Grand Theft Auto 6背后的人：Strauss Zelnick

Can you run through how you wound up buying and taking over Take-Two Interactive?

Interestingly, it's not a story that we've told. Part of the reason is that stories like this tend to be self-serving because they worked out well. Not everything works out well. In fact, most deals don't happen, and deals that do happen don't always work out.

But this one did. It's kind of a one-of-one, because the way we did this deal has never happened before, and I'm pretty certain it will never happen again. We essentially did a hostile takeover with no money. The reason we did that is we had no money, so it was really our only choice.

I had a background in the video game business. I'd started ZMC with partners, and the goal of ZMC was to buy companies, in certain instances turn them around, and in all instances build them up and create value in companies that stood at the intersection of media and technology. The idea in 2001, when we started the business, was that technology would supercharge media, create lots of value, and destroy value. Of course, that's a story now that's more resonant than ever.

I thought in 2001 it was pretty obvious, but it was not obvious to the entertainment business.

I guess we should give some context. By that time, you had already spent two decades in the entertainment business—longer?

About that. I've been in every entertainment business there is.

So why was it obvious to you in 2001 and not obvious to other people in the industry then?

I was a new-media guy. My goal, getting out of grad school, was to run a movie studio—an old business even when I graduated from grad school. So I got to Columbia Pictures in a very junior job. It was the only job I was offered and, by definition, the best I could get in the entertainment business.

I was responsible for international television distribution, which was basically the last stop on the train of distribution for film and television. In those days, there weren't many outlets. With motion pictures, you went to cinemas, and then you went to the very beginning of home entertainment, the very beginning of pay television, the very beginning of cable television, and eventually free television. My job was to distribute to free television.

New media had come along to the entertainment business. In those days, believe it or not, new media was home entertainment—which at that time was video cassette distribution—and pay television.

And this is in the '80s?

This is in 1983.

Okay, so that's new media in 1983.

It's still used all the time, almost 50 years later.

Amazingly. Yeah.

At big companies like Columbia Pictures, which made their money in film and television production and distribution, they were really old-line companies that were just beginning to modernize. I was one of a small cadre of business-school graduates who had been recruited into the business, which was atypical for the industry until the early '80s.

So they realized, like, “We need a new-media guy,” the way today everyone needs an AI guy—an AI army. They looked around and said, “Who is the least valuable executive at this company that we can put in charge of new media?” That was me.

In addition to my day job, I became responsible for new media, which was the best thing that ever happened to me. I'd always been a futurist. My thesis in grad school was a history of the electronic entertainment business from its inception in 1895 until when I graduated in 1983, and I tried to stay current since then.

The notion of looking ahead came naturally to me, but now I had to do it for my job. I also had to deliver revenue in that job. That was my initial exposure to new media.

If you look at my career, it has been the combination of traditional businesses and new businesses driven by technology, which is why this is such an exciting time with all things AI.

I want to interrupt you for one second. Did you say you were a futurist by looking back, though? Did I just hear you say you were studying the history of electronic entertainment?

You have to be a futurist by looking back.

So, wait. You started back in 1895. What was happening in 1895? What were you studying in addition?

Entertainment, recorded music, and the beginning of motion pictures.

The beginning of recorded music was the phonograph?

Well, in those days it was a wax cylinder, but you don't really need to know about it. I'll go into it if you want. It was actually a wax cylinder that looks like this. You can see them in museums. That was the beginning of recorded music, along with player pianos.

I'm more interested in what insights you were deriving from the past and then how you thought you were applying them in the '80s.

There are many insights, obviously, and we can go into them one after another. But the insight that spoke to me and probably helped me the most was that you always have to embrace new technologies. If you fight against them, you'll be left behind.

Number two, and I've said this at all the companies I've been at, most human beings are wired to believe that what is going on now will never change. The actual state of play is that exactly what is going on now will change. It will always change.

For example, people, whether they like it or not, think today's political environment is what it is. If they like it, they think it's going to stay forever. If they don't like it, they're moaning that it will stay forever. But it won't stay forever. It'll change. The economy will change, and media and entertainment will change.

Because I've always been wired that way, I was able, when I started ZMC, to make sure we had an idea: Let's not buy legacy businesses that are under pressure. Remember, this is 2001, so it was non-obvious. Let's not go into the movie business. It's a terrible business as a business. It's fun creatively, but as a business, it's a bad business.

Let's not go into deficit network television production. It was just a bad economic business—different today than it was, but it was really bad then. You would deficit-finance these shows in hopes of creating enough episodes that you could syndicate them. If you didn't get there, you had a massive loss. Occasionally, you'd have a huge hit, which was what motivated everyone.

The economics looked a lot like winning the lottery. I don't win the lottery. How about you?

Yeah.

That's not my life experience. But there are many other lessons as well. The biggest lesson, I think, is that new things come along and they can grow. Old things in the media and entertainment business take a really long time to die. Sometimes they don't. Sometimes they stay in the business forever. Sometimes they come back.

What would be an example of that from the '80s, when we're talking about new media and that's what your focus was?

Home entertainment, which was basically video cassette distribution. That became DVD distribution, which became digital distribution.

Which was a tiny market at that time that drastically expanded.

It was just beginning to boom in the early '80s.

And you were an early believer in that?

Well, so much so that I left Columbia Pictures to go to the largest independent home-entertainment company, Vestron.

Okay, tell me about that.

I'd been very fortunate at Columbia Pictures. I figured out how to double the division's revenue in 6 months, which was good for my boss's career and therefore good for mine. So I became the youngest vice president of Columbia Pictures.

Then I was recruited. I got a reputation for, “This guy figures stuff out.” I was recruited to a company called Vestron, which was then the largest home-entertainment company and had ambitions to become a diversified entertainment company. That was also my ambition.

I wanted to run a movie studio. Vestron wanted to start a movie studio. So I left to go to Vestron, where, within about 9 months, I became president. I was now president of a public entertainment company, and I was 29, 3 years out of school. It was not my expectation.

Then I had the ability to take on the new movie division, which hadn't actually made any pictures yet. It was very early. I didn't start it, though. I got there and the team was already there, but I gained responsibility for it, and we started making movies.

Go to the new-media part, though.

The biggest part of Vestron's business was home-entertainment distribution, which was video cassette distribution. They would create movies and put them on video cassettes, which you would rent in video stores, as you may recall. They would also ultimately make movies and put them through the entire distribution system.

Would they buy other content made by other people?

Yes.

Okay. Yeah, that was actually how the business started. Was that the majority of the business?

It was the business when I got there, until they started their own production. Then the idea was, “Okay, we're ready. You've got to do this yourself.”

In the same way that Netflix started as a distribution company and realized how to get into production. I've been a Netflix subscriber and never churned, including when they were just mailing me DVDs. That's, I don't know, 20 years or however long.

How did you get from new media being DVDs and home entertainment to, “Oh, wow, I think I’m going to have a religion on video games, and I want to move myself into that industry?”

I was not a pioneer in the video game business. The video game business started in the late ’70s and began to grow in the early ’80s. By way of background, I was really a contrarian about video games because Hollywood had a horrible video game experience, which I’m not sure too many people would remember today.

In 1982, there was a huge hit called E.T. Warner Communications, which was very forward-thinking, had purchased Atari, which at that time was a leading video game company. They made both hardware and software. Software in those days was cartridges, and cartridges were expensive to make and had a long lead time.

Before you released something, you had to decide how many you were going to sell and order them all. If you were right, you did great, and if you were wrong, you had excess inventory. You didn’t have just-in-time inventory with cartridges. They took too long to create.

Warner’s had Atari, and they were doing well with it. They had E.T., and they thought, “We should make an E.T. game.” Because they didn’t really have a lot of experience in how video games were made, they basically made the game in 5 weeks and put it in the box. It was a terrible game.

Then they manufactured more cartridges than there were Atari consoles. I’m not sure what their idea was, but they did. It was a disaster. No one bought the game because it was terrible, and there are visuals of the cartridges being plowed into a landfill that you can find online today.

The entertainment business is a small business, and everyone was like, “Oh my God, that nearly tanked Warner Communications.” I think they took a write-down in 1982 of $400 million, which was a lot of money for Warner Communications. So the rest of the business was like, “This is a disaster. Don’t ever get involved with video games. It’s a terrible business.”

Okay, roll the clock forward. I had been at Vestron and made a bunch of hits. The first picture I greenlit turned into a huge hit. That was very good for my career. Sometimes, it’s better to be lucky than smart.

That got me recruited to become president of 20th Century Fox just a couple of years later, when I was 32. So now I’m at Fox, and we turned around Fox from last place at the box office to first place.

Who recruited you to Fox?

Joe Roth, who had been newly named chairman of the studio with the support of Barry Diller and Rupert Murdoch.

Okay. So what was Barry Diller’s role at Fox at this point?

CEO of Fox.

CEO, but then Rupert Murdoch—

Well, he was the owner.

Yeah, okay. News Corp. owned it. Okay. But this was a flat-out turnaround. The studio part was because they were in last place at the box office, and they weren’t doing well at all. They weren’t making a lot of money.

But you’re 32?

Yes.

How did they identify you as the guy to hire for this?

It’s a long, complicated story, so I’ll try to compress it.

Give me whatever version you want.

In those days, imagine the independent business over here, siloed, and the major business here. Never the twain shall meet. Joe Roth was an independent producer, and he had never worked in a major studio. He made movies for Vestron. That’s how I knew him. He made Young Guns and Young Guns II for Vestron, which were hits for us.

He and I became friendly. First of all, I’m a friendly person, if you don’t know that. Secondly, when I work with people, I want to develop relationships with them. He was a highly creative person and a good guy, so we became friendly—not intimate friends, but friendly.

I was at Vestron for a couple of years, and I was getting very worried about Vestron’s business model for an array of reasons. Vestron’s senior leadership—the person I reported to—

Anything to do with technology?

It had to do with the fact that the reason for Vestron to exist was that they were a pioneer in home entertainment. But everyone else got into home entertainment. You can never have a competitive advantage in the entertainment business through distribution only.

