Take-Two, the parent company of GTA developer Rockstar Games, has announced it has extended CEO Strauss Zelnick’s contract through 2029. Under the terms of his new deal, Zelnick could earn more in bonuses if the company can continue to grow its microtransaction business.
The fact that an executive’s pay is tied to a performance-based metric is not uncommon in the technology space. For example, Microsoft CEO Satya Nadella’s contract has a clause that lets him earn more money when more people sign up for Xbox Game Pass. These types of performance-based incentives are offered to executives in an attempt to motivate them to maximize returns for shareholders (and enrich themselves, too, in the process).
A filing with the Securities and Exchange Commission says Zelnick could earn an additional “performance award” of more stock units if Take-Two can reach a certain “operational performance metric” pertaining to recurrent consumer spending (RCS).
RCS is Take-Two’s terminology for “ongoing consumer engagement,” which covers revenue from virtual currency, add-on content, and in-game purchases. In essence, Zelnick stands to potentially earn more money if microtransaction sales in games like GTA Online and NBA 2K continue to climb.
RCS is a massive business for Take-Two. For the latest quarter, Take-Two earned 61% of its total net revenue from RCS, amounting to about $550.8 million of the $903.3 million that Take-Two made in total net revenue. Take-Two is due to release its next earnings report today, May 16, and this is expected to provide new numbers about RCS at Take-Two. Check back soon with GameSpot for more.
Take-Two’s RCS figures are set to explode in the near future, one would think, when the company’s $12.7 billion acquisition of mobile game giant Zynga closes.
25% of Zelnick’s total performance-based “performance awards” comes from RCS targets, with 75% coming from Take-Two’s financial performance relative to the Nasdaq 100 index. In short, Zelnick stands to earn more in bonuses if Take-Two makes more money from RCS and if the company in general performs better compared to the wider market. Take-Two’s filing did not, however, outline what specific performance targets are required for Zelnick to earn the bonuses.
Zelnick’s new deal with Take-Two sees him remain CEO of the company until at least March 31, 2029. Zelnick runs a management company called ZelnickMedia, which works with Take-Two, and ZelnickMedia is paid $275,000 per month under the terms of the deal for its services (in addition to the target-based bonuses mentioned here and others).
One of Take-Two’s next big projects is Grand Theft Auto 6, which is in development now at Rockstar Games. The title has yet to be formally announced, but given the massive success of GTA V and GTA Online, it’s expected the game will have a significant online and evolving multiplayer element.
Source: Gamespot
