How 'Free' Economics Are Going To Impact The Video Game Market

from the it's-coming... dept

Reader Ben points us to a well done article over at GameIndustry.biz warning the industry to start understanding how "free" plays a role in digital economics. It does a great job summarizing the key points associated with "free" infinite goods, such as the fact that it really has little to do with "piracy," though the "piracy" may be an early indicator of where the market is heading:

The notion of Free isn't new in economics, of course. It's well understood that as a commodity becomes less rare, its value tends towards zero. When something becomes sufficiently commonplace, you can no longer charge a notable price for it - unless you artificially create a market based around image and prestige (bottled water) or find a way to add value (pure oxygen canisters, flavoured water).

You can also create artificial scarcity to keep prices high, although there are obvious moral problems with doing that with anything other than luxury items - and markets, like networks, interpret this kind of interference as damage, and usually find a route around it.

The whole thing is worth reading, and does a good job laying out the issues. It doesn't, however, suggest much of a solution -- though, there are plenty of potential solutions for the video gaming industry, focusing on finding scarcities to provide that can't be had for free. So, for example, giving away the core game for free, but charging to play multiplayer versions on an authorized server. As many are finding, that can be quite a nice business. Unfortunately, it does seem like some think the answer is to sell virtual goods within a game, but that has the potential to face the same eventual issue (the goods are really infinite, and will face the same deflationary economic pressure). But the fact is there are always additional scarcities created, which will present opportunities.

Figuring out just how to break out those scarcities from the infinite goods was the point of that economic series I wrote up a few years ago, which we're now offering nicely packaged as the Approaching Infinity book (as a part of our CwF+RtB experiment) -- which actually helps demonstrate the point. You can read most of the basic content for free online in the series, or you can buy the physical (scarce) book in a nice readable package which has been updated and expanded with more material and edited to better flow as a book (and you get a t-shirt as well). You can always take infinite goods and find a scarcity... whether it's with blog posts or with video games. So, yes, free is important to understand, but equally as important is understanding how to use it to your advantage, rather than just worrying about how it may hurt your old business model.

37 Comments | Leave a Comment..

More Artists Recognizing The New Business Model: Sell The Scarcity

from the very-cool dept

Laughing Squid, in talking about how Eminem is the latest artist to embrace the tiered selling structure (though, I think he got the model wrong -- the music is priced way too high), calls our attention to a short article by famed musician Brian Eno that highlights the point we've been suggesting for years. The music industry is doing great, and it's doing it by selling scarcities:

Digital technology has made music easier to make and copy, with the result that recorded music is about as readily available as water, and not a whole lot more exciting.

This seems like bad news, until you pick up a copy of Time Out. Then you realise that the live music scene is exploding, for, unable to make a living from records sales, more and more bands are playing live. That experience can't be put onto a memory card--and people are willing to pay for it, and to pay quite a lot. Concert attendances are at an all-time high: recordings are increasingly ads for live shows, and live shows have become once again the real thing, the unduplicable.....

The duplicability of recordings has had another unexpected effect. The pressure is on to develop content that isn't easily copyable--so now everything other than the recorded music is becoming the valuable part of what artists sell. Of course they'll still want to sell their music, but now they'll embed that relatively valueless product within a matrix of hard-to-copy (and therefore valuable) artwork. People who won't pay £15 for a CD will pay £150 for the limited edition version with additional artwork, photos, booklet and DVDs. They often already own the music, downloaded--but now they want the art. They're buying art, and they're buying it in a new way. That suggests to me the possibility of a refreshingly democratic art market: a new way for visual artists, designers, animators and film-makers to make a living. So, as one business folds, several others open up.

It's so great to see more and more content creators realizing this.

44 Comments | Leave a Comment..

My Keynote At Mesh: Growing Communities And Adding True Scarcities

from the have-fun-with-it dept

A bunch of folks have been asking for video from my keynote talk at the excellent Mesh Conference, and here it is (and if you really want to download it, there's an iTunes link as well). It's also embedded below if you click through. The whole thing is an hour, but split into four separate videos. The first two are my presentation and the second two are the Q&A that followed:

It was, as always, lots of fun to do. Also, I met tons of great, wonderful, interesting and fascinating people at the event. Interacting with people is always the best part of these things. Thanks to everyone who came out -- and a special thanks to the Mesh Crew: Mathew, Rob, Michael, Stuart and Mark who have created something really special with the Mesh event and who are each amazing individuals as well.

Also, since people were quizzing me about it later: I actually do "memorize" the presentations and what's coming next. I don't see what the next slide is before I bring it up and no (as two separate people asked me...) I did not have a little device in my ear telling me what was coming next....

85 Comments | Leave a Comment..

BitTorrent Site Mininova Makes It Easier To Sell Scarcities With Downloads

from the neat dept

A bunch of folks have been sending in the news that popular BitTorrent site Mininova is now making it much easier to monetize your own BitTorrented music. Basically, it makes it easy to sell other things alongside the torrent. This is very much about using the free music to sell related scarcities, such as concert tickets, CDs or other promotional goods. Imagine taking the various tiered upsell solutions that are becoming popular and connecting them directly to your own torrent of the music? As the story notes, at least one indie record label, Beep! Beep!, has signed up and is releasing all of its music via this system -- and even offering those who download a 20% discount on products as a thank you for helping to seed the files:

"It's only fair not to pay for something you haven't heard yet. In our opinion torrents are an excellent way to present you with our music. That's why Beep! Beep! and Mininova have teamed up. We like the fact that you're taking the effort to get to know new music. In fact, we'd like to thank you for downloading and seeding our music by giving you a discount on our hardcopies."

But, of course, we'll probably still hear from people about how such torrent sites are destroying the recording industry... even as it helps enable exactly what's coming next.

29 Comments | Leave a Comment..