Unlike that other infamous analyst, Jesse Divnich from EEDAR has written up an interesting blog post showing how high-profile DLC can have a serious negative impact on other retail games of the same genre. It might be fairly obvious that purchasing DLC will extend the lifespan of a game and will cause consumers to be less likely to pick up a similar new title. He mentions the advantages of creating DLC and discusses the window of time before developers should push out a new game after a DLC release. The underlying implication of his article is the growing popularity of digital distribution.

Most of us that have an Internet connection to our video game consoles have downloaded premium content for our games. Downloadable content has the capacity to increase the life of a game dramatically. Often times online expansion packs and map packs become as much a part of the game as the shipped content, especially with the inclusion of additional achievements or trophies. The implications of this extended game play are something brick and mortar retailers and competing publishers should take seriously, as the opportunity cost for purchasing paid downloadable content (PDLC) can often be the purchase of a physical retail game.

Before we explore the implications of PDLC on the market, we should first break up the dynamics that make PDLC so lucrative for publishers. The below table is a rough breakdown of the costs associated with each title. (Noting that each game is unique and the below figures are merely aggregates with some costs combined or omitted for the sake of simplicity).

As we can observe, what makes PDLC a lucrative product is not necessarily the volume it pushes, but rather the minimal expenses and time it takes to create PDLC. In fact, when you break down the monthly profits, PDLC provides a better return on investment than a physical title. (Noting that our model assume 1 month of full development, when in actuality, the entire development team is not needed to produce an expansion pack and can likely be done in 2 months at half the monthly costs. Nonetheless, the costs remain the same).

McClubbin via industrygamers.com »