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[MScarpa]

Never seen so much hate for a business executive.

 

[ChorizoPicozo]

Never seen so much hate for a business executive.

Is not hate, is getting things straight. But you know, that is not fashionable in today's modern world.

 

[Rykan]

I think any time you acquire Minecraft, Zenimax and Activision, you are going to be nominated by default. He's getting things done and thats what people like to see on resumes.

But if you look a bit deeper, cracks begin to emerge but I dont think thats what these awards care about. it's more of a big picture kind of thing.

I'm certainly going to put this on my resume as well.

"Really good at spending money. A lot of money".

 

[Punished Miku]

Is not hate, is getting things straight. But you know, that is not fashionable in today's modern world.

Thank God we have PS fans to correct all the business organizations that got these awards wrong; fashion be damned.

 

[MScarpa]

Is not hate, is getting things straight. But you know, that is not fashionable in today's modern world.

Oh so nobody here hates Phil? That's funny.

 

[SlimySnake]

I am a pretty huge investor into properties mainly and if I can pay for something in 5 years then its a great investment.

And anyone who bought a whole console hoping for those games you mentioned Scalebound looks like shit and needed to die and from what I remember Ryse flopped and don't remember what Sunset or Titanfall did

I have a hard time imagining all those games together would bring in what Minecraft continues to bring in

Like I have said to others we can agree to disagree and I really do appreciate your input as I have always respected your posts but in my honest opinion your argument doesn't make much sense to me

As someone who invested in Phil's Xbox One on day one, I dont think I got a great return on my investment so why should I give him awards?

I guess I am looking at this from a consumer's perspective. The Minecraft deal took years to pay off, but it did nothing for me. I didnt get Ryse 2, Sunset 2, Scalebound and the new Coalition IP. Or their replacements. He failed to deliver exclusives after spending billions on Minecraft. Thats what matters to me.

Even if you look at it from a business perspective. The guy has spent billions only to come at third place. We are handing out awards to people who finish dead last??

That to me makes no sense.

 

[Arsic]

Good guy Phil is now just fridge bitch Phil.

Gamepass is good. Xbox is trash.

 

[jaysius]

This thread will be great, console warriors with 0 knowledge of how business really works giving long nonsensical posts.

 

[yurinka]

Source? Lmao who am I kidding, there is never a source in the Phil hater circus.

Meanwhile everyone knows they were profitable in 2019 and growing their revenue from 2017… before they made any large acquisition.

You think MS was losing money on hardware in 2019?? Before the XSX/XSS launch?

I don’t know what to tell you.

In that document they mention that this is operating profit, meaning they are not counting there several costs like retail margin (the cut that get the physical stores), taxes, etc. to get the net profit, which would be quite smaller:

And this is for their software, as properly mentioned by Daniel you also have to substract the loses from the hardware. It was the year before a next gen launch, meaning R&D hardware costs during this and next year are higher than usual for both companies. In case of Sony were $1.7B. Considering XB had slightly above half of the PS install base MS gaming division very likely had a hardware related loses of almost or around $1B.

These things would eat that operative profit of their gaming division resulting in basically no net profit or more likely a net loss, as mentioned by Daniel. And then we have the acquisitions completed (so paid) that year, which aren't included there:

In June 2018 they announced at E3 the acquisitions of Ninja Theory, Playground Games, Undead Labs and Compulsion Games, and later in November Obsidian and inXile. In E3 2019 they announced they acquisition of Double Fine. The linked document is for calender year 2019, and adding a few months of paperwork pretty likely most of these acquisitions, if not all, were closed (and paid) in CY2019.

So yes, very likely MS gaming division had a net loss of a few or at least a handful Billions that year. But as you mentioned, we don't have the numbers because MS doesn't share them.

 

[Chukhopops]

that's great but it aint such a stunning achievement. most japanese games do most of their sales in the west now, so the fact that its getting ported to xbox isn't surprising since japanese gamers aren't the target audience any longer

Merely a coincidence that most of those were ported as part of GamePass deals…

In that document they mention that this is operating profit, meaning they are not counting there several costs like retail margin (the cut that get the physical stores), taxes, etc. to get the net profit, which would be quite smaller:

And this is for their software, as properly mentioned by Daniel you also have to substract the loses from the hardware, which in case of Sony were $1.7B. So probably was maybe around $1B for MS.

