Category: Business

This post was originally written in Italian by Paolo Gambardella. It has been translated by an AI agent and may contain inaccuracies.

A few weeks ago, a LinkedIn contact proudly showed off their vinyl shelf. They mentioned they also have Spotify Premium. But the records they truly love — they want to hold them, not just stream them.

For years the narrative in entertainment has been straightforward: physical is dead, streaming and digital are the future. But recent data tells a different story.

The American vinyl market has crossed the billion-dollar mark for the first time, marking its nineteenth consecutive year of growth (RIAA, 2025 Year-End Music Industry Revenue Report). Something similar is happening in film: while standard DVDs continue to decline, 4K UHD Blu-ray sales have risen 12%, a sign that the most passionate audiences want to own their content in uncompressed quality, without depending on a platform-tied licence (Digital Entertainment Group data, as reported by FlatpanelsHD).

What about video games?

Here, platform holders are moving in the opposite direction. Disc drives sold as optional accessories, a constant push towards GaaS, ecosystems designed to go ever more digital. I understand the short-term logic: digital margins are higher, distribution costs less, player data is easier to collect. But optimising for short-term margin risks alienating the most loyal core audience — the very same people who, in music and film, are today driving the physical revival.

It’s true that in volume, digital still leads aggregate sales, especially when you lump together mass-market multiplayer titles and premium single-player experiences. But high-end single-player games are emotional investments. Players don’t just consume them — they collect them. I know people who keep the cases of the games that shaped them on their living room shelf, just like my friend keeps his records on his.

On that note, have a listen to this gorgeous Ukrainian lullaby from the new Stalker 2: Cost of Hope DLC:

Why digital is still winning, for now

Geopolitical pressures on supply chains and component costs currently give digital distribution a real cost advantage, and that’s the main reason platform holders are pushing in that direction. But when supply chains stabilise and fatigue around digital licensing — that feeling of “you don’t actually own what you buy” — keeps growing, I think physical will find its moment of revival in gaming too, perhaps on a smaller scale than before, but still meaningful.

Chasing digital uniformity to chase a trend risks losing sight of a simple principle that vinyl and Blu-ray have been quietly proving for years: premium content creates premium collectors.

My gut feeling is that platform holders are abandoning their most loyal fans too soon, all to run after a passing industry trend.

This post was originally written in Italian by Paolo Gambardella. It has been translated by an AI agent and may contain inaccuracies.

Yesterday, two pieces of news dropped almost simultaneously. The first: WARN filings confirmed that the layoffs are hitting real studios — ZeniMax Online Studios (The Elder Scrolls Online) and Id Software (Doom), entire technical departments wiped out.

The second: the US Federal Reserve appointed Asha Sharma, CEO of Xbox, as an adviser to its task force on “Productivity and Jobs”, with a specific brief to study the macroeconomic impact of Artificial Intelligence. She is the only sitting CEO across all of the Fed’s task forces.

Cutting jobs on one side, being called in to advise the government on how to protect them on the other. A system working exactly as designed.

To understand why carrying out mass redundancies aligns with — rather than conflicts with — institutional recognition in corporate and financial circles, three structural factors are worth unpacking.

1. How productivity gets defined

In macroeconomic models, productivity is calculated as output per unit of labour. When leadership reduces headcount while using automation to maintain the same output, financial and regulatory institutions see a successful operational optimisation.

2. The AI integration mandate

Boards and central banks prioritise leaders with a background like Ms. Sharma’s. The primary goal is to understand how emerging general-purpose technologies can compress linear production costs and reshape future labour allocation as an asset.

Someone who has already demonstrated they can do it in-house — cutting thousands of positions while promising significantly higher output — is exactly the profile you want at a table tasked with writing the rules for everyone else.

3. The asymmetry of risk and accountability

Game developers carry product-specific risk: if the game doesn’t land, the team feels it directly and immediately.

Executives, by contrast, manage systemic risk, spread across entire portfolios and over years. In capital markets, executing mass layoffs to protect margins is codified as standard fiduciary responsibility — and that strengthens an executive’s profile for institutional and advisory roles.

The people at ZeniMax Online and Id Software spent years — in some cases over a decade — building the output that is now being measured as recovered productivity.

What remains

This divergence points to a precise structural reality: the metrics that financial systems use to reward executive performance operate in complete independence from the long-term retention of creative and technical talent, and from the moral obligations of any company.

