Take-Two plans for growth, not sale

NEW YORK (Reuters) - Take-Two Interactive Software Inc TTWO.O Chairman Strauss Zelnick, head of a new management team, said on Monday he prefers to run the publisher of the hit "Grand Theft Auto" video game series rather than sell it.

“I’m much more interested in growing the business than in selling it, to be clear,” Zelnick told the Reuters Media Summit. “I would say for the next five to seven years this is a terrific time to be in the video game business.”

There has been much talk among industry analysts this year that Zelnick, who led a group of investors in ousting Take-Two management in March, could be preparing to sell the company to a larger publisher such as Electronic Arts Inc ERTS.O.

Zelnick said Take-Two was “a very efficient enterprise now” as a result of recent divestitures, such as the sale of its gaming accessory business.

“I imagine we will try to find greater efficiencies but they probably won’t be through headcount. I imagine headcount will grow. This is a growth business. We are in growth mode,” Zelnick said.

Zelnick, who has a reputation as a turnaround artist for ailing companies, said he tried to time his entry into video games ahead of an expected growth spurt as more consumers buy new home gaming systems like Microsoft Corp's MSFT.O Xbox 360 and Sony Corp's 6758.T PlayStation 3.

But fancy new systems also mean higher production costs for game makers, and Zelnick believes four to six publishers will end up dominating the gaming side of an industry set to hit $40 billion in global sales of hardware and software this year.

“From a general point of view I think you’ll see some industry consolidation. It’s hard to imagine that you wouldn’t,” Zelnick told the summit in New York.

Take-Two would seek growth by developing original games such as “BioShock”, a spooky underwater shooter that turned into a sleeper hit, rather than by seeking licenses for movies or other properties as other publishers have done.

“From a specific point of view, what we find most compelling is building up our collection of our intellectual property. I’m not really interested in scale for scale’s sake,” Zelnick said.

Zelnick said the next installment of “Grand Theft Auto” was benefiting from a delay in its release date from October to next spring.

“I believe this release, ‘Grand Theft Auto IV,’ is going to be vastly better than those expectations -- vastly better -- and that’s hard to do when expectations are so high,” he said.

Shares in Take-Two fell 1 percent to $14.58 on Nasdaq amid a broad market slide. Over the past year, the stock has fallen 17 percent, compared with a fall of 8 percent for Electronic Arts and a rise of 11 percent for Activision Inc ATVI.O.

(Clickhere to see Reuters MediaFile blog)