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This is why paid DLC is here to stay

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Wall Street's favored news outlets are in a joyful lather today, following Electronic Arts' most recent financial statement.

The company did better than expected for its third quarter revenues and profits, with chief financial bigwig Blake Jorgensen explaining that "our revenue keeps going up and our expenses keep going down." At the dead of night, this is just the sort of sentence CFOs whisper to their pillows.

In the aftermath of the fiscals, shares jumped almost five percent. This isn't just a knee-jerk reaction to good news. It's the source of this extra income that is delighting shareholders: online.

EA generated a record revenues from digital sources such as mobile games, subscriptions, full game downloads and, of course, downloadable content. More than half its revenues for the trailing 12 month period came from digital.

The chart below shows how that digital moolah is broken down. Out of roughtly $2.2 billion for the previous 12 month period, $921 million came from "extra content." If you bought add-on levels, or some Ultimate Team packs, or an extra weapon for the Plants vs Zombies addicts in your family (and I did) then your loot contributed to EA's happy splashy day on Wall Street.


Other digital growth areas pale in comparison. Full game downloads came in at $420 million, while mobile was just under $500 million. Subscriptions, including the $5-a-month EA Access club is rising fast at $340 million. Let us not forget that EA wants this service to become "the Netflix of games."

Paid DLC has its critics in gaming, and rightly so. It often feels like a surcharge for content that ought to be included in the original price of the package.

But EA's entire strategy is now built on the idea that core game purchases are declining, and that supplemental purchases by dedicated players are increasing. Where it hasn't entirely embraced free-to-play, the company has taken on as many of that model's principles as it possibly can.

DLC's defenders say that consumers can buy, or not buy, whatever they wish. They argue that rip-off DLC will ultimately harm its purveyors. They point to big companies, like EA, which use freebie DLC as a good way to rekindle interest in games, and to foster loyalty. Certainly, this is the line EA takes, as it tries to assure consumers of its wish to balance the desires of fans with the fundamentals of value and the demands of its shareholders.

Ultimately, the numbers drive publishers like EA, and the numbers are clear. Downloadable paid, extra content is a big win for Electronic Arts.