Take-Two CEO Speaks On Entertainment Pricing Convention

Update:

Thanks to a spokesperson the CEO hopes to clarify that he is not pushing forward with a new pricing model. Instead, this is an outlook of general pricing convention for entertainment. We have included the full quote on the matter below along with adjustments to the original story.

Yes, I mean you don’t want to generalize too much from what’s going on in linear entertainment because the increase in subscription pricing and linear entertainment is really a reflection of the fact that too many streaming services were underpricing to acquire customers and then they realize those customers were not durable and the LTVs were upside down. So, they were basically adjusting their pricing to make sure that the LTVs are potentially positive. And I think there’s still more pain to come for services, and I can wax eloquent if you want, although it has nothing to do with our business.

In terms of pricing for any entertainment property, basically the algorithm is the value of the expected entertainment usage, which is to say that the per-hour value times the number of expected hours, plus the terminal value that’s perceived by the customer in ownership if the title is owned or subscribed to. And, you’ll see that, that bears out in every kind of entertainment vehicle.

By that standard, our frontline prices are still very, very low because we offer many hours of engagement. The value of the engagement is very high. So, I think the industry, as a whole, offers a terrific price-to-value opportunity for consumers. That doesn’t necessarily mean that the industry has pricing power or wants to have pricing power. However, there is a great deal of value offered. And look, it’s our strategy here to deliver much more value than what we charge consumers. It’s always been our strategy here. We want to make sure the experience is first-class, and the nature of the experience is not just the quality of what we offer, it’s also what you pay for it, everyone knows that anecdotally. So, that’s how we look at it.

Original Story…

As reported by Dexerto, the CEO made these comments in the earnings call for Q2:

“In terms of pricing for any entertainment property, basically the algorithm is the value of the expected entertainment usage, which is to say that the per-hour value times the number of expected hours plus the terminal value that’s perceived by the customer in ownership if the title is actually owned, not, say, rented or subscribed to.

And you’ll see that that bears out in every kind of entertainment vehicle. By that standard, our frontline prices are still very, very low because we offer many hours of engagement.

That doesn’t necessarily mean that the industry has pricing power or wants to have pricing power. However, there is a great deal of value offered.”

Dexerto points out that among the publisher’s companies is Rockstar Games. Rockstar has recently revealed that they will be sharing the first trailer for Grand Theft Auto VI this December. That is of course an indication that Grand Theft Auto VI will be releasing soon. For some individuals, there could be assumptions that we might see a higher priced game upon release. However, that’s not officially stated to be the case.

Still, we can look at a very recent example of Rockstar’s business practices to assess that. The company released Red Dead Redemption to the PlayStation 4 and Nintendo Switch this year, with no online features and no enhancements. Later, a patch was released that improves performance to 60 FPS on PlayStation 4.

That rerelease of Red Dead Redemption came at $50. While it is below the longstanding regular price of $60, many gamers felt that it was still far too high for what it was. Zelnick defended this pricing, saying “that’s just what we believe is the commercially accurate price for it.”

It does probably mean that Grand Theft Auto VI is going to retail at $70 which is the current standard for new AAA releases.