4 ms·

> - The make around 5 billion in revenue per quarter - The problem according to them is profit margin - around 150-160 million > So first of all, they are big!

by mjr00 3mo ago

> - The make around 5 billion in revenue per quarter - The problem according to them is profit margin - around 150-160 million > So first of all, they are big! Secondly they are not at a loss. They just have a "thin, non-growing margin". So to fix all this they are trimming down, so they can "return to growth" (which I think is ridiculous). How is that profit margin distributed though? King (Candy Crush etc) and Mojang (Minecraft) are specifically called out as money-makers, it's possible that they're carrying the majority of profits while everything else is a dud: > We have also learned that we are not the best home for every type of studio; in a typical year, we lost 64 cents for every dollar we invested. As an example, Double Fine (one of the studios being chopped) has released 2 games since 2021, Keeper (191 peak player count on steam) and Kiln (163 peak players); these would be flops even for a normal indie game, for a studio getting Microsoft salaries those are enormous flops.

tracker1 3mo ago
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.
- wincy 3mo ago
  [dead]
- foepys 3mo ago
  Billion USD grocery chains operate on 2-3% margins just fine...
  - tracker1 3mo ago
    Yeah, because video games are as essential to the home as groceries.
    - deleted 3mo ago
      [deleted]
    - breezybottom 3mo ago
      Groceries are important, but the choice of store isn't.
  - adithyareddy 3mo ago
    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 3mo ago
      Food prices can change significantly depending on natural disasters, diseases, supply chain issues. There's more uncertainty than you acknowledge.
      - rvba 3mo ago
        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.
      - 3mo ago
- ethbr1 3mo ago
  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).
egypturnash 3mo ago
Keeper needs an optimization pass so badly. Once I finished the first zone the framerate dropped to the floor on my Steam Deck. Presumably it runs okay on the current XBox, but it sure feels like Double Fine's attention has moved on and will never return. Absolutely drop-dead gorgeous but I don't think I am going to ever finish it until I get a Deck 3/4 in like 5-7 years.
johnnyanmac 3mo ago
>Double Fine (one of the studios being chopped) has released 2 games since 2021, Keeper (191 peak player count on steam) and Kiln (163 peak players); these would be flops even for a normal indie game, for a studio getting Microsoft salaries those are enormous flops. Hard to really say. Kiln and Keeper can easily be made up for by the sales of Psychonauts 2. I'm sure an indie Double Fine would not have been able to make those kinds of games. This takes me back to Pertinent, another small game from a reputable studio, had its main writer saying that "this kind of game would not be possible without Gamepass". Which I 100% believe. Microsoft definitely didn't buy Double Fine trying to make the next Fortnite, but that arthouse strategy clearly isn't a factor these days.
- orpheansodality 3mo ago
  did you mean Pentiment, led by Josh Sawyer at Obsidian?
  - johnnyanmac 3mo ago
    Yes, apologies for the misspelling. Very likely another game that wouldn't "succeed" in a traditional release, but would potentially get people into a subscription service. Despite that loss leading strategy, Obsidian has had quite a few other releases that did to make up for that side project. So the studio would overall be in the green despite that.
    - Sander_Marechal 3mo ago
      I loved Pentiment, but it was soooo much reading.
- account42 3mo ago
  Psychonauts 2 was funded we-got-kickstarter-at-home and already well into development before MS acquired DF. If anything this exemplifies that DF did not function under MS if they couldn't replicate that post-acquisition.
  - 3mo ago
alexp2021 3mo ago
Really 191 players or 191k players?
- mjr00 3mo ago
  No missing "k", really just 191 players. https://steamdb.info/app/3043580/ https://steamdb.info/app/3043580/
  - dom96 3mo ago
    Could this be due to the games being available on Game Pass? Why would anyone buy them on Steam if they can play them on Game Pass for "free"?
    - Schiendelman 3mo ago
      You've got that backwards. It's free and STILL has no players.
      - jfim 3mo ago
        Would they be counted as active players on steam if they're being played on game pass though?
        Schiendelman 3mo ago
        The split is usually not a multiple. There are people with computers, and people with xboxes. If there are that few people on steam, there are probably a similar number on Xbox. Not 10x or 100x, and at least 100X would be what you need for that game to be worth further investment.
        dom96 3mo ago
        What evidence do you have for this? It doesn't pass the sniff test: why would anyone buy a game for full price when they can get it for far less by just grabbing a cheaper subscription? (that they can cancel any time)

by mjr00 3mo ago

tracker1 3mo ago

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.

