Opinion: Why Artificial Scarcity Could Boost Digital Game Downloads
[In this thought-provoking opinion piece, industry commentator Matt Matthews suggests that artificial scarcity of digital games - only making them available for limited times - could be a way to get the public excited about games.]
The Problem with Infinite Shelf Space
Years ago Qwest produced a memorable television commercial of a bored hotel clerk telling a guest that each room had access to "every movie ever made, in any language, any time, day or night."
As color television was to the radio audience of the 1920s, so was this commercial's promise to the generation of dialup Internet users.
For the record, we still don't have all those movies on demand. However, the video game world is expanding its online offerings every day and we're beginning to get a taste of what it might be like to browse through "every game ever made, in any language, any time day or night".
From Xbox Live Marketplace to GameTap to the PlayStation Store to Steam to the Wii virtual console, a staggering number of video games are available to consumers at the click of a button. (For the sake of a cleaner discussion, let's put aside the seamy world of ROMs and emulators.)
Observers of the on-demand gaming world took note when the creators of N+ colorfully observed that Microsoft's Xbox Live Arcade offers "a hundred games, and they're all shit." This isn't just a problem for developers; consumers have to wade through all that "shit" to find a game worth playing.
Prior to those comments, Gamasutra's Simon Carless argued that downloadable game prices cut developer margins too short. Obviously less money is a serious problem for developers (no mystery there) but raising the prices will incur the wrath of consumers who've become conditioned to expect cheaper games.
The problem, in a nutshell is this: An infinitely long tail gluts the market, confounds the consumer, and commoditizes developers. And that's why I'd propose a new strategy for making games available online: artificial scarcity.
Disney Has a Solution
Disney offers a good example of this practice in the physical marketplace. Every so often the company publishes one of its famous animated movies, repackaged in the latest video format - just "for a limited time." For example, "The Lion King" was released on DVD in late 2003 and was discontinued in early 2005.
As of this writing, third-party resellers through Amazon list new copies of "The Lion King" anywhere from $40 to $65. If you want a new copy of Disney's "Beauty and the Beast" (published in 2002, discontinued in 2003), Amazon resellers can help you out to the tune of $40 to $125.
Disney even uses clever language to promote this process. A title is brought "out of the vault" and published for a limited time. After that, an ominous "moratorium" is instated. The current moratorium period is 10 years, up from the 7 year standard during the VHS era. Incautious parents can easily learn a painful lesson: when Disney brings your child's favorite movie "out of the vault", you'd buy it sooner rather than later.
By pulling titles in and out of print Disney gains several benefits. Its own extensive library of properties certainly dominates the child movie market, and artificial scarcity reduces the extent to which the company competes with itself. Consumers are kept apprised of an ongoing parade of older and newer movies, making the Disney movie market feel more dynamic and less like a static set of old products.
As consumer demand builds after a movie leaves the market, Disney can gauge when conditions will guarantee a tidy profit on a re-release. Finally, Disney's products resist commoditization: the price of a newly repackaged Disney movie (always referred to as a classic, regardless of age or quality) is $20 or more.
The Obvious Examples
Consider this hypothetical: Microsoft announces that Halo 2 will soon be available as an Xbox Original download on Xbox Live Marketplace, at a price of 1800 Microsoft Points - but only until the end of July 2008. One can easily imagine the scramble, bringing the Xbox Live network to its knees, as Xbox 360 owners everywhere download the more-convenient, discless version of the classic shooter.
Or perhaps Sony publishes the original Metal Gear Solid on its PlayStation Store for the month of June 2008, as a promotion during the launch of Metal Gear Solid 4. Afterward it is pulled from the virtual shelves and returned to the digital vault.
In both examples above, you can easily imagine that the games could be reintroduced to the market again later, at a time of the publisher's choosing. Nintendo might we wise to offer Goldeneye 007 for download on the Wii during the two weeks after Christmas, right when owners will be going online for the first time with their new consoles, ready to download a classic game or two.
Good Games Get to Live Forever
Of course the conceit of the above examples is the use of popular, established franchise games. Would lesser-known titles (especially those from smaller, possibly independent, developers) also benefit? In the sense that the virtual shelves could be a little less crowded, yes. With less competition games of all types could enjoy greater visibility and, presumably, more sales.
In return for the higher visibility, developers will have to accept an artificially shortened period on the market. Instead of being available essentially forever (and lost in a sea of other games) each developer's product will enjoy a make-or-break period, then return to cold storage. To help ameliorate the situation, prices should be ratcheted up to make each purchase more profitable for the developer.
And those new games that are legitimate hits - the PixelJunk Monsters and Pac-Man CEs - can promote the final days of their stint on the market as a carrot (or stick disguised as a carrot), prodding fence-sitters to make the leap before it's too late.
