Whats up with the revenue?

[Slimebeast]

Sqrl said:

Slimebeast said:
Revenue is much more interesting than profits, by far.

Profits. Usually I don't care if the owners of a company make money (as in profit) or not, as they are no-names to me. I don't know who they are, and btw they're not always physical persons but sometimes pension funds or some other abstract agents.

Also, there are many people getting rich even if a company doesn't show profit. The high salaries of CEOs and other bosses, and their bonuses, they're included in revenue but usually aren't tied to profit per se.

Profit is somewhat interesting as a driving force for future projects. Like if a certain game made huge profit, therefor the publisher will push dev to make sequels (although not always very innovative). But on the other hand, profit isnt always neccesary, because a certain developer might be perfectly happy to just get enuff amount of revenue so that they can keep on making games by their vision. As long as the revenue pays the salaries of the CEO, programmers, artists etc they're happy.

Profits don't reflect how BIG something (company, dev, publisher, market segment or whatever phenomenon we're talking about) is as well as revenue does.

You can have 0 profit but if your revenue is big, you are still big (affecting peoples lives, market penetration, investment, R&D... whatever parameter you examine). But even if you have 35% profits, that's still not a big deal if the revenue is also small.

Sony had losses (or tiny profits) for years. So what? That doesnt take away the fact that Sony are BIG. It's actually a HUGE company. So by revenue alone they are influencal.

Nintendo has almost always been pretty profitable. But they were always small company(until the DS/Wii). Because profits are only a % of revenue.

Same thing with publishers. Nowadays EA arent making much profit. So what? They have HUGE revenue, and that means they can keep on buying devs, making big budget games, having multiple game studios worldwide, doing huge advertising, being all-present on game-shows etc. And the market, analysts, magazines, gaming websites, the gamers, they all listen to EA and check out whats going on. So EA is like a BIG machine regardless if it makes profit or not. And the CEO, executives etc in the company sure make money (only the share holders suffer).

I really don't follow your logic at all....unless I'm just missing the sarcasm in my lack of sleep....it seems that your being serious so I will respond as such until someone tells me I fell for it....

First I wanted to point out that one of us is insane and I'm pretty sure its you. Specifically, salaries are NOT included in revenue, revenue is the money taken IN to the company only. It IS factored into profits, which is the NET CHANGE of revenue - costs.

As for a company making 0 profit and "big deal"...I don't see what you're getting at...at all. The CEOs and decision makers that have been fired or left since the PS3's launch of have done so primarily because of the situation there in regards to profits. If the key decision makers are removed and rewarded based on profits wouldn't it be the obvious indicator of performance? You said yourself that the losses haven't effected their revenue much, and in fact have increased revenue so clearly someone wouldn't be fired for increasing revenue..unless of course it was producing a negative profit....which is precisely why profit matters and revenue doesn't (at least in this regard).

The thing I think I'm missing the most is why the "bigness" of a company matters? Who does that matter to? Why does that make any difference? I'm honestly at a loss on that one. If revenue is in your view the measure of how big a company is and that status doesn't change much at all why is it the more interesting of the two in any way? It would seem to me that everyone knows without looking at a single revenue number that Nintendo is smaller than Sony & MS.

As for your EA example...this is really the point..what good does a company get from "buying devs, making big budget games, having multiple game studios worldwide, doing huge advertising, being all-present on game-shows etc." if they aren't able to actually make money from it?

 

 

In your opening post you wrote "people really enjoy talking about revenue in reference to just about everything", so I laid down some reasons for why it is so. That is, from our perspective as hobby-analysts and gaming-fans on VGC, revenue in general is by far more interesting than profits.

By mistake I wrote that salaries are included in revenue. What I meant of course, was that revenue includes the money that pays the salaries (unless borrowed money is needed). For example, AMD has shown losses for several years, but the CEOs salary is $7.4 million per year. Ford CEO gets $12 mill, EA CEO gets $1.5 mill.

Of course every business wants to make a profit. And corporation leaders get fired or removed as consequence of failed profits. Making profit and lots of it is the ideal condition, but not the only one. A business can exist for years and years without making profit but still making lots of people economically happy, affecting the world around it and peoples lives. Good examples of this are AMD, Motorola, Ford, GM and Sony. Yes, the share-holders perspective is very profit oriented, but that's not the only perspective there is. I already mentioned the CEO, leaders and managers, but you also have all the regular employees that get their daily bread from the company, i.e from revenue. Then you have the world around the company, all the people that it affects in one way or other - the society who taxates the company, the customers, reviewers, advertisers, the companies and manufactors that supply or trade with the business in question. All of these also have an interest to keep the company in business. All of these is a factor. You don't see companies disappear just because they can't show profits! As long as they don't lose money (or even if they do) they'll survive.

My point is, that whatever we study - HW/SW-sales, markets, competition, research & development, investments, number of games, game budget, future games, quality of games, platform choises - they all depend on revenue a lot more than on profit.

What point is there for MS to tell everyone that it's profit margin is 30% (MS as a whole has)? Not much, other than to inform you that they have a lot of happy shareholders and executives driving Ferraris, or if they want people to buy their stock. 

Profits are interesting for stock-holders and some specific subjects of VGC-discussion (like sequels for a game). But revenue affects everything and everyone.