The escalating cost of gaming hardware is a significant concern, but Take-Two Interactive CEO Strauss Zelnick foresees cloud streaming as the eventual solution. Zelnick indicated during the company's latest investor call that the industry is moving toward a "commercial streaming mode within three years," where gameplay streamed over low-latency connections will become commonplace.
"The rising cost of hardware is not a good thing," Zelnick stated. While he does not believe current hardware prices will impede Take-Two's ability to deliver desired experiences, he acknowledged that lower hardware price points would naturally lead to a larger installed base of gaming devices.
Zelnick also noted the ongoing shift towards open systems, citing the growth of PC gaming sales as an example. He believes that PCs, increasingly equipped with controllers, are already functioning effectively as game machines and that this trend will continue. However, his primary prediction centers on the transformative potential of streaming technology.
"With the advent of streaming, which we really do believe is around the corner in terms of having something that's low latency and really works well for consumers, machines that weren't game machines before will become game machines," Zelnick explained. He estimates that within three years, advancements in hyperscaler networks and edge network technology will enable low-latency streaming at a scale that could potentially multiply the "effective installed base" by ten.
While Zelnick does not anticipate a tenfold increase in Take-Two's revenue directly mirroring the growth of streaming, he sees it as a significant opportunity to reach new markets. He pointed out that Take-Two currently derives approximately 80% of its revenue from the US, Western Europe, and a few Asian countries, and expressed a desire to increase revenue from other regions where video games are popular but access to high-end gaming is limited by less capable mobile devices.
Previous attempts at widespread game streaming, such as Google's Stadia, have faced challenges, primarily related to latency and infrastructure. Zelnick acknowledged these past difficulties, drawing parallels to perpetually future technologies like nuclear fusion. However, he expressed optimism that recent advancements in cloud infrastructure and edge computing are beginning to address the latency issue, particularly with initiatives focused on deploying significant edge networks.
Despite the promising outlook on streaming, Zelnick clarified that Take-Two is not solely relying on this technology for its future. "We're not betting any of our company on this," he said, while still confident that low-latency streaming is achievable in the near future, likely within the three-year timeframe he projected.