That’s why Netflix produces content. You can start with distribution only if you’re a pioneer, but you’ve got to immediately go into production, and production is a very tough business, as I said earlier. Vestron wasn’t capitalized to be a diversified film and television production company with a video store division.

It was apparent to me that they were going to have problems, so I started looking around for a job. Remarkably enough, at the age of 31, people were not exactly lined up, knocking on my door to ask me to be president of a major film studio.

But Joe got this job as chairman of Fox. Behind the scenes—and I was not aware of this, but I became aware of it—Barry said to Joe, “Look, you’ve never worked at a major, and you’ve never run a business. You’re an independent producer. But I need a creative engine to turn around the studio. You’ve got to hire a business guy to support you here, to be your partner in building the business.”

Joe came from the independent world, which was a totally different world than the major world. He had no relationships in the major world. But in the independent world, I was well-known. I was president of the biggest independent, and we had done really well.

I greenlit Dirty Dancing, which was the highest-grossing independent film of all time then and stayed that way for a very long time. Until—pop quiz: what?

I don’t know. The Blair Witch Project.

Oh, yeah. Anyway, many years later.

So he was looking around, thinking, “Who’s the number one guy to be the business guy at the studio?” Now, to say that I was the number one guy—I wasn’t the number 100 guy. I was the number one guy in this little, narrow independent entertainment business.

He called me up. Actually, I called him to say congratulations. He said, “Is that the only reason you’re calling?” Then he said, “Do you want to come here and work here?”

I was like, “Coincidentally, yes.”

He said, “Do you think you’ll be in LA anytime soon?” I said, “Yeah. How’s Thursday?”

So we met at the Bel-Air Hotel for breakfast, which was a big thing in those days.

I’m very familiar with that breakfast.

Yeah. In those days, if you were chairman, you went to Bel-Air for breakfast. If you were president, you went to the Polo Lounge. But anyway, separate issue.

We met at Bel-Air on a Friday morning because I think I said I was coming Thursday. We had a very nice breakfast. He said, “Do you want to do this thing?” I said, “That sounds pretty interesting.” He said, “Are you free to meet with Barry and Rupert this morning?”

I said, “As it happens, no. I’m a little busy and tied up. I have to rearrange my sock drawer.”

So I went over to the studio, and I walked into a room with Barry and Rupert. Barry asked the very incisive questions that he does, and Rupert sat rather quietly. I’m not sure he even asked me a question.

Is that normal for Rupert?

Yeah, he’s a great listener. In those days, he was learning the film business. Remember, I was only going to be responsible for film production and then worldwide film and television home entertainment distribution.

What year are we in?

This is 1986.

What was the scope of Rupert Murdoch’s business at this point? Was it just the newspapers?

It was News Corp. No, it was a pretty big business at this point. It was worldwide newspapers. That was a lot of it, and then, of course, the Fox assets. That’s pretty much what it was, but it was a big business.

All right. So take me back. You’re in a room with Rupert.

I can visualize it like it was yesterday. Barry asked me these really tough questions, and I left the office. The head of HR walked toward me and said, “Would you like to do this?” I said, “Sure.” I walked into his office and signed the contract. That was how it worked.

But did Barry say, “You’re hired,” or did they just—

No, I just walked out, and it was like—yeah, the HR guy was like, “Okay, come on.”

That was it. It doesn’t happen that way anymore. What did you learn? I just finished reading Barry’s autobiography, which I thought was excellent. You’ve worked with him and known him. What did you learn?

Yeah, it’s good. Let’s be clear: I worked for him. I worked for him for 4 years, and I learned an enormous amount.

I've stayed friendly with him ever since. I have lunch with him a couple of times a year.

Can you tell me some of the things that you've learned from Barry, or things that you think stand out about him as a person?

Yeah, I learned the entertainment business from him. I learned everything from him because, remember, I knew very little. Thankfully, I knew what I didn't know. To this day, I'm good at knowing what I don't know, and I'm an avid learner. I've never resisted learning more, and I'm comfortable asking questions, including dumb questions. I have to be, because I kept getting thrown into these big jobs much earlier than I should have been.

He kind of had that in his career, right?

He also innovated more creatively than I did. If I can give myself credit for innovation, it would be more on the business side and less on the creative side.

Is there anything that you remember—discussions you had or things he told you—that you applied?

No, I just remember the form of the discussion, which was a lot of very robust debate with a lot of heat around it. I used to say to people, "Barry and I argue all the time, and he's right 99% of the time. But 1% of the time, I'm actually right." That's how I learned from him.

He was patient with me most of the time, but you had to have a strong stomach. He was famous and fierce in those days. He was not a junior person; he was already very senior in the industry, never mind what he's done since. He was scary.

And, by the way, it wasn't as if, if this job didn't work out at Fox, other people were lining up to hire me. I was young, newly married, had a kid, and had a mortgage. I needed to keep my job, but I understood that this was his dialectic. If you backed down, if you didn't argue, you were done.

I understood it wasn't personal. It just wasn't personal. Other people took it personally, as a personal attack or criticism. I just knew that it wasn't. It's not as if it was personal on the good side, either. It's not as if he were sitting here saying, "Oh, yes, I love Strauss. I thought he was so amazing." He might not even remember I worked for him in those days.

Therefore, I knew it wasn't personal. It wasn't about me. It was about the thing itself. It was about arriving at the right conclusion. I wanted to arrive at the right conclusion, too, and I wanted to learn.

I've had some really bad days with him, don't get me wrong. It was very, very taxing. One of the senior executives at the studio was a woman named Lucy Salhany, who ran television. Lucy and I were very close. We had a so-called president's meeting every Monday, which was Rupert and Barry and all the division heads.

I was in that meeting, and I was 10 or 15 years younger than the next-youngest person in the meeting. I was the one who would argue. I argued all the time. Many other people were just like, "Shut up and sit there."

Lucy said, "You remind me—remember when you were little and you had that blow-up clown doll that everyone had, that you would punch and it would go over and then bounce back up? You remember that?"

Yes. Everyone had that. I had that. But are you naturally argumentative?

No, not at all. I'm much more collaborative.

I thought so. This is the vibe I get off of you.

But that didn't matter. I wasn't in charge. It was his style, and I had to comport with his style to get to the right conclusion.

What are you learning from Rupert at this time? I mean, you're in these weekly meetings with him?

Mm-hmm.

With maybe the most successful person in media of all time?

He was extraordinary. What I learned from him really was in a different moment. He over-leveraged the company during my tenure there by buying STAR TV, and the company had real trouble with its debt facility. My recollection is they had a diversified debt facility with like 150 banks and a whole cross-default mechanism, which is great when things are going well because it keeps the interest costs low, and horrible if things are going badly because the cost of funds suddenly goes up when things go badly.

He was at risk of losing the whole thing. I went on a bank roadshow with him for a couple of the visits. What I found remarkable was that he was cool the whole time. He wasn't overconfident; he just wasn't ruffled. He was at risk of losing his whole business, which had been his family's business, and it just didn't faze him. He kept going.

He was laser-focused on the conclusion, and he reached the conclusion just by being focused and calm. That's really what I learned from him.

It's incredible. Okay, so you're 32, and you're doing this turnaround. What are the insights that you're deriving at Fox that you're going to wind up using later on when you do Take-Two?

The biggest insight—well, we can get into how I work with creative people, because that's probably the most important long-term thing—but I think, going back to your question about video games, it was now the mid-'80s because I'd been there for a couple of years, and I now really understood the economics of the movie business. Maybe I'm slow to pick it up, but I got it. They're terrible. They have terrible underlying economics.

They were bad, and they've been bad since 1955, since the consent decree that basically disaggregated distribution from production and turned the motion picture business from a studio system into a boutique system. A rubric for good versus bad entertainment businesses is that a boutique system is generally bad, and a studio system is generally good, or can be good.

The studio system was long gone. A studio system means your creative talent—all your talent—is on the payroll. In a boutique system, they're not on your payroll; they can auction their services. Obviously, if talented people are auctioning their services for every project, it's going to be much more expensive than if they're on your payroll in success.

So, essentially, you have a structure in the motion picture business since 1955—it didn't happen overnight in 1955, but by the late '60s, early '70s, and mid-'70s—where it's heads I win, tails you lose. If the project does well, the boutique extracts a lot of the value because of the deal they were able to negotiate so they didn't go across the street. If it's a flop, you as a studio bear the entire cost of the flop, obviously.

In a studio system, recorded music before its most recent changes was essentially a studio system. Video games to this day are a studio system. In success, you obviously pay your creative people, and we are incredibly generous in the way that we compensate our creative people for success. But the company also has an opportunity to create a return.

I was aware that the economics of the film business were really lousy and that you can't fight that. There was a Buffett aphorism, which I'm going to get wrong, but it was to the effect of: If you take a management team with a reputation for brilliance and a business with a reputation for being bad, it is the business's reputation that will stay intact.

Yeah. And, again, I didn't—that wasn't an elegant version, but you get the idea.

So I saw this in Forbes magazine in those days, when you read magazines. It was in the back. Remember, they had quotes in the back of Forbes? I read it and thought, "That's what I'm dealing with here."

I've been really fortunate that I did well because we made hits, and Fox is doing well because we made hits. But you can't fight the underlying structure of the business. My blinding flash of the obvious was that I thought to myself, "Here's the thing: As it turns out, my ambition had been to run a movie studio. As it turns out, my ambition should have been to run a movie studio in 1927, not a studio in 1991, whatever it is."

I thought to myself, "What is the moral equivalent of the motion picture business in the 1920s?" Well, that is the video game business.

How did you know that?

Because I was a student of the business. I was aware that video games were a thing, and I was aware that, despite the issue that Atari and Warner Communications had, it was still a growing business. By the early '90s, it was a real business. It was a small business, but it was a real business.

I looked at it and said, "I think this is going to be huge." Remember, that was a very unpopular view in the entertainment business because of the Atari disaster, which people still saw in bright, flashing neon.

