Player generated content is anything creative within a game that was created by one or more players. It generally requires a high level of flexibility within the game, even if that flexibility is only within a limited scope. For example, allowing players to design their own flags in a game would be player generated content. Of course, it can also be far more broad than this. Games like Minecraft and Terraria allow players to build custom structures and even complex logic constructs from basic building blocks. Most Blizzard real-time strategy games (including the Starcraft and
Warcraft series) include map editors that allow players some degree of
ability to create custom maps and other custom in-game content. This allows for large scale player generated content far beyond anything the developers could imagine (and they can imagine a lot).
Player generated content can also go outside the game. For example, there is an entire YouTube series built around the Halo games. They use video captures from the games, and then they add voices. There are also millions of "Let's Play" videos for all sorts of games, with Terraria and Minecraft being some of the most popular, which also qualify as player generated content. Even written fan fiction can be a form of player generated content.
Player generated content serves several purposes. The first is to give a game increased replay value. Replay value is the value a game has in continuing to play it even after you have beaten it. Some games add replay value by adding a multiplayer mode so players can play with their friends. Others do it by randomizing maps and adding such huge amounts of content that no one can experience it all the first time through the game. Player generated content can add almost unlimited replay value to a game though. When players are able to add their own content to a game, they can create replay value themselves. A few flexible options can turn into practically infinite combinations, and that helps a game to avoid ever really getting old.
Player generated content also helps the game creators more directly. You could create a game with huge amounts of content, or you could give your players the ability to make content for you. Spend some time looking for epic things built in Minecraft, and you will find an enormous amount of free advertising for Mojang. When people make mods for Minecraft, they are creating their own content that players can optionally add to their game. If you start to get bored with Minecraft, just add a few mods. Even the 5 most popular mods have almost more content than a single person can every experience completely, and Mojang, the creators of the original game, did not have to many any of that. Some mods add more content to the game than it has in the first place, and some people put together packages with many mods all put together. All of that keeps people playing and brings new people into the game, at no cost to the developers. In short, player generated content is essentially free labor for the game creator, and even though the game creator does not legally own the player generated content, it does not matter, because it still benefits them just as much as if they did.
Allowing player generated content in a game can be tedious and difficult, but it is generally well worth the time and effort.
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