> Oy vey maybe this kind of money grubbery is not good for our society.
No, it's a signal from the market that the product being sold is not wanted by the market.
They've mismanaged all their IP pursuing that yummy subscription revenue. Turns out gamers really don't like to buy subscriptions. As a poster downthread pointed out, the games that are not always-on and subscription-based are doing fine. It's the recent AAA model of subscription that is bleeding money.
> Oh yeah I forgot 5 BILLION dollar in revenue is a signal that the market does not want your product
Doesn't matter how big the revenue is if the market is not interested at the price you are selling.
I mean, by your logic, if I sell a dollar for 64c, and do $5b revenue, that's an indication that the market does indeed want the product, but not an indication that the market wants the product at the price you need to sell at to stay in business.
They are not selling at a loss though. The real issue here is that businesses such as Microsoft do not exist to serve a market or make enough money to survive and pay their employees. They exist to increase the value of their owner's shares. This is predicated on an unsustainable model of continual growth, with the expectation that every market they operate in can produce high margins and endless expansion. But demand is not infinite and persistent high margins are the exception, not the norm.
Maybe it isn't a loss, but as an investor (never directly in them), I consider 3% profit margin a bad sign - at that return I'd prefer a savings account: FDIC insurance means that after accounting for risks the savings account is better. I know stock returns don't directly track profit margin, but that is one input into the complex consideration of stocks.
You are right, and this is why not everything should be a stock. Whatever they will cut to avoid emitting "a bad sign", may involve:
* firing people
* making services worse
* sacrificing their own future
Whether it actually does involve those things is effectively arbitrary, because the consideration of the "bad sign" is also arbitrary. If there is no objective value judgement of their operation there is no objective value judgement in their streamlining either, so all bets are off.
Overall they are not selling at a loss, but parts of what they're selling are being sold at a loss. The market is telling them to slim the f- down and get rid of those money-losing parts.
This is all normal and justifiable. Where is the logic that corporations need to preserve dysfunctional parts of their operations?
Corporations don’t need to, no. But they are systems, and it’s a beginner mistake to assume changing one part is going to affect the whole in some simple, predictable, logical way.
Why is it that every person who tries to make these dumb arguments in favor of destructive capitalistic greed always attempts to make it look like the multi-billion dollar profitable business is somehow self-sacrificing or a force of good? "If I sell a dollar for 64 cents!", yea, as if that's even close to what's happening.
If capitalistic greed is so destructive than why are you living in the most successful and highest quality of life society in history? You can find a cave somewhere to camp in if you want, or go to North Korea, etc.
I'm sadly not living in one of the very nice-to-live Nordic countries.
This level of greed is also relatively new, and was pretty well managed by previous (30~ years ago?) administrations. There's an obvious direct correlation between the rapid growth in wealth of the top 1%, businesses becoming increasingly anti-consumer, degrading quality of life amongst the average person, etc. It isn't something inherent to capitalism, it's something inherent to unmanaged 'trickle down economics' capitalism and societies built on individualism above all else.
The issue is both. They're inefficient in that they hire too many people to work on things people don't want. They collate all of their workforce and capital into projects that will perform poorly, rather than splitting that up between different projects that will individually vary but have a much healthier release and lifetime. The thing that people very high up in the organization lose a view on is that while there are operating costs to running multiple individual small projects, overall they balance themselves out because the risk isn't concentrated and each budget is an entity unto itself that doesn't affect the others. A supermassive failure like Concord however takes everyone's budgets and puts it into one giant project that has to succeed well beyond reasonable or even sustainable returns because now you have the costs of the core developers, the half dozen assistant studios, and the dozens to hundreds of asset producers on contract. And because of that you have to target as many demographics as possible, which for marketers means shaving off as many of the pieces that are necessary for complex mechanisms functioning within their niche but are incongruous with the other complex mechanisms that have been deemed as appealing. In other words, they're gambling their entire income on the equivalent of a spaceship boat plane car that can't land on water, can't re-enter the atmosphere, can't drive on the roads because it's too big, and is awful to fly because it's all of those other things.
What's not to understand that when you're having to spend 4.85B in order to get 5B in revenue makes your business quite risky. You want to be operating on larger margins than that
Pretty normal margin in some kinds of businesses, like supermarkets. Then again, supermarkets aren’t likely to see all their customers leave at the drop of a hat.
The scale is also very different. Costco earned $70.53 billion in a recent quarter (not 5B here). Their operating margin is 3.93%, which is also healthier.
