Another look at on-disc DLC

A while ago I wrote that downloadable content for video games gets a bad rap, and that there is no difference between having to pay to download DLC or pay to unlock optional parts on the disc.

It's as arbitrary a difference as correcting a test by starting with a score of 100 and subtracting a point for each wrong answer, or starting at zero and adding a point for each correct question. Both add up to the same thing in the end.

Now the issue has come roaring back, as Capcom allegedly made the same point in messages to whiny consumers. DLC critics seem offended that people like me are correctly saying they feel "entitled" to the content.

Cliff Blezinski of Epic Games said the same technological factors that cause some DLC to be released simultaneously with a game - DLC production begins during the three month period after a game is built and before it hits stores - is causing some DLC to be burned into the disc. I don't understand Blezinki's logic in why it's better than releasing it digitally, but let's assume the worst and say he's wrong. That still doesn't mean companies shouldn't be able to charge consumers again for certain parts of the game.

These locked-away portions of games are a complication in determining the price of a game. Last year in a post about how video game prices have fallen over time, Michael Hawkins made a good point in the comments sections that the added cost from DLC add-ons was missing from my equation.

Just as Brad DeLong showed comparing the price of encyclopedia book sets over time is problematic because of the emergence of digital encyclopedias, comparing video game prices is now complicated by DLC costs.

The solution is not to merely add the cost of the DLC onto the retail price. So far, no one has released a game that is unplayable with specific DLC. Instead, we have DLC that enhances games. Consumers can skip the DLC and still enjoy the product.

Some games turn out to be duds and players have already paid the retail cost, but are not on the hook for the DLC. With that in mind, the counter to viewing DLC as a hidden cost is to see it as consumer insurance that allows players to stop throwing good money after bad.
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Deregulate local food

How bad can a situation be for local food advocates when critics like me have to come to their side?

Here's a typical example. In November the Quail Hollow Farm in Nevada hosted a five-course meal and the owners say they met all the standards they were told ahead of time, but then the health department waited for the event to start before they cited additional unmet requests and destroyed the food.



My niche for this blog has been to provide a reality check to the buy local movement. I mostly write about the pseudo scientific economic selling points, but I occasionally branch out to the phony environmental and health claims. Quail Hollow Farm is guilty of these too. These advocates make plenty of other fictional claims like "fresh locally-grown fruits and vegetables are indispensable for optimal nutrition and health" on their list of core values, but none of this has anything to do with the awful health regulations the government enforces.

The slow wheels of government has not caught up to this cottage industry of local food advocates. While I disagree with their motives and values, I feel sickened to see their consumer choices being thwarted by government officials allegedly out of paternalistic concern. It's much easier to create government restrictions than remove them, and these locavores are paying the price for bad legislation.

People on the left seem to have a knee-jerk response to the idea of deregulation. Let this example shine through to that logic. While regulation is needed in some very specific areas, we should never assume that our current level of regulation is optimal. It's easy to image a dangerous over-regulated situation, and we should always be open to arguments to remove or add additional regulations.

There's something very wrong with assuming all food is considered poison until proven otherwise, and anyone should be able to recognize that. I'm glad to see the locavores carrying that torch.
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Should the government standardize codes?

Yesterday I went on forestry management tour, where we saw how foresters choose which trees to preserve and which get the ax, and I ended up talking to a lefty about timber markings.

Foresters mark trees with paint or pieces of bright ribbon to identify the tree's fate with different symbols and colors. There is no universal code, so each company has its own language of timber marks.

This can cause problems like homeowners who panic and assume the "save this tree" mark means "turn me into a Jenga set" or laborers who misread the code and chop down trees that were supposed to stay up.

My new lefty friend instantly concluded the solution is for the government to draft and enforce a standardized code. I thought that would be a mistake.

Languages, such as codes, typically emerge through spontaneous order and sometimes we end up with redundancies. Boxes of chocolates have a squiggle code on top identifying the filling with lines of chocolate. Sorry Forrest, but you can know what you're going to get if you just learn to read.

The problem is the different chocolate companies have different squiggle codes. This is a coordination problem, but a small one. Workers sorting chocolates don't regularly bounce between companies and a forestry management company marks trees for repeat contractors who can learn the code. We can prosper with standardization.

