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submitted 1 year ago by simple@lemm.ee to c/games@lemmy.world

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[-] there1snospoon@ttrpg.network 90 points 1 year ago

So does that mean all these businesses were always doomed to fail anyways, just living on borrowed money/time, and now the bill comes due, they’re all fucked?

Kind of. In the past investors were willing to be more patient, and company values were artificially high, because they were based on potential profits rather than actual profits. That's shifting a bit as interest rates go up.

[-] Pansen@feddit.de 51 points 1 year ago

Simplified: If you can borrow 1 Million USD for 0% apr and earn 1000 USD with that, you have 1000 USD in profits. Now change the apr to 5% and you are 49,000 USD in the red.

[-] prole@sh.itjust.works 25 points 1 year ago

Welcome to capitalism.

[-] blargerer@kbin.social 23 points 1 year ago

Eh. Most of these companies were profitable. Just not seeing the exponential growth that the stock market dictates when interest rates are high. Unity, not so much, but its revenue was always fine, its just a really poorly run company. Who knows where they piss the kind of money they are pulling in to.

[-] TranscendentalEmpire@lemm.ee 19 points 1 year ago

A lot of the wealth created by venture capital and the service economy were only ever possible with the help of what is essentially free money. With the increase in interest rates and the collapse of a major venture capital bank, those corporations dependent on low interest payments are going to collapse as well.

As interest rates climb and venture capital dries up, the companies who were just scraping by, or dependent on debt loading during development have had their runway cut short.

We are getting to the point where companies aren't going to be utilize fronting a huge amount of debt as a strategy for long term growth.

Unity looks to be one of the companies who wanted to utilize the slow boil tactic perfected by the likes of Google or Amazon. Where they front the cost of tons of free and convenient services, hoping that companies become dependent on them, slowly creating fees over time until they become profitable.

If I were a guessing guy, they've hit the end of their run way, and have failed to secure a new injection of capital sufficient enough to make the payments on their loans. Likely their options have come to find a way to make your payments, or you'll be giving your entire operation to a bank.

[-] cryball@sopuli.xyz 6 points 1 year ago* (last edited 1 year ago)

I'd guess that companies that failed to turn profit when money was cheap are most likely doomed. However not all of the hype companies are like that. Some could be barely profitable, but shareholder pressure might push them to heavier monetization practices.

[-] TheBat@lemmy.world 4 points 1 year ago

Barely profitable? Even massively profitable companies indulge in rent seeking behaviour. Line must always go up!

this post was submitted on 14 Sep 2023
1923 points (100.0% liked)

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