Charles Huang on DLC

[Electric_Zen]

Red Octane's Charles Huang doesn't always give the greatest interviews, but he is very open and honest here (and doesn't snipe at Harmonix). The whole interview is here (http://www.gamespot.com/news/6180442.html).


The thing about the economics of downloads that people have to realize is the artist and the labels get the same royalty payments they would on iTunes. They're comfortable with that model, so you have to give them that same cut. And Microsoft needs to get compensated for putting up and running all this Xbox infrastructure. So there's another party that takes payment and adds some cost to this. And we not only have to give the music but also build the note chart for the game, so there's development time.

This is the first time I've seen explicit acknowledgment that the publisher's cut on DLC is the same as it is for iTunes, known to be right around 70 cents. We also know that Microsoft's cut on Marketplace transactions is about 30 percent.

So, the numbers at the following price points would be:

Per-song cost: $2
Music Publisher: 70 cents
Microsoft: 60 cents
Harmonix: 70 cents

Per-song cost: $1.50
Music Publisher: 70 cents
Microsoft: 45 cents
Harmonix: 35 cents


The thing with Guitar Hero II DLC is that it was done completely with Harmonix and made off their code base. Guitar Hero III is done all by Neversoft. If we can work something out with Harmonix, we would love to support Guitar Hero II. On the other hand, the entire studio is busy with Rock Band. With the My Chemical Romance download pack, we were able to get them to support it for Guitar Hero II. It's on a pack-by-pack basis.

I think this pretty much solves the mystery of what happened to GH2 DLC. Even while Red Octane was promising more DLC than any other game in History, they knew very well that they were severing their relationship with Harmonix, and they had failed to negotiate any sort of support agreements in advance for DLC.

So now, each and every content pack requires them to negotiate a separate support arrangement with Harmonix. No wonder so few of these packs ever made it to Marketplace.

This also gets my hopes up for a sub-$2 price point on the Rock Band DLC. The production costs on these songs are going to be high when you are contracting a third-party to produce a small number of songs, like Red Octane did. Harmonix will be producing a large number of songs in-house, which should be cheaper.

[Apples]

I think a sub $2.00 price point could be achieved by utilizing independent and upstart bands. For example, your NY times article on Bang Camero shows that game exposure = revenue through other channels.

Once bands and labels start wising up to this, or perhaps with MTV's connections, there is room to maneuver in negotiating pricing. Plus things like bulk pricing on albums.



I think that DLC pricing is going to end up having a multi-tiered pricing structure with different price points for indie tracks, big labels, albums, singles, and expansion packs.

I also think that equating DLC price points to iTunes price points is a totally BS red herring argument. DLC has *no* portability and a much more restrictive field of use compared to digital music downloads. It's amazing to me that people equate the two. IMHO it's just more of the music industry and their bumbling attempts to adapt to 21st century business models.

[Leo_10th]

Don't forget about red octane and activision's cut!

it IS business after all...

[AVC808]

things makes me wonder about PSN DLC prices. anyone know how much sony rakes in? i would imagine theyre a little more developer friendly.

[Electric_Zen]

Don't forget about red octane and activision's cut!

Hi, Leo. My price breakdowns were projections for Rock Band DLC. Red Octane and Activision would not be getting a cut for this.

[Bakkster]

Going a little farther into assumption-land, let's say that the GH2 download profits went 50-50 to HMX and RO. That means HMX made about $0.35 per song, the same as these numbers say for $1.50. I'm sure MTV and EA will take a piece of this, but at least I don't see them pricing about $2. Add that we aren't forced into buying 3-packs (woo-hoo!) and can buy full albums at a (hopefully) discounted price, I feel pretty good about the DLC pricing.

Sure, it's not iTunes cheap, but if you thought that was possible you were fooling yourself.

[Leo_10th]

Hi, Leo. My price breakdowns were projections for Rock Band DLC. Red Octane and Activision would not be getting a cut for this.

sorry, i meant for the gh2 cuts :)

[Apples]

Going a little farther into assumption-land, let's say that the GH2 download profits went 50-50 to HMX and RO. That means HMX made about $0.35 per song, the same as these numbers say for $1.50. I'm sure MTV and EA will take a piece of this, but at least I don't see them pricing about $2. Add that we aren't forced into buying 3-packs (woo-hoo!) and can buy full albums at a (hopefully) discounted price, I feel pretty good about the DLC pricing.

Sure, it's not iTunes cheap, but if you thought that was possible you were fooling yourself.

Since MTV owns HMX, they'd effectively be taking a cut from themselves I think. Thus they wouldn't be a party to contribute to a cost increase, they'd simply collect any net profits generated.

And the nature of the relationship with EA is not at all clear. Depending on the agreement in place, they may or may not be a party to all things DLC related.


