What kind of problems does Roblox, a game that has more than 380 million monthly active users but is in the red?
Roblox is Already the Biggest Game In The World. Why Can't It Make a Profit (And How Can It)? — MatthewBall.co
https://www.matthewball.co/all/roblox2024
Roblox's monthly active users of over 380 million are twice as many as the PC gaming platform Steam, three times as many as PlayStation, and three times as many as the Nintendo Switch. In terms of Xbox, that's five times as many people who have purchased an Xbox game console in the past 10 years. Considering gamers who own multiple home game consoles, Ball speculates that Roblox's monthly active users may even exceed the total number of gamers who play on consoles such as PlayStation, Nintendo Switch, and Xbox.
The graph below summarizes the number of monthly active users for each platform. Popular games such as Minecraft and Fortnite boast active user numbers comparable to those of game consoles, but Roblox has an overwhelming user base compared to them.
In addition, compared to non-games, Roblox's monthly active users are about two-thirds that of Spotify and half that of Snap, which is about the same as Instagram in the fourth quarter of 2015 and Facebook in the third quarter of 2009.
Players spend about 6 billion hours playing Roblox each month, not including the time spent watching Roblox-related content on YouTube and Twitch. Roblox is so popular that it ranks in the top five most-watched titles in the gaming genre on YouTube and Twitch. Disney's video streaming service has a total monthly playtime of about 3.1 billion hours, which is less than half of the total playtime of Roblox-related content, showing how immensely popular Roblox is.
Below is a graph showing the trend in total monthly playtime of Roblox-related content. As of 2024, monthly playtime has grown to just under 6 billion hours.
Roblox is a game title that grew rapidly during the COVID-19 pandemic, but it is significantly different from other platforms in that it has continued to grow steadily even after the pandemic ended. Zoom, Shopify, Peloton, and others grew rapidly during the COVID-19 pandemic, but their revenues have declined since the pandemic ended. The same signs were seen in the gaming industry, but Roblox continued to steadily increase its user base even after the pandemic ended.
The graphs below show, from the left, 'Changes in monthly active users,' 'Changes in daily active users,' and 'Average engagement time by region.' It is clear that the app is growing steadily by age and region.
Roblox players in the US and Canada have increased by 250% since the pandemic, but their share of the total user base has dropped from 35% pre-pandemic to 22% post-pandemic. This is due to a 650% surge in players in Asia Pacific (APAC) and a 750% surge in players outside North America, Europe, and APAC, highlighting Roblox's popularity around the world.
Before the pandemic, Roblox had a high proportion of users in high-income markets such as North America, but as the number of users in other regions has increased, the proportion of users in developing markets has become higher. However, Roblox's sales have not declined. Rather, active user spending has been increasing compared to before and after the pandemic.
The graphs below show, from the left, 'Percentage of daily active users among monthly active users,' 'Time spent by quarterly monthly active users on Roblox,' 'Amount spent by quarterly monthly active users on Roblox (expenses),' and 'Expenses per hour spent playing Roblox per quarter.'
The graph below summarizes Roblox's quarterly revenue (light blue) and developer compensation (blue). Roblox pays developers compensation because it allows users to share games they create. Roblox's annual revenue is over $3.8 billion (about 560 billion yen), but it appears that about a quarter of that is paid to developers as compensation.
These data show how popular Roblox is. However, Roblox has not been able to make a profit. On the contrary, Roblox's debt continues to grow. Before the COVID-19 pandemic, quarterly sales were $508 million (about 75 billion yen) and profit margins were minus 13%. However, as of 2024, sales are 6.2 times higher at $3.2 billion (about 470 billion yen) and profit margins have swelled to minus 38%.
One of the reasons is cost. Below is a graph showing Roblox's sales, costs, and profits from the left. It is clear that costs are higher than sales, and as a result, the company continues to run at a loss. Over the past 12 months, the average cost is $138 (about 200 yen) for every $100 (about 150 yen) in sales.
Many of these costs are outside of Roblox's control. On average, 23% of sales are paid as commission to distribution platforms such as the App Store. Although distribution platforms generally take a 30% commission on sales, the average is 23% because Roblox's PC version is not distributed through a third-party distribution platform, which means there are no costs beyond credit card processing fees. Additionally, 26% of sales is paid as compensation to developers of Roblox's user-generated content.
The breakdown of Roblox's expenditures is as follows: Black indicates fees for using distribution platforms, pink indicates remuneration paid to developers, green indicates capital expenditures for infrastructure and user safety and security, purple indicates research and development expenses, light blue indicates general administrative expenses, and orange indicates sales and marketing expenses.
Capital investments to keep infrastructure and users safe and secure are like fixed costs to operate Roblox, and do not increase even if users increase their spending. Therefore, it is possible to reduce the percentage of revenue that capital investment takes up by increasing sales. However, since the easiest way to increase sales is to 'increase play time,' it is also a difficult problem for Roblox, which already has a huge user base and play time.
Research and development costs are like an investment in Roblox's future, but they are said to be equivalent to about 44% of sales. In monetary terms, this is equivalent to $1.5 billion (about 220 billion yen), which is too high considering that even PlayStation, which has multiple game studios and is developing its next-generation game console, has research and development costs of $2.2 billion (about 320 billion yen). Most major technology companies spend 6-12% of their sales on research and development.
In addition, specific methods that Roblox can use to get out of the red include reducing commission payments to the App Store and expanding advertising functions within Roblox.
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