I won't lie, the whole, "you have to wait until the day after the game releases to start working on extra content or I should get it for free," line of reasoning cracks me up. Any other profession, they'd tell you to go the hell on. It would be like telling a writer that he couldn't work on the second or third part of a trilogy until after the first book was up for sale.

DLC isn`t entirely bad. It can be done well to extend the life of a game and give more options in a game you may have finished or are losing interest in. It can be new characters and stages in a fighter, more maps in shooters or other battle arena modes, or it could be extra characters or story missions in single player games. So it can be great if done well.

It can also be bad, locking out content essential to complete the game, or make it feel complete, or over-pricing it. I also don`t like pre-order DLC, especially when it`s announced very early in its reveal. It comes off as something that could be added in the game, but is left out to sell more copies.

So yeah, it`s not all bad...

I hate DLC, but sadly its either DLC or paying more for our video games. I'd choose an up in the price (well, not in Canada, as some games are 80$) as I can't stand DLC, and I almost never buy it (unless its really good). 

Games offer more than just a story.  When you have a book, the intention is to read to the end.  Being put off on a cliffhanger like that means you're done with the book, and it's time to go on to the next book in the series.

The logic isn't flawed, it's the way of the industry.

"Amiibo" aren't DLC.  You're not downloading physical figures through the internet.  However, the data that moves back and fourth is intangible.

In theory there's nothing wrong with DLC, it's the type of DLC that can be "wrong".

Cosmetic DLC? Whatever, do that for all I care.
DLC that gives you an unfair edge in multiplayer? You can fuck right off.
DLC that is content that was produced post launch and adds something to the game? Awesome.
DLC that's on the disc but the publisher thought they could sell extra? Fuck you.
And a special pet peeve of mine, though I only know of 2 instances of this happening, making a difficulty setting DLC? Get the hell outta here.

Also while I'm personally of the opinion that most big publishers make way less actual profit than a lot of consumer advocates like Jim Sterling would like you to believe, I also don't think that publishers have to resort to sleazy DLC practices like day 1 DLC to make their money back, create cosmetic DLC and expansions as DLC post launch, it shows you're willing to support your product, builds consumer trust and stops people from reselling their games. Also I'm pretty sure that many game budgets are higher than they need to be in the AAA space, especially in marketing. CGI trailers are expensive to make and not many people seem to like them for example, so that would be something that could be cut out.

I'm just going to admit I'm ignorant and say that I don't think it's that simple, or logical.  If the engine is already capable of producing high quality renders, why bother taking it away?  It's counter-productive.

I believe studios and publishers should stop the arms race and focus on innovation over flash. Yes, Uncharted 4 will look like a damn movie but will it innovate the industry like say... Minecraft? Costs wouldn't be an issue if they thought that way.

Small teams+less flash=cheaper games.

In response to your updated OP: no they shouldn't. That would lengthen development time. DLC is supposed to (well in my opinion at least) keep folks interested in the game over the months after release. I'd argue that you can sell more games over the coming months, and keep people invested in your game, by releasing spaced good DLC expansions/game modes etc.
When devs release DLC day 1 and charge extra; well I think they're being real twats tbh. I see what you are trying to say but technically, by my definition, it wouldn't be "DLC" if it was ready at release. It would be part of the game. In which case, the rising price of games would cover it.
So I respectfully disagree.

Ka-pi96 said: On the disc DLC is absolutely disgusting. You're paying for the disc and everything on it should be included for that price. Off the disc DLC depends on how it is done. If it's day 1, then it's terrible. If it's for something that should have been in the game in the first place, terrible. Stupidly expensive, terrible. However if it is a decent amount of content, the price is reasonable and it is clearly something that was made in addition to the original game (and NOT as a part of the game that was ripped out to be sold separately) then it's a brilliant idea, more please

I am of the believe that DLC should be free and used as an incentive to buy the game. 

Be a good argument if the most abused DLC practices weren't from games that already are guaranteed to sell mulitple millions.