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Business Take-Two CEO: "Subscription model doesn't really make sense for frontline titles”

zedinen

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Q1 2022 Take-Two Earnings Conference Call

Gamespot

Take-Two Reacts To Game Pass-Like Subscription Services


Once again, Take-Two CEO Strauss Zelnick has responded to the financial situation surrounding subscription services like Game Pass. His views are unchanged--subscription services make sense of catalog games but not new ones. This is a point he has been stressing for years already.


"Our views remain unchanged. We think a subscription model can make sense for deep catalog titles. But it doesn't really make sense for frontline titles. For any business model to make sense in the entertainment business, it has to work for the creators of the entertainment as well as the consumers of the entertainment. I think catalog can make sense for the publishers, it can make sense for the consumers who are avid, who really want access to a lot of product. But if you're getting into frontline product, then the economics are much more difficult to make sense of"

Zelnick observed that "consumption patterns" for a streaming service like Netflix--which offers linear entertainment (for now at least)--are different from interactive entertainment.

"Consumers who are involved with interactive entertainment have different consumption patterns than those involved with linear entertainment. Linear entertainment consumers consume something like 150 hours of programming a month. That's probably well over 100 different titles. In the case of interactive entertainment, consumers are consuming something like 45 hours a month, and that may be one, two, three, four titles. But it's certainly not 100 titles. So from a consumer point of view, it's not clear that a subscription model really makes sense, for the bulk of consumers"
 

Faithless83

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MikeM

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Subs work well for some, but not all. This shouldn't be news, however it seems people/fans have this idea that everything under the sun will launch on GP. Just goes to show that most people don't have a clue what they are talking about from the economics of gaming.
 

SlimySnake

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Well yeah. Red Dead 2 sold like $750 million worth of copies in one month. GTA sold almost a billion. They cant afford to give it away for $10.

GTA has now sold 150 million copies. Most of them at around $30-40. Red Dead 2 is now at 38 million and I have never seen it drop below $40 even after three years.

Subscription model should work for MS now that they have 24 studios potentially pumping out games left and right but Rockstar makes like 1 game every 5 years.
 

Haggard

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I agree with Zelnick. I highly doubt MS will see any black numbers from gamepass anytime soon, and longterm I´m not sure AAA titles which directly release to a service like GP can be economically viable at all.
Subscription services tend to get filler content sooner than later.
 
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MOTM

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Both GTAV & Red Dead have been on Gamepass though. Totally makes sense from a T2 point of view.
 
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Blond

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Well yeah. Red Dead 2 sold like $750 million worth of copies in one month. GTA sold almost a billion. They cant afford to give it away for $10.

GTA has now sold 150 million copies. Most of them at around $30-40. Red Dead 2 is now at 38 million and I have never seen it drop below $40 even after three years.

Subscription model should work for MS now that they have 24 studios potentially pumping out games left and right but Rockstar makes like 1 game every 5 years.
It’s hits 30 pretty often, once in a while even 20.
 
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ethomaz

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Well imagine any sub services that can afford to match the $500 million revenue for a single a big title.

Sub services is for old titles after the publisher got the big chunk of full priced sales.
 
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Excess

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Zelnick and the 2K board are responsible for three iterations of GTA V and a mild neglect of RDR2's online modes.

There's too much focus on "what works well", rather than on "what's good for consumers". I wouldn't expect him to say any less until 2K comes out with it's own streaming service to continue milking 2K Sports and GTA Online.
 
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have we seen any big major 3rd party titles launch on gamepass yet? this is what is actually stopping gamepass from really taking off. its mostly indies and microsoft 1st party that launch on it.
Sony was kind enough to lend their biggest sport franchise (MLB: The Show) to the service at launch and Square Enix launched their big new IP Outriders on day one there too.
 
