Where is all the money going?

[DuX1112]

Hello, it's me again! Hope you're all doing well and had a good rest for the weekend.

As most of you are aware, I had previously pointed out that the Factorio devs have made... QUITE a lot of money to be worried about inflation, or needing to raise the price of their otherwise unchanged, finished product.

In response to that, another fellow internet sleuth, nicknamed DRY411S, wrote the following:

Originally posted by DRY411S:

I'm sorry to spoil this topic with some FACTS, all of which are in the public domain, but

TL:DR Wube has less than £6M in the bank and the directors took no dividends out of the business in the last 12 month. Salaries and operating costs are not in public domain, balance sheet is.

Wube are a company based in Prague, Czechia.
In a financial sense, they are small, private limited company, registered in the UK. Their company registration number is 9201188. Source "Who We Are" at https://www.factorio.com/privacy-policy
Under UK Law, small private limited companies must file annual accounts. These accounts are published in the public domain. The last accounts in September 2022 and all previous accounts are filed by Wube at UK Companies House Source https://find-and-update.company-information.service.gov.uk/company/09201188
The last annual Balance Sheet shows that the company PAID NO DIVIDENDS to the directors (the 3 founders of Wube). If they had paid dividends, legally these must be shown on the balance sheet
It shows the actual cash in the company bank account adjusted for creditors and debtors.
No profit & loss accounts are presented. There is no requirement in UK Law for small companies to provide these. This is where you would see the sales, salaries and other company costs, including payment of debts.
A UK company is defined as ‘small’ if it has any 2 of the following:

a turnover of £10.2 million or less
£5.1 million or less on its balance sheet
50 employees or less

Source:
https://www.gov.uk/annual-accounts/microentities-small-and-dormant-companies#:~:text=Your%20company%20will%20be%20'small,50%20employees%20or%20less
Turnover is defined in UK Companies Act 2006 section 474(1)(I) amended January 2009 https://www.legislation.gov.uk/ukpga/2006/46/section/474/2009-01-01#pageTitle

Those are hard facts. Less hard is that actual profit can be estimated. The balance sheet shows that UK Corporation Tax of slightly less than £72,800 was paid. Corporation Tax is paid on profits after allowable expenses, but before dividends, at a rate in 2022 of 19%. Thus it can be deduced but not PROVED that Wube made a profit (NOT REVENUE) of about £383,000 last year.

For the record, I own a UK small private limited company of my own, and therefore have practual knowledge and experience in this legislation. I am not in anyway associated with Wube Software or any of the employees. Also, if any of this were not in public domain, I would not be posting it here.

Source: https://steamcommunity.com/app/427520/discussions/0/3768984079243848578/?ctp=46#c3768985157781529526

Now, it was curious to me how almost no one was perplexed by this report. Actually, most of the reactions were like "Wow, you're amazing!", "Finally the truth!", but almost no one reflected critically on what was shared.

But the comment, or rather the data it shows, is... worryingly suspicious. Here's why.

According to DRY411S's comment above, after 7 years of selling Factorio, Wube have less than £5.1 million on their bank account, and that they made only £383,000 last year.

Converting those figures to dollars, Wube has:

$6,132,444 in the bank account (after 7 years of selling 500K copies each)
$460,557 in profit from last year alone (after selling 500K copies last year)

Now, if Wube are to be trusted (more on this later, hint hint, wink wink), they claim to be selling 500K copies of the game, consistently, every year. If we take the price before the increase, for 2022, last year alone Wube have had a revenue of $15,000,000 (or in letters, 15 MILLION DOLLARS).

But at the end of 2022, out of those $15 million dollars, Wube only got left with less than half a million dollars in profit, i.e. $460,557. Or in other words, out of $15 million dollars in revenue last year, Wube... spent... or lost... or burned... $14.5 million dollars.

Or in percentages, out of Wube's revenue for 2022, around 97% of the money were a loss. Their profit was just 3-4%.

And considering that they report $6M in the bank... This happened every, single, year?

WEIRD.

You don't need to be a finance genius to realize that running a company with 3-4% profit margin is a terrible way to run a company. Losing 96-97% of your revenue is bound to trigger alarm bells in any normal business!

Surely the Steam cuts, and the taxes, and the bills, and the salaries don't cost Wube, a team of 30 people, $14,500,000/year?

But wait, wait, I hear the staunch fans saying, what about the regional pricing!

Well, what about it? Do you really think that half of the Factorio players are from Argentina, or Turkey? No, they aren't. The majority are from the Western sphere, i.e. Canada, EU, and the USA, where the game has always cost $25, $30, etc.

But okay. Let's steelman that argument. Let's say that a whopping one third of all players are from regions where the price is a lot lower, so they bought Factorio for $10, not for $30.

