10/17/2009 05:12 am ET | Updated May 25, 2011

DLC: The New Black! The Second Coming of Expansion Packs

I remember a few years back when the Baldur's Gate expansion, Tales of the Sword Coast, became one of the most sought after video game add-ons ever, at least for me. It was a boost for the game and for the Baldur's Gate brand. A few years after, expansions were practically dead and completely disappeared from store shelves (with the notable exception of The Sims). It became too costly to develop and publish a game that could not be sold for more than twenty or thirty dollars. At that time, it was much smarter to beef up the expansion content and release it a year later as a sequel and sell it for full price.

There's been a lot of talk about downloadable content (DLC) for video games recently. Some development studios and publishers such as Bethesda, Rockstar, Paradox and Russian publisher 1C have been pursuing strategies for digital content for many years. There is no doubt that we are in the midst of a significant, fast growing trend here.

With digital distribution, it's easy for publishers to keep a "full price philosophy" by adding and bundling content in a low-cost/low-risk-model. By offering downloadable content, either separately or as a bundle, publishers can maintain a "higher price" model that also adds more content to a game, which extends its life-cycle. Three or four DLC packs sold for a dollar or more each are much easier to develop than a full-scale game and can extend the lifecycle of a game by two years or more. In addition, successfully implementing DLC helps build consumer awareness and increase brand recognition. This model could never exist in brick-and-mortar retail, where the cost for printing a box alone can add up to one to two dollars apiece. The natural step is that expansions will continue to get bigger with a substantial amount of content allowing games to significantly extend their lifecycles.

We recognize the same patterns in both the music and film industry. For example, with iTunes, you can STILL only acquire certain songs if you buy the complete album. When will we be able to fully purchase only the tracks we want? Or even more interesting, when will we be able to buy one track AND get the ringtone AND five remixed versions of the track all at once? When will we be able to buy a movie and get, not only the selected material, but the raw material, the uncut versions, and all the different takes of a specific scene? Now we're talking add-ons and expansions! In any case, as technology makes these kinds of add-ons and expansions easier to produce and more accessible to a mainstream audience, I think we'll see a resurrection of expansions. I anticipate in the near future, they will be more micro-add-on based to allow consumers to fully customize their individual experience in gaming, music, and movies.

The good thing about DLC is that it comes in different varieties. Games such as Fallout 3, BioShock, Halo, Call of Duty, Killzone 2, Resistance, and Gears of War all offer some kind of DLC to add to the gaming experience and keep fans playing these games for extended periods of time. The price of DLC usually varies between a few dollars to around $10 for comparatively large DLC. It's not just sprite packs, weapon packs, maps and missions; the "Versus mode," DLC for Resident Evil 5 was a very innovative and interesting DLC, but for the innovation it represented, only pleased a small crowd. Many customers thought it was overpriced and should have been included in the full version of the game. In terms of units sold, three of the top five SKU's on GamersGate are add-ons or expansion packs, so let there be no doubt that gamers love the concept, it just needs further refinement to really hit the mark with mainstream consumers.

During the Gamescom event in Cologne, Germany this month, Harmonix CEO Alex Rigopulos announced details for three downloadable Beatles albums to complement the upcoming release of Beatles: Rock Band, continuing to state that the Rock Band music library now stands at more than 800 songs, with a total of 1,000 expected to be available by this holiday season. Sony/ ATV Music Publishing, the controlling party for the publishing rights to most of the Beatles catalog, knows where the big money is going to roll in from. Their CEO, Martin Bandier, said "The really big opportunity is the downloadable content." Outside of the 45 songs that come with Beatles: Rock Band, gamers will be able to download the additional albums for up to $17 each. That's more than the new remastered version of the album will cost!

It's only a matter of time before we can download - and perform - nearly every song imaginable. Not to mention the fact that one day indie bands will be able to publish their songs directly thru the Rockband Network without any interference or approval from EA.

While Activision has taken another approach to it, releasing numerous boxed expansions to Guitar Hero, such as, Encore: Rock the 80's and Guitar Hero: Aerosmith, Harmonix focuses on DLC and a digital self-publishing model. EA Sports boss Peter Moore stated earlier this year that, "We've got to find the right business model for us going forward." EA has aggressively emphasized that the traditional business model of selling boxed games in brick-and-mortar retail is no longer viable for them. They just released an NBA draft combine DLC for their NBA basketball series that not only extends the interest in the title through the off-season, but helps keep the franchise's awareness strong leading up to the next installment. I'm sure we'll continue to see innovative DLC coming from them in the upcoming year.

This month, we'll see the release of some brand new DLC for Left 4 Dead called Crash Course. It will be free for PC users, but Xbox 360 users will have to pay around $10 to download it. It's encouraging to see brand new downloadable content for the original game despite the upcoming sequel in November.

Apple paved the way for new business models in the music industry with iTunes, and now with the App Store for the iPhone, they're forging a new business model for mobile applications as well. With more than a billion downloaded apps, the iPhone has become a premiere entertainment platform for mainstream consumers. Releasing DLC alongside a full-price product, such as a video game or movie, has made this content into the entertainment industry's "new black," but the success of mobile platforms like the iPhone and digital distribution platforms like GamersGate has ensured that this trend is here to stay. It's interesting times for sure.