Bethesda has embraced the idea of downloadable content for home consoles for both of its two big releases, offering consumers everything from small in-game items such as horse armour in The Elder Scrolls IV: Oblivion, to full five hour episodes in Fallout 3.
It's clearly been a profitable approach in a relatively new market, but it's not been without its controversies, with issues from pricing to delivery. Here, in the second part of our exclusive interview, European managing director Sean Brennan discusses the company's approach to DLC, the problems and successes and the effect DLC has had on its own boxed products at retail.
Q: Do you see a significant jump in sales of Fallout 3 boxed product when you release big downloadable content update like The Pitt or Broken Steel?
Sean Brennan: If you look at the market generally, what you tend to find in terms of the longevity of a product life-cycle, often you find that if it's a huge multiplayer game it tends to sell for longer. And you can directly correlate that to word of mouth. Opinion-formers are talking about Call of Duty because they're still playing it online, it's top of their consciousness. That's what multiplayer does for a title if it's good enough.
What DLC does, particularly with Fallout 3 as it's not a multiplayer game, what that again does is gets the word of mouth going, it revitalises the whole thing. People start talking about it and those that own the original game, they're playing the DLC and the word of mouth spreads. Fallout 3 came out in October and it's still very much being talked about now. It passes on by a process of osmosis in to the marketplace. It really does help sales. And it's a marketing tool to a large degree, it's extending the playing experience of the original game but it's also marketing the original game as well.
Q: Does it help to keep the RRP of boxed products higher for longer? Because games are released and reduced in price within the first week of sale...
Sean Brennan: If you look at our pricing in the market, we were a little bit more resistant to price erosion than a lot of other products, because of the quality and the amount of gameplay and sheer value for money in Fallout 3. What tends to happen is that product comes out and the price goes down – in the UK in particular, it doesn't happen to the same degree elsewhere outside of the UK – the price comes down as retail competes with the product over the Christmas period, and then we see what happens in January. Forget the January sales issue, we took the decision to not partake in that. The RRP of our product actually went up after Christmas We've got to be very conscious of that because the market has changed and the days of something like Oblivion selling at full-price for a year or more are over. There's other factors to take in to account – the trade-in of games is significant.
Q: Has DLC helped slow the rate of trade-in for products like Fallout 3 and Oblivion?
Sean Brennan: Absolutely, we've noticed that. We've been quite vociferous in terms of explaining the what the DLC plan is going forward, and yet keeping people guessing to a certain degree. There are more plans going forward which we're not revealing yet. When you've finished a game, that's it, unless you want to play it online. But if you think there's more DLC coming down the line it's worth keeping hold of.
Q: Were the constant DLC updates a conscious decision by Bethesda to tackle the pre-owned market?
Sean Brennan: It was more because we had more to say with this game, more to add to it, more to give people. And also from a brand development perspective it is important to keep the brand alive, and I think the DLC does that really well, as I said, it's a great marketing tool. And of course it helps to continue to generate revenue.
Q: Companies like EA keep their brands alive with yearly or bi-annual updates,which is obviously harder for Bethesda to do. How regularly would you like to see your major brands appear on the market?
Sean Brennan: What we're aiming to do it to try and get major brands out every other year if we can. That two-year development cycle is something we can just about keep to. We haven't done that to-date and we won't do if it means sacrificing quality. That's a critical point to make. Other, perhaps more cynical companies, might want to do that, but it's kind of an anathema to us. We're not going to pursue that strategy if we think it would result in a downgrading of quality, because that's everything. If we thought there were going to be quality issues, we'd just delay it.We're a private company, so we're not subject to the pressures of Wall Street or The City or whatever. That doesn't happen with us. And we've got a lot of cash in the bank, we'll put product out when it's ready. Of course, if delaying it means it won't improve it that much, then we won't. We're never going to get into that approach. It also gets problematic when you've got more than one development team overlapping on a brand, it's got to be well coordinated.
Q: But you have investors to please – they're going to want their money back at some point?
Sean Brennan: They take a long-term view of it. It's not just a question of that, because they are pleased that we're making a profit and that's one of the most important things. We're growing as well, so if we continue to do that every year they'll be very pleased with us. They're not looking for any kind of minimum growth rate or anything like that, they chose to invest in us because they believed in the product vision, in the quality, and they're not about to try and curtail that for short-term reporting issues.
Q: Do you get any complaints from retail about the amount of DLC you're releasing, because they're obviously not getting a slice of that?
Sean Brennan: We don't generally. We've announced our first retail add-on pack for PC and Xbox 360, so we are still supporting retail. And I have to say the margins on those for us aren't great, quite frankly, but the reason we're doing it is to support retail and to ensure they continue to make money out of the products. When we release the first add-on pack we're expecting to do some pretty significant volumes, and we're going to promote that heavily, we want retail to share in that. As far as we're concerned retail is still hugely important.
