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Take-Two: “Ideally, we will have at least one triple-A title every year”

Strauss Zelnick and David Ismailer on the company's battle for consistency

Back in 2015, Take-Two thought they had finally cracked it.

Having long since shrugged off the 'GTA company' tag, the publisher now felt it had the brands it needed to deliver a major hit every year, alongside its annual WWE and NBA games. The days of the inconsistent Take-Two were at an end.

A few short years later, it turns out there is still work to be done.

GamesIndustry.biz visited Take-Two CEO Strauss Zelnick and 2K president David Ismailer at the company's E3 stand last month, and it was simultaneously the worst and best booth of the show. It was peaceful, complete with bar, comfortable chairs, and even a pool. It was a blissful retreat from the mania of E3.

It just didn't feature any games.

Outside of those aforementioned NBA and WWE games, and following the delay to Red Dead Redemption 2, Take-Two has no major releases in 2017. Compare that to last year when, at one point, its 2K label alone launched seven products in six weeks (including Mafia III and Civilization VI).

"We kind of thought we were there in 2015," Zelnick says.

"We had a really good schedule and we began to feel like we were delivering on the promise when we said: 'We emphatically don't believe in annualising titles except for sports titles. We want to build a big enough stable of IP so that each season we have a great group of releases'.

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Take-Two CEO Strauss Zelnick

"2K had a really good season this past year, but it was, for the company, still relatively thin. And it didn't help that Battleborn wasn't a big success. So part of it is the level of success, part of it is the schedule, and part of it is finding the human resources to actually take the intellectual property that we own and bring them to market. Those are an array of challenges, juxtaposed against the uncertainty of how long it takes to make a AAA title, which means we can find ourselves in fiscal 2018 with a much thinner schedule than we'd like.

"But it wasn't intentional, and obviously fiscal 2019 will look much better with the launch of Red Dead 2 and a huge new title from 2K, as well as the 2K Sports titles, catalogue, recurrent consumer spending, NBA2K Online in China, Social Point and the like. We've already said that fiscal 2019, which isn't that far away, is $2.5bn net sales minimum, 700m cash flow from our operations minimum... that's pretty consequential.

"We are moving in the direction of that goal, David has outlined his five-year plan that will get us part way there. Obviously we know what Rockstar tends to do. And Rockstar's activities have been transformed by Grand Theft Auto Online."

Ismailer has been part of the 2K family for 15 years, but has only been in the president role "for like two minutes". He has a vision for the label, although don't expect a huge departure from what has gone before.

"Our goal is to grow and to continue focusing on a few key areas," he outlines. "We have NBA and WWE, we have our strategy business with Firaxis, we have a triple-A business. We are going to look at mobile and on Asia. Those six buckets are our key focus areas and growth opportunities."

He continues: "I don't think there's radical changes in the strategy. Ideally, we will have one triple-A title every single year."

Mobile is an interesting focus for 2K. Take-Two has been reluctant to invest too heavily in smartphone gaming in the past, with Zelnick repeatedly expressing his scepticism about the market.

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2K's new head David Ismailer

"I'm not sceptical about the market, I'm sceptical about one's ability to participate in the market," he corrects. "The issue is when we tried to do standalone, made-for-mobile titles, we didn't do very well. We have done very well with WWE and basketball, and we think there's more opportunity there. The reason we acquired Social Point is so we would have a native presence on mobile through a company that has a track record of creating a multiplicity of hits.

"But to be clear, I just said that the hit ratios are super low, which they are. Many companies have had one hit and no more, and the valuation of these companies were high. These were all truths, not opinions. My opinion is that the market is challenging, but we think we now have a way to participate in that market in a way that makes sense."

Ismailer adds: "Our focus right now is on our core two brands - NBA and WWE. Once we get those better positioned, I think there might be an opportunity to leverage some of our other brands in the mobile space."

Social Point is the mobile and social games company that Take-Two acquired for $250m in February this year. The mobile specialist doesn't fall under the 2K label, but an undefined third games pillar that sits besides 2K and Rockstar led by Michael Worosz.

Worosz's group is also the one working with independent developers to create new projects.

"We have a number of titles that Michael Worosz's group is developing with independent developers, which are intended to be AAA products," Zelnick says. "We are quiet about it because there isn't much to say. They are in development and we'll bring those to market as and when. And then within that group is also Social Point. If we are successful with the independent games initiative, and if we are successful with growing Social Point, then that will essentially be a third label of the company."

"If we are successful with the independent games initiative, and if we are successful with growing Social Point, then that will essentially be a third label of the company"

Strauss Zelnick, Take-Two

Ismailer adds: "And we also did an acquisition of [strategy game] Kerbal Space Program recently."

