Why Roblox Can Lose $1 Billion and Still Claim Victory

The market is tough for live service games right now, just as one of its biggest successes, Roblox Corp, announced a staggering loss of almost $1 billion USD in 2022. Even more unbelievably, the company considers this a success, with the CEO calling 2022 "a year of innovation and invention for Roblox." While that kind of expense might sound unsustainable at face value, compared to their competitors in the world of so-called gaming as a service, Roblox seems to be thriving.

That figure of a $1 billion dollars lost (or $934 million, but who's counting) is hard to believe. One might point to lawsuits, public pressure over accusations of exploiting child labor to explain it, but based on the tone of the reports, the company line seems to be that this level of loss is more or less what Roblox Corp was expecting.

Investors had more mixed feelings about the reported loss; stock prices fell as they balked at another quarter of Roblox failing to meet its own estimates. However, many remain optimistic about the company's future, thanks in large part to major growth in the platform's user base, which is up to a reported 67 million.

If the daily users of Roblox made up the population of a nation, it would be the 21st largest in the world, just ahead of the UK and slightly behind France. Given the dominant market share Roblox Corp commands, they might be right in saying that this is what success looks like, no matter how much money is lost in the profit.

Compared to its competitors, Roblox’s outlook fares even better. In just the first two months of 2023, an entire slate of live services games have come and gone, "like ceaseless zombies marching towards piles of cash." The list of the newly-deceased includes recently released titles like Hyperscape and Rumbleverse, alongside almost a dozen other titles that were discontinued, abandoned or cancelled from major publishers such as Square Enix and Ubisoft.

Even for the live service games that aren't dead or dying, struggle is the norm—and it comes in different flavors: Warner Brother's Multiversus lost 99% of its player base in less than a year. Blizzard, one of the pioneers of live service games, is being forced to pull their titles from China frustrating World of Warcraft players and potentially dooming the Overwatch league. Even the formidable Fortnite is facing turbulence in the form of a suspected decline in player figures.

For critics such as the notorious Stephanie "Commander Jim" Sterling, these troubles are a sign that the entire games-as-a-service model is doomed. She points to the " virtuous cycle" of infinite growth that Ubisoft once promised the model could bring. Sterling makes the argument that infinite growth is impossible, and anyone banking on it is destined to fail, an argument backed by some leading economists.

Others see a silver lining. TheGamer's Stacey Henley, reported on the mass extinction of multiplayer games and argued that "the live-service bubble hasn't burst, but it might no longer be in reach of the little guys."

The good news, then, for Roblox Corp, at least, is that they are absolutely not "the little guys." Even after losing 150 Million USD in the Silicon Valley Bank collapse, Roblox still boasts nation's worth of users and a war chest of $3 billion in hard cash; they're confident that they'll survive long enough to see their investments pay off. One major expense has been improving their server infrastructure in order to avoid another outage like in May 2022. Another cause of spending may be what Chief Technology of Roblox Corp has called "The Future of development on the platform." His ambitious plan? "[E]nable every user to be a creator," using "generative AI."

Some fans have rebelled at the idea of AI development for Roblox, some going so far as to call it the end of Roblox. But if the goal of Roblox is near infinite growth, automation is a safe bet. Development costs have been kept down by blurring the line between players (mostly children) and developers (possibly also mostly children). While this practice is increasingly infamous, no consequences have come to the corporation as of yet, so why not make it even easier for amateur developers to work on the platform? Coupled with the promise of in-game advertisements, it looks like AI development could be an obvious home run for the company, if the service works as promised.

The question remains though, like a sword of Damocles: what happens when Roblox stops growing? That day of reckoning may be a long way away, however, and in the meantime, Roblox Corp will likely remain an industry leader, and perhaps a harbinger of things to come in the games industry.

Image: Leonidas Santana