Take-Two Interactive Chief Executive Officer Strauss Zelnick shared some new insight into his views of subscription services such as Xbox Game Pass and how those are influencing his overall distribution strategy. The industry veteran offered his comments during Take-Two's Q3 2023 earnings call, during which he also proclaimed that AI will "raise the bar" in gaming.
Given Take-Two's reluctance to embrace game subscription services as a distribution platform, its stances on this growing industry segment were a common talking point during every one of the company's earnings calls in recent years. Last quarter, Zelnick's efforts to reassure investors that the company is on the right track went as far as for him to state that day-one Game Pass launches simply don't "make sense" for Take-Two.
Analysts have once again opted to pick Zelnick's brain on the subject of game subscription offerings during the company's February 6 earnings call. This time around, they put a macro spin on their inquiries, asking the CEO whether services like Xbox Game Pass are impacting the manner in which consumers engage with new releases and whether any such changes have consequently affected Take-Two's own engagement rates. Zelnick stayed firm in his assessment that subscription platforms remain a "relatively small" niche which is in no way cannibalizing the company's core business.
As a result, the US publisher still doesn't feel pressured to support services such as Game Pass with anything beyond appropriately timed re-releases of classic "catalog titles" that already spent a long time on the market, the CEO concluded. Zelnick's comments echoed the stance that he has been defending since 2021, which is when he first publicly dismissed the idea of day-one Game Pass launches.
The CEO also downplayed the potential impact of cloud gaming solutions on the industry's bottom line during the same call. He reminded analysts that Take-Two was among the first publishers to support Google Stadia with Red Dead Redemption 2, suggesting that the company is equally willing to embrace other similar platforms in the future. However, none of that should significantly impact its turnover because cloud gaming is a distribution technology and "not a business model," according to Zelnick. Most people willing to pay "$60 or $70" for a new AAA game are also going to be prepared to shell out for a console, the CEO posited, concluding that this state of affairs facilitated Google Stadia's demise.
Take-Two reported a net loss of $172.9 million on $1.41 billion in revenue for the three-month period ending December 31, 2022. Zelnick told investors he takes full responsibility for not delivering on the numbers side, arguing that this slump was primarily caused by uncertain economic conditions prompting many consumers to tighten up their spending, which also affected the firm's competitors.
Source: Seeking Alpha