I want to close with a line from the late Adriano Olivetti, a great Italian industrialist: “A factory cannot look only at the profit index. It must distribute wealth, culture, services, democracy. I think of the factory for the person, not the person for the factory.”

This post was originally written in Italian by Paolo Gambardella. It has been translated by an AI agent and may contain inaccuracies.

Yesterday Microsoft published a note signed by the new Xbox CEO, Asha Sharma, titled “Resetting Xbox”. Inside, two pieces of news are placed side by side, as if they were the same thing.

The first: roughly 1,600 people are out today, with up to 3,200 more by fiscal year 2027. Four studios — Compulsion Games, Double Fine, Ninja Theory, Undead Labs — are leaving the Xbox fold, through some combination of returning to independence and passing to “new ownership”. Stated reason: “in a typical year, we lost 64 cents for every dollar we invested” in these studios.

The second, in the same document: Sharma says she wants to bring Xbox to “entertain more than one billion people every day.”

Let’s run the numbers, because the numbers don’t add up.

A billion a day

The latest public figure for Xbox puts the active user base at around 500 million monthly active users (MAU) across the whole console + PC + cloud ecosystem. Daily active users (DAU) are always a fraction of monthly ones — the ratio is called “stickiness”. For a free, frictionless product like Facebook, that ratio sits around 65–70%. For a gaming platform, where playing requires a console, a subscription, and actual free time, the ratio is much lower. I’ll be generous: 20%.

That puts my estimate of Xbox’s current DAU at around 100 million people.

The stated target is one billion. The gap to close is 900 million more people who need to open Xbox every single day.

For context: there are roughly 8.2 billion people in the world. One billion daily active users means 12% of all humanity, every day, without exception. The only platforms that touch that threshold today are Facebook, WhatsApp, Instagram, YouTube, and TikTok — all free, all installable in ten seconds, none requiring hardware to buy, and all of them spent well over a decade building to that scale.

How fast would you need to grow

If the target is to reach one billion in 5 years (the typical horizon for a strategic plan), starting from 100 million today, you’d need compound growth of 58% per year, every year, for five years running.

Stretch the horizon to 10 years, and the required rate drops — but it’s still enormous: 26% per year, for a decade.

There is no example in the history of gaming of a paid, hardware-bound platform sustaining that kind of growth starting from an already-mature base of 100+ million users in saturated markets like the US and UK. TikTok grew like that, but from zero, for free, on every phone on the planet. Xbox is starting from a very different place, with very different constraints.

The maths on the cuts

Let’s do the cost calculation too, since the document practically invites it by citing that “64 cents for every dollar invested”.

A fully-loaded employment cost (salary + benefits + overhead) for a AAA creative role runs, conservatively, somewhere between $150,000 and $200,000 a year. Cut 1,600 people today and the annual saving is roughly $300 million. Get to 3,200 by FY27, and you’re looking at around $600 million a year.

In 2023, Microsoft paid $69 billion for Activision Blizzard. At $600 million a year in savings from the current cuts, it would take over 100 years to “recover” that figure purely by laying off the people who made the games. Which should make one thing pretty clear: these cuts aren’t “fixing” any P&L. They’re just shifting the burden onto the people who never had any say in that spending.

And another detail, also from the same document: platform teams are “40% larger compared to the start of this generation, even as the player base and hours played have declined.” Internal headcount grew 40% while engagement was falling — and yet the ones being let go are the studios that were actually making the games. That’s indefensible.

Try to imagine

Try to put yourself in the shoes of one of the creatives who joined an independent studio during the very years Microsoft was buying everything up to build Game Pass. They’d hired you to make wild, original things. The money was there, the salary was good.

Then, years later, Microsoft pays $69 billion for Activision Blizzard. In 2024, Call of Duty launches day one on Game Pass Ultimate.

And today the email arrives. 1,600 people out today, 3,200 by next year. Your studio is one of the four being sold off or spun out.

Markets shift, currencies swing, funds buy companies and hollow them out overnight. That risk comes with the territory, I know. But this feels different. No currency crashed. The people who spent $69 billion on Activision, who put Call of Duty into a subscription and ate over $300 million in lost sales, who pushed Game Pass to $29.99 a month — those people have been gone for a while now.

The new CEO, Asha Sharma, wasn’t even in the games industry when those decisions were made. She’s just the one holding the memo today, candidly acknowledging that “in a typical year, we lost 64 cents for every dollar we invested” in those studios. The people who built exactly what they’d been asked to build are the ones getting the email. The people who made the calls have already cashed out or moved on.