The awareness of a poor return on investment is a good thing for society. We want to do more with fewer resources.
Making terrible decisions, such as investing in distractions for your company and consumers, and then letting your workforce pay the tab.. is the thing that is not great for society.
Who is the "we" here? Because the profit margin not being high enough is certainly not a problem for consumers. The only people who should care about that are the company's shareholders and "shareholders" certainly isn't synonymous with "society".
Making crazy changes like squeezing out every last dollar out of your existing, loyal customers (looking at any PE firm ever) certainly affects the wind I'd wager.
Our society has a finite capacity to do projects and to run industrial processes. We want that finite capacity to provide as much quality of life as possible (and as much expansion of our capacity to do projects and run processes as possible), and achieving that is a thorny intellectual problem, which for many centuries in our society has been solved mostly by lawyers and judges knowledgeable about corporate law, stock markets, corporate managers, accountants and investors. This entire ecosystem is predicated on the assumption that investor will try to maximize their return of investment, which is strongly correlated with profit margin.
Is a low profit margin a problem for consumers or is it the company's "money grubbery" of not being satisfied with that profit margin that is causing the problem?
When XBOX fires a bunch of people and shutters studios leading to fewer games with worse support, that's a problem for consumers.
I think people often forget that in a society we rely on companies making and serving things. They make our food and our medicine and build our homes and make our games. It's a good thing when their finances are healthy. It's a bad thing when they form monopolies and rent-seek.
How is making more and more every fiscal year "healthy"?
This is madness and it doesn't make any sense besides the one case where you pursue a monopoly.
All of this has nothing to do with the consumer of the product besides the fact that he'll get a worse and worse product while simultaneously being forced to pay more and more. Enshitification is aresult of this "healthy" business culture.
Once again, what is the actual problem here? The company was making a profit at their current employment level. They are laying people off and shuttering studios because that profit isn't enough for them. This entire argument keeps coming back to "money grubbery".
One of those terrible decisions was probably hiring too many developers, how do you suggest they fix that issue, besides changing leadership?
Many of those developers may not have the job elsewhere, or job paying much less. They now have the experience working in a proper software engineering environment.
Our society uses return on investment (which is correlated with profit margin) to decide what projects and what processes our society's workers will focus on.
So for example, if I can make twice as much money as a software developer as I can as a musician, that is strong evidence that my doing the former kind of work will benefit society about twice as much as my doing the latter kind of work.
I disagree. "Benefit society" means something that can't be defined or tracked so easily. And consumer behavior is heavily biased by things that aren't optimized to benefit society. I have in mind this book, Hooked by Nir Eyal: https://www.nirandfar.com/hooked/
We should try our best to improve our society. Sometimes that will mean doing things that are economically inefficient. Your example of Stanford professor Nir Eyal is an excellent illustration: by advising corporate managers and product designers how to fulfill their role in our economic system more efficiently, Nir Eyal made our society worse.
We should expect more from our elite professors. Nir Eyal should've known better than to make a career out of studying how deliberately to addict users. But we should also expect our professors, politicians and policymakers to understand the basics of our economic system and to understand when a proposed change to our society sounds good or feels good, but has severe adverse effects on economic efficiency that outweigh the societal benefits. Those aren't the only proposed changes we should avoid, but they form an important class of them.
Not exactly - stocks are already sold, you don't run out of cash from the stock price going down. You only run out of cash if you want to sell more stock to raise more cash (this happens, but it is somewhat rare).
However the owners are still going to be mad because their cash is down and they will demand changes to fix that.
But doesn't that make situation even worse? They likely would be 100B+ market cap/total asset value if spun off into independent company, but not able to generate even 1B in annual profit? Activision Blizzard managed 1.5B income/20% margin by themselves before being bought by Xbox -- and somehow whole of Xbox now earns less?
It didn't destroy itself, it was intentionally harvested and the husk was sold to the highest bidder. The original leadership is long gone, the shareholders got their money back long ago, and the staff has turned over significantly. The Blizzard of yore is long gone, and that's ok.
HackerNews is where I find informed commentary on tech stuff because places like reddit are hollowed out and useless for it. I don't care one bit about cretins like VCs.
No, it's a signal from the market that the product being sold is not wanted by the market.
They've mismanaged all their IP pursuing that yummy subscription revenue. Turns out gamers really don't like to buy subscriptions. As a poster downthread pointed out, the games that are not always-on and subscription-based are doing fine. It's the recent AAA model of subscription that is bleeding money.