From Today's Wall Street Journal

By IAN SHERR

Take-Two Interactive Software Inc. is developing a new version of "Civilization," one of its most storied franchises, featuring interconnected virtual worlds in which players compete. But it isn't for the U.S., its largest market; this game is being developed for South Korea.

The New York company—best known for its "Grand Theft Auto" and "Borderlands" franchises—is the latest of a bevy of large U.S. game companies attempting to embrace the fast-growing Asian markets, where gaming consoles such as Microsoft Corp.'s Xbox and Sony Corp.'s PlayStation 3 barely have a presence. Instead, gamers there typically play on a personal computer at home or in Internet cafes.


Strauss Zelnick, Take-Two's chief executive, said he chose to focus on building a "Civilization" game for South Korea because strategy-type games—which often ask players to control armies, cities or entire worlds by making decisions such as what to build and where to send troops—are popular there. Other strategy games like Activision Blizzard Inc.'s "StarCraft" space-age games have become so popular there that television channels have been devoted to broadcasting professional matches between top players in the games.

"Civilization," Mr. Zelnick said, has a strong brand as well and could perform well in South Korea if it is offered in a compelling way. "There's real untapped demand for it there," he said.

For Take-Two in particular, "Civilization" will be the first of its primary videogame brands to be shifted to the Asian market. The franchise has been on the market for 21 years and sold more than 11 million copies, mostly in the Western world, Take-Two said.

"We haven't really penetrated Asia," said David Ismailer, chief operating officer for Take-Two's "2K Games" unit, noting that "Civilization" has historically been a PC game, which are regularly copied and pirated in that part in the world.

Take-Two hasn't chosen a business model for the game, it said, which has been in development with XLGAMES Inc., a South Korea-based games company. Activision, as well, has joined with with companies such as Tencent Holdings Ltd. to bring its brands to the Asian markets, most recently with a version of its popular "Call of Duty" war shooting simulation game aimed at China.

Jake Song, chief executive of XLGAMES, said in a statement that he was excited to be working with Take-Two on expanding the Civilization franchise. "It isn't easy, but we have some great ideas that will keep its essence and also introduce a new online experience that will be shared by thousands of others," he said.

Take-Two has also joined with with Tencent to bring its popular basketball game franchise, "NBA 2K," to Chinese consumers this week. It also joined with with companies such as Nexon Co. Ltd. to develop a baseball game.

Owen Mahoney, Nexon's chief financial officer, said in a statement that he was happy to be working with Take-Two to create an "immersive and engaging new experience."

A spokeswoman for Tencent said the company is "extremely optimistic" about its partnership with Take-Two and the game they're bringing to market, adding that the game is the first of the sports genre that Tencent has offered.

Mr. Zelnick admitted his isn't the first company to make these deals but said Take-Two has learned from the successes and missteps of its competitors, particularly with a focus on ensuring high quality while tweaking the games to local tastes.

His goal isn't only growth, but also reliable revenue and earnings. Ideally, the company would have "a meaningful part of our business [that] will be less bumpy than our huge console business," he said.

The opportunity for Take-Two is there, said Yoshio Osaki, a senior vice president at market researcher and consultancy International Development Group. He estimated the South Korean market for videogames represented about $5 billion last year, and the Chinese market represented $6 billion.

In addition, he said, the biggest driver of growth for videogames in those regions has been Internet-connected games, including lucrative free-to-play and subscription titles.

"It could be an interesting high-margin revenue opportunity for them," he said, though competitors in the region have more experience. That's why the partnerships are key. "It's a wise move for Take-Two to work with these local players because they can help navigate the regulatory waters and connect with gamers," he said.

ake-Two's ambitions in Asia began in 2005 when the company opened its first offices in Shanghai, with about 20 employees mostly handling outsourcing game artwork and making games work on other videogame consoles. Mr. Ismailer said Take-Two began looking for partnerships a couple of years later and, by 2009, the company had struck its agreement to bring an NBA game to China.

Take-Two today counts roughly 300 employees in China alone, Mr. Ismailer said, with other smaller offices dotted in other parts of Asia. Mr. Zelnick said that each deal is structured so that Take-Two's risk is "de minimis."

But Take-Two said it is working closely with its partners, and its development teams make up roughly half of the staff building the games. Many of Take-Two's staff hired overseas are also being brought to the U.S. for training, the company added, to ensure they can produce the same quality of work from the remote studios.

This isn't a first step toward Take-Two testing a free-to-play model that could eventually be offered to U.S. consumers though, Mr. Zelnick warned. Instead, he said he is focused on applying business models where they'll fit best.

"We're expanding our relationship with consumers by meeting them wherever they are, whatever device they want to use, with whatever experience they want to have, whatever business model they want to use, wherever they're located," he said.