These things would eat that operative profit of their gamind division resulting in basically no net profit or more likely a net loss. And then we have the acquisitions completed (so paid) that year, which aren't included there:

In June 2018 they announced at E3 the acquisitions of Ninja Theory, Playground Games, Undead Labs and Compulsion Games, and later in November Obsidian and inXile. In E3 2019 they announced they acquisition of Double Fine. The linked document is for calender year 2019, and pretty likely most of these acquisitions, if not all, were closed (and paid) in CY2019.

So yes, very likely MS gaming division had a net loss of a few Billions that year.

Acquisition costs (the actual purchase of a company) doesn’t go into the P&L, that’s not how it works.

The costs required to manage those companies would be added, but so would their revenue. Nothing indicates those companies were losing money before they were acquired so why would they impact the P&L negatively?

I don’t think you understand accounting tbh.

 

[yurinka]

Acquisition costs (the actual purchase of a company) doesn’t go into the P&L, that’s not how it works.

Acquisition costs it's one of many types of costs that companies have. Removing from all their revenue all their the costs you get the company's P&L. So of course this cost affects the P&L of a company, and affected MS that year.

A different story is if the company includes the acquisition costs of their gaming division in the P&L of that division or in the ones of another area of their corportation. In this case, MS doesn't include the gaming division's acquisition costs in their gaming division's but counts them elsewhere, as they also do with other costs like -I assume, but not sure- the Azure & server costs ones because MS I think has them under other division.

The costs required to manage those companies would be added, but so would their revenue. Nothing indicates those companies were losing money before they were acquired so why would they impact the P&L negatively?

I don’t think you understand accounting tbh.

Yes, after an acquisition is completed the revenue and costs of the acquired company, so their P&L too, is added on top of what that acquirer company had. In this case, to their gaming division. Some companies -as in this case MS- use this as their main way to grow their revenue and profitability, it's called growth.

The acquisition cost is always way higher than the yearly profit of the acquired company. And that year unless the acquisition is completed the first day of the year (something that typically isn't the case), that acquisition year the acquirer company gets part of the yearly profit of the acquired company: the one from when it was completed until the end of the year.

That year the acquired company will mean a loss because the acquisition cost paid will be higher than the yearly profit will profide to the acquirer. The idea is that the acquisition cost is an investment that will be recouped in the long term with direct or indirect profitability that the acquired company will generate in the following years.

I mean, ABK is a profitable company but they don't have over $70B of profit per year. So if next year MS completes the acquisition and pays $70B for them it will mean that for the next year MS as corporation will have less profit than usual due to the acquisition. But the following years will have more revenue and profit due to the extra revenue and profit provided by ABK.

Profitability numbers of a division look way nicer than they really are if you don't count a huge chunk of their costs by counting them somewhere else.

 

[Dick Jones]

Acquisition costs it's one of many types of costs that companies have. Removing from all their revenue all their the costs you get the company's P&L. So of course this cost affects the P&L of a company, and affected MS that year.

A different story is if the company includes the acquisition costs of their gaming division in the P&L of that division or in the ones of another area of their corportation. In this case, MS doesn't include the gaming division's acquisition costs in their gaming division's but counts them elsewhere, as they also do with other costs like -I assume, but not sure- the Azure & server costs ones because MS I think has them under other division.


Yes, after an acquisition is completed the revenue and costs of the acquired company, so their P&L too, is added on top of what that acquirer company had. In this case, to their gaming division. Some companies -as in this case MS- use this as their main way to grow their revenue and profitability, it's called growth.

The acquisition cost is always way higher than the yearly profit of the acquired company. And that year unless the acquisition is completed the first day of the year (something that typically isn't the case), that acquisition year the acquirer company gets part of the yearly profit of the acquired company: the one from when it was completed until the end of the year.

That year the acquired company will mean a loss because the acquisition cost paid will be higher than the yearly profit will profide to the acquirer. The idea is that the acquisition cost is an investment that will be recouped in the long term with direct or indirect profitability that the acquired company will generate in the following years.

