Thursday, April 19, 2012

Supply and Demand and DLC

I've been seeing a lot of ranting and suchlike about DLC lately, and there's a point I haven't seen anyone make, which I think is relevant. A lot of people seem to be very worried about how developers are charging more for games by this route, but with one glorious exception (take a bow, Asura's Wrath!), there has yet (to my knowledge) been any example where the content in question could be called essential for "finishing" the game (I'm not going to say, or get into, "completion" as applies here). I think, though, that DLC provides a function for the gaming industry which almost all industries wish they could have, that is, a method of getting people to pay more for their product, while leaving the original price intact at a point to capture as much market as is profitable.
For all products, there is a demand, and there is a cost to supply. There is an equilibrium, where the total amount that the market will pay will be reduced by either increasing or decreasing the price: that is, if the price goes up, though some people will continue to buy it, enough people will refuse to result in an overall drop in revenue, and if the price goes down, the number of extra sales won't make up for the reduction in revenue. In an ideal world (for a business), the business would sell each individual a copy of their product at the exact price they are willing to buy at (as long as it's above the cost of production), and somehow prevent people who buy at a low price selling theirs to people who are willing to pay more and splitting the difference. This is why some discounts exist: group A is unwilling to spend X on product Y, so the business distributes a discount to reduce the price to one which members of A will pay, while still keeping the price higher for all their current customers.
When I first saw DLC for a game, I was struck by how much it resembled the idea of an inverse discount. My economics lecturer once said that businesses would love to somehow invent an inverse discount, but it's hard to see how one would convince shoppers to use a +25% coupon. Instead, they attempt rebrandings, taking the same product and putting it in a fancier packet or the like, and then allow people who want the product to pay more. But this clearly pales in comparison to simply selling a product at the market equilibrium price and then just letting people people spend more on your product if they want to. Which is exactly what DLC does.
I really should have loads of lovely graphs to totally beat this idea clearly out. But eh.

Monday, October 31, 2011

So this is a blog.

I guess it must be, if it was something else, it would be somewhere else, one would presume.