Freeloadable content - an alternative to paid DLC

Cross-posted on gamasutra.com

A lot of developers/publishers sell expansion packs and other discrete add-ons to their games as "downloadable content," or "paid DLC."  This model has problems, for both players and developers.  The problems for players have been covered exhaustively, so let's leave that aside for the moment.

Here's my perspective as a developer.

Let's say that the upcoming version 1.0 launch of our game Defender's Quest goes well, and some time down the line we release an expansion pack.  Will it earn enough money to justify working on it?

There are a couple of facts that influence this decision:
  1. It's impossible to sell more copies of DLC than of the original game
  2. DLC's price must be substantially less than the original game's
  3. Many people in your audience will never experience the DLC content*
*Only issues 1 and 2 are relevant from a financial perspective, but I'm a softie, so number 3 is important to me for other reasons.  One of the biggest reasons I make games is so that as many people can enjoy them as possible. As long as I make enough money to keep doing my job, I don't like restricting and fragmenting the experience, which is exactly what paid DLC does.  Free2Play is certainly an alternative, but I want to leave that for another article, this one is mostly about fixing DLC from within. 

So let's assume 25% of our audience buys our DLC (an optimistic estimate), and we sell it for 25% of the base game's price.  This gives us 6.25% of our original gross revenue.  Not bad - and if we spent less than 6.25% of the money, time, and effort it took to make the original game, we just got a raise! 


The problem is, it's all downhill from there.


First, it's a law of human nature that every purchasing decision has "friction," so fewer people will buy each subsequent DLC pack than the one before.  Second, it's a law of human business that day one is the most profitable day for DLC, which is why so many AAA games these days push day-one DLC.  The frightening corollary to this second law is that each day you wait after launch to release DLC means fewer sales.  Combine these pressures of time and friction, and you're looking at ever-dwindling revenue.  


What this means is that your first expansion pack will almost certainly be your best seller, and thus paid DLC can't sustain prolonged development.  Is there a way to fix this model without abandoning it for subscriptions or free-to-play? 


I think there is.

I call it "Freeloadable Content," or FreeLC.



How FreeLC Works


First, let's assume the DLC I want to create must make $5,000 to justify working on it.  So, with paid DLC, if the base game cost $7, we might sell the DLC for $2 and hope for at least 2,500 sales.  That's the traditional model.


Under the FreeLC model, we instead start a small Kickstarter project to raise the $5,000 we would normally expect to make through sales.  Now that we've covered this cost, we release the expansion as a free update to everyone who has already purchased the base game, even if they didn't contribute to the Kickstarter.  Hence, freeloadable content. 


Implications

Although the idea of FreeLC is quite simple, it has some interesting and somewhat counter-intuitive consequences. 

For one, FreeLC can be less adversarial than paid DLC.  Even if a player legitimately enjoys Mass Effect 3 and its $20 day-one expansion, it dampens her enjoyment when she has to wonder whether EA is just trying to find a sneaky way to raise the game's price to $80 (EA's Peter Moore has essentially admitted to this).

So that's one benefit.  But besides not having to nickel-and-dime, or more accurately, ten-and-twenty-dollar our players, we can let all of them have the extra content and still get paid to develop it.  We don't have to fragment the game's shared cultural experience into high- and low-paying tiers.


Furthermore, there's one final benefit that deserves special attention:

We just increased the value of the original game!

Under the paid DLC model, the base game stays the same, while any additional value the developer creates is locked up in discrete expansion packs, each of which has additional purchasing friction.  With FreeLC, each expansion makes the original game better, and since we've already made our "DLC money," we're free to sell the whole collection for the same original price.

I'll illustrate this effect with an example.

First, let's assume for the sake of argument that you can actually reduce the value of enjoying a game to some number.  So, say the base game is worth 10 units of fun, or "funits," (whatever those are).  Then, we make a small expansion, worth 2 funits.  Together, that's an experience worth 12 funits.  All together, we eventually release 1 complete game worth 10 funits and 5 DLC packs worth 2 funits each.

Then, we load all our merchandise into our digital wheelbarrow, and cart it off to the internet for sale.

Here's how it looks under paid DLC:



  Game: 10 funits,  $10
  DLC:  2 funits,  $2
  DLC:  2 funits,  $2
  DLC:  2 funits,  $2
  DLC:  2 funits,  $2
  DLC:  2 funits,  $2

And here's how it looks under FreeLC:


Game+DLC: 20 funits, $10

Which would you rather buy? 