I mean, ABK is a profitable company but they don't have over $70B of profit per year. So if next year MS completes the acquisition and pays $70B for them it will mean that for the next year MS as corporation will have less profit than usual due to the acquisition. But the following years will have more revenue and profit due to the extra revenue and profit provided by ABK.

Profitability numbers of a division look way nicer than they really are if you don't count a huge chunk of their costs by counting them somewhere else.

ABK if bought becomes an asset to MS. If you make 1bn in profit and on the last day of the company's year, you buy another company for 5 bn, your profit for the year remains 1bn, not 4bn loss.

It will affect the balance sheet only, not profit and loss.

Or are you claiming the associated costs (1bn) like Bungie and Sony acquisition?

 

[James Sawyer Ford]

Merely a coincidence that most of those were ported as part of GamePass deals…

Just another example of Phil having money to throw around for GamePass deals, not business strategy brilliance.

 

[Chronicle]

Eddie, retire.

Also, it's kinda like giving Phil Jackson praise. Why? He coached the bulls and Lakers. Gimme a break.

 

[SportsFan581]

Few things are more consistent in life than the responses in a Gaf thread with Phil Spencer in the title.

I think most of you guys are crushing on him hard and just can't handle the fact that he is straight and married, that must be where the frustration comes from.

Hat's off to @Kagey K and The_Mike for killing it in this one though.

 

[SportsFan581]

Not hard to get a blank check when Big Tech sees Netflix strategy and has ridiculous cashflow to bankroll it.

Where was said check the last 20 years than? That becomes the real question because MS has always had insane money.

 

[James Sawyer Ford]

Where was said check the last 20 years than? That becomes the real question because MS has always had insane money.

Look at MS stock price in 2010-2022 vs what it did in 2000-2009. There's your answer

Not hard to gamble a bit more when the shareholders are plump and happy.

 

[SportsFan581]

Look at MS stock price in 2010-2022 vs what it did in 2000-2009. There's your answer

Not hard to gamble a bit more when the shareholders are plump and happy.

They had like $9b in net income in 2000 (roughly $15b in today's money), not the $60b they have today with Spencer in the fold, no, but they've never had "money problems".

 

[James Sawyer Ford]

They had like $9b in net income in 2000 (roughly $15b in today's money), not the $60b they have today with Spencer in the fold, no, but they've never had "money problems".

Nowhere did I say they had "money problems". The company serves the shareholders, and if the share price goes nowhere for a decade there will be a lot more pressure on where to invest money and spend wisely rather than frivolously. When the share price has gone up 10X in a few years, and cashflows now at 60B, shareholders aren't going to be as picky on where to deploy capital.

The difference between 15B and 60B is 4X. That is massive.

 

[Knightime_X]

This is only the beginning.

 

[TheInfamousKira]

I could do good "business," if I had "money," too, "jackasses,"

Allegedly.

 

[ChorizoPicozo]

This is only the beginning.

Yep, tomorrow:

Nobel Peace Prize

 

[Chukhopops]

Acquisition costs it's one of many types of costs that companies have. Removing from all their revenue all their the costs you get the company's P&L. So of course this cost affects the P&L of a company, and affected MS that year.

A different story is if the company includes the acquisition costs of their gaming division in the P&L of that division or in the ones of another area of their corportation. In this case, MS doesn't include the gaming division's acquisition costs in their gaming division's but counts them elsewhere, as they also do with other costs like -I assume, but not sure- the Azure & server costs ones because MS I think has them under other division.


Yes, after an acquisition is completed the revenue and costs of the acquired company, so their P&L too, is added on top of what that acquirer company had. In this case, to their gaming division. Some companies -as in this case MS- use this as their main way to grow their revenue and profitability, it's called growth.

The acquisition cost is always way higher than the yearly profit of the acquired company. And that year unless the acquisition is completed the first day of the year (something that typically isn't the case), that acquisition year the acquirer company gets part of the yearly profit of the acquired company: the one from when it was completed until the end of the year.

That year the acquired company will mean a loss because the acquisition cost paid will be higher than the yearly profit will profide to the acquirer. The idea is that the acquisition cost is an investment that will be recouped in the long term with direct or indirect profitability that the acquired company will generate in the following years.