So out of 500K sold copies on a yearly basis:

166K copies X $10 = $1.6+ Million
334K copies X $30 = $10+ Million

So even if we account for regional pricing, the game is still generating YEARLY revenue of around $12 million dollars.

But what about Valve's cut?

At this point, Wube have made well over $50 million, so Valve is taking 20% from their revenue in 2022, and probably the last 2-3 years too. Additionally, Wube are paying 19% in taxes in the UK, being registered there. (per the UK Gov's listings).

So that's a loss of 39% to both Valve and taxation, or, in money, that's $5,850,000 going to Valve + Taxes out of $15,000,000 in 2022 (and a bit less, ~$5million, if we consider they had a revenue of $12 million in 2022).

Meaning, after Valve's cut and after taxation (19%), Wube have left anywhere between $8,000,000 and $9,150,000 of money, PER YEAR.

But after bills and expenses, they report that at the end of each year, they are only left with $460,557.

Which leaves us with approximately $7.5 million to $8 million dollars unaccounted for.

So, the question then becomes, where are $7,5 million to $8 million dollars going every year?

Salaries? Assuming exceptionally high salaries for the Czech Republic of, say, $5000/month for all of their hires (some of whom even work just part-time, or remotely, or are still students fleshing out their craft), the total yearly expenditures for salaries comes at around $1,800,000, TOTAL, for all 30 employees.

Which... Leaves around $5,000,000 to $6,500,000 dollars in their bank account.

And even if you say, well, what about bills? There is no chance in hell that the monthly bill of a 30-person company will be comparable to their salaries. So the bills are negligible, but hey, shove in another $100K there for bills if you really want to. It doesn't change the situation.

And yet again, even with that much money remaining, like at least $5 million dollars, they somehow manage to "spend most of it", and show a final yearly net profit of $460,557?

Spend it on what, exactly?

Remember, this is just for 2022! Apparently, selling the game for 6-7 years never netted them more than $5 million in the bank. It's begs belief. Simply put...

WHERE DID MILLIONS OF DOLLARS GO? Where are they STILL, at this very moment, GOING?

How can 95% of the money be poof, gone. It's not shown on the bank accounts. It's not visible in new game assets, or new hires, or new game projects announced by the company.

So where is the money going? What is it being spent on? Or is it just, you know... transferred somewhere else, to make sure Wube remains "a small company" and hence avoid the relevant taxation? And the relevant... attention?

Well...

I've got bad news. It gets even "funnier."

Per the UK Government, here are the traits, but also the BENEFITS a small company would have (the benefits that fellow sleuth, DRY411S, conveniently forgot to mention, ODD):

Small companies
Your company will be ‘small’ if it has any 2 of the following:

• a turnover of £10.2 million or less
• £5.1 million or less on its balance sheet
• 50 employees or less

If your company is small, you can:

• use the exemption so your company’s accounts do not need to be audited
• choose whether or not to send a copy of the director’s report and profit and loss account to Companies House
• send abridged accounts to Companies House

Source: https://www.gov.uk/annual-accounts/microentities-small-and-dormant-companies

... Did you catch that? Here it is again:

your company’s accounts do not need to be audited

My, my, isn't that interesting! 🧐

Basically, there is no inspection, audit, or oversight ever. Keep yourself a "small" company and no one will be able to actually check your financial records. You also get to choose whether you're going to send a "profit and loss account" to the authorities. Which apparently fuels online debates as to where all your money is going!

In fact, in Wube's own report to the UK authorities for 2022, they have underlined that their company is exempt from auditing, and that their directors have requested no audit. Source: Wube's "Unaudited Financial Statements For the Year Ended 30 September 2022" (forgive the long link, Steam doesn't allow link shorteners):