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A subscription service works if you are capable of producing a varied assortment of medium to large-sale game projects every quarter and have some more high-quality AAA games from recent years to back up the catalogue. The only companies I know of who could pull it off would is Microsoft (already doing it), Amazon (if they really tried), and the big 3 independent publishers (Activision, EA, Ubisoft).

Take-Two has a strategy in the last decade of simply launching one large high-quality game with open-world multiplayer component and launching expansions every quarter. Of course this wouldn't work for a subscription service.
 
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completely forgot about those two. im wondering if microsoft will go even bigger. imagine the blow to sony, if resident evil 8 or hitman 3 launched on gamepass. at that point, you would be throwing money away going with playstation.
I think if Microsoft money-hatted three big AAA games from 3rd parties every year for the service, they would be golden.
 

kretos

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Anyone that cant compete in this space will say this. See sony

or maybe because their biggest blockbusters like God of War are selling millions which already passed 20mil and it doesn't make sense to put it on sub service for peanuts? counter point MS only went that way because they weren't selling shit and that was their only option
 

Zeroing

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Sony was kind enough to lend their biggest sport franchise (MLB: The Show) to the service at launch and Square Enix launched their big new IP Outriders on day one there too.
Sony didn’t lend it, it was a deal made between MS and MLB and square enix will accept any deal, I mean if a company releases a cookbook with Lara Croft and perfume with final fantasy characters names… it’s business, they will accept anything.

So the question still remains. If there were no deals made to release those games day one… would they be there ?
 

NickFire

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A subscription service works if you are capable of producing a varied assortment of medium to large-sale game projects every quarter and have some more high-quality AAA games from recent years to back up the catalogue. The only companies I know of who could pull it off would is Microsoft (already doing it), Amazon (if they really tried), and the big 3 independent publishers (Activision, EA, Ubisoft).
:messenger_tears_of_joy: Are you kidding? Amazon has one successful beta I think. EA already pulled a soft plug and lets MS pack EA play into Gamepass. MS is still riding $1 intro offers and promising things will get better soon (which they very well might, TBD). And you somehow left out the one company who has been releasing high quality AAA games fairly regularly over the last 18 months???
 
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I think if Microsoft money-hatted three big AAA games from 3rd parties every year for the service, they would be golden.

they only need either FIFA or call of duty to really shake things up but i guess its harder than it seems otherwise they would have done it already. even the rumours of battlefield launching on it were not true. it seems like 3rd party publishers dont want to put their big ip on a subscription service at launch. maybe 6 months later at best. even that is unlikely though.
 
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:messenger_tears_of_joy: Are you kidding? Amazon has one successful beta I think. EA already pulled a soft plug and lets MS pack EA play into Gamepass. MS is still riding $1 intro offers and promising things will get better soon (which they very well might, TBD). And you somehow left out the one company who has been releasing high quality AAA games fairly regularly over the last 18 months???
I mentioned Amazon not because they have a track record in games, but because they have the money to compete with Microsoft if they were truly interested. I left Sony out because their offerings, while undoubtedly high in quality, are games that give players very little incentive to return once the credits role. Also, Sony is lacking in the variety of genres that they dabble in. Most of their games now are over the shoulder action.
 

A.Romero

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Well, yeah. I mean, even in the movie business there are still theater and Bluray releases. The only ones putting streaming exclusive movies that could be on par with Hollywood big productions are the ones that can afford to lose money.

Take Two would be making a mistake by trying to compete there. They obviously can keep doing their thing and people will follow them wherever they go.

There is space in the market for both. They actually complement each other.
 
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I mentioned Amazon not because they have a track record in games, but because they have the money to compete with Microsoft if they were truly interested. I left Sony out because their offerings, while undoubtedly high in quality, are games that give players very little incentive to return once the credits role. Also, Sony is lacking in the variety of genres that they dabble in. Most of their games now are over the shoulder action.

amazon is the next google i see. they were also said to have "money and infrastructure to compete". as we can see, google have now taken over the industry/s
 
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kingfey

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When your old title sells for 150m copies. What does those services do to you?

