Grand Theft Auto VI Is Gaming’s Biggest Financial Bet

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You can hijack cars. You can go work out. You can hit up a nightclub and dance. You could go on a crime spree and rob a bank with your partner.

Crimes and dancing.

I mean, that's the Miami experience, right?

Grand Theft Auto is a video game franchise that lets you lean in to vice. And its latest installment, GTA 6, drops in just a few weeks.

On November 19th.

There is something about GTA 6 that is putting both men and women through psychosis.

I was just letting you know I am going to be sick on November 19th.

For four days from the Thursday through the Monday, all I'm doing is binging on GTA 6. People are seriously excited.

The number of Americans who might skip work on the game's release day to stay home and play it has even made the local news. A video game so popular it could cost the U.S.

Economy a billion dollars in just one day. Gamers are already planning to call in sick or take vacation days just to play it.

The game is landing at a pivotal time for the video game industry at large, a time that Bloomberg's Jason Schreier says has been marked by massive spending from the industry's biggest players, like Rockstar Games, the studio that makes GTA.

We've seen a 10x increase in some of these game budgets And sales, revenue from sales has not gone up 10x to correspond with that. And that fundamentally is the driving factor behind a lot of the current video game industry's crisis.

I'm Sarah Holder, and this is The Big Take from Bloomberg News. Today on the show, inside the release of GTA 6, what could be the most expensive video game ever made, and why there's so much riding.

On its success.

Jason, for our non-gaming listeners, how would you describe Grand Theft Auto?

An open world crime simulator action game where you have a lot of freedom to do things. In some games, you might be kind of on rails. You're a little more restricted. In these games, one of the things that I think is most appealing about them for players is is you can do whatever you want.

Is that why you think it's endured as a video game series for so long?

I think that's part of it. Another part of it is the graphics. These games push the boundaries of what video game graphics can do. Another part of it is the storytelling. Rockstar Games are very good at telling these cinematic stories, almost like the Martin Scorsese of video games, and they're very inspired by the likes of Casino and Goodfellas and Wolf of Wall Street, etc., I mean, certainly for younger players, I think there's something appealing about getting to play this mature rated game and the kind of the taboo elements of it. It's just captured the cultural consciousness in a way that few other games have. So I think part of the reason it's stuck and resonated with so many people is because it really pushed the

boundaries and innovated this kind of gameplay for the medium. The previous game in the series, Grand Theft Auto V, has sold 230 million copies, making it the best-selling non-mobile game of all time. Which, I mean, a remarkable number, 230 million copies. It's like leaps and bounds, exponentially more than most other games.

The population of a small country is playing GTA.

It is.

It is bigger than a lot of small countries. I mean, just to put this in perspective, for most big video games that come out every single year... selling $ 20 million across their lifetime would be considered a mega hit. They would be popping champagne at selling $ 20 million. This game has sold 10 times that.

Well, you recently published this big Businessweek cover story, digging into the behind the scenes of how this game came together. And you wrote about some of the superlatives that this game meets. Most expensive game ever made. Biggest development team of all time. Most likely to shock TV newscasters. The list goes on. I want to dig into that money superlative for a bit. Do we know just how much it costs to... to make this game that so many people are expected to play?

We don't know the exact budget. We do know that Rockstar Games, the company behind this game, has 4,700 employees and that this game has been in development for more than eight years. Game budgets are a little bit different than, say, movie budgets because you don't need to go and rent out a location and provide all this heavy-duty equipment and blow things up and do all these other things that can cost a lot. Actually, game budget costs are almost entirely labor costs. And so you can do a little bit of napkin math by saying, well, okay, they have thousands of people working on this. That is more than any other game. And as a result of that, this is almost certainly the most expensive video game ever made.

The people at Rockstar told me it was less than the Burj Khalifa in Dubai, which cost about $ 1. 5 billion. So less than that.

Less than $ 1. 5 billion.

A lot more than zero.

I think a safe estimate is more than a billion, less than a billion and a half. It's the type of investment... that you can only really make in a game when it's a sure thing. And even though I guess nothing is a sure thing in entertainment, Grand Theft Auto 6 is about as close as it gets.

So eight years later, we're finally about to see GTA 6, but I'd love to talk a little bit about the financial state of the video game industry at large and where GTA 6 fits into this picture. How are video games doing as a business today?

The games industry is in a really interesting place because it's bigger than it's ever been. It is still growing, growing at single digit growth rather than the double digit growth we saw during the COVID years. But it is still growing. Yet at the same time, tens of thousands of workers in the video game industry have lost their jobs over the last three to four years.

There have been a lot of high profile layoffs at companies today.

Yes, not just the companies that are struggling, but even the most successful companies, even Take-Two, the company behind Rockstar, has laid people off during this period. And there are a few reasons for that. One is there was this kind of surge in growth during COVID, and a lot of investments made during a period of zero interest rates, 0% interest rates. And now that interest rates have gone back up, a lot of investors have pulled back or just have lost the appetite for the big investments that games take.