wincy 3mo ago
[dead]
foepys 3mo ago
Billion USD grocery chains operate on 2-3% margins just fine...
- tracker1 3mo ago
  Yeah, because video games are as essential to the home as groceries.
  - deleted 3mo ago
    [deleted]
  - breezybottom 3mo ago
    Groceries are important, but the choice of store isn't.
- adithyareddy 3mo ago
  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 3mo ago
    Food prices can change significantly depending on natural disasters, diseases, supply chain issues. There's more uncertainty than you acknowledge.
    - rvba 3mo ago
      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.
    - 3mo ago
ethbr1 3mo ago
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).

egypturnash 3mo ago

Keeper needs an optimization pass so badly. Once I finished the first zone the framerate dropped to the floor on my Steam Deck. Presumably it runs okay on the current XBox, but it sure feels like Double Fine's attention has moved on and will never return. Absolutely drop-dead gorgeous but I don't think I am going to ever finish it until I get a Deck 3/4 in like 5-7 years.

johnnyanmac 3mo ago

>Double Fine (one of the studios being chopped) has released 2 games since 2021, Keeper (191 peak player count on steam) and Kiln (163 peak players); these would be flops even for a normal indie game, for a studio getting Microsoft salaries those are enormous flops. Hard to really say. Kiln and Keeper can easily be made up for by the sales of Psychonauts 2. I'm sure an indie Double Fine would not have been able to make those kinds of games. This takes me back to Pertinent, another small game from a reputable studio, had its main writer saying that "this kind of game would not be possible without Gamepass". Which I 100% believe. Microsoft definitely didn't buy Double Fine trying to make the next Fortnite, but that arthouse strategy clearly isn't a factor these days.

orpheansodality 3mo ago
did you mean Pentiment, led by Josh Sawyer at Obsidian?
- johnnyanmac 3mo ago
  Yes, apologies for the misspelling. Very likely another game that wouldn't "succeed" in a traditional release, but would potentially get people into a subscription service. Despite that loss leading strategy, Obsidian has had quite a few other releases that did to make up for that side project. So the studio would overall be in the green despite that.
  - Sander_Marechal 3mo ago
    I loved Pentiment, but it was soooo much reading.
account42 3mo ago
Psychonauts 2 was funded we-got-kickstarter-at-home and already well into development before MS acquired DF. If anything this exemplifies that DF did not function under MS if they couldn't replicate that post-acquisition.
- 3mo ago

alexp2021 3mo ago

Really 191 players or 191k players?

mjr00 3mo ago
No missing "k", really just 191 players. https://steamdb.info/app/3043580/ https://steamdb.info/app/3043580/
- dom96 3mo ago
  Could this be due to the games being available on Game Pass? Why would anyone buy them on Steam if they can play them on Game Pass for "free"?
  - Schiendelman 3mo ago
    You've got that backwards. It's free and STILL has no players.
    - jfim 3mo ago
      Would they be counted as active players on steam if they're being played on game pass though?
      - Schiendelman 3mo ago
        The split is usually not a multiple. There are people with computers, and people with xboxes. If there are that few people on steam, there are probably a similar number on Xbox. Not 10x or 100x, and at least 100X would be what you need for that game to be worth further investment.
        dom96 3mo ago
        What evidence do you have for this? It doesn't pass the sniff test: why would anyone buy a game for full price when they can get it for far less by just grabbing a cheaper subscription? (that they can cancel any time)