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Comment by mdorazio | Hacker News Reader

I read that as they have negative cash flow and need to fix it ASAP.

I wonder if it actually had to do more with esports pulling back quite a bit this last year. Riot was leaning into that pretty hard for League. That had to factor in for a large chunk of the headcount for layoffs.

I just can’t imagine they’re cash flow negative given how popular League and Valorant are, but maybe they’re seeing enough of a dip in their numbers that they’re trending in that direction.

I thought LoL and Valorant e-sports was breaking records year on year? At least in Europe and Asia, I know the LCS is on the decline.

Breaking records does not mean profitable, having first hand knowledge of the situation esports (for Riot) is still very unprofitable -- the way that they try to measure esports profitability is by player increases/purchases after the events occur and leading up to the events and sponsorships of course.

esports does not bring in new players, it mostly brings back churned players or excites current players. The financial model for existing players versus new players is very different.

When you look at some of the sponsorship conversations over the past couple of years it makes sense why they needed to make some of the bets (https://www.polygon.com/2020/7/29/21347587/riot-games-saudi-...).

If that's true, then this is the weaseliest way to express that:

> The adjustments we're making aim to focus us on the areas that have the greatest impact on your experience while reducing investment on things that don’t.

Similarly.

And why is that bad? Because once you run out of money everything is cooked

…in order to appease shareholders and/or hit earnings numbers, right?

One possible reason is due to Section 174 tax issues. See: https://www.axios.com/2024/01/20/taxes-irs-startups-section1...

Given that the layoffs are hitting artists and content developers more heavily than the programmers, it is unlikely that Section 174 is the motivation for these layoffs.

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