https://s3.eu-west-2.amazonaws.com/document-api-images-live.ch.gov.uk/docs/fvBokQw-7pYmatcBfpM3ze3t3eWahgvtnspS9-2vX7I/application-pdf?X-Amz-Algorithm=AWS4-HMAC-SHA256&X-Amz-Credential=ASIAWRGBDBV3OJZUXTXE%2F20230207%2Feu-west-2%2Fs3%2Faws4_request&X-Amz-Date=20230207T001023Z&X-Amz-Expires=60&X-Amz-Security-Token=IQoJb3JpZ2luX2VjEMb%2F%2F%2F%2F%2F%2F%2F%2F%2F%2FwEaCWV1LXdlc3QtMiJHMEUCIBQUEYb3PnfPlngFP8XeKnFrBHUTWh2ZuEXtCR%2Fxk7DPAiEAxxQ569MXZ4chzOKN%2FW8hYwVMUDPYd5zP3%2B3ZA%2B7TyoMqzQQITxAEGgw0NDkyMjkwMzI4MjIiDLh9Lz6LajDrAttDwyqqBI78aZmXvNBJHVmYN1QZK43pBte47MhJuo2cowdVgGKBvjdnqQeVYZXe%2FgsDtezMJmlYIepn14VHPgGfN0OBs2yAWH%2FrX8NtBITcnU6NXvshVExhZYt%2FN1KiaDiy949QR76hk0PwxeMqc2c0P%2BVz7xp4%2FreD11xz4iowrwFAJOntxcDwSGUrK0QdpOrwAyTvZ6VHYKIX11UfFBzt9m5%2BQX3SeRk45E2q2Bzj%2F6wmGnvldjwiFoTMroCMyMEz0SH%2BSfcg12HymNk%2Fw883ZXtDQYMiLwhynHr3dYL9D%2FRUsjBaHdrSA0nwWudU1%2FLtZ%2B4uJ6%2BnK5LvJre2Oxwzv%2FQrXZSuN0B3TF892TeIsTseGUmoCHiQstqfiUkmJGJBw1%2F9%2Fvfj151rN9njZO6mtKbaiQn2OmNCjH6vkHoB%2Fa32f98uvVlT1gg1nrneuqOUACPIIs2L%2BE5iwLxQCVPMN7k18gximQxyyFLkXRp3BQSQ7aVJGramNls%2B6vGcjurrn88xDkiEqLOnrCQ9vwudyFK7QtUN%2FfXu7tIuQDOwbsG47dTEtBbR%2FidmP6IMrSe1p5ETDmoVDGN4bpmYmCCqKaZY4B0xDmxe1XFRhEKOUdC6Xeu2lmOVfX32%2FK1%2BAbvB%2B1y8RgEXu64td%2F5G4xWMlxviEtB7guYmoDDoEDj3jZPuOZy%2BKsNeBGS%2FHNw33pZNSPzeqONnyx3%2FT36uuKv3bv5DzmlHFhm5uV%2FbF%2F4mML31hZ8GOqkBT92i98X%2Bew%2BP28sftTPoqSPQK781NM%2Fz%2FnKBnJ2%2FoJ5Usvtu%2FC%2F3SI78uEv3q%2FHgXk%2B5wlU%2F9pKWCUYpN66SXXIvusVxU9JMOeGccCcjg82nd8dJkbhuXr%2Fdp8FVIUXfY5ton7rt6EPGBVqEzD8et8h9JnTfjPM82nYoLd%2Bjk0RS6FSw5js4yquoaKOWacMcCCLL3gsLhBQdkbSaAj5AcYj5%2FWJY3ikevA%3D%3D&X-Amz-SignedHeaders=host&response-content-disposition=inline%3Bfilename%3D%2209201188_aa_2022-10-13.pdf%22&X-Amz-Signature=eda11268556cde5ee694ab7c4df09e28cf72126567692b7eadba5ecaacccc6af

(Note: figures are in GBP, not USD.)

All Wube's documents filed to the UK Government:
https://find-and-update.company-information.service.gov.uk/company/09201188/filing-history

That sheds comical light to this comment by DRY411S, who replies to Epylector, who seemed to have "figured out the catch":

𒐪⎝ Epylector ⎠𒐪:
This paints they picture they are over-spending and thus over-compensating via an inaccurately high price on their final product.

DRY411S:
I agree that they do seem to have a small profit margin, but am not prepared to speculate that they are overspending, because there is no data in the public domain.

Source: https://steamcommunity.com/app/427520/discussions/0/3768984079243848578/?ctp=57#c3768985157785839317

But here's the thing, DRY411S: Wube, turning themselves into a "small company", are not obliged to provide that data. So you will never find it - because they didn't want you, or the government, to find it. Because per the UK Government, a "small company doesn't need to be audited or send detailed reports for their profit and loss". Wube chose to keep its "secrets" secret, and it seems they chose so very deliberately.

But remember - everyone who asks about it is a bad person! Poof! Magic 🪄

[Bender B. Rodríguez]

Thanks OP, that was a good read. Wube is not to be trusted for numerous reasons and it is good to see posts exploring these troublesome practices. Now that you posted something critical of Wube the astroturfing and steam guideline ignoring fake accounts should roll in anytime.

[looplick]

It's OBVIOUSLY all a big conspiracy!

[DuX1112]

Originally posted by looplick:

It's OBVIOUSLY all a big conspiracy!

Tax evasion is fairly common, actually.

[AlexMBrennan]

Losing 96-97% of your revenue is bound to trigger alarm bells in any normal business!

You do know that even companies like Apple "lose" 75% of their revenue, right? Turns out that it's expensive to hire staff, rent stores, build factories, and run ads.

Tax evasion is fairly common, actually.

Then why are you telling us? Go forward your evidence to HMRC because we couldn't do anything even if we believed your conspiracy ramblings.

[looplick]

Good thing you're on the case!

