Why would the GTA 6 publisher lay off 600 employees even after they said they had “no current plans” to do so?

Grand Theft Auto publisher Take-Two Interactive (parent company of Rockstar Games) is set to lay off approximately 5% of its workforce, around 600 employees.

This decision comes as part of a broader cost-cutting strategy that also includes canceling several projects under development.

The announcement became official when Take-Two filed the necessary paperwork with the Securities and Exchange Commission (SEC) on Tuesday.

The downsizing process is expected to be “substantially complete” by the end of 2024, the filing noted.

“As part of these efforts, the company is rationalizing its pipeline, eliminating several projects in development, and streamlining its organizational structure, which will eliminate headcount and reduce future hiring needs,” the document said.

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Initially, Take-Two said it had “no current plans” to lay off workers

This move by Take-Two is not isolated but part of a larger pattern of layoffs sweeping the gaming industry. Major players like Sony PlayStation, EA, Microsoft Gaming, Riot Games, and Epic Games have announced cuts to their workforces.

Earlier in February, after a period of mixed financial results for the quarter ending December 2023, the GTA publisher had already indicated its intention to put in place a “significant” cost-cutting plan.

Despite this, CEO Strauss Zelnick confirmed that there were “no current plans for layoffs” at the time.

“Our biggest expense was marketing, so we have the opportunity to optimize many expenses that don't include our headcount: marketing expenses, third-party expenses, vendor fees, and the like can still be optimized,” Zelnick told Variety.

“We are a large company, so we always pride ourselves on being the most efficient company in the entertainment industry.”

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The cost-cutting measures taken by Take-Two are substantial

The company estimates it will incur costs ranging from $160 to $200 million, and future cash expenditures are expected to range between $40 to $60 million.

The breakdown of these charges includes approximately $120 million to $140 million due to game cancellations, $25 million to $35 million for employee severance and related costs, and $15 million to $25 million associated with reductions in office space.

Despite these challenges, Take-Two has continued to invest in its portfolio

In March, the company completed the acquisition of Gearbox, the developer behind the “Borderlands” series, for $460 million.

In addition, the upcoming “GTA 6” is expected to be one of the most successful games in history.