Q: You recently had more issues with the release of Broken Steel on Xbox 360 and PC – is it still a learning process, is it still early days for DLC as a service in general?
Sean Brennan: Can I say, rather delicately, we're in the seminal stages of the market for both first-parties and third-parties.
Q: Is there an issue with QA and testing internally at Bethesda?
Sean Brennan: I don't think so. It's something where we're producing a lot of content and we're working in partnership with Microsoft on this, we've produced a lot of content in a short time frame. Think of it like this – we're releasing a lot in terms of gameplay, it's about half a full-price game with 4-5 hours worth of gameplay, when there's only eight hours in some full-price titles. That process, for us and for Microsoft, it's inevitable in a sense that there's going to be some issues there. Obviously it has been a concern but I think we've ironed all of that out now. We're in a good position now, but it's not been how we wanted it.
Q: Fallout 3 sold well over both Xbox 360 and the PlayStation 3. Why haven't you worked with Sony on DLC?
Sean Brennan: We put together a partnership with Microsoft, and with Fallout we had a global marketing partnership with Microsoft and this is an extension of that.
Q: But those PS3 owners are missing out on content and Bethesda is missing out on sales to PS3 owners...
Sean Brennan: We are, and that is unfortunate that has been the case. But at the moment we're focusing on the PC and 360 owners just to try and keep those guys happy first of all.
Q: Is there anything platform holders can do to help smooth out the issues you've had with DLC?
Sean Brennan: We work closely with Microsoft. It's early days for everyone, anyone who says it's not is a being disingenuous. As that side of the business grows a lot of those problems in general will start to be ironed out. DLC to date generally, I wouldn't say it's been an after thought, but I think it's been planned because it seems like a good idea. It will become more important going forward and as the take up of DLC increases and becomes a bigger part of the business, the focus will be stronger and there will be less issues.
Q: DLC is still a relatively new business model on consoles and Bethesda has embraced that quite early on. But are there any other emerging business models or opportunities that you're keeping your eyes on?
Sean Brennan: We've been a pioneer of DLC on consoles more as a function of the fact that we've got so much content that we wanted to bring to the consumers, so it was more driven by that than trying to be pioneering with a new business model. We keep our eyes on other things, we have an MMO division within ZeniMax, and the time that comes to fruition we don't know what the business models are going to be – it could be anything. If you talk to people on Eastern Europe they would say give it away free and generate incremental sales through downloads or in-game commerce. We keep our eyes open to any business opportunity.
Q: Bethesda is very much focused on the triple-A blockbusters but is there any focus on more modest productions? Products that can be profitable if the scale is right?
Sean Brennan: We've got Vir2l at ZeniMax which are working on handheld games, iPhone games, and trying to exploit that market. We don't like the casual games area as such. We have huge respect for the Nintendo platforms, and from a marketing perspective globally they've been phenomenal. It would be churlish to ignore that space. We've had a couple of minor products that we've released there. Looking at the opportunities in the Nintendo space is interesting for us because it's more driven by getting the right product for the demographic and also the right quality. We're not going to do a hamster simulator, it's not us. We're not going to produce games for girls or pet-sim products. There's nothing to distinguish them from one another.
Q: You product is more adult-orientated, so you must be watching a company like Sega who are trying mature titles like House of the Dead and Mad World on the Wii. Do you see a market for product like that on the Wii?
Sean Brennan: House of the Dead is great brand and the product is great too. I think it's difficult, I've got consoles at home but I wouldn't sit and play an 18-rated game with my family on the Wii. Is there space in the Wii market for that? I think there is, but again, it' all about finding out how big that is. Is it 5 per cent? If it's five per cent of the market and you can own that space it's worth doing because you can achieve volume. If you can't own it at five per cent, it's not worth doing, quite frankly. We are going to make an announcement on a really big Wii game this year, we've got a couple of other things in the pipeline, and it's a format we're really looking at with the right approach. We're not going to establish a new range and call if 'My Girly Game Range' or whatever these other companies are doing, it's so me-too and boring.
Q: A number of publishers jumped on the Wii a little too early and didn't really know what to do with it, and now they trying to get back on it with an adult slant.
Sean Brennan: Yes, and it was a problem with the DS space as well, because as soon as you spot the bandwagon, it's already too late. People don't get that. There are still some people jumping on the bandwagon but it's not within our business philosophy.
Sean Brennan in managing director of Bethesda Europe. Interview by Matt Martin. The first part of this interview can be read here.