But really, I think the kind of driving factor and maybe the biggest cause of all these problems is that video game budgets have exploded. We talked about GTA 6's budget potentially surpassing a billion dollars, and that is an enormous amount of money. But that is, like I said before, as close to a sure thing as you can get.

A lot of these games are costing $ 300, $ 400, $ 500 million to make or more, but they are not sure things, and they are not generating... 10 times as much revenue as they did in the past. Just as a comparison point, a game at Naughty Dog, which is a very legendary game studio in Santa Monica, California. They're responsible for The Last of Us, for example, which was adapted to a very popular HBO show. Naughty Dog released a game called Uncharted 2 in 2009 that cost about $ 20 million to make.

That's what budgets were around the late 2000s, like early 2010s. Cut to 2020, The Last of Us 2 came out. That was also from Naughty Dog. That costs more than $ 200 million to me. And that fundamentally is the driving factor behind a lot of the current video game industry's crisis. And a lot of what we're seeing from these layoffs is people cutting jobs in North America, where salaries are high and development costs are expensive, and instead making investments in countries that are cheaper to make games in.

Well, what about GTA 6?

I mean, it's spending perhaps more than a billion dollars. What have you heard about the company's expectations for how much it might make and whether all that time and effort is going to be worth it?

It's funny, GTA 6, they could spend as much money as they wanted and they would still make it back. Like this is a game that is going to make a ton of money. I've asked Strauss Zelnick, the CEO of Take-Two Interactive, which is a company behind Rockstar, I've asked him a few times, what do you expect from this game? He won't say numbers. He's got his media training.

He's got his answers. Safe to say it's high. They have very high forecasts for this one. Analysts expect that it could sell anywhere from 40 to 80 million copies in the coming fiscal year, which ends in March. So in its first four months on sale, which is a very wide range, but we really just have no idea what to expect from this game. There are also other variables.

One thing I haven't mentioned, and this is also another factor behind the video game industry's woes, is the chip crisis. All these AI companies are buying up all the memory chips and graphics cards for their data centers, and as a result, the video game consoles and PCs are more expensive than ever and harder to find than ever. PlayStation, Xbox, and Nintendo Switch have all risen in price over the last year, which is highly unusual for game consoles. Usually a game console starts when it comes out, it's the highest it'll ever be. And it just gets discounted from there.

This time, we've seen the opposite effect. And of course, to play GTA 6, you need a console. And so if there are people out there who plan to buy this game, but don't have a PlayStation or an Xbox and are trying to find one and find that, oh my god, this is way too expensive, or, oh my god, I can't even find this in stores, that could be a headwind for this game. So There's a lot of X factors here, and a lot of people are just watching for November 19th. It'll be very clear, I think by November 20th, if Take-Two hasn't said anything about their numbers, then that might be a bad sign. Take-Two Coming up, with so much riding on GTA 6's performance, what's been happening behind the scenes at Rockstar to set it up

for success? And how much does the rest of the.

Video game industry have to gain or lose from the launch? Well, part of what makes Grand Theft Auto 6 so unique is also what made the game so difficult to create over the eight years of its production. How would you characterize the process of bringing this game to life and what it took Rockstar as a business to actually get to this upcoming release?

With a game like this, when you start out, you don't know exactly what the game is going to look like. And again, I'll make the comparison to the movie business. In the movie business, you know what a movie is, right? It's probably between an hour and a half and three hours. It's kind of a linear story. In games, it's a little bit different because games can be so many different things.

If you think about it, Candy Crush on your phone is a game, but so is Grand Theft Auto. So is The Last of Us. So is God of War. So is Pac-Man. And these games are so drastically different from one another that oftentimes when you are making one, It can be really tough to see in your head what the final product is going to look like. And that's even the case in a long-running franchise that is up to its sixth entry, more than six if you count all the spinoffs.

Did Rockstar want GTA 6 to look a lot different and feel a lot different than the previous five iterations?

Yes. So in many ways, it's the same as previous Grand Theft Auto games in the sense that it's a satire of America. It's set in this fictional city that's based on America. You get to go and do crime and hijack cars and get into shootouts with cops and criminals. But there's a lot that's different. With the last game that Rockstar made, Red Dead Redemption 2, they started creating all these systems that were very realistic and immersive and just kind of like, allowed the player to do things, interact with the world in a way that they couldn't before.

For example, when you went and hunted a bear or something in Red Dead Redemption 2, you then had to go and get in there and skin it and take out its meat and put its meat on the back of your horse and bring that back to your camp and then you could take it to the butcher. Visceral. Yeah, quite an experience, right? And so part of what they were deciding for this game was how much of that realism to carry forward. And so, for example, if you're playing as one of these two main characters, it's kind of a Bonnie and Clyde story with these two characters, Jason and Lucia. So if you're playing as one of them, say you're playing as Jason, you go to the store and you want to buy some beer. In most games,

you would just go up to a store clerk and press a button and then the beer would appear in your hand and it would be a very convenient thing for the sake of fun. But for this game, they did a lot of debating. Would you have to walk to the fridge and pick up the bottle of beer? And then if you tried to leave without paying, would they then call the cops because you shoplifted? Did you have to go to the clerk? How long would it actually take? Like if it takes you five minutes to go and buy beer, is that not an enjoyable experience?

