The Economics of Releasing a Videogame, or: DLC Was Always a Trap
I wrote a big post of videogame economics from the perspective of someone who has been involved in the process of greenlighting projects and doing due diligence checks - not senior, but involved in the calculations and judgements.
I wrote... a lot for this post. And in the end, I'm binning that draft because it deals too much in the numbers. Lots of % and ratio bullshit to try to get across how hard it is to work, because that's what my job entailed. The key takeaway is and always was simple - DLC won't make a game profitable, it won't fix having a small audience, and unless you want to exploit people with poor impulse control you can't fix a bad pitch with "then we'll have in-game purchases."
The key point is that making DLC takes time to make, brings in a fraction of the base-game sales price, and your maximum audience is "people who already bought the game". It takes years to establish the kind of presence and workflows where it makes good money - The Sims 4 and CK3 are not niche titles - and they trade hugely off the goodwill or exhaustion of the community. Cities: Skylines was one of the most successful DLC machines in history, and that model did not survive the rocky transition to C:S2* because their community has totally lost faith in them. There's no goodwill left.
The basics of game economics are extremely simple - sell enough copies to cover your costs, don't forget to account for taxes and platform cuts, and consider having a marketing budget. "Have a DLC/support plan" is a presumed component in 2024, but I think it's a trap. I think it always was. Barring some very rarified exceptions, this was only ever an option for the most successful games, and those from companies that measure their revenues in "GDP of which small country" amounts, because they get to be omnipresent in public awareness, they get to promote DLC at international trade-shows and run preroll ads on Twitch, and they make the games normies buy a PS5 to play.
The current games market is a really hard nut to crack, I have a ton of sympathy for devs trying to find their niche and make it all work, but imo DLC is a poisoned chalice that promises technically limitless revenues while tying you down to endless development, community management, "content roadmaps", and difficulty moving on to new projects.
* - More of a piece of opinion here, but I think games which successfully leverage DLC inherently face an uphill battle releasing sequels, as the "core experience" becomes a much muddier concept. Is CK3 a sequel to CK2 or its DLC? C:S2 and KSP2 had trouble following up beloved games with long support periods, but I suspect they won't be the last to run into the problem of having spent a decade improving something then trying to sell a half-baked replacement.