Its easy for him to make that decision.

After all, the bastard enjoys gta online cash cow, and doesn't want to bring a new game at all.

F you for not making gta6.

Also, those subs makes sense, when you can pumb out games yearly. Instead of 1 every 5 years.
 
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There's always some potential backstage theatrical politics involved with these figureheads when they talk, whether it's Microsoft, Sony, or Take-Two, etc. You should never take what any of them say as pure gospel just because it might confirm your preexisting biases.

So far we've seen many more cases of games actually selling more copies (or selling well in general) in spite of being on GamePass versus games that have seen sales decrease. The only one people routinely point towards to imply the latter, is Gears 5, which at this point is an anomaly likely impacted more by other factors outside of GamePass. Yet, it's the only concrete proof anyone who keeps implying GamePass decreases game sales can ever point to. Talk about being a stubborn mule :S.

As to what he considers frontline, well I think with where GP's subscription numbers are currently at, a game of GTA 5's caliber probably doesn't work relying on the service alone. But that's just the thing; all of these figureheads talk as if the games are exclusively on the service itself, when they know they're not. So why do they keep speaking as if the only way to engage with these games in the ecosystem is through the subscription service?

Eventually if and/or when services like GamePass can reach a threshold in active subs that's high enough, then even games like GTA 5 financially work out better being included on such a service Day 1 (along with physical and digital copies available) versus not being there. If Microsoft, for example, gets to a point within the next 2 years where they have 50 million subs paying an average of $10/mo, that is $5 billion/mo in subscription revenue. People vastly overestimate the costs Microsoft incurs on running GamePass and getting content secured for it; they aren't 100% like Netflix, because Netflix doesn't own their own streaming hardware/servers and networking software/OS in a vertical stack the way Microsoft does. That alone saves a ton on operational costs.

And even somewhat more prolific AA games like The Medium seemingly cost only $7 million to secure on the service Day-and-Date; assuming they did this with all near 400 games on the service, that is an absolute worst-case of $2.8 billion over the course of a year (assuming they added 400 The Medium-budgeted games Day-and-Date to the service in one year, which is improbable), or more realistically, over the course of four years (GP has been around since 2017 IIRC). That's an average of $700 million/year in investment for securing 3P content on the service and, again, that is in no way a realistic example because you have some games higher-stature than The Medium but came to the service much later, and other games lower-stature than it which probably costed even less to secure on the service.

People do realize that they would make that up nearly 2x over in the course of a single month's sub revenue @ 50 million active users, right? Let alone the rest of the 11 months of the year, and I think it's a good hunch to assume operational costs for running and managing the servers isn't in the billions annually, or even greater than $100 million/year most likely (I'm just talking about the Azure servers for Xbox, not Azure as a whole, though I don't think operational costs annually for that are suddenly magnitudes higher, either).

Like I said, you gotta wonder if there's theatrical political chess moves trying to be made sometimes by some of these comments, because I know it doesn't take a lot to some of this napkin math and just working on some common-sense points. I get it though; again if we're talking about something at the scale of a GTA 5, yes, dropping that through a subscription service on its own probably wouldn't work if it's at the size where GamePass is currently...but that's also primarily dependent on the subscription service being the ONLY point of delivery, not an option, which is what it actually is.

Over time though, even this will fall apart as an excuse as recurring subscription revenue for a game that retains as much user engagement as GTA 5 (particularly GTA 5 Online) pretty much outweighs the standard non-subscription model handily.
 

BennyBlanco

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Rockstar is on a different level from every other dev. Nobody else sells like them except maybe Nintendo.

Yet RDR2 was on gamepass and GTAV was given away for free on EGS.
 
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kingfey

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Well imagine any sub services that can afford to match the $500 million revenue for a single a big title.