Zelnick again: "Yes, that is part of the independent games initiative. It has already sold a couple of million units and it continues to sell. It is beloved, and it has a high Metacritic score, and we expect to bring further iterations of that to market."

Back to 2K, and outside of mobile, Ismailer's group is working hard on succeeding in Asia, including the Chinese market.

"China is definitely very difficult, but I do think there are in-roads that some of our partners are making in terms of putting more Western content into the market," he says. "And I think that we have amazing IPs, and some of our catalogue business has done extremely well on PC. Our goal is to bring all of those products to market in China."

Zelnick adds: "The biggest challenge in China is Government approval. The market likes what we have to offer, the issue is being able to offer it. Tencent is launching a platform, and we will see what the approval process is like around that platform."

"The launch of the professional gaming league with the NBA is intended to be a meaningful venture, it is intended to have sponsorship, and revenue from advertising, media rights and events"

Strauss Zelnick, Take-Two

And another key strategic area for Take-Two is esports. This is a market that, in the past, Zelnick described as being a big marketing opportunity, rather than having significant commercial potential.

"That was before we launched the league with NBA," he says. "We would have no reason to launch a joint venture with them if we didn't think there was an economic opportunity. The two tournaments that we've done already were seen as promotional, testing the waters, and hundreds of thousands of teams played millions of matches, which was great. The launch of the professional competitive gaming league with the NBA is intended to be a meaningful venture, and we will see if it is or not, but it is intended to have sponsorship revenue, advertising revenue, media rights revenue, event revenue through beverage, merchandise, and the like."

Zelnick also thinks esports has the potential to expand the reach of games to the broader entertainment consumer. He says there are four different types of games customer out there. "You have the hardcore gamer, which is a natural audience for us. Then we have the 'I really like games but I'm not a core consumer' group, and in almost all instances we want to get to them. Then we have the 'I maybe buy one game occasionally when it really speaks to me'. Finally, we have the 'I just want a pure entertainment experience, and I don't care if it's a video game'... that's Grand Theft Auto.

"We have different titles that speak to each of these concentric circles, and our goal is to widen that as much as possible. Sometimes it won't happen. Civilization is not going to go out to that fourth circle, but GTA can, Red Dead Redemption can, one could argue that Borderlands gets to the third circle, probably not the fourth.

"Basketball... maybe over time you'd be unsure whether it is interactive entertainment or not. Certainly the league we're launching with the NBA could explode these concentric circles to being irrelevant, because anyone can watch what is going on.

"We have gone from a company that focuses on hardcore gamers, to an entertainment enterprise that is expressed through interactive entertainment primarily, but there may be other areas that has nothing to do with games. I would argue that the league really has nothing to do with interactive entertainment, because it will be linear entertainment for most of the people involved. They're watching it, they're not interacting with it. We're not calling it a different market, but that is what it is."

Away from 2K, the big name on Take-Two's radar right now is Rockstar's Red Dead Redemption.

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Red Dead Redemption 2 is the biggest game on the schedule over the next 12 months

Despite not releasing a completely new game since 2013, Rockstar is still the jewel in Take-Two's crown. GTA V remains high in the charts, and GTA Online continues to be a huge boost to Take-Two's bottom line.

So expectations for Red Dead Redemption 2 are high, but just how big can this game become? GTA IV (2008) shipped around 25m units in five years, while GTA V currently sits on 80m. The first Red Dead Redemption (2010) shifted around 15m, so can we expect a similar leap in commercial performance for Red Dead 2?

"I don't make assumptions like that," Zelnick says. "What the team is doing is trying to make the best possible game they can, and if they succeed... Look, the reason, in my opinion, why GTA V has sold 80m units, and GTA Online had another record year 3-and-a-half years since its release, is because it stands alone in the generation. In every prior generation, there have been other titles that have clustered around GTA from a quality point-of-view. That's clearly not the case now. If you are over 17 and you have a new generation console, you have GTA. Otherwise we wouldn't have shipped 80m units. Can any other title achieve that? It seems unlikely. Do we have incredibly high hopes for Red Dead? We do. But we are not putting it in the context of GTA."

Regardless, Red Dead Redemption 2 is seen as a light at the end of a particularly dark tunnel for those working in games retail. It may not achieve GTA V numbers, but even getting a quarter of the way there will be a huge boost to the market.

Take-Two has a quiet year in 2017, and 2016 didn't go entirely to plan, but Zelnick and Ismailer don't look particularly concerned, and for good reason. The company is taking some calculated gambles, and its 2018 line-up could see it as next year's biggest games publisher.

Then it just needs to try and do that every year.

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