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Originally Posted by Malleus Dei
Working to improve existing products does not generate a new source of cash flow.
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Not necessarily true. See first person shooter games such as the Unreal Tournament franchise for evidence of that.
The original UT, UT2003, and now UT2004, have all received a number of post-release patches which, while addressing bugs, did also offer new material and game improvements. The developer also offered "bonus" patches which did nothing but add new content.
I can also point to the IL-2 Sturmovik combat flight simulator franchise as well. Several patches for the original IL-2 and the follow-up IL-2: Forgotten Battles have also had patches which added new content.
Now, why would these companies expend this additional effort in making new content for these games if it was not generating something worthwhile for the company?
The addition of new material keeps established fans of the game interested and enthusiastic about the title, and undoubtedly someone still interested and enthusiastic about a game is going to tell their friends about it and perhaps generate some additional sales as a result. Let's remember, the biggest thing that's going to sell games is positive word-of-mouth (the same is very much true for movie ticket sales).
Of course, there's probably also a pride and company reputation element involved in adding new content to a released game. But certainly there must be some sort of financial benefit to it (even if it's an indirect one), otherwise it would not be done to the extent it has been done for the aforementioned game titles.
I really get the feeling sometimes that many of the folks here have little experience with gaming outside of the OOTP series...