Who says standardization depends on the governments help? Gay swingers developed a hanky code, where wearing a colored handkerchief in a certain pocket lets observers know what sexual acts the wearer is interested in. What regulatory jurisdiction would that fall under?

As a consumer, I see a problem with cell phone and laptop batteries being proprietary, where each model can have its own shape and there is no generic product to purchase. AA batteries are universal and interchangeable and their standardization is the result of the federal government working with battery manufacturers and major purchasers.

Since then, private industry has created standardization plenty of times. There's the Video Home Systems, the Compact Disc, the Digital Versatile Disc, the MPEG Audio Layer III, the Joint Photographic Experts Group, the Universal Serial Bus and the Blu-ray Disc. Standardization can occur

Sometimes, users don't want standardization. Linux and Mac users don't want to use the same operating system as Microsoft. Sometimes there are flaws in the accepted standard, and having options lets people choose the one they feel is right.

What if the government wrote a timber marking system that was problematic? If forestry companies were required by law, they could get in serious legal trouble just for using the best system. Imagine if we were required to speak Esperanto, the dismal failure that was designed to be a superior language. Its entirely possible the government could create a poor timber marking system that would handicap companies that adopt it.

I told new lefty friend that I'd be happy if there was a recommended universal timber marking system, and companies could ignore it at their own peril. To her credit, she agreed. If it's worth the trouble of switching over, firms will do so. There's no need to bring guns and the brute force of the law down on forestry companies that mark trees with one line instead of two.
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Pretty pretend guns are not a right

Lately my fellow bloggers have been writing about the importance of rights, like the right to a trial in relation to the safety of the public over at Congress Shall Make No Law, and fictional rights that fools cherish, such as the right not to be offended as Popehat and For The Sake of Science both did a great job of hammering out.

So with that in mind, I'm going to tackle the issue that really matters to me - the false claim that Gears of War 3 players have a natural right to pretty guns.

Gears of War 3 is an Xbox game that retails for $60. In some online multiplayer modes, there are some purely aesthetic customizations one can make to their character, the relevant one here being "weapon skins," where the guns players uses can have different paint jobs or animated graphics to make their pretend guns dazzle. Some of these weapon skins are unlocked by completing specific tasks in the game, but a set of 22 was made that players have to pay real money to use.

For $3, you can unlock a static paint scheme like tiger stripes or a flower pattern for all five starting weapons. For $4, you get an animated graphic, like an ocean ripple, for all five. For $15, you can unlock all 22 skins for one of the five weapons, and for a poorly-spent $45 you can unlock each and every one of them.

Predictably, there has been a lot of complaints on the Internet, most of it whiny. The best articulated criticism I have seen is from a level-headed competitive player named K.L. who made a very reasonable video saying this isn't the end of the world, but he doesn't like the policy of incorporating money-making tactics normally reserved for freemium games into a retail game. He hit all the normal points, such as making people pay to use content on the disc, something I don't have a problem with.

Let me start by saying K.L., or "arCtyC" as he likes to be called, has hit upon a gut feeling I share. There is something disappointing about having to pay to use these fun weapon skins. He also does a good job of stressing that this is an entirely voluntary transaction.

Paying to make your pretend guns prettier goes beyond voluntary and satisfies all of the criteria of Michael Munger's "euvoluntary" or "truly voluntary" criteria. Epic Games created the skins, has the legal right to sell them and customers know what they're getting. The weapons skins have no impact on weapon performance, and there are still zero-dollar unlockable weapon skins, so players are not punished for failing to buy them. There is no coercion vaguely associated with this transaction.

So that leaves one criteria to be considered euvolunary. How terrible is the Best Alternative To A Negotiated Agreement, or BATNA? If not buying a product will result in the death of a consumer, the BATNA differential is said to be very large.

I have trouble imaging a smaller BATNA than not being able to use a pretty pretend gun without paying $3. Sure, it's foolish for most people to pay $45, and I imagine most people chose not to, but a lot of people paid an extra $90 to have their copy of the game bundled with a cheap desk statue, a few trinkets, fake documents and a few different weapon skins and aesthetic downloads. For some reason, offering special editions of games and movies to consumers doesn't draw the same complaints, but the same elements are all there.