So, almost the way you get to what you called in the past the religion on video games is by comparing it to, like, what is the movie studio version of that today? Okay, so your point is about being a student of the business. Then you have that insight.

Yeah. So, now I've been at this studio for nearly 4 years. We've had a great run, and I think I had to go to the video game business.

What's your next move?

I went to Rupert and said, "The next big business is the video game business." I remember sitting in his office and saying, "I think we should be in that business." He said, "Great. Go start one."

I said, "Yeah, I'd love to do that while I do my day job," which was that I'd been promoted. I was now running the creative and business side, working for then-Peter Chernin, because Joe and Barry had both left. He said, "Great. You can do it. We'll give you the capital. You can pursue it. Build a video game business."

I said, "Well, the only thing is, I see it as an entrepreneurial venture, so I'd like a piece of it." And he said, "No interest."

Like, that's not an offer.

Why did he say no?

Because Rupert doesn't have partners in his businesses except his public shareholders.

Okay.

And it's just his approach. There's nothing wrong with that. He didn't pause—it wasn't like he paused and said, "Oh, let me think about it." He was like, "No." So I was like, "Okay, I guess I have to think about whether I'm serious about this thing."

Coincidentally, I got a call from a recruiter saying there was this startup, pre-revenue video game business in Silicon Valley that was doing the most advanced video games. They were really going to be the next generation of video games. They asked if I was interested, and I left.

I took a 95% pay cut and moved my family from our beautiful house in West Los Angeles to Atherton, to a rental house that was going to be torn down. It was maybe a little dated inside. It was about to be torn down for a golf course.

Because you wanted equity. You wanted ownership in the company?

I wanted to build something, and I wanted equity, but primarily what motivated me was this notion of being at the cutting edge of media and entertainment. The fact that it was driven by technology made it even more appealing.

Did you think that you were always going to be an entrepreneur? Because at this point, if I understand your career, you've always just had jobs. You were a phenomenal operator. You were a business guy, but did you, in your heart, feel like, "I should be running my own thing. I should be an entrepreneur?"

Yes. And I wasn't ready, as it turns out. I did think that, and I know I wasn't really a born entrepreneur because I was a good employee and I liked running big businesses for other people. But I also knew that if I really wanted to build something meaningful, I had to take a risk.

Why do you say you weren't ready?

I didn't have much money, and I had a young family. I think there are kind of 2 stages in life to be an entrepreneur: before you have anything and any responsibilities and obligations, and after you have some protection.

I was right in the middle. I had some responsibilities, and I had no protection. Emotionally, it was very challenging for me, and I don't think I was emotionally ready.

I did it for a couple of years. Crystal Dynamics was very successful—not hugely successful, but it still exists today.

I think I know the story of Crystal Dynamics.

That was the company that I founded.

Tell me about the company.

It was set up by Kleiner Perkins, which was backing 2 very talented women with backgrounds at Sega at the time. They needed a CEO, and they wanted a CEO from the entertainment business, so they hired me.

And literally, it was a video game studio?

Yeah. I set it up, got them distribution deals, and raised a bunch of capital. I hadn't raised much capital before.

Then I was recruited to turn around a huge record company, back in the days when that was not an oxymoron. I decided I wasn't really ready to be an entrepreneur quite yet, given this opportunity. That record company, which was called BMG, agreed that I could start a video game division inside the company.

Before you took the job?

Correct.

Okay, because I was going to say, the jump from—you got religion on video games, and now we're jumping from video games to music. Why'd you do that?

Another turnaround. It was really interesting. I'd never done music, and they said I could start a video game company.

So, talk about starting the video game company inside of BMG.

I was going to hire Jay Moses, who's now on the board of Take-Two, and the model was external development—making deals with external developers. We were going to use the BMG recorded-music distribution system to distribute worldwide, which was pretty smart because we had this massive worldwide system of local offices. We could slot right into it without adding any overhead. That was the beauty of doing this.

Say more about that.

In those days, when you distributed records, you actually had to have physical offices to sell physical discs—CDs, at the beginning of CDs and the end of vinyl—to stores. It was very similar to video games at the time because you were buying physical products.

Exactly. You were buying cartridges, and then eventually discs.

Were any of the music companies doing music and video games?

No, no.

Oh, that's smart.

No. We put aside a small amount of capital for BMG because, in those days, BMG's revenue was, I don't know, $5 billion a year, and it was very profitable. I think we devoted around $40 million to investing in this basket of games, building up the distribution system, and hiring a team.

Can I pause you there?

Sure.

At this point, video games—there's no free-to-play. You can't download anything over the internet, right?

Correct. The economics of the video game business were very similar to recorded music. You were buying—

Somewhere between toys and recorded music.

It was a top-10 business, and most of the sales were in the fourth quarter. It had a lot of the aspects of the toy business. There were still cartridges that hadn't shifted entirely over to discs, so you had all the messy inventory characteristics of a cartridge business. It had plenty of hair on it as a business that it no longer has.

But did you have any inclination at that time that there would be an end to the cartridge?

Oh, sure. I knew it was becoming a disc business. Absolutely.

But you couldn't predict what was going to happen after discs?

No.

Okay. No. So, go back to where we are in the story. Sorry.

Anyhow, I'm running the record company. That's my day job because it's a big business. Jay is building up the video game company with my oversight, but it's a skunkworks project. It's a tiny little project.

You said $40 million compared to revenue of $5 billion. That's like a rounding error.

Exactly. Jay and his team created a whole bunch of properties, and we were getting ready to distribute some of them as they were completed.

There was a new CEO of Bertelsmann, the parent company of BMG, whose name was Thomas Middelhoff. He decided the video game business was a terrible business and told me to divest the whole thing.

I said, "Wait. We've already invested. The only thing left to do is distribute the titles. That's the only thing that's left. So let me do that, and then you decide depending on how it goes."

He said, "No, just sell it to the highest bidder."

I said, "But there won't be any bidders. It's like in-production video games. There's not going to be a lot of appetite for this."

He said, "I don't care. Just sell it."

Why?

He just didn't believe. He was a person who bet on his gut. It didn't work out very well for him at all, but that's a separate story for another day.

We went out to market. There weren't a lot of bids, but we found a buyer. The buyer agreed to give us 20% of their company in stock for the business, such as it was. It was a little tiny public company with, I want to say, roughly a $100 million market cap.

So, $20 million. We closed that deal, and now we owned 20% of this company. I went to Thomas and said, "Listen, we're $5 billion in revenue. This is $20 million of stock. It's a rounding error on a rounding error. Why don't we just hold the stock and see what happens?"

He said, "Don't sell the stock in the open market."

Did you?

Precisely. So we sold the stock in the open market for—wait for it—$14 million.

A month later, this public company launched the first property that we had completed into the market.

Oh, no. Don't tell me.

The name of the public company was Take-Two Interactive, and the first release was Grand Theft Auto.

We're going to pause right here, though. Grand Theft Auto is the most successful media property of all time. Is that right?

So, yeah.

Yeah. Okay.

Oh, my God. All right. So that's my war story on being in the video game business.

Now remember, I'm out of the video game business. I'm running a record company.

You had to be pissed off at this time, right?

I didn't own the company, and I don't get pissed off easily. I understood that I was on the payroll. This is my boss; he gets to make strategic decisions like this. I knew it was a foolish decision.

But how could you think that you were going to work—did you? Maybe you didn't. There's no way, if you see this person making decisions like that, that you're like, “Oh, I'm going to work for this person.”

That's correct. I did leave. I did leave.

Okay. So then what happens next?

I realized it was time to go, and now I was ready to be an entrepreneur because I had a vision for what I wanted to build. I had a few bucks in the bank, so my family wasn't going to starve because I had saved well and made a lot of money as a professional executive. So I decided to start ZMC.

Explain what ZMC is, though.

Well, today it's a private equity firm.

Okay.

We raise capital from institutions and funds, and then we buy companies, build them, and eventually sell them to create a return. But at that time, that wasn't the vision. The vision was to create an entity that would build a portfolio of media and entertainment properties supercharged by technology. That was the thesis.

Again, this was 2001, and I thought it was a pretty obvious thesis. In retrospect, it was not.

And if that is your thesis, then video games are a perfect—

Well, yes and no, actually. I didn't have an appetite to go back into video games when I started ZMC. First of all, I'd been there and done that twice. Secondly, it was still kind of a top-10, fourth-quarter, toy-ish business with bad inventory characteristics.

Because it's 2001.

Yeah, and no. It was cyclical, and the console generation would cause the business to come and go. I wasn't anxious to get back into that business.

What's the first thing you're doing with ZMC? We started buying Take-Two stock?

No.

[laughter]

I wish. No, we started with direct-marketing companies that were becoming digital and market-research companies that were becoming digital. We turned around a Japanese record company, of all things. Whatever deals we could find—often very, very troubled companies.

Because remember, we had no capital. Oh, I left that part out: We had no capital.

So how do you start a company with no capital?

Exactly. I put in $300,000 of my own money. I convinced people to work for free. We borrowed offices. We had one fewer chair than we had people, and I'm not kidding.

The offices were so horrible that if you went to the restroom, half the time it was flooding. By flooding, I mean water sheeting down the walls. You couldn't believe this was actually going on.

I would run around and talk to capital providers—professional financial-services firms—and say, “Here's our vision. We're trying to buy companies, build them up, and create value.” They'd say, “Okay, well, show us the company you want to buy. We'll consider putting capital in.”

Then I would go to target companies and say, “I'd like to buy you.” They'd say, “Okay, great. Show us the capital that you have to buy us, and we'll have a conversation.”

This went on for 6 months, and I thought, “Hmm, there is a problem here.” I had an empty suitcase and was going to a lot of meetings.

It became obvious to me that there was an issue when we were at this very fancy private equity firm. They said, “You guys are great. You have great resumes. We'd love it if you would bring us a deal, and we'll put money into the deal.”