On the same day she announces the cuts, the CEO declares she wants to bring Xbox to “entertain more than one billion people every day” — a target that, as we’ve seen, would require multiplying the current daily active user base by ten, while letting go of a fifth of the team who were supposed to help build it.

The bill always lands with the same people

The market takes its cut from everyone — I get that. What I find indefensible is that the people who make the wild bets get paid upfront, in bonuses and packages, precisely for having made the bet. Then the bet doesn’t pay off, as was entirely foreseeable, and they walk away clean regardless. The bill only arrives for the people who never had a vote on the decision.

If you’re one of the creatives caught up in this, you didn’t fail. The bet failed, and you weren’t even at the table when it was placed. Your craft, your ten years of shipped games — that stays yours and travels with you wherever you go next. I’d rather see that talent land somewhere that genuinely values what it’s built, than read another memo saying “we lost 64 cents on every dollar”. If you’re hiring, or you know someone who is, this is a good week to say so.

This post was originally written in Italian by Paolo Gambardella. It has been translated by an AI agent and may contain inaccuracies.

There’s a belief, among the finance people who now call the shots in my beloved industry, that because we’re in a large, mature sector, the only sensible move is to invest in things that are bigger, shinier, better.

But getting to bigger and better generally means going through smaller first. Anyone who’s studied the history of video games can see that easily enough.

There’s a video I watched yesterday on YouTube where Ross, a data scientist at Game Oracle, does exactly that: he analysed sales data from over 62,000 developers on Steam. The figure that struck me most is that only one in five developers publishes a second game. Those who stay in the game through to their fourth or fifth title see their chances of a significant hit climb from one in ten to something close to a coin flip. That’s compounding advantage — reusable code, a community built over time, a genuine understanding of what actually works.

Statistically, the Call of Dutys of tomorrow will come from something that would make a major VC smile politely and move on today. It’s worth looking at how the giants we have now actually got started.

Minecraft: one man, very little money, and a lot of drive

Markus “Notch” Persson wrote the first version of Minecraft alone, at home, drawing inspiration from Infiniminer and Dwarf Fortress. On 17 May 2009 he uploaded an alpha to the indie forum TIGSource and sold it for $10, with no marketing plan whatsoever. There was a rough prototype and a community that started sending back feedback, ideas, mods. That loop between a lone developer and his community became, over the years, the best-selling game in history.

Fortnite: a game that was struggling

Before Battle Royale, Fortnite was “Save the World” — a PvE building-and-survival mode that Epic Games had spent years developing, released in 2017 to a fairly muted reception. When PUBG blew the battle royale genre wide open, a small internal team (the same one working on Unreal Tournament) repurposed the existing engine and assets to build the new mode in roughly two months. It was supposed to stay in the background, locked behind a purchase of Save the World.

It only became standalone and free-to-play in the final rush before launch — more out of necessity than vision.

If they’d been shut down straight away? Well, it would have been lost.

Call of Duty: a brand-new studio, 22 people, $1.5 million

Infinity Ward was founded in 2002 by Vince Zampella, Grant Collier, and Jason West, veterans of Medal of Honor: Allied Assault. The entire founding team — 22 people — came from that same previous project. Activision invested $1.5 million for a 30% stake in the studio, a modest sum even by the PC standards of the time. The first Call of Duty, released in 2003, was a solid game but nothing like the phenomenon we know today. It took another three entries before Modern Warfare, in 2007, turned the series into the hundreds-of-millions-of-dollars franchise it is now.

The real investment is staying in the game

None of these three giants was born as a “big, ambitious, best-in-class” bet. They started small — often inside projects that were struggling or studios that had barely formed — and only became enormous after multiple iterations, second attempts, and communities nurtured over time.

If you’re an investor, the right question is how long you can afford to let a team stay in the game long enough to land on the right project. If you’re a developer, the job is to finish the game in front of you, ship it, and use it as the foundation for the next one.

Creativity needs direction and constraints, but it can’t survive this new start-up mindset of wanting everything at once and right now. That’s not how you build the industry of the future — investment needs vision too.

This post was originally written in Italian by Paolo Gambardella. It has been translated by an AI agent and may contain inaccuracies.

Today’s post starts from this piece of news: Sony is ending physical disc production for new PlayStation games from January 2028.

For me, when you’re doing marketing there are always three relationships to keep an eye on: the one with your customers (obvious), the one with your partners, and the one with your peers. On all three counts, this move looks poorly handled.

