Bad Ideas: Instituting Artificial Scarcity To Annoy Fans Into Buying Now
from the economics-of-destroying-value dept
The more you look at the economics of abundance, you realize how ridiculous it is to ever artificially create scarcity. It only serves to shrink a market and leave open huge opportunities for competitors to wipe you out. Most of the time, though, we’re talking about things like copyrights and patents — which many people (who haven’t considered the matter thoroughly) don’t think of as artificial scarcity. However, it’s quite rare to see someone be totally open in defending artificial scarcity as a smart business model option. Reader Mart writes in to point to just such an editorial, over at Gamasutra, where Matt Matthews tries to make the case for why video game makers should create artificial scarcity in an attempt to have more control over their markets.
Specifically, he suggests that games should only be released and available for limited times before being pulled, with the idea being that this artificial scarcity would cause people to rush to buy now. This is part of the common misconception about artificial scarcity. It assumes a somewhat static market, where all the scarcity does is make the same number of people want to buy in a smaller window. That’s simply untrue, and plenty of economic research in the space has shown that to be false. It’s not difficult to understand why either. A purchase decision involves a variety of different factors, and if one of those factors is that the company selling the product is toying with you by putting extremely annoying limitations on the product, that’s going to turn a lot of people off. It also opens up much wider opportunities for competing companies who don’t toy with their customers and offers a product to whoever wants — embracing the wider opportunities of the long tail, rather than shutting them off. The whole point of the long tail is that it expands your market — whereas Matthews seems to want to destroy that expanded market in favor of additional control over a smaller market.
What seems to really get Matthews are two things, which he notes as being the core of the problem: “An infinitely long tail gluts the market, confounds the consumer, and commoditizes developers.” As for “gluts” the market — that’s not a problem that you solve by artificial scarcity (limiting choice), it’s a problem you solve by having better filters and better recommendation systems. As for commodtizing developers, that’s shorthand for “I don’t want to compete.” But, of course, the second you do something so silly as limiting the timeframe in which your fans can buy your games, the faster you hurt your own business by letting your competitor get their business. That seems a lot worse than having to actually compete.