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Resetting Xbox

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Re: Resetting Xbox

#631

Post by mike_hearn »

nicolas_17 wrote: post #394
xienze wrote: post #267

Earlier quoted context omitted.

> This is still $150M of pure gravy every single year You're neglecting to consider that any time they acquire a studio or have a flop or two -- poof goes that $150M and probably more. It's not a risk-free venture. Entertainment is all about hits, and misses hurt. Would you put up $5K to win $150 on a hypothetical roulette wheel that hits 90% of the time? The math's not perfect obviously but Xbox is a somewhat simila…

If they shut down their gaming operation and instead decide to stuff money into bonds, where would that $5B even come from? As said elsewhere in the thread: > You’re saying that they should take the money people pay to buy Xboxes and put it in T-bills instead of delivering Xboxes?

ROI lags. If they laid off 90% of the Xbox division and left only enough to keep the lights on (they don't run their own factories I guess), then they'd still get nearly the same amount of income the next year with far lower costs. Of course revenue would start to sharply decline as the number of games produced was much lower, as the tech became obsolete. But it's not like revenue would evaporate instantly.

So they could do that and invest the income they still get into bonds, and then that would be where the returns come from.

They don't want to do that obviously, hence why Xbox needs reform.

Re: Resetting Xbox

#632

Post by rvba »

breezybottom wrote: post #505
adithyareddy wrote: post #186

Earlier quoted context omitted.

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…

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

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.

Re: Resetting Xbox

#633

Post by mike_hearn »

monocasa wrote: post #357
skeeter2020 wrote: post #311

Earlier quoted context omitted.

>> 150M at 5B revenue is not great: that's 3% margin! and yet everybody - including Microsoft - is in a big rush to sell us AI services, which could look an awful lot like a historical utility business. 3% will be a dream return in that scenario!

AWS is essentially a utility and gets way better than 3%.

AWS isn't a utility because utilities sell commodities for which you can switch to a competitor easily, as you're buying the same thing. There are companies selling similar products to AWS but none that sell AWS itself.

Re: Resetting Xbox

#634

Post by slg »

hx8 wrote: post #411
evan_ wrote: post #390

Earlier quoted context omitted.

Only if you count the value of the games produced as $0

Wouldn't a fair way to count the value be all of the money selling them produced minus all of the money you spent producing them?

No, because the customers bought the games. That means the customers valued the games at some value higher than the purchase price. There's a ton of surplus value for society produced as part of this process that doesn't end up on a company's balance sheet.

Re: Resetting Xbox

#635

Post by lelanthran »

rockyj wrote: post #24

This is a total mess IMHO. - 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). Some points - - They are huge business even now - 5 bi…

> So first of all, they are big! Secondly they are not at a loss. They just have a "thin, non-growing margin".

At a roughly 3% profit, they are barely breaking even and have no money to invest in staying current. It's not a sustainable business.

Re: Resetting Xbox

#636

Post by dd8601fn »

slg wrote: post #630
7thpower wrote: post #599

Earlier quoted context omitted.

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.

>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".

It absolutely became a problem for consumers.

Re: Resetting Xbox

#637

Post by ErneX »

genxy wrote: post #504
dcrazy wrote: post #280

Earlier quoted context omitted.

And they have hiked the prices of the current gen very late in the cycle to reflect component costs.

The cheapest xbox should cost 129. Instead it is $399. That is how consoles work. It gets cheaper, the back catalog grows and now you have a mass market item that ideally could source games from anywhere. Consoles losing physical media and not allowing 3rd party app stores, or gasp, the ability to run user programs is going to kill the consoles. Expensive and marginal future utility.

Cheapest will be 499 dollars from August 1st.

Re: Resetting Xbox

#638

Post by dd8601fn »

coffeebeqn wrote: post #620
georgeecollins wrote: post #410

Earlier quoted context omitted.

Sure, 3% is terrible. But the point is you spent a fortune buying all these studios-- aka key strategic intellectual properties-- and then you manage them badly. Then you just sell or shut them down at their absolute bottom and you end up just destroying value. Older forms of media understand this. WB loses money and its still really valuable because people see the potential of Batman, Harry Potter etc. IP studios ar…

I just don’t know how great the IPs at Xbox game studios are. They have a few staples but most studios they bought have struggled to put out any major successes in the last 5+ years. There’s only a few Pokémon’s and Harry potters out there. They even ran Halo to the ground ffs

I assume a bunch of them print pretty reliably, like Call of Duty, when you're not using them as a loss leader on an expensive subscription that nobody wants.

Re: Resetting Xbox

#639

Post by madeofpalk »

johnnyanmac wrote: post #188
taurath wrote: post #170

> We will deliver success through a flatter organization that is built around makers (individual contributors focused on building), player-coaches (leaders who remain deeply involved in the work while developing their teams), and directly responsible individuals (DRIs) who own key decisions and outcomes. This is the new trendy management style - a few executive owners and then everyone else are expendable ICs, with a…

Sounds like an awful model for making a game if I understand the model correctly . Forget tight-knit, multidisplinary teams. Everyone's just a special cog to switch in and out from project to project, and laid off when we need a little bit better of an earnings call. Add in micromanagers and directors who need to have their fingers and every project (instead of focusing on the individual needs of a team and game), an…

I'm sceptical of Hacker New's fascination with all managers being worthless, but I don't follow your logic here.

Why is "lets have more people who do things" a move away from multidisplinary teams? Unless you count being a middle manager a valuable discipline in game making?

Re: Resetting Xbox

#640

Post by lelanthran »

Drupon wrote: post #579
mattalex wrote: post #207

Earlier quoted context omitted.

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 -…

>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.

> 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.

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