I mean, ABK is a profitable company but they don't have over $70B of profit per year. So if next year MS completes the acquisition and pays $70B for them it will mean that for the next year MS as corporation will have less profit than usual due to the acquisition. But the following years will have more revenue and profit due to the extra revenue and profit provided by ABK.

Profitability numbers of a division look way nicer than they really are if you don't count a huge chunk of their costs by counting them somewhere else.

I’m sorry but this is almost entirely wrong.

If the deal goes through MS is not going to put a 70bn expense in their P&L and post a loss of +/- 9bn for the entire company. They did not post a 26bn expense when they bought LinkedIn…

 

[Fuz]

Rich people fellating each other.

 

[Brigandier]

What exactly has he turned around?, MS constantly in last place sales wise and their 1st party output is nothing short of fucking wank.

He announced sensible studio acquisitions galore 3? Years ago and they've put zilch out currently and then MS take it up a few notches or rather the easy way out and just swallow up publishers because they don't have any good games besides Forza and errrm? Even Halo which was once the king on the board is now a pawn and Gears is meh.

The XSX is a seriously good piece of kit but it's software offering is complete garbage.

The fascination and fanboyism surrounding these executives in the gaming industry is honestly bizarre.

 

[digoutyoursoul]

What exactly has he turned around?, MS constantly in last place sales wise and their 1st party output is nothing short of fucking wank.

He announced sensible studio acquisitions galore 3? Years ago and they've put zilch out currently and then MS take it up a few notches or rather the easy way out and just swallow up publishers because they don't have any good games besides Forza and errrm? Even Halo which was once the king on the board is now a pawn and Gears is meh.

The XSX is a seriously good piece of kit but it's software offering is complete garbage.

The fascination and fanboyism surrounding these executives in the gaming industry is honestly bizarre.

Agreed.

Personally I think they were at their best despite RROD with Xbox 360. It felt they had genuine momentum, exciting events and were progressive with UI/Online features.

I buy these systems for great games and features not arse kissing executives.

It’s easy to listen to people who tell them nothing constructive.

 

[Brigandier]

Agreed.

Personally I think they were at their best despite RROD with Xbox 360. It felt they had genuine momentum, exciting events and were progressive with UI/Online features.

I buy these systems for great games and features not arse kissing executives.

It’s easy to listen to people who tell them nothing constructive.

I absolutely loved the OG Xbox... That big oversized bastard was some of my favourite moments gaming offered, I couldn't get off Ghost Recon, Rainbow Six and Halo 2 on Xbox live and gems like the splinter cell trilogy that were a huge step up from PS2 versions.

360 was amazing but it left a bitter taste for me as I had RROD 4 times and another issue with fan failure which made me switch mainly to PS3 and since then I've never really cared for MS offerings as the Xbone was so bad it was mind boggling.

Kinda off topic but just incase I'm called a fanboy off someone for dissing mighty Phill and MS in my previous post but I used to be pro Xbox and still have their latest hardware even if it is a dust magnet right now I'm just not satisfied at all with their first party offerings.

 

[digoutyoursoul]

I absolutely loved the OG Xbox... That big oversized bastard was some of my favourite moments gaming offered, I couldn't get off Ghost Recon, Rainbow Six and Halo 2 on Xbox live and gems like the splinter cell trilogy that were a huge step up from PS2 versions.

360 was amazing but it left a bitter taste for me as I had RROD 4 times and another issue with fan failure which made me switch mainly to PS3 and since then I've never really cared for MS offerings as the Xbone was so bad it was mind boggling.

Kinda off topic but just incase I'm called a fanboy off someone for dissing mighty Phill and MS in my previous post but I used to be pro Xbox and still have their latest hardware even if it is a dust magnet right now I'm just not satisfied at all with their first party offerings.

I’m similar. I want Xbox to do well, it’s getting to a point where I’d like to see fresh people in the division, new faces and ideas.

Launching with a lack of compelling big games I can understand to a point although they should never of solely relied on Halo but these systems are supposed to be years in the making, where is the foresight with the content?

“If this is delayed we still have this for the year “

2023, more Forza and what was supposed to be 2022 line up from what we know. It’s like a lot of the games they have announced we have barely seen anything from them.