Sub services is for old titles after the publisher got the big chunk of full priced sales.
That is if that $500 game can be successful.
We have seen big games flop easily. Black ops 4 flopped. Avengers flopped.

Having a game which big money doesn't guarantee success. Gta had a long road and franchise built in to achieve 150m. Same for red dead 2.

Can't say the same for new titles. You need a risk taker. That is where sub services comes in. Getting paid 1/5th of your investments makes your flop less. Than to just get 1/5 by selling your product.

Best example is avengers game vs outriders. Outriders made money from gamepass, while avengers lost tons from sales only. It made a huge loss for square.
 

Evilms

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or maybe because their biggest blockbusters like God of War are selling millions which already passed 20mil and it doesn't make sense to put it on sub service for peanuts? counter point MS only went that way because they weren't selling shit and that was their only option


If Microsoft's 1st party franchises had been as successful on Xbox One as they were on X360, the game pass would never have seen the light of day but since it didn't work out well they had no choice.

Now this model doesn't make sense for Sony or Nintendo, they don't have a problem with their 1st party games selling very well, so there's no point in selling them off in a service like the game pass.
 
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i play maybe 10 games a year at best.

Why the fuck would i subscribe to a service and limit my self to their catalogue.

instead of just picking the titles i want freely regardless of what's on a service.
Because if that game is also on the service then you're still getting the game, and potentially other games that might've been unknowns on your radar previously?

I mean if the games you'd pick up yourself are on the service anyway then you'd be saving money going with the service and the game pubs already get their cut making the agreement to go on the service. And certain services you can still buy the game at a small discount on top.

If the game(s) in question aren't on the service though then I can see a point there. Might still be worth at least a month tho just to sample a few games to see if there's a gem you'd like to pick up you normally wouldn't of.
 
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or maybe because their biggest blockbusters like God of War are selling millions which already passed 20mil and it doesn't make sense to put it on sub service for peanuts? counter point MS only went that way because they weren't selling shit and that was their only option
You realize a lions-share of those 20 million weren't sold at full original MSRP, right? So the lower the pricing on the games, the lower a cut the publisher gets from the sales, at least at retail.

Digital is a different story tho Sony might find themselves in some legal trouble for this as apparently at least one dev/pub has tried suing them for not offering digital codes from different outlets redeemable on PSN. Guess we'll see how that evolves, don't know how much of a case they have there tho.
 
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Fbh

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That's sort of how I hope subscription services go. Big AAA games are paid releases that after some time come to the subscription service.
Still don't see how the model is sustainable otherwise unless you turn all your big AAA titles into microtransaction fueled GaaS, or significantly raise the subscription price.
 

Stuart360

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Subscription service has sense if you produce shitty tier B games as Netflix does to fill his catalogue. As Microsoft is doing except for a few AAA titles.
Netflix spens tons of money on its tv shows and movies, as much and more than actual tv series.
And Gamepass have a good selection on AAA, AA, and Indie games, and they pick and chose most of these games wisely. They tend to only pick the well regarded Indie and AA games.
They could easily have 3 or 4k games on Gamepas now of they put any old shite on, but they dont.
 

sunnysideup

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Because if that game is also on the service then you're still getting the game, and potentially other games that might've been unknowns on your radar previously?

I mean if the games you'd pick up yourself are on the service anyway then you'd be saving money going with the service and the game pubs already get their cut making the agreement to go on the service. And certain services you can still buy the game at a small discount on top.

If the game(s) in question aren't on the service though then I can see a point there. Might still be worth at least a month tho just to sample a few games to see if there's a gem you'd like to pick up you normally wouldn't of.
gamepass cost 15 bucks. Thats what a game costs. on pc.
 

Clear

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Basically that statement is exactly what I've been saying for years:

Economics don't work for big third-parties outside of product that's already at end-of-life, and the consumption pattern for an a-la-carte gaming sub is highly dissimilar to that of passive entertainment media.