It was the end of the day, and we were packing up after they had left the room. There was a cleaning person emptying the garbage, and I said to my colleagues, “I guarantee you that after we leave, someone who works here is going to go to that person and say, ‘Incidentally, if you see a really interesting company, why don't you come talk to us about it? We could both finance it for you.’”

I realized these were empty words. They said it to everyone. They were just looking for free options.

Yeah.

So I had to find this lightning in a bottle where there would be an opportunity to buy a company with third-party capital. Thankfully, one came along.

It was called Columbia Music Entertainment. It was a deeply troubled Japanese record company. I had recorded-music experience. The short story is that, amazingly enough, we turned it around.

Your idea is to buy, improve, and sell. Correct? You're not—

Forever. We did it. It took us a long time—it took 9 years—but it was very difficult because it was recorded music in the early 2000s, it was Japan, it had a 0.5% market share, it had way too much debt, and it had no hits whatsoever.

So wait, how do you—because you're saying the early 2000s. Now you're getting the iPod, you're getting iTunes, and Napster was in 1999. Why would you even—

It was the early 2000s, but all of this had happened.

Yeah, exactly. So—

Why would I want to be in the record business?

Yes.

Yeah, I didn't want to be in the record business. I was like, “Been there, done that.” I had no interest, and it was a really horrible company.

It came about because one of the capital providers we spoke to was a company called Ripplewood. There was a partner there named Jeff Hendren, and Columbia Music had been part of a sort of two-part company. Essentially, Ripplewood wanted to own the good part, and they wanted to find some person like me to run the bad part.

I didn't know that entirely, but I wasn't smart enough to figure it out until it was too late. Jeff, who I'd had a couple of meetings with about buying a company together, called me up and said, “Here's a perfect deal for you for your first deal. It's recorded music, which you know. Sure, it's in Japan, and they have a 0.5% market share and altogether too much debt, and probably there are criminals lurking around. But nonetheless.”

I said, “Well, I know the business because I was in the record-music business. It's a horrible company. It's a disaster. Don't do this deal. I'm not doing this deal. Sorry.”

He said, “Okay.”

A week later, he called me and said, “You know, we're still looking at this business. We really think you ought to look at it seriously with us because you'd be perfect for it and it would be your first deal.”

I said, “Okay, listen. It's a public company, so I'll pull all the public documents and look at them over the weekend.” My partner at the time, Ben Feder, and I spent the weekend poring through the documents.

On Monday, I called Jeff and said, “It's even worse than I thought. Just run in the other direction. Don't do this deal. It's a disaster.”

He said, “Okay, thank you.”

He called me a week later. I promise all of this is exactly how it happened—there's no hyperbole. I can sometimes be accused of hyperbole, but this is not one of those moments.

I remember I was in my dining room, and there was a wall phone. This was a long time ago; it was 2001. He called, and I picked up. He said, “Look, we're going to do this deal, and we really want your firm to take it on and be responsible for building and managing it. Obviously, you're going to get upside in the deal.” They would put up the capital.

I said, “Jeff, look, I told you it was really bad. Then I spent a week looking at it, and it's even worse than I thought. We're passing. You should pass.”

He said, “Can I ask you a question?”

I said, “Sure.”

He said, “Just how busy are you?”

[laughter]

I laughed and said, “You make a very good point.” He said, “I think you should do this deal.”

So we did. It was the hardest deal I've ever done in my life. It was terrible. Terrible. I could literally take 5 hours and tell you every horrible problem this company had.

But I remembered my experience with Rupert. I became laser-focused on just turning it around and getting to the finish line, no matter what it took. I realized, correctly, that if someone gave me $300 million to take over a company and I failed, that would be my last deal.

That's true. That's not dramatic. No one's giving you more money after that.

So, remarkably enough, we turned it around and got about a 22% IRR in the recorded-music business in the early 2000s. That was unheard of.

That's insane. And this is the first deal of—

That was the first ZMC deal.

That's incredible.

That's how we began to generate income to build up a team. I reinvested and reinvested, built an enterprise, and bought more companies.

So take me to Take-Two.

All right. So it's 2007. We started raising our own capital in 2007 and 2008. This was the very end of our time as what was then called a fundless sponsor.

Today, they're called an independent sponsor because it sounds much nicer than “fundless,” but I promise you, we were fundless. Even though we'd done 6 deals at that point, we had very little capital and a very tiny balance sheet.

I'd become, quote, friendly with Carl Icahn. I put it in quotes because he is the man who said, “On Wall Street, if you want a friend, buy a dog.” But in any case, I had a relationship with Carl.

The relationship took the form of—and I did this intentionally—I would go over and visit with him. He's a lot of fun to spend time with. I'd bring him ideas.

Initially, I brought him an idea for something that we couldn't act on, but he could because he would do public-markets investing. He said, “Listen, I just want you to know I'm happy to listen to your ideas, but I'm not paying you for them.”

I said, “Yeah, I know.” I thought that, if you had a relationship with Carl Icahn, you never knew where it could go.

So, I’d bring him ideas, and they were good ideas. The first one I brought him was actually Reader’s Digest. I had a feeling something would happen there. It was underpriced.

He bought, I don’t know, for him, nothing—like $50 million of stock. It immediately went up. I go over to his office about 3 months later and say, “Sell your stock.” He made whatever—for him, nothing. Nonetheless, he likes making money. He made about $50 million.

Incidentally, at the end of it, he said, “You know, I really need to thank you.” He said, “I told you I wasn’t going to pay you.” I said, “Yes, you did.” He said, “But you know what I’d like to do? I’d like to take you and your wife out for dinner.”

So, thank you. That’s great. Wendy and I go for dinner with him and his wife, Gail. He only went to 2 restaurants in those days: a Japanese restaurant, a Chinese restaurant—I forgot the name of it—and an Italian restaurant called Il Tinello. It was good food, actually.

Wendy and Gail and I get there early because he tends to work late in the day. I remember he comes to Il Tinello, and they know him very well. As he’s sitting down, I see the waiter sort of glide over and put a martini in his hand, so it looks like one smooth movement: martini in the hand, sits in the chair, drinks the martini, puts the empty glass down.

That was how dinner started, and we had a very nice dinner. Carl’s a good storyteller, and he’s a lot of fun. But about halfway into the dinner, my wife leans over to me and says, “Honey, he doesn’t know your name.”

Anyway, Carl then started calling us because I had a team, and he would ask us to research ideas that he had. So, we would research ideas, and I remember my partner Karl Slatoff, who’s still to this day the president of Take-Two, got really annoyed at Carl, who speaks his mind.

I was asking them to do research for Carl Icahn, and Karl said, “He is the richest guy on Wall Street, and we’re doing spec research for him. Oh, and incidentally, he has informed us we will never get paid. What are we doing here?” I said, “You know, I just don’t know, but I feel good about this.”

One day, Carl calls up and says, “Are you familiar with this video game company called Take-Two Interactive?” I said, “I’m really familiar with it, obviously. It’s a really messy company at this point.”

You came to own 20% of it?

Take-Two is in very bad shape. It’s failing. It’s got very bad management. The chairman had been indicted. It was under investigation. They hadn’t filed financial statements, and it wasn’t even that cheap despite all that.

Wait, the chairman is under indictment?

Yes.

Okay, they’re being investigated.

Yes, they didn't hold their annual meeting. They’re not filing financial statements. The company is being investigated by a bunch of different—

4 entities. Okay, 4 different entities.

Yeah: the IRS, the SEC, the New York DA’s office, and the FTC.

How much do they have in revenue?

About $700 million in revenue, and they’re losing loads of money. They have no debt, thankfully, and about $50 million in cash. We looked at the numbers and thought, “They’re going to be bankrupt in 6 months. That’s what’s going to happen here.”

And you’re like, “Great.”

No, I’m not great. I said, “This is a disaster.” So, we wrote a whole memo and said, “Stay away from it.” I wish I could say I was so forward-thinking. I sent over the memo saying, “This is a disaster. Stay away from it.”

By the way, I had done video games, but I had no interest. We were doing other stuff that was more tech-driven, and we were doing really well with it. So, he calls up—

What was the market cap of the company back then?

About $700 million.

So, it went up 7x from when you had to sell, because it was $100 million when you had 20%?

Okay. Okay. So, you know, it wasn’t great, frankly, but it was a good growth business, and they had increased the revenue materially. They built a business. It was a business, albeit a very bad one.

So, he calls a month later and says, “Listen, I have a friend who’s looking at buying a big stake in Take-Two. Can you refresh your memo and do this for the friend?”

At this point, Carl Icahn loses his mind. His head explodes. He says, “All right, so this was bad before, when we were doing free work for Carl Icahn. Now he’s pimping us out through his Wall Street buddies for free? This is outlandish.” I said, “You just never know where this can go. You never know.”

So, we do the memo, which essentially says, once again, it’s a mess. Stay away. Again, not being so forward-thinking.

I don’t know how much time goes by. Carl calls me and says, “Listen, this thing, Take-Two—you ever look at this?” I was like, “Yes, I looked into it for you, and then I looked into it for your buddy, and I said, ‘Don’t do it.’”

He said, “Yeah, yeah, yeah, that thing, Take-Two, it’s really interesting. Have you read the bylaws?” I said, “No, Carl, I’ve not read the bylaws.” He said, “Well, you know what you ought to do? Read the bylaws.” And he hung up.

So, Ben read the bylaws, and he comes in the next day and says, “Holy—this company has a plain-vanilla, unamended Delaware charter. In this charter, the right exists that if you have 50.1% of the shares vote to fire the board, you can take over the company.”

Because the company was so troubled, the stock had collapsed into about 20 hedge funds’ hands. So, this was actually mathematically possible. The problem is, you can’t go around and solicit people to vote their stock without creating a group, most likely.

This is arcane stuff, but we didn’t have any money, so we couldn’t buy stock. We couldn’t go into the market, and we didn’t have the money even to mount a proxy fight, which would be the standard way of going about it. In those days, a proxy fight would cost $3 million. We didn’t have that, particularly because it was totally spread out.

