Hurricane Sandy Helped Take-Two Prepare for COVID-19
The COVID-19 coronavirus pandemic left many companies scrambling when shelter in place orders came down from government officials. But Strauss Zelnick, CEO of Take-Two Interactive Software, was planning for that day for nearly eight years.
The preparations began in the aftermath of 2012’s Hurricane Sandy. The storm hit the company hard and Zelnick, who had been CEO for less than two years, quickly ordered his team to devise a plan for future possible situations where working from the office would not be possible.
Coincidentally, Take-Two already planned a work from home test day of its disaster recovery plan on March 12 when the coronavirus became a concern in the U.S. That test ended up serving as more of a kick-off point than a test, and the transition, Zelnick told Digital Trends, has been “seamless”.
“Any public company, any reasonable organization, needs to have a disaster recovery plan,” he says. “When Hurricane Sandy hit, we had a really hard time in New York. It was relatively early days for [our current management team]. We were still building up our infrastructure and we lost our email servers for about 2.5 days. To say the very least, that focused on our mind. And ever since then, we’ve been highly focused on disaster recovery.”
That’s not to say the shift hasn’t had an impact on the company. Take-Two delayed the launch of Kerbal Space Program 2 until the fall, but it has a fairly light slate of releases planned for the next year, giving developers time to make up any ground they lose due to current conditions. Zelnick also noted that the pandemic has not delayed any planned game reveals.
While Take-Two “couldn’t have been more prepared” for the current environment, Zelnick says he looks forward to returning to the office. Productivity actually rose initially among the company’s employees, he says, but working from home cuts down on collaboration. And certain activities, like motion capture, can’t be done in the current environment.
“The longer it goes, the more challenging it gets, of course,” he says. “I am not a believer that the world is going to become a work from home environment. … I’m hopeful that with appropriate precautions we won’t have another shutdown. We don’t expect to have another shutdown. But if we do, we’ll have to deal with that.”
The growing importance of e-sports and NBA 2K
The pandemic has certainly been good for Take-Two financially. The company’s fourth-quarter financial results were significantly better than expected, thanks to Grand Theft Auto Online, Red Dead Redemption 2, and NBA 2K.
It’s virtually impossible to break down how much of that financial windfall was due to people being stuck at home, but Zelnick notes that NBA 2K saw an 18% increase in customer spending in the most recent quarter, which took place from January through March this year. Take-Two actually expected the number to decline.
That’s notable for a lot of reasons, but it’s most significant to Take-Two’s e-sports plan.
While other publishers are leveraging top brands and creating new intellectual property with e-sports in mind, such as Activision’s Call of Duty League and EA’s Apex Legends, Zelnick thinks the real breakout successes in that market will be limited.
“There will be only a handful of sports that will matter to a broad audience,” he says. “We hope that basketball will be one of them. We think that a sport that people love can be a permanent e-sport, whereas individual games will have a harder time creating a permanent audience. And that’s why we’re investing behind the NBA 2K League, but it remains to be seen. It’s still early days leading into the third season.”
E-sports isn’t a primary focus for Zelnick right now as it’s not a material contributor to Take-Two’s bottom line. The company has high hopes for NBA 2K League, though. And Zelnick’s theory about e-sports versions of popular real-world sports connecting with an audience has certainly gained some credence in recent months as NASCAR fans watched drivers compete in iRacing simulations, setting e-sports viewing records on Fox Sports 1.
“I know NBA 2K League will do great and I know it’s going to take time,” he says. “We’ll see if these times have a salutary influence. That would be great, but we certainly wouldn’t have wished this on anyone.”
While Zelnick says he expects the PS5 and Xbox Series X to release as planned this year, Take-Two noted in its earnings announcement that the speed of console transitions is unpredictable in the best of times. Add in the chaos brought on by COVID-19 and the roadmap becomes even less clear.
That could work to Take-Two’s advantage. New systems were already facing a challenge to meet demand. If that goes a little slower than expected, the publisher could roll out its slate of games just as the systems start to hit critical mass.
“We clearly planned 2021 with an eye towards new consoles,” Zelnick said. “What we couldn’t have known was there would be a pandemic. That obviously puts uncertainly around the launch of new consoles. So, it’s probably not bad being in a position of having a light release schedule this year.”