Take-Two's Layoffs: A New Approach to Cost-Cutting

This week, Take-Two announced its third cost-cutting plan in 14 months, which includes layoffs affecting approximately 5% of its workforce. The move comes less than three weeks after the company acquired Gearbox, the developer of Borderlands, for $460 million. This latest round of layoffs marks a shift in Take-Two's approach to cost-cutting, as the company had previously stated its intention to avoid mass layoffs. The Gearbox acquisition is seen as an opportunistic move, allowing Take-Two to gain control of the Borderlands franchise and expand its portfolio. However, the timing of the acquisition and the subsequent layoffs have raised questions about the company's financial priorities. Take-Two has reported seven straight quarters of net losses, and its forecast indicates that this trend is likely to continue. The company's mobile business, which accounts for 52% of its revenue, is not well-represented in its financial reports, making it difficult to assess the health of this segment. The lack of transparency in Take-Two's mobile business has led to a perception that the company is overly reliant on its Grand Theft Auto franchise. Despite this, Take-Two has a diverse portfolio of franchises, including NBA 2K, Red Dead Redemption, and Civilization. The company's stock performance has been buoyed by the anticipation of a new Grand Theft Auto release, but the expectations surrounding this title are extremely high. If the game fails to meet these expectations, Take-Two may regret not being more aggressive in educating investors about its mobile business. The recent layoffs have sparked a debate about the impact of mass layoffs on employees and the long-term sustainability of the gaming industry. Some companies, such as Schell Games, have managed to avoid layoffs for over 20 years by prioritizing job security and sustainability. In contrast, others, like CI Games, have laid off staff shortly after reporting record revenues. The Fallout TV series has had a significant impact on the gaming industry, with the show's premiere leading to a surge in revenue for Fallout Shelter and a renewed interest in the franchise. The UK games market has also seen growth, with revenues increasing by 4.4% over 2023. The ongoing dispute between Epic and Apple continues, with Apple responding to Epic's request to be held in contempt of court for complying with a rule to open up iOS to alternative payment methods.