How Much Do Video Game Companies Make Off DLC And Add-Ons? Around $5B A Year

Image courtesy of Jason Cook

The typical price tag for a full-fledged console or PC video game is around $60, but rare is the game that doesn’t also include an array of add-ons — everything from additional game content to new characters to outfits to in-game currency. It’s become such a popular practice that this “extra” stuff is now larger than some entire industries.

According to the Wall Street Journal, video game makers are bringing in billions of dollars a year in these post-purchase add-ons, with at least one major distributor raking in more than $1 billion annually on its own.

To players, all this extra content is known as DLC (short for “downloadable content”), and by now it’s par for the course. It comes in a few different forms, though.

Genre, goal, and content aside, blockbuster, big-budget, major-publisher (“AAA”) games can basically boil down into two major buckets with some overlap: single-player narrative or strategic titles, or multiplayer (competitive, cooperative, or both) experiences.

As an analogy for DLC in a single-player game, consider a book.

Let’s say you buy a brand-new hardcover novel in your favorite genre for $19.99. You read it over the course of a week or two, and then you’re done. You can always revisit it later, of course, but it doesn’t change over time. That book will still have the same 350 pages and the words in it will go in the same order and tell the same story no matter when you next pick it up.

Now imagine that for $1, three months after buying the book, you could buy three extra chapters. They might come at the end, after the rest of the story. Or they might come in the middle, and lend new context and new information that makes you think about the ending differently. Or maybe, instead of new chapters, your dollar can buy a whole new character who wasn’t in it the first time you read it, but who — by the time you’re done again — you can’t imagine first having read the book without.

Three months later, another $1 gives you more new chapters. And again another quarter after that. By the time the book has been out 18 months, you’ve paid $5 more for it than the $20 you spent up front… but it’s also now 450 pages long. (And now the sequel is announced, the publisher is done updating it, and it will start selling to new readers for $10 instead of $20.)

For multiplayer titles, meanwhile, you can’t ever really “beat” the game; you just get better at it over time (hopefully). But players get bored after achieving full mastery of something. Solution? Add new content: new characters, new maps or levels, new weapons, new appearance packs — whatever — that players can buy for a nominal fee. Keep adding that content regularly, over time, and you’ve got yourself a business model.

Last year, the WSJ says, EA made $1.2 billion in revenue from selling add-ons. The industry as a whole made $4.78 billion. And this year, that number is projected to come in at $5.21 billion or more.

For years, the biggest publishers in the business have been trying to push the idea of games as a service, or something with a long shelf life. The goal has been to keep the player engaged with your content longer, keep them buying in, keep them playing. But there’s a down side to that, the WSJ notes: If your players are still playing your old game, not only will they not play competitors’ titles… they won’t play your new game, either. And that hits particularly hard in franchises that have annual releases.

For example, last year’s Call of Duty installment, Infinite Warfare, didn’t sell as well as previous installations in the series, the WSJ notes. And it may have been that fans weren’t that into it… but also, Activision Blizzard told the WSJ, a huge number of players were still deeply engaged with the previous year’s game, Black Ops III.

Even so, it’s keeping the studios busy. “It used to be that you would ship a game and everyone would go on vacation for a month,” Ubisoft’s VP of digital publishing, Chris Early, told the WSJ. But now, everyone’s right back to the grindstone, churning out DLC.

Videogame ‘Add Ons’: Billion-Dollar Business and Two-Edged Sword [Wall Street Journal]

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