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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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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No discount for Rock Band song repurchases

Video game fans always make a fuss when a developer charges them for something, even if it's completely justified, so it feels weird for me to be on their side this time.

I support companies that charge users to access parts of the game that are included on the disc. I don't have any problem with using downloadable content to kill the used game market. I think the legions of forum rats feel they are entitled to the whole carnival just because they bought an entrance ticket. Usually they're wrong. This time, they have a point.

But this time is different.

Here's the scoop: Harmonix makes the Rock Band video game series where players use fake instruments to simulate playing popular songs. Besides the songs on the disc, players can pay to download additional songs. Players can also pay to export songs from older versions of the games onto their hard drives, so they don't need to swap discs around to play those songs.

This fall Harmonix released Rock Band 3 which includes a new instrument, the keyboard, and songs with multiple singers, known as harmonies. All of the old DLC works in this game, it just doesn't include keyboards or harmony parts. A lot of the older songs like Queen and Bon Jovi featured them musically, but nothing was programmed in to make them interactive.

So that's where the trouble starts. Harmonix said they did plan to add keyboard and harmonies to "legacy" songs, but were unsure how they would charge for them. The three major options to upgrade songs to include the new parts were:

*Upgrades will be free.

*Upgrades will cost a fee, but it will be less than the cost of purchasing a new song.

*Songs will be re-relased entirely and no discount will be given to customers who purchased the original version of the song.

This morning Harmonix re-released several Queen songs using the third option. A lot of fans expressed their anger on the official forum when the pricing scheme was confirmed at the end of last week. Again, this is exactly how they respond when the cost is entirely justified. This time is different.

I was hoping they would choose the second option, and I think it would have been the best solution. We got a preview that they were going with the third option a few weeks ago when some Bon Jovi songs were re-released the same way, but fans said it wasn't a big deal because all of the legacy songs were exported disc songs bundled together with a large swathe of other tracks - not DLC that fans individually chose. They were hoping it would be different for legacy DLC.

Making the upgrades free would have been entirely unrealistic. As other fans have discussed, it takes resources to engineer these upgrades. Harmonix deserves to be paid for the work it does. I expected the price of new songs to rise about the $2 standard rate, as they now require more work to create each song. Harmonix kept the price the same, and they deserve credit for it.

Harmonix also has a way of upgrading their new songs. They've introduced a special realistic guitar controller with actual strings, and it costs an extra $1 to upgrade new DLC songs to get the "pro guitar" upgrade. That's why I imagined paying an extra $1 to upgrade legacy songs.

But apparently that is not possible, engineering-wise. I've seen several references in the official forum to Harmonix claiming it's not possible to upgrade legacy DLC or to know what songs the user has purchased. Also, the contracts Harmonix makes with the rights-holder of the songs may not allow it. I can't find an official statement anywhere, but let's assume they said it. This raises several questions.

Is it really impossible, or did they just not find a feasible and cheap way to do it?My Xbox Live account is aware of which DLC I purchased. Is there really no way to access that information?

I realize that post-Rock Band 3 DLC can be upgraded, but I'm aware that the files are very different for the new DLC songs. If the old tracks can not receive upgrades, is there a way to patch the files to make it possible? Since they invented the file types, didn't they already know this six months ago when they would not reveal the pricing strategy?

Would Harmonix be open to letting the fans pool some money together with a PayPal account to put up a reward for someone to solve the technical problem? I imagine a few code monkeys would be tempted by reward money to solve the problem and if one of them succeeded, would Harmonix agree to change plans?

This pricing option is a recipe for a major public relations setback. Music games peaked in sales a few years ago and the genre leader doesn't need to take any risks. I think Harmonix should make a stand here and explain the technical hurdles they claim forced their hand in choosing this payment option. Their website does not have an easy-to-find statement, and I have not seen one released anywhere else. Either they are keeping quiet when they shouldn't, or they are speaking very softly.


Perhaps the company is afraid speaking up would draw more attention to the situation. That's a risky strategy and we'll see how it works out. I don't think they made the right choice.


I have to admit that when I purchased the older versions of songs, I made a deal with Harmonix. They gave me a product I thought was worth $2. They promised me nothing more. This is why I find myself on the same side with the complainers, but still don't feel like one of them. They have a point, but that doesn't make them entirely right.

A lot of this is a reflection of the nontransferable nature of DLC. A fraction of the legacy DLC I purchased in the past is redundant and if it was any other product I could sell it or give it away. Instead it's a sunk cost.



I don't feel like Harmonix owes me the upgrade option, but I am disappointed I didn't get it. That's as close to their side as I'll get.
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Video game community divided on push to kill used game market

A very smart post from the video game web comic Penny Arcade about the use of DLC and one-time use codes to combat the used game market. The accompanying comic sums it up nicely:

As I've written before, this is a lot of anger from video game players about these business tactics. Video game companies do not profit from the sales of used games - and they lose potential sales to the used market.

From my own experience, there are some great games I plan to purchase, but I usually wait until a used copy sells for $30 or less. That's a game I was going to buy at some point, but because the used market is out there, I chose to save about $5 on it.

But the other side disagrees with this idea. As Daniel summed it up in the comment section of my last post on the used market:

I either wait until the price drops in half or buy previously played. Does this cut into the sales of a company? Not in the slightest, because I would never have bought the game new. Ever.

As Daniel admitted, these are the actions of one person. That's not a trend, and even if consumers like him were in the majority, people like me still exist - people who buy a used copy of a game we would have otherwise bought new - and that absolutely cuts into their profits. Even if the Daniels of the world buy DLC, which does go to the company, it is small potatoes compared to the missed profits the used market eliminated.


To avoid being misunderstood, let me clarify. I am not saying that video games companies deserve some special protection, or that used buyers are rogues or thieves. Occasionally I am one of those rogues, but if companies keep using one-time use codes, I will cave in and buy more new copies.

I do not support the other solutions, such as inspiring game players to buy new copies as an act of compassion to show support to the companies that produce them. This is asking people to sacrifice self-interest in order to help someone else's business.

Widening the divide between the quality of a used copy and a new one, on the other hand, does play to people's self interest. There is no difference between giving a bonus to new copies and taking away features from a used one.

Keep in mind that it's the people who buy new copies who are the customers, and they have to pay when other people get a good deal on a used copy. Since the company is losing sales to the used market but still needs to remain profitable, resulting cost hikes or the decision not to lower prices means more money comes from the pockets of customers who buy new copies.

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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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