Under SEC rules, you could solicit up to 10 shareholders without triggering any kind of filing requirement. About 70% of the stock was in the hands of 10 shareholders. So, we put together a deck of what we would do to fix the company, and we went to meet the 10 shareholders, who were happy to meet with us because you’re talking about a position they have in a troubled company.

We started getting commitments from people who were going to sign the written consent that would give us the company. That’s all you had to do: sign a consent.

So, we go through this whole process. We’ve now gotten all 10 that we can get to. We can’t go to numbers 11 through 20 legally, and we can’t publicize it either. You can’t market this at all. So, it’s all done quite quietly.

Ben comes in and actually says, “We got 48%.” I was like, “Okay, it’s game over. We’re done.” He said, “Well, let me just think about it.”

Ben’s a very smart guy. He goes home the next day, comes in, and it turns out there’s another provision in the bylaws. If you show up at the annual meeting, you don’t have to put an item on the agenda in advance, which is unheard of. You can just raise your hand at the meeting and say, “I want to vote.”

If a majority of the shareholders vote in favor of your slate, you can take over the company at the meeting, which is unheard of. It just doesn’t exist, but it did exist here.

It’s not 51% of the people who show up at the meeting. It’s 51% of the votes in the meeting, but you have to be there physically. You cannot vote by proxy because, remember, we didn’t file a proxy, and we couldn’t solicit anyone.

What we did do was go back to those 10 people and say, “Look, do you want to form a group with us now so we can actually talk and reach an agreement, show up at the annual meeting, and vote for us?” We thought we could win that way, even though we only had 48%, because we knew not 100% of the shares would show at the meeting.

That’s what we planned to do, and we got a lot of support—or so we thought. We thought. Until it was very close to the meeting they had scheduled, we formed a group. We now announce that we’re doing this and indicate it to the company weeks before the meeting.

The company—not a professionally managed company, to say the least, and not a good board, to say the least—really didn’t even know what to make of this. They’d never seen it before. They didn’t understand it. They had bad counsel. They just had no idea what to do.

We were thinking, “We have 48%. We think that’s pretty good. If 75% of the shares are at the meeting, we’re probably good.”

Then we found out that these hedge funds had loaned out their stock to short sellers, as one does. If you do that, you can’t vote the shares. And we couldn’t solicit anyone, remember. We had solicited our 10.

I said to Ben, “So, what percentage do we have?” He said, “You’re not going to like this: 22%.” I was like, “Hmm.”

So, we had to disclose that. We had prior disclosure of the group, which was at 48%, and we went to the meeting. We physically went to the meeting.

At this point, there had been a journal article because no one had seen this before, and there were television cameras out front. We were at the meeting, walking into the meeting in a hotel. We’d hired the 2 top proxy solicitors just to protect us, and we’d been smart about the people we hired. We spent a lot of money for us on fees because we had to.

Before it starts, a guy waves across the room. I go over, and he says, “Hey, I haven’t seen you since law school. It’s great to see you. How are you doing? How’s your family?” We talked for about 5 minutes.

I go back and say to my proxy solicitors, “Who was that guy?” They said, “He’s Fidelity.”

Fidelity was a larger shareholder, but they had declined to participate in our group.

So, we had no idea where they would vote. Fidelity doesn't typically support anything hostile; they typically support management. So, I looked at my proxy solicitors and I said, “We just won.”

The company had a new general counsel. We had a room in the hotel, and the company had a room in the hotel. Incidentally, the CEO of the company declined to attend the meeting. That gives you a sense of what we were dealing with here. This was a Thursday, by the way.

The general counsel comes into the meeting room that we're in and says, “Well, we don't have the final vote, but we have a provisional vote. You have 88%.” He said, “So, will you accept that, or do you want us to keep counting?” I said, “We'll accept that.” [Laughter]

The next morning, Friday morning, I walked into the company and walked into the corner office and became chairman of the company.

What year was that?

That was 2007.

And you're still running it?

I'm chairman now; I'm CEO. Ben was the CEO from 2007 to 2011, then he decided to leave and I became the CEO.

So, this is what you described as basically a hostile takeover with no capital.

Yeah.

So, now you come in. You went from writing this memo to Carl Icahn saying, “Stay away from this,” to “We just took over the company.” What was your plan?

The plan was that there was only 1 good property, GTA, which was in development and we thought was soon to be released. It ended up getting delayed. Everything else was a total mess, except the NBA franchise, which was really tiny; it was making a tiny amount of money. Everything else was losing money. So, our plan was to meaningfully cut costs, run a rational company, be friendly to creative talent, diversify the product pipeline, and build an entertainment company.

Did I hear correctly that you cut something like $40 million to $50 million?

Yeah, we cut about $40 million.

Explain how you did this.

Well, we have an approach. When you're doing turnarounds, you have to cut costs, but our approach is a little different: we don't want to show up and fire people. It's a great way to build ill will. Also, you don't know anything when you show up, so you might fire the wrong people. And who knows? Maybe you need everyone—you just don't know.

We have a rule: we only do turnarounds if we're the first team in. You know why? We're not so smart. Smart people all do the same things. So, if someone came in before us to do a turnaround and failed, guess what? They probably did all the stuff that we would end up doing, and they still failed. That's not for us. But we were the first team in.

If you're the first team in, the first thing we look at is third-party expenses. Every company, particularly a big company, has deals with third parties. This was back in the days when you put discs and cartridges in boxes. So, we had a printing deal, a cardboard deal, and a pressing deal for our discs.

We do a top-10 vendor survey: all the top 10 vendors and how much we spend with each. Then we call them all up and negotiate them down. The reason we do that is, number 1, you immediately save money. Number 2, you don't scare or upset the team. Number 3, you begin to create credibility with the team because the team's like, “Wow, they just saved all this money and no one got fired. That's pretty good.”

We also don't do things like put in new expense policies. That is a great way to alienate everyone. Or let's say, “David, let me see your expense report. Why did you have lunch at McDonald's on Tuesday with Mike? Why?” That's a great way to alienate David. And if David has another option, he's going to leave the next day. So, we don't do that either.

But our top-10 vendor approach saves a lot of money. Then, about 3 to 6 months in, when we know what's going on, we have to right-size the overhead. In most instances, of course, sadly, you have to cut some headcount.

Yeah, especially at a company like this. How much money was GTA making back then?

When GTA released, the company would have a meaningful profit, like $100 million or so a year. But it only released every 4 years, so they lost money the rest of the time.

Okay, so what was your plan for that?

Make other hit titles.

This goes back to your insight, because I don't even know if we were explicit about this enough, but when you were a kid, you were like, “I want to run a movie studio,” right?

Yeah.

And then 20 years into your career, you're like, “No, I want to run a movie studio in 1926, not 1987 or whatever.”

And here we are. So then you took that idea and you're like, “We're going to build a movie studio and it's going to be great.”

How do we do it? We're going to try to be the most creative, the most innovative, and the most efficient company in the business, which was the same rubric I used at every entertainment company I ever ran. When I told that story, because Take-Two is public, I had to tell the story. I remember investors saying, “How does that plan differ from your plan when you were at Fox?” I said, “It doesn't. It's the same plan. It's the entertainment business.”

And we have found that that rubric, which we use to this day, if you're honest and if you're true to the rubric, if your decision-making supports the rubric, tends to work. You take over the company; the market cap was $700 million, whatever. Today it's $30 billion, whatever. $35-ish.

That's an insane run, by the way. That's absolutely incredible.

Thank you. Great team.

So, can you explain the ideas that you were putting into place? Was anybody even thinking about taking ideas from building movie studios in the 1920s to video games in the early 2000s?

It isn't what people thought. What people thought about there was making a great video game. That's what they had to think about.

No, I meant you. Were you thinking that?

No, yeah. Were any other people doing that? I was doing that.

Yeah, like you were applying this idea.

No, but I mean, I'm not sure that that idea informed what we did day-to-day. There were some great executives who built great companies at EA and Activision, among others. And certainly, I don't feel like I had any kind of monopoly on figuring this out. It took us a long time to turn the company around, and we had some meaningful missteps. We have not created more value than anyone else in the business. I would argue that, for a pure play, Bobby Kotick probably has with Activision.

So, what were these missteps?

Oh, I mean, they're daily. I'm probably making one right now.

No, but what were the big ones back at the very beginning?

At the beginning, we didn't make too many mistakes. How could you? When you're on the floor, there's nowhere to fall. This was a terrible company, terribly run. Every decision they made was horrible. It was very easy to make sound decisions.

Yeah, this is something I thought was interesting that I heard you say: your pitch to talent was—well, I think anybody who's successful has some form of ego, but you're willing to put yours aside. You said something like, “In the entertainment business, the only people that matter are you. I don't matter; it's the people that make the hits that matter.”

Which is a very interesting thing to say. It also had the added benefit of being true.

Yeah. You can replace people like me. You can't replace the hitmakers.

But what's fascinating to me is your pitch to them is just like, “I'm just going to run a rational organization.” You've used the phrase “rational organization” at least once in this conversation. I've heard you say it before, too. The pitch is, “We're just not going to do anything crazy.” Over a long period of time, that is an edge. Can you talk about that?

That was sort of a nice-to-have, but the must-have was: we are going to give you the creative and financial resources to pursue your passion. We're not going to interfere creatively. We want you to make the best video games on Earth. That was the pitch, and we mean it. And we will support you through thick and thin to do so, more than any other company.

Oh, and by the way, then we'll run a rational business organization. No one's going to scream at you. You're not going to find out that someone's getting indicted. We're not going to get sideways with the FTC. It'll be like a real grown-up company.

Over time, I couldn't promise this right away, but I had to promise it. I said, “We'll also have a solid balance sheet so that when we fail—inevitably, you fail in the entertainment business—we can live to play another day.” That took us a few years.

These super-talented people also tend to be highly disagreeable and somewhat erratic. I find it interesting that you kind of balance their—you say you're not talented, which obviously means your talents are different. You're very talented, but I think you mean in a creative way, like you're not the one who can create the video games.

