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Four keys to next-gen success, according to Take-Two's Zelnick
Four keys to next-gen success, according to Take-Two's Zelnick Exclusive
June 15, 2012 | By Chris Morris

June 15, 2012 | By Chris Morris
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    16 comments
More: Console/PC, Business/Marketing, Exclusive, E3



While Nintendo fell short of its goal of whipping gamers into a frenzy for the Wii U at this year's E3, third-party publishers, who see the system as a key driver of future growth, were reticent to downplay its potential. Instead, they cited the system's long-term potential, rather than its initial impact.

Take-Two Interactive Software chairman and CEO Strauss Zelnick, however, was not among the cheerleaders.

While Take-Two will make sports and family titles for the Wii U, its bigger core franchises have been notably absent from the list of partners. And that seems unlikely to change anytime soon.

"We haven't announced anything," says Zelnick on the possibility of moving the company's mature titles onto the Wii U. "I'm skeptical."

Don't mistake that skepticism for a pessimistic attitude about the next generation of consoles, though. If anything, Zelnick is eager to kick off the next line of game systems, because he sees it as a chance for Take-Two to continue to advance its position in the industry.

"For a company like ours, it's a great opportunity," he says. "[New console launches] separate the winners from the losers -- and we fully expect to be one of the winners."

There are four keys to success in a new console cycle, Zelnick believes -- owned intellectual property, top-tier technology, top-tier development talent and a strong balance sheet.

Take-Two, he says, has all four. And that could help it overcome the launch cycle hurdles that many publishers struggle with.

"I don't want to minimize the challenge of creating titles for new technology or the economic challenges of doing that, but if you get it right, it's a terrific time to launch a new IP," he says.

While more and more companies are rolling out new versions of their biggest hits each year to ensure a steady (and, ideally, reliable) stream of income, don't expect Take-Two to follow that model anytime soon.

There's a risk in overexposing your key franchises, says Zelnick. And while doing so might give a company a tremendous short- (and even mid-) term cash boost, the practice can ultimately leave money on the table.

"I don't aim to annualize our non-sports titles because I think you run the risk of burning out the consumer -- even if its very high quality [product]," he says. "Some of our competitors have had this trajectory where they extract a lot of value and the IP goes away. We're trying really hard to build permanent IP. And if you have to rest the title for a few years, over time you'll extract more value. ... We're not trying to create something good and market the hell out of it. We're trying to delight customers with something great -- and market hell out of it."

That's a strategy that initially baffled some shareholders and analysts, but one that has helped the company rebuild from the chaos it was in five years ago (even if the stock, which has fallen roughly 50 percent in that time) doesn't reflect that. Zelnick concedes there's still work to be done -- which is part of the reason he's eager to see the next generation begin.

"We haven't optimized our system – our slippage last year tells you we haven't - but we've made a lot of progress," he says. "When I showed up here five years ago, THQ's market capitalization was four times that of Take-Two. Ubi's was twice Take-Two. EA's was 25 time Take-Two's. To say the very least, that's not remotely the way the world works today. Would I like to apply a little more rigor to our art? Of course I would! Look at me, I'm a suit! But I have an excitement for what our team can do."


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Comments


E McNeill
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"I don't aim to annualize our non-sports titles because I think you run the risk of burning out the consumer -- even if its very high quality [product]."

This is the first I've heard a biz guy say this. I think it's very, very true, unless there's a lot of innovation between each title.

Eric Geer
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Brand fatigue I think is the stage that we are seeing right now with alot of these games that are in their 3rd+ iteration within a 3-4 year period. I would expect to see some of these IPs die in the next few years

[User Banned]
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This user violated Gamasutra’s Comment Guidelines and has been banned.

Michael Joseph
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If you're cranking out a new version every year or every other year for big titles, chances are the teams just dont have enough time to go much beyond merely making the game prettier. I think that's the root of customer burn out with anuualized game products. Over the long term, this is a problem for all "permament IP" titles. How do you avoid creatively pigeon-holing your permanent IP? How do you push the envelope or break out of boundaries that have been erected in both the expectation of customers and the developers own creativity once the IP has become so solidly defined?