The second option provides the exact same content for half the price.  We've already recouped the cost that we would normally have to make through DLC sales, so we don't have to charge the extra $10.  


Even better, there's one, simple low-friction purchasing decision - "Do you want to buy everything for one low price?"  Sounds like a good deal to me!  That's a much easier sell than, "Do you want to buy this? And how about a little more for this? And this? And this?"


Now, let's look at all the potential problems with the FreeLC model and see if we can address them.


1) Freeloaders

James actually has one of these

Since everyone who's already purchased the game gets the FreeLC, there's less incentive to support the Kickstarter drive, and just wait to get the content for free. This is the biggest risk I can think of (though we certainly have nothing to lose by just trying it and seeing what happens).  

First of all, you have to buy the original game to get the FreeLC, so it's not as big a concern as if it was just free for the general public.  That said, here's some possible solutions to the problem:
  • Exclusive pledger rewards
    We create special stuff for high-dollar pledgers, such as exclusive bonuses and vanity items, putting their likeness into the game, etc. The only way you can get these things is by supporting the Kickstarter drive, so people still have an incentive to contribute besides just getting the FreeLC.
  • Sell the basic game
    The lowest pledge level lets you buy the original game at a reduced price, so the Kickstarter drive doubles as a kind of sale.  If you already have the game, you can gift this copy to a friend.  If you don't have the game yet, now's your chance to buy in at a reduced price.  Not only do you get something right now, you've now bought into all current and future FreeLC.
  • Count on goodwill?
    Perhaps this crazy idea will drive people to support it out of the sheer goodness of their hearts.  I wouldn't count on this alone, but it's a real thing that happens, and the amount of resentment players have for DLC suggests many would welcome an alternative that gives them more respect.

2) Lost "potential" sales


The next concern is that by giving away the updates for free, you're losing sales.  "Never leave money on the table," as the saying goes. 

First of all, if the Kickstarter drive succeeds, it doesn't really matter if you "lose" sales because the money you would have gotten through DLC sales is already in the bank.  Everything after that is just gravy. 

Second, and as I've said above, people now have more incentive to purchase the original game, which sells for a higher price than a DLC pack and can reach a larger potential audience since it has the lowest possible purchasing friction.

Third, although it's impossible to know the precise number of DLC sales you'd have made otherwise (and thus ask for too little in the Kickstarter), we have enough information to set a reasonably accurate upper bound.  DLC requires the original game to work, so you simply won't sell more copies than you did of the original game.  Furthermore, in the articles I linked above, we saw that AAA titles with huge marketing budgets like Mass Effect 3 had a 40% attach rate for day-one DLC (again, the best day for DLC sales), so it's safe to assume that we mere mortals would get substantially less than that.    

Finally, the FreeLC model opens up an additional revenue stream - dedicated players with deep pockets.  Free-To-Play developers call these "whales," but under the FreeLC model, I'd call them "patrons."  These players are the game's biggest supporters and are often looking for ways to spend more money.  Rather than just getting their money, this method includes them as pillars of the game's community.

3) <Insert complaint about Kickstarter>

The next issue is that of Kickstarter and crowdfunding itself.  

Many people have raised concerns about pie-in-the-sky Kickstarter campaigns for games that promise the moon and ask for tens or hundreds of thousands of dollars in funding, which then take years to materialize, if ever.  Most of these concerns don't apply to FreeLC. 

First of all, if you're a developer kickstarting FreeLC, you've already made your base game and established your track record. 

Second, you already have a basic reward that you can deliver to pledgers right away - a discounted copy of the original game, which entitles them to all current and future FreeLC.  

Third, since it's just an expansion pack and not a full-fledged game, even a relatively large and expensive project can ask for a modest sum of money and still cover the cost of development.  

Fourth, developing an expansion pack is much less risky than creating a game from scratch, and it takes a lot less time to boot. 

This should result in an attractive Kickstarter campaign that's easy to fund without making outlandish promises.

Future Work

Let me emphasize that the entire FreeLC model I've just laid out is a hypothesis.  I'm not sure if anyone's actually tried this before, and I don't know whether it will actually work in practice any better than paid DLC.  These are the effects and implications I can foresee, but nothing beats actually trying the thing out. 

So...when are we coming out with FreeLC for Defender's Quest?

