The videogame industry in 79 words

As an economist I analyse markets for a living.  But I am shocked at the amount of absolute garbage being written day after day by professional writers who somehow think there is some hidden meaning or grand plan hidden in plain sight within often straightforward announcements to investors. Here’s a hint,  there’s not, and believe it or not the games press is not the centre of the world.

Markets are complicated things but at the surface they represent something really quite simple.  Businesses, similarly, operate with regards to two key metrics; profit and loss – past, future and everything in between.  The decisions that they make are hard, yes, but the drivers for decisions are not.  But somehow game journalists, game bloggers, the twittersphere and everyone from whom the word ‘video game’ has pursed their lips choose to weave a rather large and intriguingly complex web while playing business advisor to the mega corporations that rule the industry and in turn save them from an untimely demise.

Twelve months ago Sony was dead;  six months ago Criterion Games was a goner;  and for the last month or so nothing but doom and gloom has been on the minds of everyone that dares speak the word ‘Nintendo’.  They’ve all been wrong, and will likely continue to be, but for all that think themselves a bit of a market soothsayer, here’s a little markets 101 for you to think about before you write your next fact-filled but ultimately frivolous article; in 79 words.

Businesses invest in consoles.  Businesses invest in games to sell those consoles.  When consoles sell they provide capital for longer development times and better games.  When consoles are successful other businesses make games for those consoles.  If consoles aren’t selling there will be fewer games for them.  If consoles fail businesses invest again with a new strategy.  Businesses don’t typically walk away from investment.  And finally very little of the cost involved in developing a console is sunk cost.  

…And also please stop.

Nintendo

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4 Comments

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4 responses to “The videogame industry in 79 words

  1. I mean, people have a right to be worried if they own the console. While I don’t believe Nintendo would jump ship (like you say, it doesn’t make that much business sense), I’d hate to see them cut the system’s life prematurely in a few years and move all development to a new platform.

    It is everyone on the outside who seems gleeful that Nintendo is going through hardships that annoy me the most!

    Like

    • If there is one thing internet is good at it is wishing ill! But what gets me the most is the sheer ignorance. It’s as if people regress to the most superficial, populist analysis whenever it is about something beyond simple sell through figures. Business is complex for sure; but they’re not even getting the fundamentals right….

      Rest assured there is always an advantage to having end to end control of your business.

      Like

  2. I love this post! You hit the nail on the head by pointing out that the internet is actually a small cosmos compared to what’s really going on in the world. Games, no matter how big we perceive them, is still a very insular hobby that people don’t often understand beyond their own scope.

    Thanks for recognizing this!

    Like

    • It may come off as arrogance in some ways, and I acknowledge that, but its a constant source of frustration for me. With this Nintendo situation it really hit new lows of idiocy.

      Glad you enjoyed it.

      Like

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