[tracker1]

On the margins, that's crazy thin for the size of the org... One bad quarter could turn from a few million in profits to hundreds of millions in losses. It's too close, and there's no way to build/store funds for any kind of storm at that level.

Now, I think the vast majority of the pain is more than self-inflicted... I think actual business, marketing and focus need to start taking priority over idealistic political PoV. Let the games target their natural audiences and have the broadest appeal... at a certain point, trying to gain 1% of audience means alienating 25% or more.

[ethbr1]

This is the industry in general though, and why you see so many historical AAA studios go bankrupt after one bad game.

The problem was that if you kept a studio small and lean, you were often at the mercy of predatory publishers who controlled the distribution channels (pre-network, physical media).

So most studios tried to vertically and horizontally integrate into conglomerates: own their own publishing + have a diversified enough pipeline of games that one flop wouldn't take down the entire works.

Unfortunately, that works at Activision (pre-Blizzard) and EA (00s) scale, but not Microsoft scale (where you essentially own a large chunk of all studios).

This was a reckoning long in coming, as MS XBOX leadership, after some initially brilliant ideas, got high on their own supply and forgot they couldn't endlessly acquire more studio with their parents' cash.

Tbh, they probably should have lured away one of Berkshire Hathaway's acquisition people and put them in a go / no-go decision role.

It's the acquisition price, product, and financials that make something a good deal or not, but XBOX spent the last 10 years valuing potential acquisitions on intangibles (synergy, strategy, if we don't they will, etc).

[foepys]

Billion USD grocery chains operate on 2-3% margins just fine...

[adithyareddy]

If you're a grocery chain you know exactly how much an item costs and exactly how much you sell it for. You also simply order more or less stock of the item depending on how it's selling.

If you're a video game company, you invest millions of dollars in a project up front, for years, and you don't know until after release whether you:

- Make back all the money you spent plus a healthy profit on top.

- Just break even, but you lost the opportunity cost of all the other things that money could have been spent on with better utility.

- Your game flops and you wasted all the money you spent developing it.

It's also highly uneven. Extremely likely that King (Candy Crush) and Mojang (Minecraft) are making a ton of money, and everything else is a money pit where you pour in millions of dollars and you don't even make your money back.

[breezybottom]

Food prices can change significantly depending on natural disasters, diseases, supply chain issues. There's more uncertainty than you acknowledge.

[rvba]

People have to eat. They dont need to play games, especially bad games.

Or they play some indie game like Among Us and not some big studio expensive game.

[tracker1]

The stores themselves aren't losing money if there's a natural disaster.. the farm does, the distributor likely does.. but not the store. The store just raises prices against future inventory pricing, often ahead of the inventory itself.

[jayGlow]

food demand is pretty inelastic their margins are low but they're fairly consistent. modern games can have budgets of a few hundred million dollars with absolutely no guarantee of sales. at those margins 1 failed triple ai have could wipe out several years of profits.

[tracker1]

Yeah, because video games are as essential to the home as groceries.

[breezybottom]

Groceries are important, but the choice of store isn't.

[peder]

Everyone in this thread thinking they know what's best for other people's money.

They're getting below the rate of return of treasuries. That's abysmal.