[Bender B. Rodríguez]

Originally posted by AlexMBrennan:

Losing 96-97% of your revenue is bound to trigger alarm bells in any normal business!

You do know that even companies like Apple "lose" 75% of their revenue, right? Turns out that it's expensive to hire staff, rent stores, build factories, and run ads.

Tax evasion is fairly common, actually.

Then why are you telling us? Go forward your evidence to HMRC because we couldn't do anything even if we believed your conspiracy ramblings.

You offer no facts or sources and instead rely on slanderous statements in a failed attempt to discredit OP. OP has far more credibility than you.

[DuX1112]

Lol, he actually compared Wube to Apple... And he thought he was making a point... By telling us that Apple loses LESS of their revenue than Wube. Which makes Wube even MORE suspicious in comparison...

I can't anymore 😂😂😂😂

[brian_va]

good thing you've been spending your downtime wisely, we almost forgot where to direct our hate.

[johntarmac]

Originally posted by DuX1112:

Where is all the money going?

Why does that have anything to do with you?

[Creep Gnome]

Originally posted by johntarmac:

Originally posted by DuX1112:

Where is all the money going?

Why does that have anything to do with you?

Yeah, I'm really not getting the issue here. The law states that small companies have the right to not be audited and somehow Wube is bad for exercising that right?

Is there some grand conspiracy I'm missing, or are people just mad about other people doing their bookkeeping in a smart way?

[Shurenai]

Originally posted by Creep Gnome:

Originally posted by johntarmac:

Why does that have anything to do with you?

Yeah, I'm really not getting the issue here. The law states that small companies have the right to not be audited and somehow Wube is bad for exercising that right?

Is there some grand conspiracy I'm missing, or are people just mad about other people doing their bookkeeping in a smart way?

Dux' whole thing since the price change was announced has been trying to make Wube look bad in every possible way. Since their last major stance of "they have 100 million in the bank, how dare they raise the price" failed, now it's the inverse, "Where did the millions go".

Report and move on. Not worth getting into it with someone who shifts goalposts as fast as you kick the ball, and tries to twist anything you say to their own ends.

[Overeagerdragon]

Originally posted by Shurenai:

Originally posted by Creep Gnome:

Yeah, I'm really not getting the issue here. The law states that small companies have the right to not be audited and somehow Wube is bad for exercising that right?

Is there some grand conspiracy I'm missing, or are people just mad about other people doing their bookkeeping in a smart way?

Dux' whole thing since the price change was announced has been trying to make Wube look bad in every possible way. Since their last major stance of "they have 100 million in the bank, how dare they raise the price" failed, now it's the inverse, "Where did the millions go".

Report and move on. Not worth getting into it with someone who shifts goalposts as fast as you kick the ball, and tries to twist anything you say to their own ends.

Yeah I'm pretty much done with him at this point too... nice link... shame it doesn't work or at least it doesn't on my end. Still though... I can do basic math and making a profit of 400K x 7 = 2.8M which is still only a third of the stated 7M..

At this point this is bordering on slander and I'll have no part in it.

[Ass Blaster]

Scandalous: company follows local laws. Can that be sinned into something malicious? The answer will surprise you!

[Khaylain]

Originally posted by Overeagerdragon:

-snip-

At this point this is bordering on slander and I'll have no part in it.

Actually, it'll be libel, since it's "printed".

[Hurkyl]

I mostly don't care since the whole thing is framed as sensationalism (and superficially, the outline seems rather bizarre) rather than as presenting a case, but I wanted to comment on this

Originally posted by DuX1112:

And even if you say, well, what about bills? There is no chance in hell that the monthly bill of a 30-person company will be comparable to their salaries. So the bills are negligible, but hey, shove in another $100K there for bills if you really want to. It doesn't change the situation.

This is surely very wrong. Even if you ignore all costs except those directly related to the employee, the additional costs should still be significant.

I did some internet searching, and get that the typical rule of thumb is that the cost of employing someone is around 25% to 40% more than just their salary. And that excludes the costs of actually finding and hiring them.

The numbers I remember hearing were significantly larger -- but that's probably a STEM field thing, where those costs need to include things like licensing for software tools, which I understand are notoriously expensive for corporations.

Oh, and don't forget the 15 additional people listed under "past team members and special thanks" that they had to hire and pay in the past. I don't know the timeframe on those.

---

That aside, there's also a very glaring omission in the speculation about their expenses: marketing.

I know some people like to act like Factorio does absolutely nothing to market their product, but color me skeptical that they could be such a well-selling product if they weren't spending money on things to keep the game in public awareness.

E.g. Factorio was actually in the 9/13 Nintendo Direct announcement, and there is actually a dedicated Factorio announcement trailer, a two-minute video in Nintendo of America's official youtube channel.

And wasn't Factorio appearing in some of the Steam Deck marketing?

Do you really think they didn't have to pay anything to get in on that?