I gave it some thought and paid $3 to have the pretty flower imagine at the start of this post put on some of my pretend guns. This small price acts as a barrier, preventing every other player from having an obnoxious arsenal, and as a result I haven't run into anyone else with the same pretty guns.

There is no way to know if Epic Games planned to include the weapon skins, and later decided to charge for them, or were simply looking for another source of revenue and put a little bit of work into creating these for-pay paint jobs. The intent is irrelevant. The weapon skins are a fun addition to the game that I was happy to pay a small amount of money for, and in result, I received exactly what I wanted.
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Blocked by coordination concerns

I fully intended to take advantage of the lift on the state sales tax over the weekend, but I had the unfamiliar problem of not being able to think of any items I wanted to buy.

Sunday afternoon I found myself in the toy section at Target, trying to find a gift for a friend's one-year-old daughter that I would expect her to enjoy, and wouldn't mind being associated with by the other adults.

A further restriction is the child's mother cares a lot about what materials the toys are made of, so most stuffed animals were out. While I do not share this view, a gift to a young child is really a gift to the parents, money being fungible and all, and I believe when you try to help someone, you should do so on their terms.

I ended up putting the purchase on hold because I could not decide between several Lego-style knockoff plastic blocks. The actual Lego Duplo blocks are labeled for 18 months and up, and her first birthday isn't for a month, so that's no good. On the same shelf for 12 months and up were Fisher-Price Trio Junior blocks and Mega Bloks, and I didn't see any obvious difference in quality or price.

My concern was that someone else may give her a different brand of blocks, such as the three above or a dark horse candidate like Best-Lock blocks. It would be rather inconvenient for the birthday girl to have two incompatible block "scales" in her playpen, and the two would be mixed together and cause a real headache. I needed plastic block coordination before I felt comfortable making a purchase.

What's more, with the irrational power of sunk costs, that mere $20 purchase could inspire her parents to buy more blocks of the same brand and build up a single-brand block collection. However, none of those blocks looked as sturdy and uniform as the Lego blocks I grew up with. I could be hamstringing this girl's chance for a real Lego childhood. Can that all be avoiding by waiting an extra six months to go with Lego Duplo? I'm not sure.

I thought about making the purchase anyway, but I decided to put it on hold until I could coordinate things with the parents. I had to remind myself that the gift doesn't have to be a surprise to them.

After this overly-introspective attempt buying a gift, I think I can finally relate to Dr. Manhattan. Knowing too much really can paralysis your ability to function socially.
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The right to discriminate against customers

I hope my bitterness isn't showing.

When I was in cub scouts, our den spent two weeks writing, building and practicing all of the components of a puppet show. We had a big cardboard box we made into a theater and the puppets were static figures on the end of popsicle sticks.

Attending the puppet performance meant my mom and I had to delay an extra day to leave for a family trip up north. It was held in the middle school gymnasium.

So after the performance, I asked my Mom what she thought of our work. I've never forgotten the conversation that followed.

She was unable to make any sense of the puppet show because a small pack of screaming infants were running lose the entire time. The audience could see the sloppy figures we made, but no one could hear a word of the script we had written. All of that effort was wasted.

Angered, I asked my mother why people would bring unruly infants to a live performance. She said it was a family event, so all children are welcome.

That never sat right with me, and a news story this week has touched off the debate about what right people have to be free of disruptive children.

The Olde Salty's Restaurant in North Carolina printed off some signs saying screaming children will not be tolerated, and the staff will evict any table that includes an unruly child. Children in general aren't banned - but the ones who make a scene are asked to leave until they calm down. Angry parents have said restaurant owner Brenda Armes is discriminating.

And they're right.

Just as customers are free to discriminate against restaurants they don't want to patronize, businesses should be free to turn away customers they don't want. In this case it's clear that Brenda Armes does not have some deep resentment of children - she just wants her customers to have an enjoyable atmosphere. She use discretion to sort out the troublemakers - people who are caught in the act of disrupting others.

