Red Dead vs. Red Ink

With Red Dead Redemption, Strauss Zelnick and the Houser brothers have a hit. But to survive, Take-Two Interactive needs a few dollars more

By Cliff Edwards

Strauss Zelnick, the chairman of Take-Two Interactive (TTWO), sits in a soundproof room enjoying a moment of professional success and a cookie. The room is part of a lavish Take-Two installation at Electronic Entertainment Expo, aka E3, the annual video game conference that's held each June in Los Angeles.

You've got to spend money to make money, he explains between bites, referring to the elaborate setup outside, where an endless stream of conference-goers, mostly geeky guys in jeans, are posing for pictures with Tommy gun-toting Playmates hired to promote Take-Two's upcoming Mafia II game.

Zelnick doesn't look much like his customers. He's 53 years old, dressed in a dark suit and pin-striped shirt, and sufficiently tanned and fit to have made the November 2008 cover of Men's Fitness magazine. Although Zelnick is looking good, his business is looking&hellips;uncertain. Video games, once considered recession-proof, are stumbling, and while Take-Two has produced a hit with Red Dead Redemption, the company is still struggling toward profitability. Sales of all but the hottest, most-hyped games have tanked since 2009. Wedbush analyst Michael Pachter says July marked the fifth straight month that overall title sales have fallen. "Some of our competitors who put out modestly good games this year, they got clocked," Zelnick says. "They're not developing great products, they're delivering good products. Good is the new bad."

Just now, though, Zelnick has a product to celebrate, and it's better than good. Red Dead Redemption has become the industry's summer blockbuster. And it happened in large part because Zelnick stayed with a project that was overdue and over budget.

Red Dead, conceived before Zelnick took over in 2007, is one of several long-gestating and expensive games Take-Two hopes will break its reliance on its popular, and often controversial, Grand Theft Auto franchise, which had its debut in 1997.

Since its release in late May, Red Dead, a $59.99 game, has shipped more than 5 million copies. Few games are as chaotically dynamic and stylishly cinematic (think Clint Eastwood's Unforgiven) as Red Dead. Seth Schiesel of The New York Times called the game a "tour de force" and "the new standard for sophistication and ambition in electronic gaming." Set in the early 1900s, it's a gloriously rendered "open" world that allows players to roam parts of the Western U.S. and Mexico and to do as they please. Skin a dead wolf, and blood spatters on the screen. Gallop into a lush red sunset, and dust rises on the trail. As in Grand Theft Auto, players get to choose how moral they want to be, this time while standing in a six-shooter's shoes. People die. Lots of them. Six Dutch gamers were so taken with it that in July they played Red Dead for 50 hours straight and broke the Guinness World Record for nonstop gaming.

In the best case, Red Dead may be that wonderful phenomenon in the video game world, the "franchise" game that fuels a long cycle of sequels. With Red Dead, Zelnick also aims to prove that the Hollywood-style formula of producing epic games, coupled with budgets to match, still works at Take-Two Interactive. And Red Dead's success marks a turnaround for a game that was starting to look like gaming's Heaven's Gate, the too-long and too-late Michael Cimino western that helped break the back of United Artists in 1980.

If creativity thrives on chaos, Take-Two Interactive has been creating the conditions for artistic genius. For years the Manhattan-based company has attracted critics, among them the Securities & Exchange Commission, Hillary Clinton, and a group claiming to be programmers' wives, which in January of this year posted an anonymous open letter damning the company's labor practices.

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