Benzinga - by Franca Quarneti, Benzinga Staff Writer.
Editor's note: This story and headline have been updated to accurately reflect Take-Two CEO Strauss Zelnick's comments during the company's second-quarter earnings call.
Take-Two Interactive Software Inc (NASDAQ: TTWO) CEO Strauss Zelnick outlined a calculation of a video game's cost during the company's recent earnings call by considering the per-hour value multiplied by the anticipated play hours, along with the perceived value of ownership for the customer.
This answer came in response to a question from a Goldman Sachs analyst, who asked Zelnick for his views on subscription pricing in the broader entertainment market.
“The increase in subscription pricing and linear entertainment is really a reflection of the fact that too many streaming services were underpricing to acquire customers and then they realize those customers were not durable and the LTVs were upside down,” the CEO said.
He added: "The algorithm is the value of the expected entertainment usage, which is to say that the per-hour value times the number of expected hours plus the terminal value perceived by the customer in ownership.”
Taking that algorithm into account, Zelnick assured that Take-Two’s prices do not reflect the extensive engagement they offer, stating: "Our frontline prices are still very, very low because we offer many hours of engagement."
The top exec said he doesn’t think game prices should go up.
On the contrary, he highlighted that delivering more value than what the company charged consumers has “always” been the company’s “strategy.”
“We want to make sure the experience is first-class, and the nature of the experience is not just the quality of what we offer, it's also what you pay for it, everyone knows that anecdotally,” Zelnick pointed out.
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