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).
Now back to the problem at hand.
For most gamers, our discretionary time is fixed, meaning that on a weekly basis we have a set amount of time we can spend on leisure. Sure, we can adjust how that time is spent by watching less television, falling prey to “outside” activities, avoiding the Internet, or ignoring our families, but let’s face it, those adjustments are temporary—those that are married can attest to the complains from our loved ones when we cram in a 12-hour Halo session.