So there were a lot of decisions like that. That's just one small example. That's the variable in game development that makes it so much trickier and more complicated than pretty much any other medium. Movies are the easiest comparison point. When you are making a movie, you don't have to worry about how it feels to play. And that just adds such a complicated variable to the whole equation. So there was a lot of this. And there was what Rob Nelson, who's one of the heads of development, he describes it as the doldrums or the dark times. Because while they were making these decisions and trying to figure out what the game would actually look like, a pandemic struck and suddenly everything was disrupted. Pretty much all video

game productions, it's set back by at least a few months, if not a couple of years. But by 2022 or so, 2023, they had a clearer vision. Although, of course, there were many other problems along the way, including trying to fix some cultural problems that it had run into on the last game.

What kinds of cultural problems?

Most notably, crunch, which is the video game industry's term for excessive overtime, often over the course of weeks, months, sometimes even years. And a lot of game developers have had to go through that at a lot of different companies, but it became a firestorm of controversy on Red Dead Redemption 2 for Rockstar Games. And so one of the reasons that Rockstar exploded in size, growing from about 2,400 people in 2018 to more than 4,700 people today, is because they wanted to distribute that workload and try to alleviate the problems of crunch that they'd run into before.

And with that explosion in size comes all sorts of issues. Imagine trying to communicate the vision of a game, which itself is very difficult to communicate even to one person, but imagine trying to do that to 4,700 people. It's almost impossible. A lot of people in the video game industry will compare these big projects to trying to turn an oil tanker. right? Like, you know, if you have faith, eventually the oil tanker will turn. But if you're sitting in the back, you don't see it making any progress.

And you're just like, is this thing actually going to turn?

Okay, so Rockstar has managed to turn the tanker and steer GTA 6 towards launch. If GTA 6 does as well or even better than expected, could it actually boost the rest of the industry? Like, on the console front already, we saw PS5 sales jump 22% in September in advance of the game's release So that seems to indicate that people are, you know, getting excited about the release and perhaps willing to spend on video games. Yeah.

So there are two ways in which this could buoy other companies. But obviously the biggest winner here is Take-Two. Second biggest winners are PlayStation and Xbox. Aside from them, Yes, to your point, if console sales go up in a big way, that could lead to a benefit for other game companies that are trying to sell games on those consoles.

Although it's also possible that a lot of those people buying consoles for GTA are only going to play GTA. And I'll share a fun stat with you, which is that according to Circano, which is a market research firm, more than half of video game players buy between one and two games per year. And usually it's one. The other potential way that this could buoy the entire video game industry is if VCs and other investors out there look over at GTA 6 sales and say, hey, frothy, this is a nice little area. People are excited about video games again. Let's try to get in there.

One of the other paths for success that we've seen for video games is taking the Hollywood route. You mentioned HBO's adaptation of the video game The Last of Us. Are other games going to follow? Might we see like a GTA 6 miniseries on HBO?

Rockstar's precious about GTA. It's unlikely we'll see that. But Hollywood people right now are saying that video games are the new Marvel, the new comics. So yes, we're seeing them all over the place over the last two or three years. We've seen Hollywood production companies snap up every single game franchise from the big ones like Last of Us God of War to tiny little indie ones that nobody's ever heard of. And we'll see how many of those actually result in hits. But that is the hot new area for Hollywood right now. Absolutely. And just wait and see, especially after Mario and Minecraft and the success they found there. Sonic the Hedgehog 2. So yes, we will be seeing a whole lot of video game adaptations

moving forward.

Jason, you're going to get to play... the new GTA game before the general public. What's the first thing you want to try out in the virtual world? What are you most excited to see?

I don't know. I'm very curious to see. So the big appeal of this game or the big hook of this game is that the two main characters can have this romantic relationship. So I'm looking forward to seeing that.

And their name, one of their names is Jason.

Yeah, Jason. There you go. I can live virtually through there. My wife will be thrilled. No, I'm going to have them hold hands and walk in a park. Because The violence part of it, I mean, I'm fine with it, but it's like, that's not as appealing to me as like the story and the relationship. And so that's what I'm interested in seeing.

This is The Big Take from Bloomberg News. I'm Sarah Holder. The show is hosted by me, David Gurra, and Juan Ha. The show is made by David Fox, Jeff Grokot, Naomi Ng, Julia Press, Naomi Schaven, Julia Weaver, Yong Yong, Aaron Edwards, Patty Hirsch, Tracy Samuelson, Sean Carter II, Emma Munger, and Alex Sugiura. Our executive producer is Nicole Beamster-Boer. If you liked this episode, please leave a review wherever you listen.

It helps people find the show. For unlimited access to all of Bloomberg.com, we have a subscription offer at Bloomberg.com slash podcast offer.

Thanks for listening. We'll be back on Monday.

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