The weird defense of some offended parents is that they can't control their children - a mild admission of irresponsibility. However, how does that justify bringing loud children into unwelcome restaurants? If I had a dog that leaks a thick, black ichor everywhere I go, I would not take it over to a friend's house. How would saying "I have no control over how much slime comes out of my dog" change the fact that I am harming others?

The popular culture has learned the term "externality" from economics in terms of corporate pollution, and it applies equally to this case. A screaming child destroys the enjoyment of the strangers around him or her. Those people have not been presented with a choice to be in that situation, or reaped any benefits from the child. They are paying a cost for an action they had no role in.

Two sides of the same coin

The right for businesses to discriminate was recently mishandled by Rand Paul. Simply put, businesses already have an incentive not to discriminate - it hurts profits. Even racist business owners know that dollar bills spend the same, no matter who they came from, and it's foolish to turn paying customers away. This is well understood by multiple Nobel Prize-winning economists, including Gary Becker and Milton Friedman.

In addition, customers will avoid businesses that they think unfairly discriminate, so being caught discriminating is a dangerous game.

The market does a good job of preventing discrimination. It does an even better job when the public opposes discrimination, such as the modern opposition to racism. This is compared to government solutions to discrimination, which only kick in when it becomes politically popular. If the public supports racism, then the government will pass things like Jim Crow instead.

While the market failed to prevent "whites only" businesses in the South, government action didn't prevent it either because that's what the public supporte.

Gay marriage supporters do not pretend that a majority of the public support their position. They are counting down until that shift happens to change the laws. Why? Because when government is allowed to be involved in discrimination, the side it chooses depends on the whim of the public. Institutional discrimination and anti-discriminatory laws are two sides of the same coin.

Government involvement in discrimination also has other consequences; false positives, fraudulent accusations, firms need to spend resources to protect themselves from these mistakes and some firms are discouraged from hiring the targeted groups to protect themselves from hiring a potential liability.

There are also the losses of freedom to business owners. Roger Pilon of the Cato Institute asked:

Suppose you're an Italian restaurateur and you want to have only Italian men as your waiters because that's the ambience you want. Shouldn't you be able to do that?

By the same token, I would be opposed to a law banning screaming children from all restaurants. It should be the choice of business owners to keep out people they think will disrupt customers. If it turns out the policy was a mistake, the loss of business will force the owners to repeal their own rules.

But they can't change the law if hurts their profits. They may end up going out of business.

But profits are up

Back at Olde Salty's Restaurant, the decision to discriminate has not hurt profits. Brenda Armes said sales are up. Some of this can be attributed to all the media attention her restaurant has received, but most of it appears to be because customers like the policy.

After all, don't people without children have the right to a restaurant where they can be left in peace? It's clear enough people want it.

Last year I went to the midnight release of Watchmen. Half an hour in a baby started screaming in one of the seats. I realize it's hard to find a babysitter that late, but when you become a parent you have to make some sacrifices, such as not being able to see a movie the split-second it's released.

Shouldn't the theater owner be able to have a policy keeping young children out of movies for adults? Movie goers were mad that these people were not thrown out. As a customer, would you be more or less likely to attend a movie theater that banned all loud people, regardless of their age?
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What's wrong with limited-access goods?

People are upset that sometimes when they buy a video game, their consoles won't let them play all the levels unless they pay an extra fee. I argue that they're wrong to be upset and should save their outrage for something more earth-shattering, such as the president eating ice cream at a funny store.

I've written about downloadable content before, it's extra levels and items that players can purchase to expand a video game. The normal order of things is that a game will be built and released, and then extra pieces to the game will be made available to download. Some DLC is free, but most costs money.

But sometimes extra content is already on the disc. Take Dragon Age: Origins and Mass Effect 2, both developed by BioWare and both contain character and equipment on the disc blocked away until customers enter a special code or pay $15. New copies of the game include a one-time, one-console code to access the hidden material, presumably to kill the second-hand market for the games. This has made people upset. As they see it, customers already purchased the game, so they should be able to use everything on the disc.

As video game producer David Brickley put it:

"It’s quite simple to explain, but I do think players are entirely right – if the content is on the disc already there’s absolutely no justification for studios to offer DLC which is essentially an unlock key or something."

