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A Look at How One of the Largest Record Companies in the World Once Owned Rockstar Games and Sold it For a Pittance (musicbusinessworldwide.com)
Question: what is entertainment's highest-grossing weekend debut of all time? Hint: It only took place two weeks ago. From a report: It was claimed by a Western-themed video game called Red Dead Redemption 2 -- the second in a series dubbed 'Grand Theft Auto on horseback' -- which generated over $725m in just three days. The wording above ('highest-grossing weekend debut') has been carefully chosen. Because the highest-grossing entertainment launch of all time actually kicked off on a Tuesday, in September, 2013. That launch was Grand Theft Auto V, another video game, which grossed more than $1bn during its opening 72 hours on sale. Both Red Dead Redemption and Grand Theft Auto are made by Rockstar Games -- a New York-HQ'd interactive entertainment company famed for its ability to bring filmic sophistication to the world of PlayStations and Xboxes, and for its ability to generate billions upon billions of dollars by doing so.
Ready for this? The Grand Theft Auto franchise, and the core team behind Rockstar's success, were, unbelievably, both once part of the music business. They were allowed to leave 20 years ago. For an absolute pittance. Let's rewind. Back in 1990, London-born Sam Houser, aged 19, landed a dream first job -- working in the post-room at BMG's UK HQ. Houser then supplemented his university studies by continuing to work at BMG for the next four years, focusing on pop music videos and VHS releases. By 1994, he'd graduated, and took a full-time role within BMG's new interactive entertainment division. Houser, it turned out, had a natural talent for 'A&R'ing' video games -- spotting titles that would sell big and signing them up as a label would an artist -- and, by 1996, he was named Head of Development at BMG Interactive in the UK. Got your palm located somewhere roughly near your forehead? Good. Prepare for the two to forcibly meet.
Interactive released Grand Theft Auto, a 2D action-adventure game, which saw players fulfilling the objectives of criminal overlords across three cities. The title was a commercial smash in the US and Europe -- yet it emerged amid serious corporate turbulence. In March 1998, convinced that its foray into video games had been a waste of time and money, BMG -- under the instruction of owner Bertelsmann -- agreed to sell off BMG Interactive. According to Sam Houser, BMG let the company go, to New York-based Take Two Interactive, for a total consideration of $9m. (For those who can see where this narrative is going: Red Dead Redemption 2 generated that $9m back within an hour of going on sale last month.) The story doesn't end there.
Ready for this? The Grand Theft Auto franchise, and the core team behind Rockstar's success, were, unbelievably, both once part of the music business. They were allowed to leave 20 years ago. For an absolute pittance. Let's rewind. Back in 1990, London-born Sam Houser, aged 19, landed a dream first job -- working in the post-room at BMG's UK HQ. Houser then supplemented his university studies by continuing to work at BMG for the next four years, focusing on pop music videos and VHS releases. By 1994, he'd graduated, and took a full-time role within BMG's new interactive entertainment division. Houser, it turned out, had a natural talent for 'A&R'ing' video games -- spotting titles that would sell big and signing them up as a label would an artist -- and, by 1996, he was named Head of Development at BMG Interactive in the UK. Got your palm located somewhere roughly near your forehead? Good. Prepare for the two to forcibly meet.
Interactive released Grand Theft Auto, a 2D action-adventure game, which saw players fulfilling the objectives of criminal overlords across three cities. The title was a commercial smash in the US and Europe -- yet it emerged amid serious corporate turbulence. In March 1998, convinced that its foray into video games had been a waste of time and money, BMG -- under the instruction of owner Bertelsmann -- agreed to sell off BMG Interactive. According to Sam Houser, BMG let the company go, to New York-based Take Two Interactive, for a total consideration of $9m. (For those who can see where this narrative is going: Red Dead Redemption 2 generated that $9m back within an hour of going on sale last month.) The story doesn't end there.
Corporations have no idea what they're selling and only know for how much.
For the average CEO it doesn't matter whether he's selling computer games or lawn mowers, they pretty much treat them the same. This is why small businesses with people who know what they're doing can actually still exist.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
The story doesn't end there
The summary does, though. Anyway: this story can be summarized by "Execs fail(ed) to predict the future, and isn't that dumb?". There are many similar stories of execs selling an asset cheaply only to see it blossom into a profitable powerhouse. And while these stories are a good example of survivor bias, the reverse also happens: they buy a highly successful promising startup, which then turns out to be a thoroughly unprofitable one hit wonder. It happens.
If construction was anything like programming, an incorrectly fitted lock would bring down the entire building...
it makes it sound like they left a billion dollars on the table, but give a company a completely different set of management and you'll get different results. The Rockstar we have today wouldn't be the Rockstar that made GTA. Especially if they were owned by a record company.
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