Zelda series producer Eiji Aonuma recently revealed in an interview with Famitsu, a Japanese games magazine, that Nintendo currently has no plans to release additional content for The Legend of Zelda: Tears of the Kingdom. This decision marks a notable departure for both a blockbuster game and a major first party Nintendo release.
AAA games’ risk profile typically mandates post-release DLC
Tears of the Kingdom is what is known as a “AAA” game. These are popular titles which, like blockbusters in cinema, are costly to bring to market, limiting the number of companies which make them.
AAA games are characterized by their need to push the boat out in areas such as scale and graphical fidelity to ensure they stand out as prestigious in a bid for consumer attention. This, of course, results in lengthy and expensive development cycles, with their publishers often spending as much money on marketing as they do on making the games.
Indeed, it took an estimated six years and 1,400 employees to produce Tears of the Kingdom – a marked increase on predecessor Breath of the Wild, where development lasted five years and involved over 900 staff.
The complexity of modern game development has been associated with an acceleration in development costs. Two console generations ago, $50m would have been the norm to develop a AAA title, publisher marketing spend notwithstanding. Today, this has increased fourfold, with recent titles Horizon: Forbidden West and The Calisto Protocol reportedly costing $220m and $162m to make respectively. Meanwhile, a highly mature console hardware market means audiences for AAA games are not rising at the same rate as development costs.
The sustainability of AAA games development depends on a publisher’s ability to maintain interest in their title post-release. Publishers have since adopted a more complex value chain utilizing elements associated with live service games. In other words, publishers must support a game with paid and free content updates in terms of patches and DLC, which ultimately contribute to lifetime revenue of a title beyond its launch date.
Nintendo is well aware of this. In the seventh console generation, it commanded a combined installed base of over 250 million systems across Wii and DS. Comparatively low production costs meant paid DLC was not considered as an option for the highest-profile games of the era.
Fast forward to the ninth generation and it’s clear this has changed. Despite its runaway success, in a world where mobile gaming reaches the masses, the Nintendo Switch was never going to command the same wide audience as Wii and DS. At the same time, production values of Nintendo’s most important releases have increased significantly.
As a result, Nintendo now couples most of its AAA blockbusters with what it calls the Expansion Pass – a paid add-on that grants access to about a year’s worth of DLC. For instance, Nintendo published 10 months of DLC following Xenoblade Chronicles 3’s release in July 2022.
Tears of the Kingdom foregoing DLC highlights Nintendo’s unique market position
Not coupling Tears of the Kingdom with an expansion pass is unusual since it bucks an industry trend, yet there are many reasons why it makes sense for Nintendo to have done so.
Tears of the Kingdom was the first title to command a higher $70 launch price in North America, Nintendo’s biggest market. An absence of extra content may be a conscious decision to highlight extra value as part of the higher base price which is likely to carry through to Nintendo’s AAA titles going forward.
Its predecessor, Breath of the Wild, was also a similarly huge game, sporting around two hundred hours of overall content. Consumer appetite for even more content may be lower than average, which may be reflected in conversion rates for its expansion pass DLC and Nintendo’s decision to drop DLC from Tears of the Kingdom.
Nintendo Switch owners’ demand for DLC is also lower compared with directly competing platforms. Despite Nintendo having grown spend on DLC per Switch by over double since the system’s launch in 2017 (see Figure 1), Omdia expects spend on DLC per Nintendo Switch connected console in 2023 to remain at just a quarter of that on PlayStation and Xbox systems.
Figure 1: Nintendo Switch still lags behind PlayStation and Xbox in DLC spend by a large margin
This underscores how the opportunity cost of making DLC for Tears of the Kingdom is higher compared with a similar blockbuster first-party title on PlayStation or Xbox.
There are two other factors which compound this. First, the demands on Nintendo’s internal development and publishing resource. While the credits of Breath of the Wild reveal its expansion pass was produced by a smaller team of around 400 people, this is still a significant number of staff – about 39% of the original game’s team.
Second, Omdia is expecting Nintendo’s next-generation console to release in 2024. The core Zelda production team (Nintendo EPD 3) will be focused on early software support for the new system, which is likely to take the form of enhanced versions of Breath of the Wild and Tears of the Kingdom.
The potential significance of these enhancements combined with the absence of Switch DLC suggests Nintendo will be happy to sell these games again, as it has been comfortable doing so in the past.
This all serves to highlight the unique position Nintendo finds itself in. Its ownership of a hardware and software platform affords it additional revenue streams over publishers of AAA titles who are beholden to seasonal, annual release cycles.
Unlike other console platform holders, Nintendo also has different motives for its AAA games development. Microsoft wishes to bolster the appeal of Game Pass, while Sony is focusing on building a portfolio of live service titles to monetize its existing audience. Nintendo still sees its AAA games as system sellers first and foremost, with their long sales tails also ensuring ample software sell-through. It is also keen on retaining the upfront value of its software, refraining from utilizing steep discounts.
While Tears of the Kingdom will not be receiving DLC any time soon, we shouldn’t be surprised to see it appear on Nintendo’s next-generation platform at a premium price instead.
Console Report – 1H23 (May 2023)
Games Hardware Database (May 2023)
Why is games development so expensive? (December 2022)
James McWhirter, Senior Analyst, Games
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