Contraband another game, is waiting to see that going to drag on throughout the generation like the others?

 

[Gavon West]

Being trusted and respected is just part of the job as CEO. I think that Nadella has so much money he doesn't care to actually hold Phil accountable, and Nadella is clueless on games so he's just willing to run with it.

I am not deeply offended at all that MS is investing money. But they aren't investing in the right things and are just pissing money away unproductively. Phil Spencer should have been shown the door years ago.

You sound SUPER SALTY, my boy. How many $7 billion, $67 billion dollar deals have you negotiated? How many megacorps have you ran? Do you even have a rich daddy like Nadella where you can even pretend to negotiate a $7 Billion dollar deals, much less $67 billion? I'm just asking, my dude ..

 

[James Sawyer Ford]

You sound SUPER SALTY, my boy. How many $7 billion, $67 billion dollar deals have you negotiated? How many megacorps have you ran? Do you even have a rich daddy like Nadella where you can even pretend to negotiate a $7 Billion dollar deals, much less $67 billion? I'm just asking, my dude ..

You sound SUPER SALTY about my post, homey. But facts don't care about your feelings.

I've never done those deals. Neither have you. There is research that suggests a significant portion of corporate acquisitions are a failure long-term, regardless of whether it's Microsoft or any other megacorp. And typically, when you have less financial restraints, the more likely a company is to engage in wasteful acquisitions. Activision is a massive acquisiton that doesn't really serve any useful purpose other than empire building, and a real risk that Microsoft simply cannot manage all the studios long-term. They certainly have shown they are not good at managing their own.

 

[Gavon West]

As someone who invested in Phil's Xbox One on day one, I dont think I got a great return on my investment so why should I give him awards?

I guess I am looking at this from a consumer's perspective. The Minecraft deal took years to pay off, but it did nothing for me. I didnt get Ryse 2, Sunset 2, Scalebound and the new Coalition IP. Or their replacements. He failed to deliver exclusives after spending billions on Minecraft. Thats what matters to me.

Even if you look at it from a business perspective. The guy has spent billions only to come at third place. We are handing out awards to people who finish dead last??

That to me makes no sense.

It's funny how you leave out a world wide epidemic that changed the landscape of game development for the foreseeable future. Or that it takes 3 to 5 years to make AAA games, or the time it takes to transition after an acquisition.

But, please...continue.

 

[Gavon West]

You sound SUPER SALTY about my post, homey. But facts don't care about your feelings.

I've never done those deals. Neither have you. There is research that suggests a significant portion of corporate acquisitions are a failure long-term, regardless of whether it's Microsoft or any other megacorp. And typically, when you have less financial restraints, the more likely a company is to engage in wasteful acquisitions. Activision is a massive acquisiton that doesn't really serve any useful purpose other than empire building, and a real risk that Microsoft simply cannot manage all the studios long-term. They certainly have shown they are not good at managing their own.

"Homey?" People still use that phrase? I feel like you're attacking me with the early 1990s. Stop it!

You're making VERY broad assumptions based on Jack shit but YOUR feelings, broski. You have no idea what will happen. And I can guarantee the people at Microsoft have a much better understanding of what they can and can't do when it comes to acquisitions. I highly doubt they're simply wasting money on any of their financial agendas. You don't become a multi TRILLION dollar company by simply throwing money around because you have nothing else to do. Seriously. You sound hurt. Lol

You and Phil got history or something? Legit curious

 

[Gavon West]

You sound SUPER SALTY about my post, homey. But facts don't care about your feelings.

I've never done those deals. Neither have you. There is research that suggests a significant portion of corporate acquisitions are a failure long-term, regardless of whether it's Microsoft or any other megacorp. And typically, when you have less financial restraints, the more likely a company is to engage in wasteful acquisitions. Activision is a massive acquisiton that doesn't really serve any useful purpose other than empire building, and a real risk that Microsoft simply cannot manage all the studios long-term. They certainly have shown they are not good at managing their own.

I'm pretty sure somy has also closed studios down, too? Why pretend as if Microsoft is the only publisher who closes down their own studios? You guys are spectacular...

 

[James Sawyer Ford]

"Homey?" People still use that phrase? I feel like you're attacking me with the early 1990s. Stop it!

