DLC is becoming increasingly important, according to Take-Two CEO Ben Feder, who said "any triple-A title needs aftermarket content to be competitive," and that franchises like BioShock, Borderlands, and Grand Theft Auto are an examples of that principle for success.
Downloadable content can contribute to keeping games relevant longer than usual in an environment where most titles disappear from shelves within a few months. Games from Take-Two subsidiary Rockstar have often displayed resilience against that quick falloff, and Feder hopes the company's latest, Red Dead Redemption, will prove similar.
"It's following an erosion curve that every game will follow," he said in an analyst conference call after the company's financial results announcement, "but we're cautiously optimistic...that this game will be attractive to consumers for a long time to come."
The Grand Theft Auto series demonstrates such long-term sales potential that each individual entry becomes almost a franchise unto itself.
Feder said Grand Theft Auto IV has sold 17 million units to date, and the release of its Episodes from Liberty City for PC and PlayStation 3 in the latest quarter was another financial boost for Take-Two.
"Grand Theft Auto IV and its episodes will continue to have a long life in the market, as [Grand Theft Auto: San Andreas] did before them," he said.
Take-Two also sees BioShock, created by Irrational Games with a recent sequel by 2K Marin as a franchise that could enjoy similar longevity. BioShock 2 has more DLC in development, and Feder made it clear that more main entries in the series are assured, whether or not 2K Marin remains the developer.
"We think BioShock is still one of the most important franchises in the industry," he said. "We do intend to support it. It doesn't have to be at 2K Marin, but we do intend to support it. ...The franchise has a long life indeed."
I believe that DLC is only important because the game publishers are relying on it to maintain revenue growth in the face of the realities of the game market; mainly, that development costs are still too high for what is considered a "AAA" game by them. Unfortunately, they continue to ignore the many historical examples of "AAA" games that are highly profitable without paid DLC, due to the major factors of 1) high polish (a Mario game, for example), 2) replay value (competitive multiplayer), or 3) free, user-generated content (Civilization IV, Starcraft, Half-Life 2). These factors result in high, long-term unit sales and good profits, especially user-generated content, since it lowers overall development costs and lengthens the product's lifetime.
By relying on DLC to maintain revenue growth and not cutting development costs to improve profit instead, publishers like Take Two are calculating projected profit by expecting high short-term unit sales, followed by a percentage of DLC consumer conversions. This is a dangerous way to make the company look good to stockholders. If EITHER part of that shaky equation fails, the projection fails.
It is healthier for a publisher to make a strong product, market it well, and get high unit sales that can cover development and marketing costs, and then rake it additional profit from DLC to beat revenue projections.
I wonder why CEOs like to say things which are so obviously not true.
Crazy CEO: "TRIPLE AAA GAMES NEED DLC TO BE SUCCESSFUL!!!!1111"
Voice of Reason: "Uh...actually there are many games which are very successful without DLC. Even in titles like Modern Warfare 2 DLC is merely a tool used to increase success. A sucky, unsuccessful game doesn't become successful because of DLC."
Crazy CEO: "PROFIT MARGINS!!!111"
Of course shareholders lap this shit up, so the CEOs keep on with the spew.
If it is about how long a product stay on shelves, yes, content updates will let it stay longer. But also, content updates means you are diverting resources from new content.
So eventually, it's not about whether a product stays competitive, but whether it has generated profits worth it's content, and whether the DLC would generate more profit than fresh new content would, given equal development costs.
Chris has the right idea and understands that the market is changing. DLC is the new "merchandise" of gaming, an accepted post market revenue model. Rather than poke fun at Chris's comments, we should recognize his point - Games need additional ways to generate revenue and stay relevant.
Carl, I agree with your assessment about mods - but in my opinion mods fit the definition of "aftermarket content." Mods may not generate direct revenue but like DLC mods increase the relative value of the game long after launch.
I understand, that people are complaining about the revenues of AAA titles and try to improve them with DLC, but I agree with Carl, that this won't change the general situation.
The usual AAA title today has much higher developement costs, than in the last generation, but the problem is, that the installed user base (for the HD consoles, which get the most AAA titles) isn't nearly big as in the last generation. You can't compensate this with higher prices, cause people aren't willing to pay more, than they do now.
DLC won't change this in a fundamental way, cause if every AAA title gets DLC, it would look to the consumer like a price increase, people are already complaining, that they have the feeling the DLC is a cut out portion of the retail product and that companies are trying to sell only 75% complete games, and then charge the player for the remaining 25%.
In short term, DLC seems to be booming for titles, that are already super-succesfull like MW2 or GTA IV, but in long term, people will take a closer look, before they buy the DLC.
In the late 1990s the PC market was flooded with Add-Ons for every game, it seemed, there wasn't one game, that didn't received at least 3 Add-Ons, but after a while, people stopped buying these Add-Ons and publishers had to include the content into the Patches of the game, to keep the player interested.
I guess it will be the same with paid DLC over the next years.
By relying on DLC to maintain revenue growth and not cutting development costs to improve profit instead, publishers like Take Two are calculating projected profit by expecting high short-term unit sales, followed by a percentage of DLC consumer conversions. This is a dangerous way to make the company look good to stockholders. If EITHER part of that shaky equation fails, the projection fails.
It is healthier for a publisher to make a strong product, market it well, and get high unit sales that can cover development and marketing costs, and then rake it additional profit from DLC to beat revenue projections.
Crazy CEO: "TRIPLE AAA GAMES NEED DLC TO BE SUCCESSFUL!!!!1111"
Voice of Reason: "Uh...actually there are many games which are very successful without DLC. Even in titles like Modern Warfare 2 DLC is merely a tool used to increase success. A sucky, unsuccessful game doesn't become successful because of DLC."
Crazy CEO: "PROFIT MARGINS!!!111"
Of course shareholders lap this shit up, so the CEOs keep on with the spew.
If it is about how long a product stay on shelves, yes, content updates will let it stay longer. But also, content updates means you are diverting resources from new content.
So eventually, it's not about whether a product stays competitive, but whether it has generated profits worth it's content, and whether the DLC would generate more profit than fresh new content would, given equal development costs.
Carl, I agree with your assessment about mods - but in my opinion mods fit the definition of "aftermarket content." Mods may not generate direct revenue but like DLC mods increase the relative value of the game long after launch.
The usual AAA title today has much higher developement costs, than in the last generation, but the problem is, that the installed user base (for the HD consoles, which get the most AAA titles) isn't nearly big as in the last generation. You can't compensate this with higher prices, cause people aren't willing to pay more, than they do now.
DLC won't change this in a fundamental way, cause if every AAA title gets DLC, it would look to the consumer like a price increase, people are already complaining, that they have the feeling the DLC is a cut out portion of the retail product and that companies are trying to sell only 75% complete games, and then charge the player for the remaining 25%.
In short term, DLC seems to be booming for titles, that are already super-succesfull like MW2 or GTA IV, but in long term, people will take a closer look, before they buy the DLC.
In the late 1990s the PC market was flooded with Add-Ons for every game, it seemed, there wasn't one game, that didn't received at least 3 Add-Ons, but after a while, people stopped buying these Add-Ons and publishers had to include the content into the Patches of the game, to keep the player interested.
I guess it will be the same with paid DLC over the next years.