Big bucks for Grand Theft Auto creators

Grand Theft Auto V, the latest instalment of the shoot-'em-up gangster series, has sold nearly 100 million copies and generated more than $8.3 billion in revenue. Red Dead Redemption II creates a reward system for doing good. The better a character c
Red Dead Redemption II creates a reward system for doing good. The better a character cares for his horse, for example, the more likely the animal will respond quickly to facilitate a getaway.PHOTOS: ROCKSTAR GAMES/YOUTUBE
Grand Theft Auto V, the latest instalment of the shoot-'em-up gangster series, has sold nearly 100 million copies and generated more than $8.3 billion in revenue. Red Dead Redemption II creates a reward system for doing good. The better a character c
Grand Theft Auto V, the latest instalment of the shoot-'em-up gangster series, has sold nearly 100 million copies and generated more than $8.3 billion in revenue. PHOTOS: ROCKSTAR GAMES/YOUTUBE

The Houser brothers will get additional internal royalties this year, with the release of their latest title, Red Dead Redemption II

LOS ANGELES • In a compensation deal unique to the video-gaming industry, Mr Sam and Dan Houser, the brothers responsible for Grand Theft Auto, will get the bulk of an expected US$538 million (S$744 million) in royalties Take-Two Interactive Software will pay to all employees for this year, according to an analyst.

That is thanks in large part to their latest title, Red Dead Redemption II, which was released last Friday.

The British-born brothers and a few key insiders share half the profits of Rockstar Games, the Take-Two subsidiary that makes both titles, according to a lawsuit filed by a former employee.

Last year, Take-Two distributed US$383 million in what it called internal royalties. More than 2,000 Rockstar employees receive bonuses, a company spokesman said.

Take-Two said its compensation programmes allow employees to join in the success of software they help develop.

The company declined to say how much of it went to the Housers. Mr Gerrick Johnson of BMO Capital Markets estimated the brothers received the bulk.

"As long as Grand Theft Auto is chugging along, no one seems to care," Mr Johnson said.

The Housers' haul shows just how far video games have come since the days of Pong and Space Invaders.

The industry is expected to bring in US$138 billion this year, according to market researcher Newzoo. Red Dead II will sell at least 15 million copies by the end of the year, analysts said, at a retail price starting at US$60 for the base package.

Grand Theft Auto V, the latest instalment of the shoot-'em-up gangster series, has sold nearly 100 million copies and generated more than US$6 billion in revenue. That is more than the last 10 James Bond films combined.

It was one of the first major games in which heroes were bad guys who could murder and thieve at will. Last year, the online version brought Take-Two US$758 million in revenue, according to an estimate by asset management firm Piper Jaffray.

Mr Leslie Benzies, a former Rockstar executive, said in a 2016 lawsuit that he was squeezed out of a royalty pool that may have generated US$843 million for the Housers. His case is expected to go to trial next year.

While analysts and industry insiders said it is not unusual for game designers to share the profits, the Housers' take is extraordinary.

By comparison, Mr Michael Morhaime, the former president of Activision Blizzard's Blizzard Entertainment division, earned US$12.3 million last year, according to a public filing.

Wedbush Securities analyst Michael Pachter said he wondered why the Housers' pay is not disclosed.

Take-Two has a narrower profit margin than rivals Activision and Electronic Arts, partly due to the royalty structure, according to Bloomberg Intelligence analyst Matthew Kanterman.

But since revenue has doubled and earnings before interest, taxes, depreciation and amortisation have nearly quadrupled since 2012, Take-Two shareholders have not complained. The stock has gone up more than 10-fold since then.

Take-Two chief executive officer Strauss Zelnick gives the Housers leeway in running their business, analysts and former employees said.

A spokesman for Take-Two said it is in the best interests of shareholders for Take-Two management to leave marketing and other decisions to the Rockstar team.

Red Dead Redemption II is much anticipated, in part, because of its level of detail.

In the Old West, characters traverse snow-capped mountains and dusty plains. They rob stagecoaches, chat up ladies of the evening and blast every bounty hunter or United States marshal who gets in their way.

Arthur Morgan, the main character, gets his outfit dirty over time, and players can clean his clothes once he gets to a town. Over 190 pieces of original music were composed for the game.

Following the model set by Grand Theft Auto online, the Web version of Red Dead, due next month, is expected to include opportunities to spend real money to purchase gear.

But unlike Grand Theft Auto, Red Dead II creates a reward system for doing good. The better a character cares for his horse, for example, the more likely the animal will respond quickly to facilitate a getaway.

"What really makes those games is the freedom to run around and do what you want," writer David Kushner, who authored the 2012 book Jacked: The Outlaw Story Of Grand Theft Auto, said.

"What's made Red Dead a success is that freedom. It's the brothers' greatest contribution to video games."

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A version of this article appeared in the print edition of The Straits Times on October 31, 2018, with the headline 'Big bucks for Grand Theft Auto creators'. Print Edition | Subscribe