How in the heck does the gaming industry stay alive??

I'm somewhat new to gaming. Everything I've read about the finance behind gaming companies is SCARY. It seems they rarely make much of a profit, constantly making up for sunk costs, seldom brake even, always on the edge of bankruptcy (one mediocre game can sink the company), etc. Plus the cost of production and marketing games are MASSIVE. It seems like a very unsteady up and down industry, games are such a hit or miss (and the miss is BAD).

This leads me to my questions... Why would anyone want to get into the gaming industry (doesn't seem very profitable for most)? Is the risk truly worth the reward? Do gaming companies really make that much of a profit? How does the gaming industry stay afloat, is it going to collapse?

For a hobby that is so expensive, I would think the companies that produce for the hobby would have extreme monetary success. What are your thoughts? I'm very curious about this subject.

Nobody wants to take a stab at this?

Easy because the product they sell basically cost nothing after its finished. A DVD costs at most $1 to manufacture and they sell them for $60, and then sell lots of games digitally so they dont even pay that cost.

Yeah some games flop and dont break even, but some games sell in huge numbers. Games like Witcher, UC4, Halo 5, BF, CoD etc sell millions of copies. If CoD sells 10m copies at $60/per copy thats $600million in revenue. Even if it cost $200 million to make the game (and most games dont cost that much to make only the biggest AAAs do) thats still a huge return on investment.

Now think about games like No Mans Sky that was made by 5 people but sold 5+ million $60 copies or a game like Minecraft that was initially designed by one guy and has made billions.

look at it like the movie industry. it uses the same formula. Some movies flop but some are huge hits and keep the industry going.

As far as getting into the industry, I imagine its because they like videos games. Coders and devs usually work crappy hours etc and get laid off constantly but they make a decent amount of money if they keep working.

And its an industry where once established you can pretty much make your own path, be your own boss etc. Just like everything else in the entertainment industry.

As far as the gaming industry,I think it's healthy enough to go on for many decades,and maybe then some.

@oflow: Best response I have gotten on this subject! Thanks, friend.

@oflow: out of that $60/game sold, how much of that would go to the developer, sony, Microsoft, etc?

@Black96Z: I'm not in the gaming industry but most reputable sources break it down something like this:

http://latimesblogs.latimes.com/entertainmentnewsbuzz/2010/02/anatomy-of-a-60-dollar-video-game.html