After a negotiable time out of print, a game can be revived - a classic in true Disney fashion - and promoted as yet another limited time offering. If the developer has made modest modifications in the meantime, then all the better to advertise the product as a remastered improvement over the original.
For consumers, there will be some discomfort in adjusting to artificial scarcity. Buyers will either have to purchase games during the availability window, or suffer some regret at letting the deal slip away. Moreover, the higher prices will make impulse buys less likely. In return, consumers will browse a less daunting catalog of wares, increase exposure to lesser-known games and genres.
Undoubtedly some software (the aforementioned "shit") will suffer under this system. After a bad game ends its time in the marketplace, there would be little incentive to bring it back. That's just as well, since the garbage filling up the system now serves little purpose. Artificial scarcity provides a convenient means of purging the system of unwanted games and then keeping them out on the basis that they didn't warrant a second publishing.
A New Secondary Market
Publishers no doubt see digital distribution as a means to rid itself of the used game market, which some contend cuts into publisher profits. Whether this is true or not should be a discussion for another time.
But this new artificial scarcity opens up an opportunity for a publisher-controlled secondary market where the used version of a game need not compete with the new version.
Imagine that a popular game -- say flOw on the PlayStation Store -- is put into the vault. Now Sony opens up a section on the PlayStation Store where existing owners of flOw can sell their license to another user.
The existing owner can set the price (according to demand), prospective buyers can shop around for someone willing to sell at a lower price, and Sony can take a small percentage for providing the means of commerce. When flOw comes back on the market, the used copies on the store are removed, of course.
Existing Scarcity Experiments
I'd love to make a financial argument based on hard data, but that's just not possible. The numbers behind the current digital markets are nebulous, to say the least. All we know are that prices are generally low and the truly high-quality titles get lost among the mediocre-to-poor. The gatekeepers - Sony and Microsoft and Nintendo and Valve and Turner - are in the best position to know whether artificial scarcity might have a positive impact on bottom lines.
However, there are some small experiments with limited availability right now. Nintendo has just started making demos for the Nintendo DS available through the Wii's online service. While some demos may be available permanently, some are already slated to be removed from the service.
For its part, Sony will be offering additional levels for echochrome, its Escher-inspired puzzle game, for only a limited period of time. And GameTap has an advertisement-driven client that offers certain games for free for a period of time, after which those games are available only with the subscription-driven client. Finally, Valve has scheduled weekends during which some games on Steam are free to play.
In each of these cases, the companies controlling the platforms are getting data on how limited availability translates into sales. I'm suggesting that at least one company take it one step further: follow Disney's vault/moratorium model and start training your consumers to buy early and often.
Comments
It's an interesting idea in principle, but a bit of a fantasy, really.
Additionally, Disney controlling the release of their own movies helps them to move their own product, but doesn't really do much for the glut of movies from other companies. It doesn't really seem to apply very much to the market as a whole - I can see where the small, indie developer would benefit from other developers doing this, but I have a hard time seeing where they themselves would see a benefit from this.
Also, for the most part, the shelf-life of even a digitally delivered game is a heckuva lot more limited than the shelf-life of a movie... Disney movies are still making them money long after they would've had their copyrights expire under older copyright laws... and that's a really long time.
I understand that some of the digitally delivered games are "retro," such as the Virtual Console or Gametap, but by and large the retro digital delivery specialists occupy vertical markets.
To analogize slightly, Gametap is to Steam as TBS is to Pay Per View.
I believe this is a very good thing, and is itself a bit of a cure to the glut that you foresee... vertical market segments are good for that, when your total market is too big to be manageable.
Posted by: cliff | May 22, 2008 5:28 PM
Well, it might add some perceived value, sure, some urgency to get people to download things before they disappear. It's worked on me when the music biz did it, back in the days of CD singles with rare B-sides, so why not downloadable games too?
On the other hand, it was specifically Disney's 10-year rerelease policy that led my elderly parents to discover they could circumvent the Macrovision on rented Disney VHS tapes using a camcorder. They were unable to actually buy the movies my niece wanted to watch. Once you get over that hurdle of doing something illegal, it's easier to just keep doing it. So while it may increase downloads of the stuff you're pushing at any given time, it'll also increase piracy by those who actually would have bought your product if it were available when they wanted it.... and those new pirates will soon discover they can pirate stuff they can still buy, as well. Basically, Disney's artificial scarcity is a "gateway drug" to piracy.
I guess that's a moot point for consoles since most people are never going to get their consoles chipped, but services for Windows like Steam and Gametap should be wary of driving customers, with money in hand and ready to buy, to newsgroups, torrent sites and IRC servers to get what they want.