One final comment: HMX had months to watch the uprising and backlash regarding GH2 DLC bundling and pricing. It is reasonable to assume they would not have touted DLC so highly without having a more reasonable and profitable model in place.

[Electric_Zen]

And the nature of the relationship with EA is not at all clear. Depending on the agreement in place, they may or may not be a party to all things DLC related.

I think the relationship is pretty clear. EA is purely a retail distribution partner, not a publishing entity.

They do the same thing for Valve's The Orange Box release. EA gets the product onto store shelves, and gets a cut for retail distribution, but they get nothing for copies that are sold electronically over Steam.

Similarly, EA has nothing to do with Rock Band's DLC efforts. In that case, Microsoft and Sony are performing EA's distribution role, and getting the cut for that.

[TheTogfather]

Cool article. Pretty informative and honest...actually kinda refreshing after some of the other GH3/Red Octane related stuff. And yah, he doesn't take any jabs at HMX, but I wonder if he does have a point about the whole 'albums business model being broken' thing. With Rock Band/Harmonix putting a lot of effort into downloadable albums, I wonder how that model will hold up.

Good read though, thanks for posting.

[Magnet]

They wanted it to be in the harder section, so they volunteered to go back into the studio and rerecord the song with a special solo in it so they could move further down the [setlist].

That's from the bit about Cult of Personality being re-recorded. I don't know why Huang phrased it that way. He makes it sound like the main reason it was re-recorded was just to have the song be in a harder section. Of course, the real story is that the master couldn't be located. While I'm sure that adding in the solo was an obvious thing to do, it wasn't like it that was what made them re-record the song.


From a consumer standpoint, it's a bit tougher. I think most consumers, at least most younger consumers in the iTunes generation, don't buy whole albums. They buy songs, or packs of songs. They buy individual tracks if they can.

Also, it's funny how Huang talks about how people don't buy albums, but they buy packs of songs. (Anyone else feel like that "or packs of songs" was just put in there to cover himself with respect to the GH DLC model?) What does that even mean? As if offering less songs in packs would be a better DLC model than offering all the tracks on an album as a whole or downloadable individually? He's really misrepresenting the options we're getting with RB DLC.

[logicalnoise]

things makes me wonder about PSN DLC prices. anyone know how much sony rakes in? i would imagine theyre a little more developer friendly.

actully MS give tehd evs a break by not charging seperately for bandwidth coasts(it's included with their 30 percent).

Sony unless there's a seperate agreement charges additionally for bandwidth costs.

[Brock_Landers]

I think a sub $2.00 price point could be achieved by utilizing independent and upstart bands. For example, your NY times article on Bang Camero shows that game exposure = revenue through other channels.

While I wouldn't agree completely, I do know that there's no way in hell I would buy the last two GH2 DLC packs on disc or iTunes, but I do feel pretty happy doing so in the name of game content.

And it may be a bit presumptious to assume exactly what deal EA does or doesn't have in regards to DLC profits. Anything can be put into a contract, and if they knew that DLC was going to play a big part and that HMX would need them enough, who's to say that they didn't try to get a cut?

[sporkBrigade]

One final comment: HMX had months to watch the uprising and backlash regarding GH2 DLC bundling and pricing. It is reasonable to assume they would not have touted DLC so highly without having a more reasonable and profitable model in place.

Unfortunately, they've also had months to see that the download packs for GH2 were a smash chascow success. Those packs sold like hot cakes, and they didn't even smell like hot cakes.

However, HMX did undercut that $200 price tag we'd been seing for months, so I'm actually pretty optomistic about the whole thing. Fingers are crossed.

[PurpleHaze]

However, HMX did undercut that $200 price tag we'd been seing for months, so I'm actually pretty optomistic about the whole thing. Fingers are crossed.Just to play devil's advocate - but it's possible they decided to cut the hardware price as an incentive to hook people into their "music platform", and that they are therefore looking to make that money back on DLC, which could actually push up the DLC price.

I'll be very interested to see whatever price they do finally announce - my optimistic side says that they are pushing the idea of DLC very hard, and that they must therefore be confident they can negotiate a popular price point, but my cynical side says there's a lot of fingers in these pies, and that might make it impossible to drop any lower than the GH2 DLC prices, which certainly were not popular.

[Terranova]

actully MS give tehd evs a break by not charging seperately for bandwidth coasts(it's included with their 30 percent).

Sony unless there's a seperate agreement charges additionally for bandwidth costs.

Hmx could quite easily have their own PS3 servers, Resistance fall of man has it's own servers hence why you can buy the map packs direct from Insomniac, HMX could do the same thing if they wanted, the only fee then they would pay to Sony is to host the DLC on the PS Store servers as well.

[Ninegauger]

I don't thing the GH2 prices were unreasonable or unfair... it was the bundling that killed me and that for the most part it was recycled content anyway. If they release individual songs Rock Band will be way better than the Guitar Hero II DLC already.