Nintendo Enables Paid DLC

Here's a story that I've just posted to IndustryGamers.com, about how Nintendo will be enabling developers to put DLC online in the 3DS eShop and actually charge customers money for it. This is apparently something Nintendo is doing because developers have asked for it, not because the Big N particularly thinks they should charge for DLC. I'm sure gamers everywhere cheer at the thought of free content, especially more free content for games they've already purchased. But is this really a good idea, ultimately, for a business?

After all, the biggest change in smartphone games is the shift to free-to-play, going form only 12% of smartphone games to a project 92% of them in a couple of years from now. If the games are free, how will they make money? Sale of virtual goods... AKA, paid DLC in another guise. If that's the right path in smartphones, is it necessarily the right path for consoles?

Well, maybe, maybe not. I think part of the reason (a big part) that free-to-play (F2P) is taking over smartphone games is that there are so damn many games out there it's hard to get people to commit to buying one. If it's free, then people have one less barrier to trying it out, and then if they like it they might spend money on buying things for it. So F2P is a way to encourage discovery. On a platform like the 3DS, though, there are very few games (compared to smartphones, orders of magnitude fewer), so buyers aren't as overwhelmed... and therefore maybe they don't need to be enticed by free games to make a buying decision.

I see that counter-argument, but I think the bigger picture for consumers is that they see "Hey, I can get a smartphone and have thousands of free games" which may lead them away from choosing a dedicated gaming handheld. Oh, the hardcore gamers will see the advantages of the dedicated handheld, but that audience isn't very big compared to the size of the smartphone buying audience. The comparison between $30 games on a 3DS and free or $1.99 games on the smartphone isn't helping dedicated handheld sales at all.

The real tough part is that making a game F2P means fundamental design changes; you can't just take any old game and make it F2P and expect it to work properly. And many $30 games aren't really worth the full price, especially when it's easy to find them used. I think games have sustained really high prices for a very long time, but the party is rapidly coming to a close. For every Call of Duty or Skyrim, there's dozens of games that don't even cover their development and marketing costs.

I think Nintendo's fighting a rearguard action here, but the industry as a whole is inexorably moving to lower game prices up front (in many cases, free) and looking to make their money after the initial game acquisition. Companies are trying like hell to increase customer engagement with game brands, using Facebook and multiple tools to keep you continuously interested in their game. Companies are racing towards this goal of comprehensive, multiplatform brand engagement, but I'm not sure what exactly they'll find at the end of the race.

2011 has been a year of big changes, but 2012 may be even bigger.