You're making VERY broad assumptions based on Jack shit but YOUR feelings, broski. You have no idea what will happen. And I can guarantee the people at Microsoft have a much better understanding of what they can and can't do when it comes to acquisitions. I highly doubt they're simply wasting money on any of their financial agendas. You don't become a multi TRILLION dollar company by simply throwing money around because you have nothing else to do. Seriously. You sound hurt. Lol

You and Phil got history or something? Legit curious

It's not based upon my feelings. We know based upon academic finance from Eugene Fama and French that companies that perform aggressive acquisitions/investments tend to perform worse for shareholders than companies that invest conservatively. A multi-trillion dollar company makes mistakes all the time. Microsoft has made a ton of them.

I'm pretty sure somy has also closed studios down, too? Why pretend as if Microsoft is the only publisher who closes down their own studios? You guys are spectacular...

This thread isn't about Sony. Sony has made some really poor acquisitions as well. What's the point of bringing them up? I have never claimed that they have a sterling record there, so you are manufacturing straw man arguments.

 

[yurinka]

ABK if bought becomes an asset to MS. If you make 1bn in profit and on the last day of the company's year, you buy another company for 5 bn, your profit for the year remains 1bn, not 4bn loss.

It will affect the balance sheet only, not profit and loss.

Or are you claiming the associated costs (1bn) like Bungie and Sony acquisition?

I’m sorry but this is almost entirely wrong.

If the deal goes through MS is not going to put a 70bn expense in their P&L and post a loss of +/- 9bn for the entire company. They did not post a 26bn expense when they bought LinkedIn…

In terms of accounting true, the value of the acquired asset (in this case a company including their IPs etc) is added to the assets in the balance sheet and the acquisition payment gets listed under investing in the cash flows, instead of in the costs and net income of the income statements.

But I didn't mean that, I meant that even if in accounting the cost of the payment isn't listed under the income statements the cost is still there. If you have $10 and spend $7 to buy something then you end having $3, even if the income statements don't reflect that now you have $7 less in the bank. Let's say you were generating $2 per year before acquiring that and thanks to the asset you acquired hopefully you'll make now let's say $3 per year instead, so hopefully in 10 years you'll have recouped the investment and after that, any extra profit will mean that it has been a profitable investment.

But the year you paid for it you went from having $10 to have $3, you lost these $7 for acquiring an asset that hopefully in the long term will help you recover the investment and after that produce profits. Hopefully. The thing is that in this case it's $70B, not $7, so the MS higher-ups and major stakeholders will want to see results.

The associated costs you mention of the Bungie and Sony acquisition are a separate thing, I meant the whole cost of the acquisition as an abstract concept. In the Bungie case Sony added some associated costs that weren't the payment of stocks themselves listed as cost in their income statements but I was thinking specifically on the payment of the stocks/strict direct cost of buying the stocks, the one listed in the cash flows (in the case of Bungie I think it was $2.4B for the stocks and in the future $1.2B more as retention bonuses and other things).

 

[SportsFan581]

But I didn't mean that, I meant that even if in accounting the cost of the payment isn't listed under the income statements the cost is still there. If you have $10 and spend $7 to buy something then you end having $3, even if the income statements don't reflect that now you have $7 less in the bank. Let's say you were generating $2 per year before acquiring that and thanks to the asset you acquired hopefully you'll make now let's say $3 per year instead, so hopefully in 10 years you'll have recouped the investment and after that, any extra profit will mean that it has been a profitable investment.

Would be a weird way to look at it because that first extra $1 you earned is already a return on that investment. Say you buy a house for $500k and rent it for $2,000/mo. You don't need to rent it for 250 months to make a return. Assuming the house is worth $500k, as long as you own it you've equalized that investment, you could always sell the home in 2yrs and the $48k in collected rent is the return. Maybe the home appreciates and you get even more return, the only way you lose the $500k is if you burn the house down by accident (Nokia says hello!).

 

[yurinka]

Would be a weird way to look at it because that first extra $1 you earned is already a return on that investment. Say you buy house for $500k and rent it for $2,000/mo. You don't need to rent it for 250 months to make a return. Assuming the house is worth $500k, as long as you own it you've equalized that investment, you could always sell the home in 2yrs and the $48k in collected rent is the return. Maybe the home appreciates and you get even more return, the only way you lose the $500k is if you burn the house down by accident (Nokia says hello!).

