Take-Two CEO Strauss Zelnick on Future of Game Streaming, Unionization (Q&A)

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Strauss Zelnick

The head of Rockstar Games' parent company spoke about the advent of streaming tech and growing talks of unionization ("I’m not sure what benefit unionization would bring") for game developers.

Take-Two Interactive, the parent company of video game developers such as Rockstar Games and 2K Games, saw a 12 percent climb in its stock in May, just ahead of this year's E3 convention in Los Angeles where the company is touting its latest major release, Gearbox's Borderlands 3

Following a year in which Rockstar's Red Dead Redemption 2 topped the year's best-sellers, Take-Two is looking for another big hit with Borderlands in 2019, the third installment in the successful "looter shooter" franchise that first debuted in 2009 and has sold over 43 million copies in its lifetime.

With streaming and subscription services such as Google's Stadia and Microsoft's Project xCloud dominating much of the early conversation at this year's E3 gaming convention, Take-Two CEO Strauss Zelnick caught up with The Hollywood Reporter to discuss his company's battle plan in a quickly evolving industry. From best-selling sports titles like NBA 2K19 to continued support for online play on the Grand Theft Auto and Red Dead Redemption franchises to the upcoming release of Borderlands, Zelnick offered his thoughts on his company's own games, the advent of streaming technology and growing conversations of unionization for game developers.

What do you attribute the rise in Take-Two stock to?

It’s hard for me to call that sort of thing because daily, weekly, monthly movements don’t usually make sense in the absence of an announcement or results. Obviously, things are going really well. It’s possible people were doing checks about how Borderlands is lining up and it looks like it’s lining up really well. We feel good about it. It’s also possible people were looking at activity surrounding Grand Theft Auto Online and Red Dead Online.

Does the announcement of Google Stadia and Xbox’s Project xCloud streaming services help the industry with investors?

I think it’s creating some enthusiasm. I think there are so many things going on all at once. To be clear, the fact that there are industry tailwinds does not necessarily mean that any individual company will do well. We have to execute to do well, but it is easier to succeed when the wind’s at your back. So, what’s going on in addition to the market clearly growing — in success you can sell 24 million units of Red Dead Redemption 2 — you also have the potential launch of various streaming services and subscription services, which need to be differentiated because one is a technology and one is a business model. The growth of international markets, the reopening of approvals in China, some energy around potential growth in India, Africa, the Middle East, the continued growth of e-sports, the list goes on. From our point of view, we are driven by our continued release schedule, and that looks great this year. Borderlands 3, NBA 2K and WWE coming, we’re feeling good about all that.

You mentioned tailwinds. How do you capitalize on them?

You capitalize on them based on your catalog. We have plenty of things going on that speak to consumers on an ongoing basis, but you have to constantly refresh those activities with frontline hits.

Does the rise of e-sports pull viewers away from traditional sports and hurt sports game titles?

I don’t think so, but it’s very hard to know. That audience may have never existed in the first place for traditional sports. It is true that golf is declining, we see that. There may be some kind of shift but generally speaking the next generation of consumers may be more attuned to e-sports for their home viewing experience than some professional sports, but obviously the NFL is still huge, NBA is huge and growing, soccer is huge and growing. I think there’s still room for growth. We’re in the golf business, we’ve been in hockey, we’ve been in boxing, we no longer are. We’ve been in baseball, we no longer are. Primarily, we’re in the basketball business. We’d love to be in more, but football is still subject to an exclusive.

Do you adjust expectations when there is no new major Rockstar release?

Having a huge hit from any label, but particularly having a Rockstar hit, generally means in the year of initial release we’re going to have a very, very big year. What we say is that our goal is to be big, growing and profitable in any year and we have some massive titles that come from Rockstar, so when we release those we’re going to have an even better year. But we wouldn’t expect to compare positively following a big Rockstar release, even given a very robust frontline release schedule, which, to be clear, is our goal. That’s why we have a robust roster of labels.

What does robust mean in terms of releases for Take-Two?

Probably five in a year, in addition to our annualized titles. That’s an average every year. Now and then, we’ll miss it. Prior to this most recent fiscal year, we had a couple dry years for frontline releases, but luckily we had Grand Theft Auto Online performing very well.

The shelf life of games is much longer now than it was even a few years ago. How important is it to have new titles?

It’s very important because over time everything decays. We talk about our IP as permanent IP, but that’s a bit of an overstatement. Generally speaking, most IP diminishes over the long haul. We think if you’re respectful of the consumer and the creative process then you can push out that decline curve for a very long time, maybe even forever. We think we have some permanent IP. I think Grand Theft Auto, Red Dead and Borderlands are permanent IP, but that’s all reliant on bringing great games to market every time we bring out a new title in those franchises.

Do new iterations kill the longevity of older titles?

The catalog is still very valuable, so it definitely doesn’t kill it but at a certain point in time any title reaches the end of its lifetime, unless it’s just an ongoing business like World of Warcraft. We don’t really have any of those. I mean, Grand Theft Auto Online certainly looks like one and our mobile titles are very strong.

Are you interesting in having your own World of Warcraft, then?

Well, that model is owned by Activision and now is old enough to be very hard to recreate by anyone else. That’s been true for some time.

Are you looking at acquiring more developers?

We are ambitious and very disciplined and selective. We built Private Division to bring independent developers into our enterprise. We acquired Kerbal Space Program through that activity, so we are selectively acquisitive. We are looking for very strong IP, great teams and creative transactions.

Are you interested in launching your own subscription or streaming service?

We’re open-minded about whether we should have a direct-to-consumer offering. We do have a small company store. I’m of the view that, generally, distribution should be as wide as possible and should not be exclusive. That would include your own services and other people’s services, generally speaking. My guess is the business of the future will have companies doing an assortment of things.

The plan, then, for future Take-Two releases is to be multi-platform?

Assuming the world looks in the future the way it does today, yes. If things change, perhaps not.

Do you think it will change?

No. I think there will be more rather fewer alternatives in the future.

And you see that as a positive?

Very much so.

What are your thoughts on streaming?

If they can deliver on the promise, it will be great for the industry. It all remains to be seen. They’ve certainly set high expectations. I’m guessing it will be a work in progress, but over time they will certainly work and will matter. My guess is that two to three years there will be a lot of very high-quality services up and running. There is very little work that we need to do to avail ourselves with these platforms, but to the extent of things we need to do, we’re already thinking about them.

What do you think about the growing interest surrounding unionization for video game developers?

We observe the law and typically collective bargaining makes sense when people aren’t treated well. This is an exceedingly high-paying industry. Typically, unions make sense when there are too many people seeking too few jobs and therefore the industry in question can underpay people. In our industry, there are too many jobs seeking too few people and the industry pays a lot of people. I’m not sure what benefit unionization would bring. We’re very proud of our labor relations. We’re not the fast food industry and we’re not struggling with minimum wage. There’s something like 200,000 people employed in the U.S. and I believe the average salary is somewhere around $100,000, so it’s hard to imagine what beneficial effect unionization would have. However, we’re of course open-minded and will comply with the law.