Take-Two’s CEO addresses potential disruptions from new business models, distribution and technology

Strauss Zelnick, CEO of Take-Two Interactive, spoke in an analyst call about how the company is approaching new technologies and potential disruptions from changes in gaming.

While Zelnick said missing the booking targets was mainly due to the weak economy and its effect on consumer buying, he said the company will remain on track to invest in its game development pipeline, especially in massive intellectual properties .

During the call, he answered questions from analysts on things like cloud gaming. Zelnick said, “We believe in cloud gaming. We were one of the first licensors, if not the first licensor for Google Stadia to support that product.”

Google shut down that service late last year after a multi-year effort.

“But don’t forget that cloud gaming is a technology. It’s not a business model. It’s a distribution technology. And we believe that wider distribution is always a good thing in the entertainment business. If we can reach more consumers with our properties, we’re happy to do so, as long as the terms make sense,” he said. “I think wider distribution over time will probably benefit us in a number of ways, including distribution costs, which I think will come down over time. That being said, I’ve never felt that cloud gaming would represent a seismic change because I think if you’re willing to pay $60 or $70 for a frontline title, you’re also willing to buy a console to buy. And I think Stadia found out about that.”

He added: “So bringing high-quality titles to consumers who don’t have consoles is likely to have an edge effect, but I don’t think it’s going to be a hard revolution in the industry. I think it will be more and the evolution of the business, and there are still technical challenges to address.

In terms of mobile games, Take-Two spent $12.7 billion on the acquisition of Zynga. But it remains a challenge during the industry slowdown to collect many users for each new game. The goal is to generate $100 million games, but Take-Two president Karl Slatoff said on the call that you have to invest in a lot of titles. You can release a game, support it with user acquisition spend, and then change it one or more times based on the feedback. That’s how you find the $100 million games, he said.

Going forward, he said, “It’s going to be harder to hit that $100 million threshold.” Zelnick added of mobile, “I don’t think business has gotten easier or harder. I think it’s about what we expected, as I said. Hit rates in mobile are low.”

As for the changes to the Identifier for Advertisers, which saw Apple prioritizing user privacy over targeted ads for mobile apps and games, Zelnick said the company has been living with that for a while and there is some improvement in the way it works. company can target customers.

“I don’t want to characterize that as we’re kind of back to where we were, because that could be a mischaracterization,” Zelnick said. “But we definitely feel like we have our hands on it, and then we go the other way. So that’s positive in terms of our ability to target.

Asked if subscriptions are negatively impacting individual game sales and changing the way people interact with new titles, Zelnick said he’s thrilled to be in the subscription business for catalog titles at the right time.

“We think this is the right way to support subscriptions,” he said. “I think the last announcement was that Game Pass had 25 million subscribers. We’re not talking about a hugely broad company yet. I don’t believe companies cannibalize our business.”