With players

Sony has chosen to alienate a significant chunk of its own users. There’s a bit of confusion around that “20%” figure floating about — it’s not entirely clear what it actually represents. Sony reports roughly 80% digital sales versus 20% physical in the last fiscal year: that figure describes sales, not people. A handful of collectors who buy almost exclusively on disc is enough to generate that 20% of sales, without representing a fifth of the fanbase. That said, the underlying point still stands: there’s a real audience, far from negligible, for whom this news means their collection stops here.

I understand the move makes sense if you want to control the entire supply chain and improve margins, but I don’t understand the coldness of the execution. They could have offered an alternative plan rather than simply closing the book. The model of a physical object as a permanent access key already exists and is well proven: Nintendo’s amiibo unlock content through a toy that remains yours and resaleable, Limited Run Games has built an entire business selling physical editions with a code for games that would otherwise be digital-only — and people snap them up — collector’s editions with steelbooks and a code are now a standard that publishers use to monetise attachment to the physical object.

Sony could do the same thing at scale — with a figurine, a book, a collectible artefact that guarantees lifetime access to the game: a reason to keep buying physical even in a digital-first world.

With commercial partners

Sony has also managed to antagonise its main distribution channels. The response from Meridiem was blunt and direct: some things aren’t downloaded, they’re felt, with a promise to resist. And they’re not alone: GAME responded with “it’s time to defend what matters to us”, Tesura Games openly called for the decision to be reversed.

I don’t know who makes these calls at Sony, but with partners you act before you publish a blog post, not after. Now Sony will have to find the carrot to offer after already swinging the stick.

With competitors

The major publishers, Nintendo aside, seem to be almost competing to see who can upset their audience the most. I don’t always buy physical — I buy a lot digitally — but knowing that I could no longer choose even if I wanted to stings a bit, and maybe makes me feel a little more distant from this industry I claim to love.

This post was originally written in Italian by Paolo Gambardella. It has been translated by an AI agent and may contain inaccuracies.

The games industry has been in crisis for a few years now, like the rest of the world. Mass layoffs, studios closing, investment drying up.

The crisis isn’t a surprise. Things don’t grow forever — that’s a natural law. And yet people coming out of MBA programmes and finance courses seem to forget this basic fact, or perhaps they’re trained to ignore it. The result is that unrealistic expectations of continuous growth are created for investors, expectations the industry simply can’t sustain for long. Add the global geopolitical situation to that, and you’ve got a recipe for disaster.

What struck me most, though, was the behaviour of developers themselves.

This year in Madeira an interesting workshop took place. Participants were first asked to pitch an original game, then to build a hypothetical investment fund with a million dollars. The result: most of the money ended up going to tools, tech infrastructure, and ecosystems like Roblox. The very same developers who had just passionately pitched an original project wouldn’t have funded it themselves.

As one participant put it: “I literally built an investment firm that wouldn’t have funded my own pitch.”

It’s a system that rewards short-term returns and penalises long-term vision. When money becomes the goal rather than the means, everyone falls into line.

This isn’t a game for people without a safety net

I should be honest about where I stand in all of this. I’m an independent consultant, and one of the reasons I chose that path is precisely that I understand this mechanism and I’d rather not be dependent on it. But there’s another reason too: my parents are well-off. I’ve had a safety net that allowed me to stay in this industry through the rough patches. Not everyone has that.

The games industry today is increasingly an industry for people who can afford to wait. For people who already have family money behind them, who don’t need this month’s salary to cover the rent. This is a problem not just of fairness, but of quality. You’re shutting out talent that simply can’t afford the structural risks of such an unstable industry.

So what do you do?

I look to Hollywood with genuine interest, because it’s found some practical answers to similar problems.

1. The slate model: spread risk across multiple projects instead of betting everything on a single blockbuster. It means accepting that some will fail, but that the overall portfolio holds up.
2. Structural protections for creatives: Hollywood’s unions exist because without them the balance of power between capital and talent is too heavily skewed. The games industry needs similar structures.
3. The A24 model: small, curatorial, with a clear editorial identity. It picks the projects it believes in, makes them with care, and generates sustainable profits. Modest scale and a sharp vision can coexist with financial health.

A solvable problem

What’s needed are financial structures built around the actual timelines of game development, not venture capital cycles. More forums where developers can practise thinking like investors before they’re ever in a real boardroom. Models that give a studio enough runway to build something that lasts.

This is the moment when the people with decision-making power — investors, publishers, leads — can choose to build something more solid than what came before.