The publisher of GTA sets a complex hourly entertainment pricing algorithm

Strauss Zelnick, CEO of Take-Two Interactive, expressed his position on how entertainment, specifically video games, is priced, a controversial topic at the best of times. According to the executive’s philosophy, this could be calculated by a seemingly simple algorithm, although its arcane nature makes its effectiveness unclear.

During the company Q2 2024 earnings call (Thanks, eXputer), Zelnick was asked about increasing prices for subscription services across the greater media landscape. The executive responded to the question but noted that it had “nothing to do with our business,” and then clarified his position on how much value consumers get for the price they pay for games, noting:

“In terms of pricing any recreational property, the algorithm is basically the expected recreational use value, which means the value per hour multiplied by the expected number of hours plus the final value that the customer realizes in the property if the title is actually owned, not say leased or shared.” “And you’ll see that this applies to all types of RVs. By that standard, our front-line rates are still very low because we offer long hours of engagement.”

We had to read that a few times, but it’s helpful that Zelnick explains: “The value share is very high. So, I think the industry, as a whole, provides a great opportunity for consumers in terms of price to value. And that doesn’t necessarily mean the industry has strength.” Pricing or want to gain pricing power. However, there is a great deal of value on offer.”

In our opinion, what Zelnick seems to be getting at is that the perceived value of having a title like the next Grand Theft Auto is greater, proportionally, to the customer based on how eagerly they anticipate it and how deeply they engage with it post-release. By this measure, we can see his point, and even agree with it to some extent. For example, we put hundreds of hours into Civilization VI, which came to PS4 in 2019 and is endlessly replayable. If we knew this to be the case, paying more up front wouldn’t seem so burdensome, but therein lies the problem.

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Zelnick concludes with some final thoughts: “Our strategy here is to deliver much more value than we charge to consumers. There have been precious few price increases in the business. The price increase of, say, $70 for some front-end products was the reason for that.” “. “First increase in many years after many generations. So, again, I think we’re providing great value to consumers.”

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