Not in the least. How do you deal with these very disagreeable, talented geniuses?

I love them.

[Laughter.] I'm serious. Okay, then you have to say more about that. I mean, you have to sincerely care about other people to be an effective leader.

I sincerely care about my colleagues, genuinely. I don't love every attribute of every one of them, and I don't love every conversation we have. But they don't love every attribute of me. I just did a 360, and I found that out—not that it came as a surprise.

We care about one another, and I want the best for them and for the organization. I treat everyone with respect, and I demand that everyone do the same thing. There's no yelling at the company. There's no bad behavior. If you engage in bad behavior, you have to leave.

One of our competitors at one point had 500 sexual-harassment claims at their company.

From one guy?

No, no. Unfortunately, it was broadly distributed. We don't have claims like that. We've had, obviously, a few things here and there, but we don't have claims like that.

We treat people with respect. People can come as they are. We don't care about your ethnic background, your religious background, your orientation, your lifestyle, or the color of your hair. Just do great work, seek excellence, and be kind to others.

By the way, I've had plenty of hard conversations—super-hard conversations. You said it earlier, and I think I learned this with Barry Diller: I still take it personally. It's not personal.

I never say the words that executives use with me, like, “We're a big family here.” We're not a big family here. This is an enterprise. My family's at home. We don't have all the angst around being a family. However, we are an enterprise that treats people with respect.

If someone is offsides with me and they misbehave, I don't see myself as so important that they can't do that. I don't feel the need to teach everyone all the time. I had to learn the hard way: the Delete key is there for a reason.

I had one creative person who isn't with us any longer because it just got to be too much, and the value delivered wasn't worth it, to say the least. He used to send the most outlandish and unpleasant emails. I remember saying to someone, maybe a board member or something, “This is really tough because the lack of decorum is so outlandish that at some point he's going to do or say something where I just have no choice but to fire him.”

Then I realized, “Wait a second. I always have a choice.” You know what the choice is? Delete. I just started deleting his emails. I hadn't seen the first—

Oh, I thought you meant delete him as a person.

No, delete his emails. I was like, “How can I be offended if I delete them?” I just delete them.

Without reading them?

Absolutely. If I read them, they'd upset me.

[Laughter.]

Eventually, he had to go because it was just too bad. But I put up with it for a long time.

I find this very interesting. Just being completely rational over a long period of time can actually give you an edge in business.

Well, in the entertainment business, particularly.

I think in all businesses. I mean, this is something Munger and Buffett—you mentioned Buffett earlier. I'm obsessed with them. That was one of Munger's whole things: just be able to be rational over long periods of time.

Yeah. We don't engage in magical thinking, which is hard not to do in the entertainment business. Magical thinking is, “Because I want it, it's going to happen,” right?

Magical thinking is, “I don't know, someone's going to see this podcast and they're going to call me up and say, ‘We need to give you $10 to do X.’” Like, that's magical thinking. “That's very likely going to happen. I'll give you a call. I'll give you 10%.” That's magical thinking.

That's what Brad Jacobs gave me. Brad Jacobs was Episode 3. We all went to his house. This guy is laughing. He's like, “I love David.” He goes, “I raised $750 million out of his audience, and I had to pay him a fee.” He slapped his knee, and I was like, “That's not funny.”

[Laughter.]

But I got dinner with Carla.

And then he goes, “You got to dinner,” and then you found out he didn't even know your name. Then he puts you to work.

So the starting point is not that we run a rational organization. The starting point is that we will support your creative activities through thick and thin. That gets tested, and it gets tested at the worst possible time.

I like to say, “Culture, like character, is tested in the breach.” You're not tested when things are going well. Great, we just delivered a hit. We're making all this money. This is awesome. Have a celebration. That's not a test.

The test is when someone comes into your office—and this happened to me—and we had not turned around the company and had very limited capital. We were developing a game, and it was about to be released 2 months later, which is to say, it was done. We had spent a lot of money.

The head of the division came into my office and said, “Look, we just don't think this is good enough. We think we screwed up, and the art style is not appropriate and it's not differentiated. So we want to remake the game.”

I was like, “Well, what does that mean?” This was a long time ago, so it's slightly different. He said, “It means $50 million of incremental development costs. It's a lot of money to us, and another year.” It was on a release schedule that we hadn't announced.

I dug in. I don't give knee-jerk answers. I did my homework, and in the end, I supported the decision. That title became Borderlands. Had we not done that, Borderlands wouldn't have been a hit.

Yeah, it's a huge game now.

That was a non-obvious decision, and I can pretty much assure you no one else in the business would have done it. Why? Because it was insane. They would have said, “The game is done. Put out the game. Move on to the next thing. I'm not spending $50 million to remake the goddamn thing in another art style, and I have no evidence that it wouldn't work either.”

So you just trusted the intuition of the talent?

I had to. That's the story. Be the most creative, be the most innovative, be the most efficient. I hired the most creative people. I said, “You have to pursue your passions. We will support you.” They came and said, “This is our assessment. This is our passion. Are you going to support us?” And I said, “Yes.”

The timeline's slipping because you're sitting on the most valuable media property in the world. Everybody online is just like, “When's GTA 6 coming out?”

Yeah.

How do you deal with the timelines? It's just like, the answer to that question is, “I don't know,” right?

Well, no, no. November 19th, I do know.

Oh, okay. No, it's been announced. But this has been pushed back, I think, twice. For how many years?

I think we're about 18 months behind the original date. Not much more than that.

Is it the most successful video game of all time?

I think so, but it depends on how you count. If you count just revenue, I think so. If you count every Mario Kart and Call of Duty and a bunch of others, it's not entirely clear.

But I think in terms of the value of the intellectual property, most people believe it's the most valuable entertainment IP ever created. People could argue about that.

And you don't disclose the revenue for GTA 5, correct?

Not the total revenue. It's a lot.

[Laughter.]

The reason people keep playing is because it's constantly updated and it's really good. The most recent content pack was awesome.

And they like the social element, too—they can catch up. You can actually talk, connect, and play together. It's amazing that people don't realize that online games are highly social experiences. Especially when you see this with kids now, with Roblox and everything else.

Well, it's everything. My mom is 90. She plays bridge online.

With Buffett? Sorry—with Buffett? Warren Buffett?

[Laughter.] Somehow I doubt that. She's good, though. She has bridge friends who she's never met in person.

She gets around. She's mobile, but she doesn't get around the way she used to. This is an enhancement of her life. It's a social life, and it's something she's good at and loves doing. She's 90.

This is an industry that speaks to little kids and people of all ages. Gaming is enduring. We've played games since the dawn of humanity. We figured out games to play with each other.

There was something you said earlier that I want to pull out from your book.

You said, “I don’t believe in magical thinking.” I don’t think visualization is magical thinking, but you do talk about being very, very particular. The note I left myself when I got to this section of the book is that the universe rewards the specific ask and punishes the vague wish.

Your point was—and that does sound a little magical, but you have to dig into it—that creative visualization, which people think is some woo-woo, foo-foo thing, can be effective. I’ve read 415 biographies now of history’s greatest entrepreneurs. I’ve kept every single note, every single highlight, and every single transcript of anything I’ve done for that project, which I’ve been working on for a decade, in this giant searchable database. Visualization comes up all the time, and these are not woo-woo, foo-foo people.

No.

I love what you said about why it might be effective. You said, “I’m pretty sure it works because the method requires one to concentrate hard, exclusively, and frequently on what one wants.” Can you say a little bit about that?

Sure. I think, having not done as much research as you but having read a billion biographies, I was very focused growing up on success—traditional success, but also political success. I tried to drill it down to: What is the factor that is most common among highly successful people? The only thing I could come up with was that they knew what they wanted.

It’s not because you know what you want and, as Napoleon Hill says, write it on your mirror: “I want a million dollars on Thursday.” It’s because I wanted to build a diversified collection of media, communications, and entertainment assets supercharged by technology, starting in 2001, and I’ve been laser-focused on it ever since. That means I make choices that are in service of that.

Magical thinking is, “I want to do that, but you know what? It’s a very nice day out there. I’m going to the beach today, tomorrow, and the next day.” You just told me you’re a reasonably successful guy, I think. You just told me you work 7 days a week. I have 3 jobs. I work really hard. Why? Because I have a set of goals, and I’m focused on achieving those goals.

There’s still no guarantee. But by knowing what you want and working in service of what you want, you are much more likely to get what you want than if you don’t know what you want or work in service of that thing. That’s the truth.

When I started ZMC, I thought, “I want to build, I don’t know, a $20 billion company that looks like this.” It was out of the blue, and I can’t explain it. It wasn’t like I ran around and was talking to people as I was endlessly and vainly trying to raise capital or find companies, and they were saying, “This is awesome. You’re doing great. Who’s better than you?” People were saying, “This is a crazy idea. This is crazy.”

But I looked at it and said, “I don’t think it’s so crazy. I think it’s possible, and even if I fall short, I’ll probably get closer than if I don’t try.” I was okay with that. I’ve said this publicly: After 10 years, I was speaking at MIT. Remember, I wanted to build a $20 billion company, and one of the students said, “How big is your company now?”

I said, “Well, if you take everything together, I don’t know. It’s about a billion-dollar company.”

He said, “Are you deeply disappointed?”

[Laughter]

I said, “Well, I was. I really appreciated the question. Look, it isn’t what I set out to do yet, but you know what? We’re directionally correct, and I’m not stopping. If this is as good as it gets, at least I tried, and we made a little progress. We did okay.”

Today, our company, taken as a whole and in terms of our market cap, is a $40 billion company. We kind of exceeded our goals, and we’re not done yet. But we wouldn’t have done that if we didn’t know what we were trying to achieve.

