Digital distribution not a holy grail - Zelnick
Take-Two CEO sees growth in downloadable revenues, but impact on profit margins isn't that dramatic
Digital distribution is changing the industry, but some industry watchers may be overstating the impact it makes on publishers' bottom lines. In an appearance at the Credit Suisse Annual Technology Conference today, Take-Two CEO Strauss Zelnick discussed the publisher's agnostic approach to digital distribution when asked how quickly he sees company revenues moving to downloadable sources.
"We're indifferent, because we can't choose how a consumer wants to consume," Zelnick said. "We need to be everywhere. We need to be flexible to make our products available. The margin dollars are a bit higher, but not so much higher I can say in good conscience to you, 'Here is the holy grail of our business. In addition to all of the great stuff--new generation, wind at our back, high quality, a vastly more rapidly growing area of entertainment consumption than anything else--All of that good news would be even better news, which is that our entire model switched from one to another that has a higher margin.' That's what people want me to say, but it just doesn't have the benefit of being true."
Currently, Take-Two brings in between 15 and 30 percent of its revenues from digital sources, Zelnick said. Some quarters might even edge a bit higher than that if they're driven by catalog spending.
"It is almost certainly true that people will consume more and more digitally, as they do, for example, with music. But right now, physical distribution is still 70-80 percent of our business. And physical distribution partners are our primary distribution partners, and happily so."
That said, Zelnick said on a personal level it's "hard to believe we won't head into the 50 percent land relatively soon" when it comes to digital revenue share. He also added that, much like with music, he sees no structural ceiling to just how far the industry could shift toward digital.
But the comparison to music is pretty inaccurate. Music is consumers by most people passively. It's a bite size three minute experience that's typically The soundtrack for something else. Games are completely interactive, and thousands of times the sizes download and store.
In addition, music is typically at most a teo dollar expenditure. Most people have an issue spending over $15-30 on something thry can't touch or resell. Sure, there's going to be a larger number of people in games who are going to go digital, But the kind of dominance you see is music is likely a pipe dream.
At this point, the industry should seriously start to lobby governments and councils to increase internet capability in suburban and rural areas - because when games are 40gb downloads, it's going to affect all publisher's revenues.
Edited 2 times. Last edit by Morville O'Driscoll on 4th December 2014 7:23am
I'm on DSL as well, thought softly u because I haven't been bothered to clean my house to the point id low am a anger to see it to install FIOS :)
If I laid off anything more hardcore than web browsing, a 50GB game would take me 4 days
There are still plenty of places, like much of Canada with hardcore stupid data cape, and all the ISPs are desperate to force them on US customers. Of course, I'm ire if Microsot and Sony paid the appropriate kickbacks, such things would be exempted.
Microsoft's system would have been interesting, where the discs are merely a delivery mechanism. It would have also allowed a future where flash drives could be stuck in a kiosk. I think that's merely delayed though, and that E3 is going to be mighty interestng
Just step back and think about how much paper and plastic we waste on games. I mean, walk into a Game or HMV and just marvel at the environmental damage the industry wreaks, just to sell some data and a key to legitimately play. Think of how much simpler it would be. Cheaper, too, not just on production, but store space - no more racks and racks of cases.
Running those data centers is actually st so polluting, and you can't recycle the juice they use
I've participated in extensive studies, and with Netflix and the app store, the poor browse ability buries a lot of titles there's no moment of discovery, you're limited by patience and what the algorithms thinks you'll like. That's why Best Buy is moving into the "showcase" business, renting floor space to Microsoft, Samsung etc for a store within a store. I don't know how many movies are in my collection because it looked great on the shelf at the video store, and even a lot of teenagers find games because they're briwsing the cracks at GameStop.
I see the kiosk as an answer to broadband challenged areas, to keeping games available at retail that isn't quite worth doing another run on, and keeping small developers collecting royalties. There's already a huge problem with getting lost in the App Store shuffle, and huge money on making the "Deans list" on iTunes or Steam or PSN or XBL. So give that plastic a chance to find a good home, and pulp what diesnt
quite literally, and I mean this most sincerely............
WOOOOOOOOO - HA -HA - HA -HAAAA!
ROFLCOPTER!!!
:) :) :) :) :) :) :) :) :) :) :) :) :) :) :) :) :) :) :) :)
They'll just stick with the current offering of a serial code in the box with the statue. NFC chips to validate games have lots of problems, and anything that actually transmits requires batteries and expensive parts