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Take-Two CEO open to buying more studios

Take-Two CEO open to buying more studios

Wed 14 May 2014 2:55pm GMT / 10:55am EDT / 7:55am PDT
Business

"This company is in growth mode," Strauss Zelnick says. He also praised Microsoft for unbundling Kinect

The publisher has just shy of $1 billion in cash on hand - even after spending $227 million last year to repurchase shares. And it's trying to decide what to do with it - and CEO Strauss Zelnick says he see three options.

"We have the opportunity to support organic growth with our balance sheet," he says. "We also have the ability to do inorganic growth. And we have the opportunity to return money to our shareholders."

Traditionally, Take-Two has kept that focus on organic growth, building up its own studios from within, rather than purchasing existing development houses. But Zelnick says he's not ruling anything out in the current video game environment.

"If there's an opportunity to grow inorganically with a company that's consistent with our disciplined approach, then we would absolutely do so," he says. "There's no question this company is in growth mode."

A good bit of that growth is coming from the digital side of the business. Digital revenue increased 65 percent in fiscal 2014, compared to the previous year, to a record $435.1 million.

"our primary business is making large-scale, immersive titles - and when tablets give the opportunity for big titles to be played on them, I think you're going to see our titles there"

That growth is keeping investors happy, but Zelnick says there are no plans to decrease the company's emphasis on traditional retail sales.

"We're very excited about what digital distribution allows us to do," he says. "Among other things, it has allowed us to build this significant recurring revenue model. But typical retail is still (up to) 80 percent of the market. ... Our view is bring consumers the best products on whatever devices they have and otherwise be flexible about the channels used to get it to them."

While the digital focus at Take-Two is largely on DLC, the company has also been increasing its attention to the mobile gaming world of late, with last year's highlights including Grand Theft Auto: San Andreas, XCOM: Enemy Unknown and NBA 2K14.

Mobile is a relatively new focus for the publisher and Zelnick says he's not opposed to moving deeper into it, but still seems to believe phone screen sizes are too small to showcase the company's AAA games - and tablets could use a bit more horsepower.

As such, don't expect to see the company launching a lot of original spin offs of its core franchises on mobile devices in the immediate future.

"I wouldn't rule it out," he adds. "[However,] our primary business is making large-scale, immersive titles - and when tablets give the opportunity for big titles to be played on them, I think you're going to see our titles there. Might we make standalone titles tailored especially for lighter applications? Sure, but only if it's really an immersive experience."

That said, he's happy with the state of the console market these days - and applauds Microsoft for its decision to offer a lower-priced Xbox One model without Kinect.

"Anything that increases the installed base is a good thing for Take-Two and other publishers," he says. "We're happy with the way Xbox One has performed. The next generation launch of both platforms has been successful from our point of view."

Zelnick is taking a more cautious approach, though, when it comes to the next big hardware release in gaming - virtual reality. While he notes his developers have had good things to say about the Oculus Rift, it's too early for the company to commit to the platform, in large part because the headset has yet to hit retail.

(That's not the only reason, of course. Take-Two tends to be more conservative than, say, Ubisoft when it comes to new platforms.)

"Our folks who [tried] the Oculus Rift were very excited by it so I'm sure there's a business opportunity there," he says. "But it's too early right now."

As for Nintendo? Well, it's still an "important business partner," says Zelnick, but "we haven't talked much about it and have nothing announced at the moment."

"We haven't talked about what's going to happen to the [BioShock] franchise, but it's beloved... Today, the franchise is in hands of 2K. More to come in the future"

Take-Two may be growing, but it's also something of a hard read for analysts. It plays its cards close to the chest, rarely giving much visibility to its release schedule - and personifying the "when it's done" development mantra in an age where annual releases are becoming the norm.

Indeed, the state of some of the studio's best known franchises is a mystery. For example, Rockstar will release a next generation title sometime in the next year - and while most expect that to be a port of Grand Theft Auto V, Take-Two refuses to confirm that. (Meanwhile, there's no intel on whether new games are coming in the Bully or Red Dead Redemption franchises.)

Even BioShock is a mystery, after Ken Levine's announcement that Irrational Studios would retool and become a small team with a flat structure. Zelnick didn't offer a lot of clues.

"We haven't talked about what's going to happen to the franchise, but it's beloved," he says. "BioShock has sold over 5 million units. Today, the franchise is in hands of 2K. More to come in the future."

Some have questioned the company's seemingly slow pace of development, especially on titles that don't knock it out of the park. Zelnick shrugs off that criticism, though, saying the focus at Take-Two has always been on the highest quality product, regardless of how long it takes.

And, he adds, deadlines at the company are hardly as loose as some may think.

"I wouldn't arrive at the conclusion that we're not deadline oriented," he says. "I haven't been accused lately of having a soft touch."

Correction: An earlier version of this story said that Ken Levine's new studio would keep the Irrational name. Take-Two has contacted us to say that's not true.

2 Comments

Tim Carter
Designer - Writer - Producer

562 311 0.6
In an art-driven industry the focus needs to be on signing artists or acquiring libraries.

A focus on acquiring companies is misplaced in an entertainment industry. That's what you do in operations-based business, such as internet, mining or manufacturing.

Richard Garriot said he was "acquired" by EA six times. After each acquisition he became bored, left, his team left one-by-one to join him (leaving only a shell behind), they formed another studio and the whole thing repeated itself all over again. Obviously then what they're doing is project-based, not operations-based.

Edited 2 times. Last edit by Tim Carter on 14th May 2014 8:57pm

Posted:4 months ago

#1

Darren Adams
Managing Director

240 436 1.8
Richard Garriot said he was "acquired" by EA six times. After each acquisition he became bored, left, his team left one-by-one to join him
Money for old rope then. ;)

Edited 1 times. Last edit by Darren Adams on 15th May 2014 2:09pm

Posted:4 months ago

#2

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