Today, Take-Two has this, and I advocate it for every enterprise. The mission of Take-Two is to be the number-one entertainment company on Earth. That’s a pretty bold idea, but everyone understands it. The strategy to get there is to be the most creative, the most innovative, and the most efficient. Remember I said that earlier. The culture in which we work is one of seeking excellence, working together as a team, and being kind. Remember that from before.

There are 14,000 people at Take-Two. There’s not one person who can’t tell you that. It’s simple, it’s straightforward, and it has the added benefit of being true.

This is why I asked you before we started recording if you minded if I did an episode on your book for my other podcast. I want to read this because I think it’s really important. People have asked me before, “What’s the most important thing you’ve learned from this crazy, decade-long study of history?”

Because you’ve done centuries of it. If I had to put it in one word, it would be focus. They’re just unbelievably focused, almost like a different species in terms of how they can concentrate.

I want to read the part I just read. It says, “I’m pretty sure it works because the method requires one to concentrate hard, exclusively, and frequently on what one wants.” Then you end this chapter with another great sentence:

“The most important thing you can do to achieve the success you desire is to discover your ambition, narrow its scope with as great a degree of specificity as possible, and blazon it on your consciousness, and revisit it daily.”

That is visualization. It’s just not magical visualization.

I was on a Zoom call with one of my colleagues because I’m reachable by everyone. If people email me, text me, or Slack me, I respond. I’d been doing a town hall in our office in Austin, and this woman Slacked me afterward. She was a brand-new colleague, and she said, “Can I have a chat with you about my career?”

I said, “Sure.” We were chatting, and she was really impressive. I was quite taken with her. At the end of the call, she said, “What should I do to succeed around here?”

I said, “Well, you need to know what you want. Then you need to show up on Monday and think about how you’re going to create more value than you cost. On Friday, think about, ‘Did I create more value than I cost?’ Because if you’re here for a year and you get paid $100 plus $25 in benefits, and you generated $10 in value for this enterprise, one of two things will happen: Either you’re going to lose your job, or this company will fail. If you want to succeed and you want the company to succeed, you’ve got to create more value than what you cost.”

I said, “Think about that.” She’d already decided what she wanted. She wants to be CEO, which is great—terrific. Then I said, “Come to work, don’t have political exchanges, put a smile on your face, say yes, and you’re going to be fine.”

Are you surprised? First of all, I’ve heard you say this, and you’re like this with me. When we were at lunch, I said, “Hey, do you have a team I need to go through to schedule the podcast?”

You said, “No, we’re going to do it together. Just text me.” And you respond. Are you surprised by how few people take you up on this—the fact that you will respond to emails or messages?

No. Here’s what surprises me, and this part I don’t get. I spend 20% to 25% of my time mentoring and coaching people—

Which I want to talk about, yeah.

—using the tools in the book. As you saw in the book, some of them are exercises. You have to do the work to get the benefit.

Someone will reach out to me, and while I’m easy to get to, you still have to do some homework. I like having an assistant who schedules me, so there’s a bit of a process to have a meeting with me. It’s not like, “Hey, come on in tomorrow at 9:00.”

I’m amazed that people will come in with a specific ask for something that would affect their life. We spend time on it, we talk about it, and maybe I assign them one of the exercises in the book. I usually do. I would say about half the time, they never follow up.

That, to me, is kind of astonishing. I don’t think it’s because I’m a horrible person, or I’m scary, or something. I think there are people who believe, “If I can just get into a room with that really successful person, they can just wave a magic wand, and I will have success.”

That’s sort of my point earlier: Someone’s going to listen to the podcast, and I’m going to win the lottery. It doesn’t work that way.

One of the things I understood about starting ZMC is—look, I’ve been around the block. I don’t think I have an enemy in the business. I know everyone, I like everyone, most people like me, and I think, candidly, I have a very good reputation. Nonetheless, I think people confuse that with somehow having a shortcut.

I had the attributes I just described. Lots of people wanted to help me when I started ZMC. The conclusion I arrived at was: No one can. They would love to. I had all kinds of goodwill. What could they do for me?

I had to run out and find the deals. I had to go see Carl Icahn. I had to hire a team, pay the team out of my pocket, and manage the team.

Think of the story you told earlier, when you were recruited to 20th Century Fox. I have a maxim that appears in these biographies. It just gets explained as, like, “Opportunity handled well leads to more opportunity.”

Right. You had to handle the opportunity at Vestron. How do I say the company name? Vestron.

You had to handle Vestron first for this guy to say, “Hey, I need some help now.” And the whole thing is—that’s why he’s like, “Whatever. This is, again, from Munger.” They say they believe in Carlyle’s prescription, which is: do the best possible job on the opportunity you have in front of you. And then you don’t have to worry about the opportunity that it will unlock future opportunities.

Or it may not, but it’s the best that you can do. What else would you be doing, anyway?

Do anything better? But you said earlier, when you were on my friend Patrick’s podcast, I think you mentioned this book. You were like, “How few people—this book is not for sale. You can’t buy it, but you give it out.” Even then, hundreds of thousands of people heard that, and you were like, “50 people asked for it.”

Yeah. That’s insane to me. I think it’s tied to what we were talking about earlier. You have this edge where you can just run a rational organization over a long period of time. You also understand, I think, that time carries most of the weight. Think about the compounding you’ve done in the last 25 years, from $750 million to $40 billion.

It’s just like, “I’m going to apply this rational approach. I’m in a good business. There are technology tailwinds here, and I’m going to apply this rational organization, working with the best people possible.” The score takes care of itself over multiple decades. You said you wanted to do $20 billion. Well, you’ve doubled that, and you’ll probably keep going.

That’s the goal. Let’s go back to the talent and how you serve the talent, because when I hear the conversation we had, the book I’ve read, and interviews I’ve heard with you, you seem to be very comfortable—almost like you’re in the service business. Is that a way that you think about this, or not?

Yeah, I think a good CEO needs to serve his or her team. No work gets done in the CEO’s office. So what do you really do? You agree on the mission, you set the strategy, you agree on the culture, and then you drive daily execution—but you’re driving that daily execution through other people.

How do you do that? You have to motivate them. You obviously have to stay informed so you know what’s happening, and then you have to motivate them. On the very rare occasion that a problem can’t get solved below my level, you have to solve the problem. On the rare occasion that a decision about an approach or capital allocation isn’t obvious, or is above someone’s approval level, it comes to me.

I’m not writing memos. I’m not doing Excel spreadsheets.

And are you adapting your style to each individual talent?

Of course. I’m true to who I am, but of course.

Okay, so we had the same experience: some of these books are great, and the titles are terrible. Like, How to Win Friends and Influence People?

Like How to Be the Most Popular Boy in the Class.

It’s just like—yeah. So many people told me about that book. I didn’t read it because the title was terrible. But you almost saved me the need to read How to Win Friends and Influence People. Your whole thing is: take a sincere interest—with an emphasis on the word “sincere”—in other people.

Right. That is really the story of the book.

That is really a book on sales and leadership.

Yep. And friendship.

So explain how you would apply that inside your own work.

Well, I just did a 360, and there was criticism in it, to be clear. But one of the positive attributes—and there were plenty of those, too—that were noted was, “When he sits with you, he really, really cares about you.” He sits with anyone at any level in the organization. He responds to everyone. He’s kind to everyone. You think you’re the only person in the room when he’s talking to you.

You asked me how I deal with difficult creative personalities. I say, “Because I love them. I care about them.” I genuinely care about them, and I care about my executive team. I care about everyone who works at the business.

Frankly, I care—you’re going to find this hard to believe, but it sounds self-serving. I really don’t mean it that way. I think it’s table stakes of humanity. I care about the person behind the counter at Starbucks enough to say hello, ask them how their day is going, and interact with them a bit if they’re not busy—if they’re not pouring coffee, which sometimes they are—to see if maybe I can brighten their day a little bit. Why wouldn’t I?

There’s a great story in Dale Carnegie’s book. He says, “I had an idea. When I went into the post office, I wanted to brighten the day of the guy behind the counter.” He was struggling with what he could say, because this really was an exercise for him. He got to the front of the counter, and the postman behind the counter apparently had a great head of hair. So Dale Carnegie said, “You have a great head of hair. I wish I had a head of hair like that.”

The guy said, “Oh, thank you, because I’m actually kind of proud of my hair.” That little interchange—and Dale was telling the story to a friend, and the friend said, “Well, Dale, what did you get out of that?” And he said, “What did I get out of it? Are we so small-minded that we need to get something out of every interaction? How about that I improved that person’s day, and it improved my day? How about that?”

If you’re taking that position as a starting point—look, if you’re taking a position like, “I’m here doing this podcast. Here’s my goal: My goal is to look awesome on your podcast,” that’s a very bad approach. My goal is, when I show up, to have some engagement like this. How can I be of service to David and to his audience? That’s what I’m thinking.

One of my favorite quotes ever comes from Henry Ford. He says, “Money comes naturally as a result of service.” And I think part of what we’re trying to do here is—this whole show is essentially a love letter to capitalism.

And the reason I say that—or it’s apocryphal, not clear—is: “Whether you think you can or you think you can’t, you’re right.”

Yeah, that’s attributed to him. It’s not clear it was him, but we used that line at ZMC for the first couple of years because it was so hard to do what we did.

It’s in your book.

Yeah. See, that line is in—

I was going to read the book in a while—well, I read it this past week. To the degree that we do have any kind of influences, I’m the son of a Cuban immigrant. I grew up meeting people who literally risked their lives to flee communism. I knew from the time I was probably 9 years old that something was weird about this country I’d been born into. Something special is here.

What we’re trying to do is distinguish that from corruption and crony capitalism. We’re trying to celebrate people who build products that make other people’s lives better. They build wealth for themselves, their families, and their employees. They create jobs.

We had John Mackey on this podcast, the founder of Whole Foods. One of the stories he told was one of my favorite stories. Because we went public early, and there were stock options for our employees, these were grocers—normal people who just wanted to live a normal life—and they were able to send their kids to college because of the stock. They were able to buy a home because of the stock.

