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Not that it should be a surprise to anyone, but is this the first time Valve has openly admitted that Episode 3 is officially cancelled?
They have mentioned before that they gave up on episodic development, which tacitly ditches Episode 3. The episodes ended up not being that much easier or faster to make and in a time when PC games in retail was still kind of relevant, it was a pain to make, distribute, and get shelf space for.