Take-Two Interactive boss raises doubts over viability of subscription service for gaming
Strauss Zelnick, CEO of market-leading video game publisher and developer Take-Two Interactive, recently aired his views on the possibility of a subscription-based model for accessing video games. Here’s the basic version: he’s not into it. Why not? Because people don’t consume games like they do more “linear entertainment” such as TV shows. He might be worth listening to – after all, Take-Two is the company that owns Rockstar, the studio behind smash-hit franchises like Grand Theft Auto and Red Dead Redemption.
Take-Two Interactive’s share price has appreciated by 19% over the past three months
Source: Yahoo Finance
In a recent interview, Zelnick said: “You have to find that intersection in business models that serve the customer successfully and also serve everyone else who participates in the value chain. And that may prove to be a little challenging for subscriptions in this space because people do consume video games differently than they consume linear entertainment.”
Here's the difference: a household might spend way more time every month watching TV than it does playing video games. Additionally, TV shows and movies are short, digestible, pieces of content. You can watch a movie in a couple of hours, or a whole series of TV in 10 hours or so. A large video game, however, might take a skilled gamer more than 100 hours to complete. For those hundred hours – which could be split over weeks or months – that video game is likely to be the only one played. Zelnick elaborates:
“In the case of video games, it is possible that the average user in those 45 hours might be playing 1, 2, maybe 3 titles; certainly not 70 titles. In that event, if you play 1, 2, or 3 titles and you play them for months in a row — which often happens in [the video game world] — then a subscription model may not be such a great deal for the customer.”
As a final thought, however, Zelnick wanted to cover his bases. He might not see a subscription-based model as the future of gaming, but Take Two remains “open-minded” to the idea.
Dominion holds Take-Two Interactive in its Global Trends Luxury Fund. Share price as-at 23 May 2019.
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