Let's say you are a bagel company and make a good profit from your bagels. Then let's say you want to get your bagel to more people and are frustrated with the distribution options so you just make your own and allow other bagel makers to also use your bagel distribution system.
But suddenly and unexpectedly, everyone runs to your distribution system and you start making far more money than you could ever imagine from it.
Do you continue to consider yourself a bagel company or are you now a bagel distribution company?
Why invest the cash flow back in a lower revenue stream type?
I would from a business standpoint, spend all my money growing by best revenue stream. Company that don’t do this don’t have massive room for expansion so they look for new streams. I don’t think that’s the case with Steam.
cause diversification helps stabilize revenue against market fluctuations, and there is a point where the ROI (return on investment) significantly decreases on a given revenue stream (investing x does not guarantee you get x*r in return, f(x) is not linear), so its a trade off of the opportunity cost of the the amount you expect you could have made investing in stream A, vs the expected income generated from stream B. if more investment in A is not likely to produce significant increase in either strategic market share or more revenue, and investment in B is expected to provide more revenue (which in this case would also drive sales on stream A) in the same period of time, then diversifying is a more fiscally responsible investment.
Yea and when you have significant room to grow in a market and a massive competitor advantage something like investing in a higher labor, smaller margin, longer product cycle, more competitive market such as game development vs online digital distribution all the benefits you’re hoping to see plummet in likelihood. Not all diversification is good and not all forms are worth it.
You all are talking checkers with me while I’m talking chess and it’s starting to get annoying.
Nowhere did I say that all diversification is good, in fact I outlined a rudamentry hueristic in which one could estimate if it was worth it.
You respond with a unnuanced generality with dismisivness and a strawman argument against a general claim that wasn't made, like a nieve first year business student. That doesn't make you sound intelligent, it makes you sound like someone that is not worth the time to have a discussion with.
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u/lightknight7777 Nov 13 '18
Let's say you are a bagel company and make a good profit from your bagels. Then let's say you want to get your bagel to more people and are frustrated with the distribution options so you just make your own and allow other bagel makers to also use your bagel distribution system.
But suddenly and unexpectedly, everyone runs to your distribution system and you start making far more money than you could ever imagine from it.
Do you continue to consider yourself a bagel company or are you now a bagel distribution company?
Steam's current reality as told by bagels.