Posted by: raindog469 | May 22, 2008 8:39 PM
Theres a lot of respect for the customer around here. If they're not foolishly paying too little for games, they're fragile minds are being manipulated by evil KKKorporations into expecting low-low prices.
Posted by: Movius | May 23, 2008 10:22 AM
You're describing something that reminds me of the (japanese) figures market : items are sold out even before they're released thanks to pre-orders. Only the best sales will see a re-edition way later in the future, and often with less units than at the original launch.
This seems to also create a sub-group of people who will buy multiple items *just* to sell them at higher prices later when it's not available anymore.
I've discovered this little commercial world recently and I'm very disappointed. I see many interesting figures on lists, but they're all sold out... and I'm not paying double the price to get them.
I also agree with raindog469 : be wary of the counter effect of people fed up with this. Sure, we might have to swim through lots of "shit" before reaching our diamonds... but at least we know the diamonds are there...
Let's just say I'd like the total opposite of your proposition : I've often been ready to shell out some money for games and videos and found myself with only eBay as a possibility. And I don't do eBay.
Posted by: Monele | May 23, 2008 12:57 PM
Shhhh.... don't give Nintendo any ideas. They might like the idea and only release VC games for a limited time.
Posted by: ima420r | May 23, 2008 3:52 PM
Yeah, that sounds incredibly anti-consumer, especially since there is no opportunity for consumers to get ahold of the game if they've missed the window. As Chris Kohler points out on Game|Life, this kills all potential of giving games a "long tail" life-span and instead encourages the obnoxious hit-driven first-week-or-die business model that currently plagues traditional game development (as well as every other entertainment medium that relies on limited retail space). There's simply no good reason to punish consumers, developers, and publishers by artificially limiting the available library.
Posted by: Shih Tzu | May 23, 2008 7:51 PM
While this is an interesting theory, my opinion on it is very simple: no, no and no. I agree that there there are too many games on the download services, which makes it hard to tell the good from the bad, but artificial scarcity is not the way to do it. If an of the services implemented an artificial scarcity model they would alienate their consumer base. In addition, an artificial scarcity model would not necessarily fix all of the problems present in the current model, and could bring back some of the problems download services were supposed to fix.
The main problem is sacrifices long-term positive consumer relationships in exchange for a short-term sales spike. Going to the example of the Disney model, it might help them to sell a few more copies of TheAristocats to people who might have have passed it over it it was freely available, but they lose the sales of any consumers who want to buy it outside the release period. Those consumers will have to turn to the secondary market or piracy in order to obtain a copy. This then risks tarnishing Disney's image to parents who can't show their kids the animated films they loved as children because they missed a 10 year window of opportunity. The next time the window comes around those parents might be less inclined to buy the film.
Now Disney can get away with this because they've been around so long and they have such a large consumer base they can afford to alienate a few thousand. Video game don't have that luxury. The portion of the consumer base that would most likely be offended by an artificial scarcity model represents a much more significant part of the whole, and is also be the loudest. Imagine if every hardcore gamer (define that however you will) ofPSN/XBLM/whathaveyou service boycotted said services. It would result in a significant drop in sales.
The other issue with an artificial scarcity model is that there is no guarantee it will solve all the problems affecting the current download services. If Microsoft released Halo 2 on theXBLM nder their current model tomorrow there would be a sharp jump in sales as the fans and those curious about the hype immediately download it, which would level out as as everyone who needs it gets it. There would still be people downloading it periodically, but never that many at once again. Making it available for only a limited amount of time really won't change the overall sales numbers.
Similarly, making a less-known title, like say Psychonauts, available for a limited time doesn't ensure that it will sell more copies. People who've never heard of a game won't necessarily buy it simply because it's only available for a week. So while bad games no one likes might get shuffled off of the download services there is a distinct possibility that good games only a few people care about might get cut as well.
Finally, the absolute last thing the video game market needs is another secondary market. There have been many retro games that can be downloaded for a fraction of the cost it would take to buy an original copy on the secondary market. Add that to the fact the service eliminate the need for the original hardware, and suddenly games that would cost the consumer a premium, such as Rez or Ikaruga, become easily affordable. Make them available for a limited time, and then people will be stuck having to pay too much for them again.
So in the end the artificial availability only really helps the distributors (to an extent) and the potential resellers. The consumers and the small developers still run the risk of getting completely screwed in the process. Also, the examples of current artificial availability models doesn't really apply to the arguments presented in the article. Almost all of them involve a distributor making a title temporarily available for free in hopes of enticing people to play. It would be like arguing that demos for PC games are a form of artificial scarcity. While all gamers would hate to see the various download services collapse under the weight of bad games, they would absolutely despise seeing Gamestop entering the realm of downloadable content.
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