Revenue is important due to the fact it shows growth in the industry. The Video game industry is known for making it's profits on the back end of a generation. With High revenue on the front end companies can see growth in the industry, and with growth on the front end you can bank on more profits on the back end. Both Sony and MS have to rely on this. They know as the generation goes on manufatureing cost, development costs, and tech costs will go down. when this happens they have their chance to see profits, but they need market growth on the front end to guarentee this. this is why they and market annylists put allot of stock in revenue numbers right now.

Not sure if you're joking (the :P is throwing me off), but I figure I'll respond as if you are serious.

You forgot to factor in the main thing: revenue - cost = profit. So taxes,etc. are a part of cost, but not the whole cost. In reality, stating your salary in true profit form would be $100k - (rent + food + ...) = $5k (increase in cash + operating capital i.e., checking account).

If you really calculate it this way, you get a much more interesting value: the net cash gain. Thus, profit would be more important than revenue here as well: it's an indicator of how well you are improving your immediate situation. On the other hand, as some one else pointed out, market cap is a much more reliable metric than profit in most cases, since it indicates the value of your accumulated assets, thus taking into account both profit and historical revenue. Of course, since market cap is based on investor opinion (stock price), it can also be completely wrong.

And, of course, don't forget about the importance of factoring in trade volume, so you have some info on the volatility of the stock. 

Sometimes I feel like I'm screaming in the middle of a room and nobody hears me lol =P

I'm not debating the business uses of analyzing revenue guys. I just don't see how it is useful for gamers on a website talking about specific games, or possible future games, hardware sales, and of course future hardware sales.

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.

my god slimebeast....are you serious?

 Sorry, Sqrl, I should have made the connection explicit.

Since game companies are usually publicly traded companies, their ability to make games in the future is largely dependent on public perception of how they are currently doing. The big boys like Sony, Microsoft, etc. might be largely immune to any temporary setbacks, but everybody eventually has to pay the piper. If a company is not doing well (stock price goes down), they could be either a) forced out of the industry or b) taken over by a rival company (usually resulting in massive lay-offs and game cancellations).

 Therefore, if we take it for granted that the public perception of a game company can affect the games that we see, every little bit of financial information becomes important to detail oriented jerks like myself. The relative importance of that financial information is up to debate, though I tend to agree with you that revenue by itself is not very informative.

I think Sony and 360 fans talk about revenue while Nintendo fans talk about profits. Not hard to understand why. In my view revenue is irrelevant. But I'm a Nintendo fan so I guess I'd say that.

Wow, I thought we're in a sales related site, but the amount of ignorance of the basic economics is just staggering. I'm in the board of directors of a small-to-mid size company so I have some background on the subject matter. Not much, but enough to know what's important and why.

Profit is ultimately the most important number for any company that intends to stay in business. Period.

Everything else is subordinate to profits. Everything.

The following might have some errors in it as I'm writing things purely from memory, but the basic structure should be correct.

Revenue = Net sales + miscellaneous income

Operating income (loss) = Revenue - variable expenses - fixed expenses

Net earnings (loss) = Operating income +- interests and other items - taxes

Variable expenses include for example the manufacturing costs, which also include the salaries of the manufacturing personnel. They are called variable costs because the higher the revenue, the higher the variable costs will be.

Fixed expenses include for example deprecations and R&D costs, administrative costs, salaries of R&D, administration, accounting, support etc. Fixed costs are called fixed because they do not depend on the revenue.

Now, contrary to what at least Slimebeast believes, revenue in itself rarely matters. What matters is the profit potential, which is linked to revenue, but also highly dependent on the cost structure of the industry. The reason AMD, Sony or other big companies can post losses for several years is because a) either they have built up cash reserves to surf through the slim years or b) some parties are willing to finance the operation of the company. If neither of these happen, the company goes bankrupt, no matter how much revenue it brings. Of course, in the case of a looming bankrupcy, the company will desperately try everything to obtain liquid assets to continue operating, which could lead to for example selling the company for a wealthier owner. In the case of Sony, for example, it is suspected that they have had to sell assets in order to finance their normal operations.

Another misbelief of Slimebeast, it seems, is that the profits of a company only benefit the shareholders. Now, let's correct this with some real information. A company can choose to pay dividends to the share holders, a decision which is made by the board of directors of the company. Microsoft posted astounding profits for a long, long time before paying any dividends at all. Dividends are paid from the accumulated free capital the company has (at least here in Finland, don't know about the legislation in other countries). Microsoft had accumulated some 80 billion dollars, and not paid a cent of dividends, until one year they rewarded the share holders royally and paid about half of the 80 billion as dividends. However, the profits benefit the company as well, argualby even moreso than they benefit the shareholders.

If you still wonder why profits should be more important than revenue, I'll put it in simple terms:

A company that posts losses has to cut costs, which often times leads to downsizing, though not always. However, continuing losses will inevitably lead to either bankrupcy or downsizing.

A company that posts profits can use those profits to grow, hire new people, set up new facilities, start new businesses etc. It is not necessary to grow, but most companies pursue growth because, if their cost structure will stay more or less the same, meaning that their sales margin, operating margin and gross profit margins don't take a dive, they will make more money if they can increase their revenue.

A company that posts zero profits or losses can't (at least easily) grow without external money. And a company that does not grow will face the degradation of their margins as inflation increases costs pretty much every year.

Every single company that is big today is big because it has been profitable and, thus, has been able to grow.

Now onto a slightly different matter. Why are revenues talked about so much within the game industry? The answer is actually quite simple: software companies, such as game studios, have close to zero variable costs. The cost structure of the software industry is such that nearly all expenses are fixed, which means that basically all revenue that exceed the fixed costs is profit, minus taxes of course. For the console manufacturers, this is clearly not the case, and that's why sensible people talk about installed base and not about the revenue that the console brings.

Also, as has been pointed out, measuring the revenue is an indication of the growth or shrinking of the industry as a whole, or of a single company. Growth tends to correlate with a healthy business, but as in all business analysis, you have to look at the results over several years. One year is just a drop in the ocean, it might be abnormally bad or abnormally good for countless reasons, and without delving deep into IR material it's hard to say how the company actually is doing.

^^ I thought that post was never gonna end

cuz all the companies have been releasing the financial reports