| ▲ | mattalex an hour ago | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
150M at 5B revenue is not great: that's 3% margin! The bigger issue is that console manufacturer revenue is highly cyclical. This is hard to see in e.g. Xbox and Sony since they are both part of a larger conglomerate, but really obvious for nintendo. You generally have a cycle of - "Launch": high marketing costs, low/negative HW margins - "Mid-cycle": lowering manufacturing costs, large game sales, high margin DLCs - "end-of-cycle": falling HW sales, fewer exclusives (-> preparation for next gen), fewer consumers (-> waiting for next gen). Here you usually have maximum profits since you don't subsidize HW and marketing is minimal (platforms are already locked in) Generally you have to establish a big userbase during the mid-cycle such that you can levarage it during the late-cycle to be able to afford next-gen. Xbox has the big issue that their mid-cycle was catastrophic, which means they now don't have the console base to get into the next generation: If they have 3% margin _right now_ in the end-of-cycle where marketing and development costs are at their lowest, this does not bode well for the overall health of the business. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ▲ | Narishma an hour ago | parent | next [-] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
> "Mid-cycle": lowering manufacturing costs, That was true historically but is no longer the case. Even last gen manufacturing costs didn't go down as much as they used to. This current gen they actually increased multiple times. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| ▲ | _verandaguy an hour ago | parent | prev [-] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
- A company which has undertaken a concerted, long-term effort to consolidate the industry under its umbrella (something they themselves call out as a problem in this post), reducing consumer choice - A company which has captured a significant chunk of the console market. They're one of the big three (alongside Sony and Nintendo), and have been since the early 2000s, arguably, for crying out loud. At a certain size (typically as measured by market capture) the expectation for growth needs to be reality checked. This is still $150M of pure gravy every single year. Sure, this is going to a corporation, but that's more money than most people could possibly dream of earning in ten lifetimes. Every year. For a company that's already putting money towards opex in the form of developing new games and new content for existing ones, for a ridiculously broad portfolio. To be clear: it is Microsoft's and Xbox's prerogative to pursue more profit, but I reserve the right to call this out as absurd under the circumstances. If you want to make the argument that Xbox has suffered from a lack of focus in the past decade (... or even longer), or that there's been mismanagement (I would say since around the time 343 got created), then those are fair arguments, though I don't think those are justifications, on their own, for cutting thousands in headcount. Allowing this org to balloon to fourteen levels of management on any vertical is a joke. Allowing the absorption of so much of the game dev industry and still being unhappy with $150M in annual profit after being such an active participant in the oligolpolization of console gaming is just a bit unserious. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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