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>150M at 5B revenue is not great: that's 3% margin! Oy vey maybe this kind of money grubbery is not good for our society.
by Drupon 3mo ago
>150M at 5B revenue is not great: that's 3% margin!
Oy vey maybe this kind of money grubbery is not good for our society.
- Daz912 3mo ago[dead]
- 7thpower 3mo agoThe 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.
- slg 3mo ago>We want to do more with fewer resources. 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".
- dd8601fn 3mo agoIt absolutely became a problem for consumers.
- slg 3mo agoIs 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?
- Gareth321 3mo agoWhen 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.
- Krasnol 3mo agoHow 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.
- average_r_user 3mo agoI agree. The numbers need to go up every year without thinking about the health of the economy, and the Average Joe is delusional.
- Gareth321 3mo ago> How is making more and more every fiscal year "healthy"? Because if they didn't make a return on their investment, they would invest their money elsewhere. When you have money you want a return. You can invest it into games, or cars, or phones, or mining, or healthcare. Whatever you invest it in, you want to be justified for your risk because you can lose money. Sometimes you can lose all of it. If you're really risk averse you just put it all into a bank account on low interest. A lot of European investors do this, which is why their technological innovations are falling well behind the US. If you want more games with better support, we all benefit if they're making a profit on their investments.
- slg 3mo agoOnce 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".
- LtdJorge 3mo agoOf course it is a problem for consumers if it bankrupts the company. Healthy company is better than no company. And I mean healthy, not greedy.
- Krasnol 3mo agoMaking less doesn't equal to going bankrupt.
- LtdJorge 3mo agoYes, but making just 3% could mean tomorrow you’re in the red.
- slg 3mo agoIt's pretty difficult to go bankrupt turning a profit.
- refurb 3mo agoMaking a thin 3% profit that can go negative when the wind blows
- tommit 3mo agoMaking 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.
- refurb 3mo agoAbsolutely, and plenty of companies have made that mistake. But the point is locking up money in a 3% margin business doesn’t impress investors. So you either need to improve the margin with lower costs or higher price (or both). Or bail from the market entirely and put your money in something that makes more money.
- hollerith 3mo agoOur 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.
- dannyw 3mo agoI think a lot of people in the gaming community would agree that Microsoft has ruined, or hindered (instead of helping) many studios they bought.
- pfdietz 3mo agoThe mistake isn't shutting stuff down, it was overpaying for the stuff in the first place. This most recent action is unwinding the earlier mistake.
- signatoremo 3mo agoOne 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.
- petu 3mo ago3% is lower than buying US Treasury bonds? Effectively zero risk zero effort return vs running a business. https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2026 https://home.treasury.gov/resource-center/data-chart-center/...
- petters 3mo ago5B revenue is not the same as 5B in the bank collecting interest.
- petu 3mo agoIndeed, I had a brain fart. Thank you. 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?
- XorNot 3mo agoBlizzard managed to so thoroughly destroy itself that I'm not sure the comparison is fair. It's a ghost of what it once was in gaming.
- xyzzy_plugh 3mo agoIt 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.
- mnky9800n 3mo agoI would be afraid that the size of the revenue versus the margin would make small fluctuations in revenue create large fluctuations in margin.
- mike_hearn 3mo agoMargins that low are dangerous because businesses can often see year to year margin variance higher than that.
- account42 3mo agoSo? Why is it impossible for businesses to do long-term accounting?
- refurb 3mo agoMany reasons: - Investors bail - You run out of cash
- lomase 3mo ago[dead]
- bluGill 3mo agoNot 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.
- refurb 3mo agoI wouldn’t call issuance of new stock rare, it’s a major funding mechanism. Not to mention a company with thin margins is going to have a hell of a time raising money through debt.
- ChrisRR 3mo agoThey have been doing long term accounting, and that's why they're resetting their business
- chasd00 3mo ago> Why is it impossible for businesses to do long-term accounting? 3% is pretty close to 0% which is very close to -1%. Think of it as a 3% margin for error.
- lelanthran 3mo ago> 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.
- Orygin 3mo agoOh yeah I forgot 5 BILLION dollar in revenue is a signal that the market does not want your product
- lelanthran 3mo ago> 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.
- tommit 3mo agoNo? By that logic you sell a dollar for 103c and that's not enough to quench your greed. Obviously both statements are gross oversimplifications. But I could not help myself and let that slide just like that.
- moron4hire 3mo agoJust to add to your comment, people do sell dollars for $1.07, they are called mortgages. I've heard it's a pretty big business.
- 3mo ago
- ChrisRR 3mo agoWhat'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
- mtsr 3mo agoPretty 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.
- hollerith 3mo agoOur 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.
- benatkin 3mo agoI 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/ https://www.nirandfar.com/hooked/
- hollerith 3mo agoWe 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.
- Invictus0 3mo agois it somehow lost on you that you're commenting on a vc's website
- Drupon 3mo agoHackerNews 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.
- ksec 3mo ago>HackerNews is where I find informed commentary on tech stuff b Unfortunately that hasn't been the case for most subject in over 10 years. But I have yet to find a better place though.