Earlier this month, Take-Two announced a cost-cutting plan that included canceling projects, laying off 5% of its workforce and other spending cuts. Amid this announcement, reports based on internal documentation appeared to confirm that Take-Two was shutting down OlliOlli World developer Roll7 and Kerbal Space Program 2 developer Intercept Games.
But when I asked Take-Two CEO Strauss Zelnick on a call today why these closures happened, he said, “We didn’t close these studios”:
We have not closed these studios, to be clear. And we always review our release schedule across all of our studios to make sure it makes sense. So we’re very judicious because we’re in the middle of a cost reduction program that we’ve already concluded and are fully rolling out. We announced that we are saving $165 million in current and future costs, but we have not cut anything.
The reports, which came from both a WARN Act notice flagged by Game Developer and internal documentation viewed by Bloomberg, seemed pretty definitive, so it was a surprising response. (Update(Bloomberg reporter Jason Schreier has also since shared an excerpt of the document on Twitter/X.) I then asked Zelnick if he was denying the reports, at which point a company PR representative intervened with the following:
What we said is that in the 8-K filing that we put out, we talked about the cost reduction plan which represents about a 5% reduction in workforce globally, but we didn’t not given any detail, label by label, of what it looks like. .
I tried again asking if studios existed or not. PR reiterated that “we have not provided any additional color beyond what I have just said.”
If you’re wondering what to make of all this, you’re in good company. The WARN Act notice for Intercept Games in Seattle specified a “shutdown” as the reason for laying off 70 people, or roughly all of the company’s employees. It seems possible that Take-Two has somehow folded these two studios into a private division, given that the label will take over maintenance of Kerbal Space Program 2 in the future. I asked Zelnick if we should take these reports as a sign that the Private Division itself was in trouble:
I do not think so. I think, as I said, we look at all projects company-wide and sometimes we have to make tough choices. We just tend to leave those announcements to the label, we don’t tend to talk about them, so we’re not trying to be cute or difficult today. It’s just that we don’t tend to bring these discussions into these meetings.
In a follow-up email, Take-Two PR clarified that “the entire organization” contributed to cost-cutting efforts and that Private Division still planned to support games such as No Rest for the Wicked from Moon Studio and the upcoming Tales of games. the Shire and an unrevealed Gamefreak project that the publisher announced last year.
During our last calls, Zelnick told me the company was in “growth mode” and, as recently as February, had “no current plans” for layoffs. He has previously spoken about the state of the industry post-pandemic, noting that other companies that suffered layoffs had become “a little fat and happy during the pandemic” and therefore overspent. But now he admits that Take-Two is, at least to some extent, in that boat:
We have been very lucky during the pandemic, we have done very well, as have many of our competitors. But I said, when asked during the pandemic, that we expected post-pandemic demand to be lower than pandemic demand, but higher than pre-pandemic demand, and that’s is exactly what happened. That said, I think we’ve overachieved a little bit, and I think we’ve been too ambitious in terms of building fixed overhead. We have this three-pronged strategy to be the most creative, most innovative, and most efficient company in the industry, and I’m not sure we’ve fully delivered on our promise of efficiency.
The hardest thing I do as a CEO is separate myself from my friends and colleagues, and that’s always the last choice we make. We always try to find efficiencies elsewhere, with suppliers, in the way we structure and in our operations. Sometimes, though, it’s unavoidable, and this is one of those times. We are therefore reducing our workforce by around 5%. It doesn’t feel good to do it, but it’s our obligation to be a really efficient company, and the good news is that we feel like we’re very well structured for the future and we have the right level of operating leverage, so as we implement this new pipeline, we will generate the results that reflect that.
As for Intercept Games and Roll7, the prognosis still does not seem excellent. What’s even stranger is that this isn’t the first time Take-Two has done something like this to a specific Kerbal Space Program developer. In 2020, a studio called Star Theory was making Kerbal Space Program 2 before Private Division took the game away from them. While some employees were transferred to Intercept Games, the rest were left adrift to desperately start new projects to save the studio…only for the COVID-19 pandemic to cut off their pitching opportunities and lead to the studio’s closure. 2K Marin was also quietly shut down, without Take-Two officially acknowledging the change.
Today, Take-Two Interactive reported full-year net revenue of $5.35 billion and a net loss of $3.7 billion. A significant portion of the reported loss relates to impairment charges and business reorganization charges related to the company’s cost-cutting programs, resulting in operating expenses up 69% year over year. Take-Two also announced that it plans to release Grand Theft Auto 6 in fall 2025, while Grand Theft Auto 5 has surpassed 200 million units sold to date.
Rebekah Valentine is a senior reporter for IGN. Do you have a history tip? Send it to rvalentine@ign.com.
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