Earlier this month, Take-Two announced a cost reduction plan that included project cancellations, the layoffs of 5% of its workforce, and other spending cuts. Amid this announcement came reports based on internal documentation that seemed to confirm Take-Two was closing OlliOlli World developer Roll7 and Kerbal Space Program 2 developer Intercept Games.
But when I asked Take-Two CEO Strauss Zelnick in a call today why these closures happened, he told me, “We didn’t shutter those studios”:
We didn’t shutter those studios, to be clear. And we are always looking at our release schedule across all of our studios to make sure that it makes sense. So we are being very judicious because we are in the middle of a cost reduction program that we’ve already concluded and are now fully rolling out. We’ve announced that we’re saving $165 million in existing and future costs, but we haven’t shuttered anything.
The reports, which came both from a WARN Act notice pointed out by Game Developer and internal documentation seen by Bloomberg, seemed pretty definitive, so this was a surprising response. [Update: Bloomberg reporter Jason Schreier has since shared a snippet of the document on Twitter/X as well.] I followed up by asking Zelnick if he was denying the reports, at which point a PR representative for the company stepped in with the following:
What we’ve said is, in the 8-K filing that we put out we talked about the cost reduction plan is approximately 5% reduction in headcount worldwide, but we did not give a label-by-label breakdown of what that looks like.
I tried one more time, asking if the studios existed or not. PR reiterated that “We have not provided any additional color beyond what I 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 “closure” as the reason for the layoffs of 70 people, which is roughly the entire total of all the employees there. It does seem possible Take-Two has somehow folded both of these studios into Private Division, given that the label will be taking up maintenance of Kerbal Space Program 2 going forward. I asked Zelnick if we should take these reports as a sign that Private Division itself is in some kind of trouble:
I don’t think so. I think, as I said, we’re reviewing all of the projects company-wide, and sometimes we do have to make hard 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 those discussions into these meetings.
In a follow-up email, Take-Two PR clarified that the “entire organization” contributed to cost-saving efforts, and that Private Division was still planning on supporting games such as Moon Studio’s No Rest for the Wicked, and upcoming games Tales of the Shire and an unrevealed Gamefreak project the publisher announced last year.
On our last few calls, Zelnick had told me that the company was in “growth-mode” and, as recently as February, that it had “no current plans” for layoffs. He’s spoken before about the state of the industry post-pandemic, noting that other companies undergoing layoffs had gotten “a little fat and happy during the pandemic” and had overspent as a result. But now, he’s admitting that Take-Two is, at least to some degree, in that some boat:
We were very fortunate during the pandemic, we did really well as did many of our competitors. But I said, when asked during the pandemic, that we expected post-pandemic demand to be below that of the pandemic demand, but above pre-pandemic demand, and that’s exactly what did happen. That said, I think we did get out over our skis a little bit, and I think we were overly ambitious in terms of building a fixed overhead. We have this three-part strategy to be the most creative, the most innovative, the most efficient company in the business, and I’m not sure we were delivering fully on the promise of efficiency.
The hardest thing I do as a chief executive is part ways with friends and colleagues, and that’s always the last choice we make. We always try to find efficiencies elsewhere, through vendors, the way we structure, through operations. At times, though, it’s unavoidable, and this is one of those moments. So we are reducing our headcount by about 5%. It doesn’t feel good to do it, but it is our obligation to be a really efficient business, and the good news is we do feel like we’re structured really well going forward and we have the right amount of operating leverage, so as we bring this new pipeline to bear, we will generate the results that reflect that.
As for Intercept Games and Roll7, the prognosis still doesn’t seem great. What’s even stranger is that this isn’t the first time Take-Two has done something like this to a Kerbal Space Program developer in particular. Back 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 moved to Intercept Games, the rest were left adrift to desperately pitch new projects to save the studio…only to have the COVID-19 pandemic cut off their pitching opportunities and lead to the studio’s closure. 2K Marin was similarly closed quietly, without Take-Two formally 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 is connected to impairment charges and business reorganization charges related to the company’s cost-reduction programs, leading to operating expenses that were up 69% year-over-year. Take-Two also announced it expects to release Grand Theft Auto 6 in the fall of 2025, while Grand Theft Auto 5 surpassed 200 million units sold life to date.
Rebekah Valentine is a senior reporter for IGN. Got a story tip? Send it to rvalentine@ign.com.