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Comment by eddythompson80 | Hacker News Reader

I initially misunderstood OP. However the more I think about it, the more it seems similar though. If Steam is charging game developers a 30-20% cut, that must mean those game developers margins are higher than 30-20% or there will be no point selling on Steam. It seems that Xbox would be expecting their Studios to operate at the same efficiency as others in the market then, no?

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If you're talking about the margins of a video game sale, the gross margins on that are like 99.9% in absolute terms.

You don't seem to understand the difference between the margins on a sale and the averaged margins once the studio development costs are included.

If the store takes 30% you are still left with 70% gross margins but if you have development costs, you maybe only have enough sales to break even or just barely be profitable. A 30% margin on the entire studio means the studio must produce guaranteed successes consistently.

It might also not be obvious but if Microsoft imposed 30% margins, those are a floor, whereas a fee reduces the ceiling. They are not the same even if we assume the target is met.

No, they’re not even remotely the same. The retailer keeps 30% of the retail price and, out of that, they pay for the upkeep of the store. It’s not 30% pure profit, it’s not even gross profit given they need to pay the card processing fees out of that 30%.

I’m not following how that is a response to what I said. I’m not talking about Valve’s profits. I’m talking about the profit of the game developers selling their games on Steam.

I think I understand why Microsoft costs are higher than others due to their a spending spree, so the break even is much higher.

You said “they’re similar” and I’m refuting that by pointing out that they operate very differently. One is a retailer and one is a developer/publisher. Their operating models are different, so you can’t point at two percentages and say “they’re similar” in any way.

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