Well I think there is a lot of justification. Let's compare two realistic scenarios:

"Gorilla Wars" is released on Wednesday. On the same day, a $5 DLC is released to expand the game, possibly containing an extra jungle level and two more banana-themed weapons. The DLC uses 300 megabytes of the customers hard drive space.

Also on Wednesday, "War Gorillas" is released. Players can pay $5 to download a tiny 50 kilobyte file that will access a special jungle level and two more banana-themed weapons already on the disc.

Which game gets the most angry nerd forum posts?

War Gorrilas, of course, as all the information was already on the disc. Players assume that means they should be entitled to it for "free." But let's look a little closer.

The Gorillas Wars players is using 300 megabytes of hard drive space, while the "exploited" War Gorrilas player is using a fraction of one megabyte and playing the rest off the disc. It doesn't sound so bad now, and both players paid $5 for the same thing. It's as arbitrary a difference as correcting a test by starting with a score of 100 and subtracting a point for each wrong answer, or starting at zero and adding a point for each correct question. Both add up to the same thing in the end.


Moving levels to DLC for profit

As the previously-quoted David Brickley said, there is a debugging period of about 5 months between when a game is put together and when it goes on sale, which frees up team members to start working on DLC before the game is actually released. This can mean that a company can have DLC ready on day one without intentionally moving material off the disc and into the download queue for profit.

But what if they did? That's what some fans accused Ubisoft of doing when two levels from Assassin's Creed 2 were cut, but later released as DLC. A report on 1up.com editorialized:

"The game has certainly enjoyed a positive reception and good sales, and few fans seem to complain that it's too short. Still, confirming that content was removed from the game and repackaged as DLC is a risky PR move, as it is bound to leave some gamers feeling short-changed."

A post on Neoseeker.com claimed:

"Portions of games being cut out and tagged on as DLC isn’t exactly commonplace, but it isn’t unheard of either. Gears of War 2 and Tomb Raider: Underworld are two example of titles that were cut short to earn some extra cash post-release, and now Assassin's Creed II is another."

Both posts quote game designer Patrice Desilets as saying that the levels were cut to get the game released on time without spreading the team too thin and because the game seemed too long already - not to make more money.

I recall an interview with a God of War game developer about one of the levels they designed but had to cut to get the game released on time. There was no DLC at the time, and a version of the level appeared in the sequel. Should fans have gotten mad, as they had to buy a second game to get the whole God of War experience as envisioned by the design team?

Of course not. Cut levels are liked deleted scenes in movies - a normal part of the creative process, not a plot to boost DVD sales or "earn some extra cash post-release." Players should be delighted that technology has given them access to deleted portions. If they don't think it's worth paying extra for, they can skip it and just play the core game.

Or, they can do what I'm doing and wait for a future version to be released with all the DLC included as a bundle.


Killing the second hand market

Back to BioWare and their codes to unlock content on the disc. I think the complainers on the Internet are correct - this is a move to kill the second hand market for console games.

Video games have a short shelf life of a few years. The price falls dramatically during the first year for most games. In addition, chains like GameStop sell used copies of games for about $5 less than a factory-sealed. Since the used games are guaranteed to work, a lot of people (like me) buy used copies whenever possible.

But by locking off content to everyone but the original user, BioWare has found a simple way to discourage players from buying used copies. The new copies are either a richer, larger game or players have to pay more in DLC then they would save with a used copy. (GameStop still discounts these used copies $5 as usual, but it costs $15 to get all the content on the disc without a code). I can see exactly why used-buyers wouldn't like this

But what if they did nothing and allowed the used market to cut into their sales?

One of the most important questions to ask in economics is "Then what?" I would expect profits to decline. This could lead to future games being made with less resources or game prices going up. Doesn't BioWare have a right to encourage customers to buy new copies by rewarding them with a better game? Used copies still work, they're just not as big and flashy.

In the grand scheme of things, video games are a frivolous form of entertainment; not a life-or-death purchase. They're also a business and there's nothing wrong with companies giving customers more options. It's true that DLC started as a way to tack new parts onto existing games, but game makers are now thinking of DLC during the development process. Players shouldn't be scared of this change. It may keep game prices from inflating because companies have other sources of income.

