Earlier this month, Take-Two announced a cost-cutting plan that included canceling projects, laying off 5% of its workforce and other cuts. Amid this announcement came reports based on internal documentation that appeared to confirm that Take-Two would be closing OlliOlli World developer Roll7 and Kerbal Space Program 2 developer Intercept Games.
But when I asked Take-Two CEO Strauss Zelnick in a phone call today why these closures were happening, he told me, “We didn’t close those studios”:
To be clear, we have not closed those studios. And we always look at our release schedule across all our studios to make sure it makes sense. So we are very sensible because we are in the middle of a cost savings program that we have already completed and are now fully rolling out. We announced $165 million in existing and future cost savings, but we haven’t closed anything.
The reports, which came from both a WARN Act announcement pointed out by Game Developer and Bloomberg’s internal documentation, seemed pretty definitive, so this was a surprising response. I followed up by asking Zelnick if he denied the reports, at which point a company PR representative interjected with the following:
What we said is that in the 8-K filing that we filed, we talked about the cost savings plan that will reduce global headcount by about 5%, but we didn’t break down what that looks like by label. .
I tried again and asked 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 this, you’re in good company. The WARN Act notice for Seattle’s Intercept Games specified a “shutdown” as the reason for the layoffs of 70 people, which is about the combined total of all employees there. It seems possible that Take-Two has somehow merged both studios into Private Division, as the label will take on maintenance of Kerbal Space Program 2 in the future. I asked Zelnick if we should take these reports as a sign that Private Division itself is in trouble:
I do not think so. I think, as I said, we review all projects across the company, and sometimes we have to make difficult choices. We tend to leave those announcements to the label, we don’t talk about them, so we’re not trying to be cute or difficult today. It’s just that we don’t tend to include these discussions in 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 Moon Studio’s No Rest for the Wicked and upcoming games Tales of the Shire and another unrevealed Gamefreak project that the publisher announced last year.
During 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 has previously spoken about the state of the industry post-pandemic, noting that other companies facing layoffs had “got a bit fat and happy during the pandemic” and had overspent as a result. But now he admits that Take-Two is, at least to some extent, in that boat:
We were very lucky during the pandemic, we did very well, as did many of our competitors. But when I was asked during the pandemic, I said that we expected post-pandemic demand to be below pandemic demand, but above pre-pandemic demand, and that’s exactly what happened. That said, I think we overreached our skies a bit, and I think we were too ambitious in terms of building fixed overhead. We have this three-part strategy to be the most creative, the most innovative, and the most efficient company in the industry, and I’m not sure we’ve fully delivered on the promise of efficiency.
The hardest thing I do as CEO is saying goodbye to friends and colleagues, and that is always the last choice we make. We always try to find efficiencies elsewhere, through suppliers, the way we structure, through our operations. However, sometimes it’s unavoidable, and this is one of those times. That is why we are reducing our workforce by approximately 5%. It doesn’t feel good to do it, but it is our duty to be a really efficient company, and the good news is that we feel that we are very well structured for the future and that we have the right amount of operational influence, so as we put this new pipeline into practice, we will generate the results that reflect that.
As for Intercept Games and Roll7, the forecasts still don’t seem great. What’s even stranger is that this isn’t the first time Take-Two has done something like this with a Kerbal Space Program developer in particular. 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 pitch new projects to save the studio… only to have the COVID-19 pandemic limit their pitching opportunities and force the studio’s closure to lead. 2K Marin was similarly quietly closed, without Take-Two formally acknowledging the change.
Today, Take-Two Interactive reported full-year net sales of $5.35 billion and a net loss of $3.7 billion. A significant portion of the reported loss relates to impairment and business reorganization costs associated with the company’s cost savings programs, which increased operating expenses by 69% year-over-year. Take-Two also announced that it expects to release Grand Theft Auto 6 in the fall of 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 story tip? Send it to rvalentine@ign.com.