The point I was trying to make is that there is no 20/80 in the context we are discussing (20% of the titles on gaming business make 80% of the profit). The rule may apply to other business or other variables, but the points Squilliam made are all wrong. Nintendo had less than 20% of the marketshare last gen and made more mony than Sony (a hobo made more money than MS). Take 2 made only 90 million on the quarter GTA 4 released (revenue and profits are far away in this case).

If 80% of any market is losing money, things change. Either the old 20% turns into the new 100% or the market crashes. MS may own 95% marketshare on the OS business, but the other guys are only there because they make some profit.

And for the 10000th time I must say that 400+ xbox games include downloadable games or different versions of the same game.

Squilliam essentially gets things. Malstrom appears to not understand economics, which to someone educated in their area of finance, economics and business makes many of his arguments appear without substance.

You guys can find small flaws in Squillian's post because few of us have times to dedicate large posts to these things with all the suitable caveats. Well done on that. Squillian on the oher hand finds flaws in Malstrom's entire methodology, which is fairly significant.

Luckily he tells a lot of fanboys what they want to here so none of that will matter to them. But for the record, you should all aspire to be far more knowledgable than Malstrom - because it's not that hard (I promise).

Its well known that nintendo made the majority of their profits from the handheld sector. So if you're taking the whole market into account they probably had closer to 50% market share considering their handheld dominance, or 40% it doesn't matter. Still even then they had the best selling games on their own platform and they made a lot of money from them so how does that even disprove the 80/20 general rule here?

Pardon my saying so, Picko, but you seem to say an awful lot that conflicts with reality. So I hope you won't be too terribly offended if I decide not to put much stock in what you say. It's nothing personal.

No one has actually shown me where he's been wrong yet however, I agree that further argument is like teaching a pig to sing. It accomplishes nothing and it annoys the pig.

So Here's my personal business theory to lighten things up a bit.

Grand Theft Auto 4 sells 6.29 M copies at $60 with a $100M development cost = 337.4% profit (very nice)

 Nintendogs sells 20M copies at $25 and is rumored to have had a development cost of less than $300,000?

 $300K development cost on $500M is a profit of 166,666.67% (F**king Fantastic)

Casual gaming pay off!

Works for me.

And by the way, the difference between the real world and your math class is it that doesn't matter how you make the right choice. If I had invested in Nintendo a few years back for a stupid reason like I thought Princess Peach was cute I'd still be richer than if I had followed "expert" advice and invested in Sony because of all the "right" reasons.

The problem you face is that you're going up against someone who's been pretty on-the-money the past two years armed with nothing but "he ain't that smart." Surely you can see why you'll have to bring more to the table.

Belike it doesn't. But again, what does the as-yet-unproven 80/20 rule have to do with the topic at hand?

The premise you're attacking is "HD games in general are not sufficiently profitable for most developers and publishers, at least not so much so that most companies can reliably stay in business by focusing on HD games."

The answer, from many different sources, appears to be "no", hence the rash of shut-downs, mergers, etc., but you are claiming that the answer is "yes", with a particular set of companies being used to provide an answer to a general question.

I refer again to my Walmart example. Indeed, Malstrom himself has repeatedly said that select companies can become enormously wealthy in a downmarket, assuming they correctly read the tea leaves and act accordingly. It is telling that of the four examples you listed, one deals primarily in middleware (which the rising HD costs are forcing even the most reluctant of companies, such as Square-Enix, to use), while another gets a ton of its money off digital distribution. The other two are second parties, and I haven't personally seen their individual financial reports (but I have seen those of their owners, and I am not impressed...).

The long and the short of it is that you have yet to support your argument here, and arguing (probably incorrectly) that most revenue goes to a small handful of companies does not disprove a profits argument.

Some believe genius is being able to see what others do not. But true genius is being able to explain that which others don't see to them in a way that they understand and that doesn't offend them. Malstrom is decidedly a genius in that regard, which is more than I can say for the sorts who say "you're wrong", rant on about theories and rules, utilize statistics in place of qualitative arguments, and then simply refuse to clarify in a way that uninformed individuals on the subject would understand.

Some hide behind statistics, theories, and equations to conceal their actual capabilities. They turn to their knowledge to make them look smart in the presence of the uninformed, and it's all about them. But some of us opt to go the other way, and reveal what we know to the world so others can appreciate it, admitting our shortcomings as we go and making sure that our listeners understand what we say and that they actually care. To those of us like that, it's not about what we know, it's about what our listeners want to know.

Fine if you don't like my quick and dirty analysis how bout a more thourough database.

302 games in the database The number of games in the American database to prevent repeats. ( Conservative assumption because the games not included would have sold poorly anyway, the bias from this assumption further supports my point.)

142,000,000 games sold.

60 games comprise the top 20% (rounding down)

42 million sellers + 18 non million sellers. (94.6+14.8 = 109.4 million games sold comprise the top 20%)

The top 20% of games have therefore sold 77% of the total.

Therefore my assertion that 20% of games make 80% of revenue holds true.

Furthermore it is also well known that the top selling games hold their prices higher for longer and that most games sell in the first few weeks after the release (front loaded) These two factors further support my statement that 20% of games make 80% of the revenue.

Now consider that software development is a fixed cost once the game is released to the public with very little in terms of variable costs. So you see my assertion that 80% of profit goes to 20% of games is probably wrong, its closer to 90% actually. Since only about a 3rd of games actually break even.

This is typical of creative industries. Bookes/Movies/Games/Music all share the model where the lions share of actual profits go to very few endeavers. This would be an atypical model for other industries. This is not to say that profit cannot be found in smaller niches, what im saying is that most of the "total" profit goes to very few works.

The same would hold true of the software market on the Wii or PS3 or DS or PSP.

 Bull...

You're not making a very good image for yourself in this thread at all, Squilliam. Responding to a well-worded and carefully considered explanation of what true genius entails, as well as the pitfalls of relying on knowledge over clarity, with nothing more than "Bull..." suggests only that you have no alternative explanation to offer. Indeed, it suggests that you didn't even read what was written.