Why wouldn’t John be celebrated? He started that with an idea, with his girlfriend and 2 other co-founders. Those people should be celebrated. I think the reason that came to mind when we were talking right now is that they’re not celebrated because they want to do it for themselves. It’s in service of other people.

Oh, listen, I’m not saying—and I definitely have my own personal ambitions, including material ambitions. They were palpable and meaningful, and the truth is that I’ve evolved over time.

So when I started out, I didn’t read How to Win Friends and Influence People for the first few years. I was at Fox when I read it.

I put off the book for a while. I saw it like you. I was like, “Ugh.”

And I think I was the guy who was insecure, and my approach to a situation was, “How am I coming across? How do I look? What do people think about me? What do you think? Let’s talk about me.” I could mask it behind a humble exterior, but frankly, you can’t fake humility. I was anxious all the time as a result, and I nearly failed at Fox as a result of this. It was a book that changed my life. I turned it upside down—immediately turned my life upside down.

What was the different position you were taking when you were in your early 30s at Fox?

It was basically, “I’m trying to work through you to accomplish what my ambitions were,” as opposed to actually figuring out, “I’m the smartest guy in the room. I’ve got the sharp suit on. I can speak grammatically. I’ve got a couple of Harvard degrees. We’re just going to do it my way.”

I wasn’t like that, because I wasn’t a— But that was the subtext.

I shifted that to, “How can I be of service to you? How can I be of service, and how can I get to know you?”

Have you seen anybody have long-term success who doesn’t have a service mindset?

Sure. There are different styles that work. One of the things I’ve learned is that it isn’t one size fits all. My approach is not for everyone. And, by the way, I’m not the most successful guy on Earth—not even close. So this is not, by the way—and I hope it didn’t come across this way. This is my approach, and everyone should follow my approach. To your point, you’ve interviewed loads of people and read hundreds of books. It’s not the same approach. There are some common elements, of course, but Elon Musk’s approach to business is diametrically different from mine. He does not have “be kind” as one of the company values.

I just did an episode with the author of the new book, and one of the things in that book about Elon, in Elon’s own words, was that camaraderie is dangerous. So, I don’t know him. It is clear that we have very different approaches. Last time I checked, he’s the richest guy on Earth and I’m not, so I’m not here to criticize him or his approach. It’s his journey.

But I’m aware of the fact that his style, though completely different from mine, is a very successful style. In the video game business, I would argue that we run our business differently than anyone else. There are other successful enterprises, plenty of them. By the way, thank God there are, because if we were one of one, I’d be nervous about our future.

Even more broadly, in the entertainment business, there are styles that win that are not my style. Barry Diller’s style, for example—the Socratic method that he pursues, which can be brutal. It really can. I mean, I can’t use it. It’s brutal at times. That’s just not my approach. I don’t do it that way. But it works for him. We’re different people.

I think there are times when I have missed things because I take too soft an approach. I think I can sometimes support people on the team longer than I should. There are times when I’ve kicked the can down the road and shouldn’t have done that, although I really learned from it. But I don’t have the view that my approach is the only one or the best one. It just happens to be my approach, and it does, generally speaking, work.

It’s worked for my life in that, you know, I’m not the richest guy on Earth, but I’m not going to miss a meal. I haven’t built the biggest business, but I built a business I’m proud of.

You’re going to miss a meal for several lifetimes.

[Laughter]

And let’s be clear.

You know, I haven’t built the biggest business, but I built a business I’m proud of. I built a giant business.

Yeah, you don’t think in those terms, though, right? The notion that one size fits all in almost anything in life—well, I want to transition and ask you about something because you have all this experience in media. Obviously, I’m kind of in that business, even though I don’t know if I think about it that way, so I want some personal advice from you.

This is such an important thing about how one size doesn’t fit all. Daniel Ek, the founder of Spotify, and I are working on this project to try to outline all the different founder archetypes. We might even commission a book on this because it’s so important. It became a lot of conversations where he was essentially playing a role. He said, “All young entrepreneurs—technology entrepreneurs in their 20s—say, ‘What are my options? I have to be like Steve Jobs in the way he communicates, and now I have to be like Elon.’”

He said, “I was literally playing a role that wasn’t me.” He says he wasted so many years of his life not realizing that there isn’t one type, and it’s dependent on who you are and your own style. You just said something that was interesting. Somebody who works with you emailed me, and I’m curious: People think Take-Two is in the video game business. I think you think of it as being in the media business.

The media business, yeah.

Okay, what’s the difference between the media business and the entertainment business?

Media is just a broader rubric that could include advertising, for example. Advertising would be a media business.

Why not describe it like this: What’s the difference between entertainment and video games? “Video games” just sounds a bit narrow.

We provide an entertainment experience expressed through video games. Maybe that’s a difference. It doesn’t make a difference, but I think it does.

Okay, so explain how you think about this. You could think of a video game as a mobile video game you spend 7 minutes on, or you could think of it as Grand Theft Auto 6, which you spend hundreds of hours on. They’re very different experiences. They’re both entertainment experiences. I think to call them both video game experiences maybe understates the diversity of the experience.

Do you think all the different forms of entertainment compete with one another, but are also kind of collapsing together? Do you look at it like that, or no? To me, the distinction between a video game and watching something else, listening to a podcast, or interacting with AI is just all entertainment and information.

Oh, yeah. I look at the media day broadly. According to Activate Consulting, the media day is around 13 hours in the U.S. Anything that fits within the media day can compete or coexist. So, yes, in that way—but no, at the end of the day, playing a video game is still a very different experience from watching a linear television show.

It just is. This goes back to your insight that I don’t even think we talked about. When you thought about new media, you said the most valuable new media was not going to be passive; it was going to be interactive. I think that’s the term you used.

That’s the case with video games because it’s the biggest entertainment business, and it’s growing more rapidly than any other. In size, it’s bigger than all the other forms combined.

Is that at the software level?

Yeah, at the software level.

That’s insane, and it’s growing faster.

Absolutely. Roughly double the rate.

Is there anything else that you would be interested in pursuing in media besides video games?

Sure, I’m open-minded. I think that in the fullness of time, one could ask whether it would make sense for Take-Two to diversify into other forms of entertainment. I can assure you we would not diversify backward into backward-looking, legacy, declining businesses. But there are other exciting entertainment businesses, and there will be more in the future. Live entertainment is a really interesting space, for example, and it’s growing.

How is Take-Two using AI right now?

We have hundreds of projects going on, and we already have enterprise software. We have enterprise versions of ChatGPT and Claude available for everyone to use that are fully licensed and paid for. We have about 200 projects going on to try to create more productivity and give people the tools they need to do their jobs, whether they’re creative jobs or executive jobs, more effectively and efficiently, with more innovation.

Let’s go back to that story where you were like, “Well, we need a 20th Century Fox. We need a business guy. Let’s grab this guy.” When you realized you needed an AI person, did you create an entirely new role? How was the structure?

No, we have a new CTO, David Klein, and it all reports to David because it’s technology. It sits within the technology world. And not in any way to minimize the effect of all things AI, but first of all, the words mean different things to different people. We’re a technology company that makes entertainment. We always have been.

This is not new to us. Engaging with technology aggressively to create better products, market them better, and run our business better is what we do. Innovation and efficiency fit well within our system. We’ve pushed really, really hard to be as ambitious as possible, and even so, I’d say we’re getting internal criticism that we’re not moving fast enough. But we’re trying to.

What is your overall viewpoint on AI, though?

Again, that’s sort of like saying, “How do you feel about motherhood and apple pie?” I like both. All things technology that can create efficiency, I’m all in on.

But you’re doubtful of the creative ability of AI?

No, I’m not doubtful of anything. I’m totally open-minded. But remember what AI is, despite the fact that there are people in Silicon Valley who don’t want you to believe this: It’s big data sets, lots of compute, and a large language model mushed together. That’s what it is.

Data sets, by their very nature, are backward-looking. Creativity, by its very nature, is forward-looking. Creativity is informed by data. You’re informed by those hundreds of books that you read, and when you have a podcast, you’re informed by the ones you’ve listened to. How could you not be?

But if yours was just a really high-quality clone of Patrick’s, who would watch yours? The thesis that, with AI, we can more efficiently create a completely derivative property—derivative properties don’t work. That’s where the thread has been lost. AI so far is really great at asset creation, but hit creation is not asset creation. Asset creation is a necessary but insufficient condition for hit creation.

I would love to say that AI will make it easier, quicker, and better to make hits, because who would benefit more than we would? We’re in the business already. We own IP, right? You know, you don’t have to create new IP. But it’s really, really hard to do with or without AI.

Creating a “This Table Goes to Hollywood” is incredibly hard. Getting someone to buy that video game is incredibly hard. Getting them to buy Grand Theft Auto 6 is not so hard by comparison. So, it’s not that I take the potential benefits of new technology lightly. To the contrary, I don’t.

No, I think your entire career has been a good example—

Of my career. It’s just that when our stock goes down by 50 points because people say, “Anyone can make a video game,” that was the thesis.

And with AI, anyone can make a video game. It’s like, “Anyone could make a video game last week.” Anyone could make a video game 5 years ago. The technology is readily available. It’s commoditized.

Do you know how many mobile games get put out in a year? Thousands. Do you know how many hits are made in a year? Zero to 5. You know who makes them? Thank you very much, we do.

This is just true. We don’t need this new technology to create assets that are competitive. That already exists. It will be quicker to do it, but speed isn’t the issue.

If I told you, “David, with this technology, you can create something that looks exactly like GTA, and it’s going to take 3 years, not 30 seconds,” you’d be like, “I’ll spend 3 years on it. It’s worth it.” That exists. In 3 years, technology existed prior to AI to clone GTA. But it won’t be GTA. It’ll be a clone of GTA.

Clones don’t sell. All hits are, by their very nature, unexpected. That’s the most important thing to take away. Things that are data-driven in their entirety can’t be unexpected. But that doesn’t mean AI isn’t super helpful.

Perfect place to end. Strauss, thanks for the time. This was awesome. I really appreciate it, man.