Originally Posted by
mschwett
i think if we’re going to oversimplify their business, the better way to state it than “10% is the cost of delivering the product” is that 10% of their costs is the equivalent of the raw ingredients at a restaurant. you still need the recipes, the chefs, the restaurant, and a hundred other things.
venture is profit motivated, of course, but it is also a highly competitive space with multiple sources of capital competing for the same founders. we’ll never know the exact terms of their deal but the idea that zwift could continue to deliver their product with 10% (or some other random <50% number) the cost if they didn’t have to pay back the people who paid to build their business does not compute.
I agree. I mean if they somehow managed to set the cruise control and crawl over to the back seat for a nap or head to the mini-fridge in the back of the motorhome for a bloody-mary, slices of cheddar and triscuits or whatever, then yes, yes it would. But otherwise, obviously there are labor costs involved. What those are or the composition of their outflows are nobody knows. That's my point.
I'm not daft. Sustaining cruise control is good 'till it ain't. But if their floor of existence to simply deliver the service and nothing more is "x" What are they doing with the rest? Paying taxes and global accounting can't possibly suck up 100% or more of the 90% that remains. That doesn't compute either. We don't disagree. We are just coming at it from opposite ends.
To play off the restaurant analogy: After the initial startup cost & build out, even a Fro-yo place has 1 employee, the service is all automatic. There is a lot of margin there to be had somewhere. Even a vending machine works for a time between servicing.
Perhaps with all the hard work of world development and game mechanics accomplished they are simply "right sizing" their workforce to more of a "sustain" mode. There is a right size for everything. Forcing growth/expansion beyond market demand is a sure-fire way to implode. Radio Shack, Quiznos, come to mind. Making the hard decision to reassess and course correct is the mark of a smartly run organization.