One way to do that is to leverage your good company name and release new IP.

William Collins
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"I don't want to minimize the challenge of creating titles for new technology or the economic challenges of doing that, but if you get it right, it's a terrific time to launch a new IP,"

Absotutely agree. It could just be me, but I don't understand why the big 3 have such a hard time doing this with each new hardware release.

Joe Zachery
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Take Two seems they want to play the waiting game on Nintendo consoles again. If you want to build an audience for your games you need to do it asap. If all your going to do is use Nintendo consoles to fund your other games. Then when you finally bring out a mature game they audience will not be there to buy it. After the reception that Max Payne 3 started out with in the US. You would think having one more system to port their games too would be welcomed. Even though they have said they shipped 3 million games to retailers. In it's first 2 weeks in the US market the game only sold 440,000 on PS3/360.

"Absotutely agree. It could just be me, but I don't understand why the big 3 have such a hard time doing this with each new hardware release."

N64 Wave Race 64
GC Luigi Mansion
Wii Wii Sports
3DS Steel Diver
WiiU NintendLand

All new franchise that started at the launch of the console life. Some became major hits, and others didn't. So to a degree Nintendo takes the chance at bringing out a new game at launch.

Merc Hoffner
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Always bet against Nintendo

Jr Hawkins
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Wow good stuff from Zelnick. Take-2 could be looking at becoming a heavy hitter next gen. I know pretty much everybody fears their marketing campaigns right now.

Harlan Sumgui
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yup, great interview. & I loved the "look at me, I'm a suit." comment. great stuff

Merc Hoffner
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"and a strong balance sheet. "

Net income in millions:
2006: (185) (October filing)
2007: (138) (October filing
2008: 97 (Ootober filing)
2009: (140) (October filing)
2010: 43 (October filing) / (123) (March filing)
2011: 48 (March filing)
2012: (108) (March filing)

For those who don't know, brackets (parentheses) means losses.

2 years profits vs 5 years losses. 2006 losses > all profits for the generation. Good to know they have a winning strategy.

Duong Nguyen
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Were those 3 years of profit solely due to Rockstars games? GTA 4 and RDR2? If so Take Two needs to diversify it's portfolio.

k s
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@duong I'd wager yes, Take Two is only really known for GTA and RDR (GTA in the old west).

Amir Sharar
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Duong: Diversification is nice, but the reality is that they have some of their games like Civilization won't get mass market attention like GTA or RD.

XCOM: Enemy Unknown, being a turn-based strategy game, is something that us fans feel will be a high quality title and very different than most games on the market nevermind Take-Two's own offerings. But I fear that it will be overlooked by the traditional gaming mass-market (ie. casual "hardcore" gamers who only play FPS titles).

So while I agree with you as a consumer that likes to see diverse products, it can be argued that diversification may not be the solution to financial woes.

I look at all of their titles and I see a great majority of them being high-profile, getting a lot of media and grassroots attention. How these titles result in losses year after year almost points to other issues rather than product appeal. Cost of development, mismanagement of assets and studios...it begs investigation.

k s
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I honestly haven't bought a 2K published game since Bully (in 2006?) all they really have is Rockstar and one development house can't completely support the company. Bioshock may have had some sales but really the bulk of their income comes from GTA.

Ian Uniacke
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BioShock? There are several others as well...although I had to check that myself I hadn't even remembered BioShock, so I can see why at first thought we think of Take Two as equalling GTA.

Bart Stewart
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"I don't aim to annualize our non-sports titles because I think you run the risk of burning out the consumer -- even if its very high quality [product]."

This sounds like what Zenimax/Bethesda are doing now that they can alternate Fallout with Elder Scrolls games. If they can add a third IP (from Bethesda, not id/Arkane) in time for the next iteration of consoles, even better.

"Look at me, I'm a suit!" -- wow. :) That by itself may have been the best part of the whole article....


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