A double-take on Take-Two's layoffs | This Week in Business

20.04.2024 - 07:47 / gamesindustry.biz

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This Week in Business is our weekly recap column, a collection of stats and quotes from recent stories presented with a dash of opinion (sometimes more than a dash) and intended to shed light on various trends. Check every Friday for a new entry.

Take-Two joined the parade of publishers with a round of triple-digit layoffs this week, announcing plans to cut headcount by approximately 5%.

It's awful, as all such layoffs are. And it reflects poorly on the management who did not run the business in a way that wouldn't lead to hundreds of employees' lives being upended, as all such layoffs do.

That this belt-tightening comes less than three weeks after Take-Two decided it could afford $460 million to acquire Borderlands developer Gearbox makes it look that much worse.

Looking at the layoffs all on their own, it's not difficult to see what Take-Two is thinking. On top of the general "economic headwinds" that even the most profitable companies in the industry have been using as a reason to cut staff, Take-Two specifically hasn't been profitable of late. The company has reported seven straight quarters of net losses and its forecast says it will be eight-in-a-row once it reports its earnings next month.

So why is it splurging for Gearbox now, when it's had a rough stretch and isn't expecting the long-awaited Grand Theft Auto 6 to come and save the day until next year at the earliest?

Well, the Gearbox acquisition looks opportunistic to me, a chance for the publisher to get a deal on a valued asset. Embracer's struggles have been well-documented, and it could kindly be described as a motivated seller here. Gearbox is also uniquely valuable to Take-Two, which already had the publishing rights to Borderlands but now owns the IP outright and has control of the franchise's success going forward.

That's the sort of deal I would expect Take-Two to pursue almost regardless of its current financial situation because it can't expect to have a similarly beneficial array of factors in its favor whenever the company switches from red ink to black. Gearbox might not be up for sale in 2025 or 2026, and if it is, it would still likely cost more to acquire than right now.

But acquiring Gearbox meant significantly adding to Take-Two's overall headcount, which is something the publisher apparently doesn't have an appetite for.

STAT | 550 – The number of employees working at Gearbox when the studio was acquired by Embracer in 2021.

STAT | 580 – 5% of the full-time staff figure Take-Two reported in its last annual report, or approximately the number of employees Take-Two plans to layoff this year.

Both those numbers are outdated by now,