Why the Game Industry Is Considered a Poor Business Model
This is a post from the Xueqiu discussion.
The main reason is that game revenue is lagged and highly uncertain (risky), while costs are front-loaded (requiring significant upfront spend on user acquisition and promotion), which amplifies the risk.
If a game can't recoup its costs within the first 3 months of launch, it's almost always heading toward substantial losses. In other software industries (and indeed across all industries), the ability to generate revenue tends to increase with time (the time value of money), but in gaming, revenue declines as time goes on (the lifecycle effect is very pronounced).
This means there's constant pressure to ship new games to cover financial obligations, yet it's extremely difficult to build successful games in the first place—even replicating success within a genre you've already mastered is hard.