In most instances, when people buy NFTs, they’re buying an NFT because they believe it’ll go up in value. And in certain instances it has and in other instances it will. But I would argue that a collectible only has durable value if it sits at the intersection of rarity and quality. And quality is in the eye of the beholder. Many people would think that a beautiful Picasso painting, in a spectacular unlimited edition of prints, is of great quality. But it’s not going to be rare and therefore won’t have too much value. I mean, it can’t. Eventually its value will come down to the cost of production plus a modest margin. So there’s something there when you have both elements, rarity and quality. Quality is the part that right now is being overlooked.”
Zelnick would not be drawn on the idea of players owning and subsequently trading their rare (and presumably top quality) cars in GTA Online. “Let’s leave GTA out of it. Conceptually, could we have NFTs in our games? Yes. Could we have a means of exchange? Yes. Could we monetize that means of exchange? Yes. We’ll only do it if it is in service of a great entertainment experience. And if it’s good for consumers. If it purely is a speculation, which means that a lot of people are going to get hurt at some point – because that’s what happens in speculations – that probably isn’t for us. If it’s in service of a great consumer entertainment dynamic, yeah that’s pretty interesting.”
ON OTHER CEOS
“I’d want to do all of them,” says Zelnick, when asked which gaming CEOs he’d like to replace. By ‘do’, of course, he means to experience what they go through in their workaday lives, not to sabotage their efforts or to have them sleep with the fishes (we assume).
“I’d have so much to learn, right? I mean, you can always find a way to be critical about being complimentary.” Are there any specific CEOs he’d swap places with in an instant? “There are two huge publishers that are bigger than we are. They must be doing a bunch of things right: EA and Activision. There’s this great big company in China that has a massive footprint in the interactive entertainment business, Tencent, a very well run company, run by great people. Would I like to be a fly on the wall there? Of course. And would I be super excited to see what’s going on inside Epic and Riot.” Microsoft? Sony? “Absolutely. Sign me up. Maybe that’s what the metaverse will bring to me: I’ll pay a little subscription and I can change places with Andrew Wilson for a week – that would be just great.” ON BLOCKCHAIN Blockchain technology hasn’t found many uses yet outside of cryptocurrency, but Zelnick believes it’s only a matter of time until it will. How does he think it might find a use in gaming?“NFTs are a great example. Conceptually it’s a transparent, honest, highly distributed ledger that no one owns and it’s reliable. The problem is, it isn’t anywhere near as transparent as it needs to be. And, so far, not as reliable either, because there have been many instances of people losing value of goods that they thought were reliably protected on the blockchain. So there’s work to be done but that technology almost certainly will find some other uses that matter. Right now it’s really about cryptocurrency. And to the extent it’s not about cryptocurrency, it’s about other speculations. It has yet to find a place that isn’t about speculating, that isn’t about cryptocurrency that actually matters, but I’m going to keep an open mind and suggest that it will.”