Right now, we're still working on our big free update to Defender's Quest, version 1.0, followed by a release on all the big digital download stores that will accept us.  This should happen in a month or so if everything goes according to plan.  If I had been smart, I would have thought of this FreeLC idea back in February and used it to fund this huge update, but our financials are in reasonable shape and we should still be able to squeak by, and hopefully new sales will give the game a future.


I'm not sure what the future holds for us, but I can say for a fact that if and when we release an expansion pack for a game, it will be FreeLC.

Further Reading
If you're interested in my other musings on games and economics, try my Piracy and the Four Currencies series.

9 comments:

Unknown said...

Great idea! I will definitely back your expansion for defenders quest since I enjoy the game and don't enjoy DLC.

furiuzmnky said...

Very interesting article as usual. The idea of all users getting the update as long as they purchased the initial game offering is a great one. Those who really want it can fund it for themselves. Those who are on the fence may not get it if they don't help out so that is the risk they take. The remainder may not even know about it will one day get an update which they will be appreciative of and and will hopefully build loyalty toward future games you make.

Blitz said...
This comment has been removed by the author.
Blitz said...

I think it's an interesting idea, and is overall worth a shot since it's a pretty low risk - high reward (learning new spending trends is always good info). The only addendum that I would put, is within the game when it updates with that dlc etc, perhaps some link where the person knows they got it for free and if they haven't already to please donate via paypal or whatever front end you use. This way you can still potentially get an additional revenue stream from people that like supporting developers like you, rather than just a one & done source. I feel adding that extra is both minimally invasive and is also a Low Risk - High Reward move.

Silicor said...

I think the kickstarter is a great idea. Customers can support future development and the developer can move forward without fear. I would have participated for DQ becuase I want more and trust you because of the base game. In essence it is "optional" prepayment for an expansion. I think it would take a good bit of work to figure out good incentives to get people excited and willing to pay, but having an option for base game+expansion would be good and another sales channel. I just wouldn't make the lowest level gets the base game. This way you can give a fair price for just expansion support and a fair cost for base game + expansion. I would feel irritated if i had to pay for the base game again that I don't really need.

It is sort of similar to what GMT Games (a boardgame/war game company) with their P500 program. Games that get 500+ preorders go to print, those that don't... This way the customer gets to choose what they will get next and the game company has a minimum level of guaranteed sales.
http://www.gmtgames.com/s-2-p500.aspx

MrKay said...

The team behind Defense Grid have done something along these lines, just with a sequal instead of DLC. It seems like a cool model. They're also rewarding a lot of their backers, even if the kickstarter should fail. And they'll still be making the sequal, even if that's the case.
http://www.kickstarter.com/projects/hiddenpath/defense-grid-2

Chestertonian Rambler said...

I still think paid DLC can be good...if it transforms the experience.

Ironically, the two best examples are evil: the zombie update to Red Dead Redemption and the Darkspawn Chronicles for Dragon Age: Origins. Both gave content that was intriguing and attractive to some DA players, but not everyone's cup of tea. In fact, certain purists might not want to have the option of shooting zombies or leading the forces of evil, and making it a paid add-on actually does a good job (in that case) of insulating the primary concept and marking the extras as duterocanonical.

Of course, what applies to a large-scale project probably doesn't apply to something that's already as small in scale as this is. Dragon Age simply has the massive popularity so that the price of add-ons can actually support high quality production values. While I might be willing to drop, say, $1-2 on a truly amusing and different add-on for DQ, I don't know if the collective force of bucks would be enough to fund it.

Xiong Chiamiov said...

I work for a company with a SaaS platform, and we do something similar to this. We have tons of work to do (always!), but if one of our customers really wants a feature we don't yet have (and are willing to make), we'll quote them a custom development price. This is somewhat dependent on how global a thing it is - if lots of other people are going to want it, we'll probably charge less than something only useful to that one company.

Anyways, they can sponsor development of a feature, and it'll get pushed up in the schedule; when it gets done, it's available to our other customers (current and potential), which makes them happy (and us more profitable).

It's slightly different due to the complexities of our pricing scheme, the fact we mostly deal with single large entities instead of many small users, and the fact it's not a game. But it's the same general concept. I've seen similar things happen with open-source projects, too (see: http://www.freedomsponsors.org/ and similar).

Henrik Sætre said...

Very interesting hypothesis, one that I'll be keen to try out when we reach a stage where we will look into expansions.

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