Losses in a Growing Market: Am I Missing Something Here?

    I'm not an accountant; I don't have an in-depth knowledge of posting profits, announcing losses, or the nuts and bolts of running a company. I will admit I have a naive, albeit common-place, view of how things operate in the marketplace: growth and profit is "good", losses and reductions are "bad".

    So when I see major game companies continually posting losses quarter after quarter, I am puzzled. I thought the industry was growing, moreso than other sectors in the market. But even with industry-wide growth, it seems quarterly success is measured by who failed the least.

    Perhaps I just don't understand how the market works, or how public companies grow. Perhaps there is no good or bad in the market- just the constant exchange of money. Or, maybe video game companies are exceptionally bad at handling money- something of an occupational hazard. This is a risky business, and sometimes games flop, which would account for losses.

    But it seems more often than not, articles have a headline of '[Major Game Company] posts losses albiet higher than expected sales of [Game Name]'. Is the cost of running a major publisher/developer too much? How can a major game ship millions of units and not turn a profit for those who made it? Where is the money going? Is this an industry-wide problem, or is it just a few major players that are standing out?

    As I said, Im no accountant, but I am a game developer, and its concerning to see constant losses in the industry I work in. I wish I had answers to these questions, at least a better understanding of how games translate into money for a major developer. Something tells me I'm not the only one- it seems most developers have a 'fun-first' mentality for making games. The idea that making a fun game comes first, and that pleasing the costumer is paramount. This is EA's well publicized theory of game development- make great games, and the money will come. But seeing as EA seems to be posting the most losses, how much credence is there to this theory?

    So I ask, whats the deal? The industry is growing, more people are playing video games than ever before. So why are so many losing money? Are they losing money at all, do I just have misconceptions on what posting losses is?