Well, I think it isn't a fair comparision.

Let's say MS acquires ABK for $70B which sounds good because they make almost $9B/year in revenue and around >$5B/year of gross profit.

But decide to put their back catalog games on GP plus the new ones day one, highly affecting their game sales on Xbox and PC so decreasing AB revenue and profits. Plus when their deal with Sony ends, also go console exclusive so they lose all the revenue and profit they were getting from the platform that was their main revenue and profit source.

The revenue and profitability of ABK would be seriously damaged, imagine they only end having $1 or $2B per year (thanks to mostly King) or even less in profit and having to recoup a $70B investment with that.

The value of ABK right now it's because the revenue and profit they generate, to the point they are the top 3rd party publisher on console. If their sales, revenue and profit highly decrease and become less relevant dissapearing from the rankings and games from their genres that compete against them become more popular and relevant than them, then the value of ABK would drop.

So imagine that the MS higher ups or main stakeholders decide it's time to stop throwing billions to the garbage bin and decide to sell their MS gaming assets or at least some of them (I think won't happen, but it's just to explain this example). So if in the future MS would want to sell 'this house' (ABK) having way less value than when they bought it, they'd have to sell it for way less than the $70B, let's say $30B.

Imagine they buy ABK for $70B, it generates $10B inside MS and they sell it for $35B. Their ABK investment in this case would have meant $25B loss for MS.

I mean yes, when you acquire an asset it has its value, and it may help you increase your revenue and profit, but also could generate big loses and may end generating huge loses and highly depreciate its value in a way you couldn't recover it even if you sell it.

So yes, ABK has right now a lot of value, but now that is having a very profitable strategy of not including their game on subscriptions and focusing on game sales in all gaming platforms. And if acquired, if they continue with this strategy I assume they'd keep and even grow their value. But maybe it isn't the case and move after some years to a another strategy that could highly negatively affect their value.

This is why I prefer to don't assume that the value of an acquired asset keeps being the same and that you still have it there, but instead prefer to analyze an acquisition looking at what it did cost and what it did produce year by year and see if it ends recouping its investment turning into a profitable investment.

 

[alabtrosMyster]

Would be a weird way to look at it because that first extra $1 you earned is already a return on that investment. Say you buy a house for $500k and rent it for $2,000/mo. You don't need to rent it for 250 months to make a return. Assuming the house is worth $500k, as long as you own it you've equalized that investment, you could always sell the home in 2yrs and the $48k in collected rent is the return. Maybe the home appreciates and you get even more return, the only way you lose the $500k is if you burn the house down by accident (Nokia says hello!).

Nobody will invest 500k on anything to make a profit in 25 years.

 

[Eddie-Griffin]

It's not based upon my feelings. We know based upon academic finance from Eugene Fama and French that companies that perform aggressive acquisitions/investments tend to perform worse for shareholders than companies that invest conservatively. A multi-trillion dollar company makes mistakes all the time. Microsoft has made a ton of them.




This thread isn't about Sony. Sony has made some really poor acquisitions as well. What's the point of bringing them up? I have never claimed that they have a sterling record there, so you are manufacturing straw man arguments.

Aggressively?

Two publishers and a few small studios.

If we are talking numerically Sony ahs this won cumulatively, MS didn't really start doing buyouts at any real pace until 2017. Before that there was Bungie, and then like one other thing, than years past and maybe one other thing and then nothing until 2017.

 

[James Sawyer Ford]

Aggressively?

Two publishers and a few small studios.

Yeah, only the biggest third party publisher and another one that’s top 5-10

You make it sound like these deals are inconsequential lol

 

[Klayzer]

Yeah, only the biggest third party publisher and another one that’s top 5-10

You make it sound like these deals are inconsequential lol

Have you not been paying attention. All of Microsoft's PR, and fans, are trying to sell everyone on, "its not a big deal" or "its doesn't affect the industry negatively" campaign of bullshit.

 

[bender]

Aggressively?

Two publishers and a few small studios.