The Divnich Debrief: The Implications of DLC

Given the aforementioned considerations, there does exist an opportunity cost for PDLC, that being, the more we play Game A, the less likely we will buy Game B. This is where PDLC poses such a threat and decreases the amount of games we need to buy each year to satisfy our gaming needs. In other words, there is no upside for physical retailers and PDLC poses a further threat on competing games.

If Halo 4 is coming out on October 15th, that leaves a 15-day window before and a 30-day window after release where you probably do not want to release another First-Person Shooter (FPS). If Bungie decides to follow-up with a February 1 major PDLC expansion pack, that likely leaves an additional 15-day window (before and after) that you want to stay clear of. 

To digress and quantify why, take a PDLC like Map Pack 1 for Call of Duty: World at War, which sold over 800,000 units in its first month in the United States (and over 1.4M worldwide). That is 800,000 consumers in March who did not need to get their gaming fix by buying a physical title. In addition, if you were a publisher releasing a competing title in the FPS genre that could possibly be 800,000 consumers who could delay their purchase of your title (at most likely a discount) or refrain from purchasing it at all. 

In total, the addition of PDLC adds a blackout period of 75 days (from 45) in which you do not want to release a competing FPS. If you assume two major FPS per year, that is 190 days completely blacked out, compared to just 90 without PDLC.

The bottom line is that while PDLC has been welcomed with open arms by consumers, there exists a threat to both retailers as well as competing publishers. Albeit the threat is minimal in the short-run, but with the pace that this industry moves we could see some struggles a year or two down the road, and once troubles begin for the retailers, they might not end. The downside is especially concerning for retailers that rely on second-hand markets, because they are hit twice by the effect; once for consumers delaying other purchases and another time for consumers delaying trading their game in. 

Should PDLC be treated as an ominous warning of the impending digital transition? Yes, probably, but on the same hand I do agree with most experts that we are well over five years away from digital distribution making any serious run on brick and mortar market share.