Above all, players need to keep things in perspective and realize that buying a game doesn't entitle them to anything more than what they paid for, just like buying a Big Mac doesn't entitle you to fries and a soda.
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Where is Downloadable Content headed?

I remember the good old days when on a whim, my Mom offered to buy my brother and me a Nintendo Entertainment System.

Video game purchases are a lot more complicated today. The current generation of console systems - ones like Xbox or Nintendo that play on a special machine as opposed to a home computer - are all able to plug into the Internet and gaming companies are able to sell downloads to players.

Downloadable Content, or DLC can take the form of an enhancement to a game - such as additional levels or items. DLC can also be entire games. There are a lot of small DLC-only games that have never been released on a disc. in addition, some older games that were released on disc can now be purchased digitally and downloaded.

Technology wise, this is great. Not only can DLC keep a game fun and playable longer, it gives developers longer to add to a game. Fans of the space opera Mass Effect had two different DLCs released with more alien-blasting adventures for $5 a pop. Cheap, short games are now possible, instead of the regimented $60 price tag.

But there's one big problem I have with DLC. It is not transferable.

As Hal Halpin, a video game consumer advocate, said in the October issue of Game Informer:

"...The downside may be that you sacrifice ownership rights. For $60, you've had a reasonable expectation that you'll own the game that you're buying. You can legally re-sell that game once you're done with it... With digitally-distributed content the question of what you bought comes in to question. In fact, the new question becomes if you bought it at all! It could be that instead of buying the game, you actually just licensed it."

For example, my friends and I have really gotten into Civilization Revolution for the Xbox 360 in the last few months. Because it's been out for a year and a half, it can be purchased from Amazon.com for $28 with free shipping. A used copy sells for $20 at Gamestop.

In addition, a digital copy can be downloaded onto the Xbox hard drive for $30. So far, it's a bad deal. In addition, the game takes up 5 gigabytes of hard drive space. Xbox hard drive space is tough to come by - a 20 gigabyte drive costs $45 and a 120 gigabyte drive costs $150. To simplify a complex problem, the game is occupying in the neighborhood of $6.25 to $11.25 of space. DLC can be deleted and reinstalled for free, but it incurs an unavoidable transaction cost - the slow speed of console downloads.

But even if they brought the download price for Civilization Revolution down to $10, I'd still find it a tough sell over a physical copy. You don't have the same rights with downloaded copy of a game that you do with a physical one. Because a downloaded game is married to your hard drive, it can't ever be sold or even lent to a friend.

DLC can also entangle a game to your hard drive like a tree growing in your yard. Sometimes disc-based games come with a one-time use code for DLC, like Fallout 3 Game of the Year edition. The game came out in 2008, and five DLCs were released for $10 each. In 2009 the game of the year edition was released as a $60 package that includes the original game and the five DLCs.

However, the five DLCs are not played on a disc. They still have to be saved onto the hard drive* where they stay forever. Indeed, once a person has a game with a few DLCs they can sell or lend the disc as much as they want, but the DLC stays in the hard drive like tree roots.

There's a lot more to this issue - a lot of video game enthusiasts allege that companies are removing the content of the disc in order to sell it by the download later. We're also seeing DLC levels come out the same day a game is released. Those are valid criticisms of business practices, but essentially this is the same as saying a game costs too much. As this is merely entertainment, consumers who don't like the price simply shouldn't buy the product.

I don't see any technological reason DLC resales couldn't become the norm. If enough consumers really care about the issue and made it known to the video game companies, you would expect it to materialize. As it stands today, there simply isn't enough demand for resales to make it a priority.

*Edit I have since learned that disc-based version of DLC, like the Fallout 3 edition I mentioned, do not have CD-keys to limit the download to the original customer. It turns out they can be copied unlimited times, possibly because the whole point of having them on a disc is for people without internet access, and the companies can't justify the cost of making an offline CD-key that can't easily be cracked. This changes my point that some DLC is stuck with the original customer, as disc-based DLC can be shared just as easily.

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