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Opinion: Why Artificial Scarcity Could Boost Digital Game Downloads
by Matt Matthews
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May 22, 2008
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[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 be 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.
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I wonder if Disney's "vault" strategy actually makes them more money than the typical strategy that other publishers take with their classic movies.
The problem with Disney's approach is that it requires extra advertising expenditure. We need ways to reduce the 1st publishing cost, not double up on a 2nd. These extra costs seem justified only for classic "gem" titles, and if that's the case, implementing this solution will only reduce the quality of available titles -- removing the gems and leaving behind only the "crap".
I like that this is a think-outside-the-box approach, but it seems more like a band-aid than a cure. There's always going to be a ton of crappy games -- especially as the market widens, catering to consumers with dissimilar tastes and interests.
What about format of games? Clearly, it's not as easy for games to be ported over from one format to another, and I'd imagine the price for port is much higher than that of linear entertainment like animated films.
And also, good games that were not comercially successful gets traded online at a high price anyways.
Now let me see if I can get my hand on Sega Saturn and Guardian Heroes...
I say this, because part of why they do this is to make the same consumer rebuy the same movie at a likely higher price just for their pocket. Now don't misunderstand me. I'm all for retouched and restored titles and so forth being released. But in all honesty if you have a DVD of say, the lion king do you really need to go purchase the brand new blueray version? No. You don't. You own the movie and most players still play it so what's the point?
To me this sort of strategy feels to me like trying to 'trick' the consumer, and while I understand to an extent a LOT of marketing is in this boat, this feels like a particularly slap to the face way of trying to trick you. Besides, what if, for instance, some parent wants to get their child beauty and the beast as a gift, is it fair to them that it was released when it was and now that their child has an intrest they have to amazon to find it and pay possibly to the tune of 125 dollars for a movie that was in stores for 20? No this is a gyp and a ripoff.
So in short, I agree with Leo. The value of the digital 'revolution' is in it's choice providing. If anything I'd rather give the consumer more ways to organize and sort their choices of games than go with this 'artifical scarcity' thing.
While I'm sure this will make you more money, in the short term, this displays an absolutely astounding level of contempt for the consumer. What's next, are you going to stick some invasive drm on the game, too?
Just look at the messages that a strategy like this will send consumers and players: We don't want you to play our game. You weren't there when it was released, and now you want to buy it? Tough.
It sends the message not that your game is exclusive and awesome, but that it is so crap that you stopped selling it because it didn't make enough money to even be bothered putting a website for it up. This strategy makes people think that your game is an object of shame for you - something that you don't want other people to see.
I'm sure that will build consumer trust and good will.
Still, definitely some food for thought.
Some discomfort indeed.
The solution is not to restrict access to titles that people want, it's to not offer them the crap they don't want...
2. This will also cause outrage with many customers. Since there is no actual inventory issue, no production of physical objects problem, there is no serious reason why games would have to be taken 'out of print'. Public opinion might at some point be loud enough or unanimous enough to dramatically hurt sales of titles the publishers try this with. One only need look at the thankful failure of DivX (the player/dvd system, not the codec) in the marketplace.
3. Argument against doing this could actually wind up in legislation as declaring it an illegal practice subject to stiff fines, if people turn to the courts or public officials to curtail this tactic.
I think there are plenty of other ways of calling attention to games and extending their sales life without insulting your customers. Things like adding new content, updating key elements are a couple of methods that yes, will require more work be put into these titles - but will result in happier customers more willing to repeat their business with you.
The reason XBLA is a source of frustration is twofold: first, the storefront is absurdly shoddily designed, making it difficult for quality titles to stand out. Second, Microsoft has shown a willingness to accommodate large companies who opted to use XBLA to dump shit into the market to make a quick buck and then turn around to great smaller developers like Cave and stonewall them due to a "glut."
Also, you dismiss ROMs pretty easily, but they're one of the one situations where ordinary, honest folk often feel no shame at downloading illegal games. The justification that the publisher is no longer offering the product they want, would easily apply just as well to planned scarcity.
Disney is a massive player. They can anger their customers and get away with it, because of the way they dominate their market and own such a huge majority of the "must have" titles in the market segment they try this trick on. How many download-able game providers can piss off their customers with such impunity?
I also disagree with this strategy for games. The problem to solve is to make it easier to browse/find/try games. The music industry will deal with this after they pull their heads out, and the movie industry will have to as well someday. Hampering technology to mimic outdated retail problems is not solution.
I like a lot of games that are out at the moment. If they were going to be taken off the shelf soon I wouldn’t be able to buy them all, as im not willing to spend that much at once. Therefore I would be without one or more games I like and the company would sell one or more copies of that game. And that’s just one for one person. The other all effect would be a massive loss for the industry and there would be a lot of unhappy customers.
Also the most popular games would do fine whilst second best and the others would not be bought buy customers with little money.
The only benefit is the really rubbish games may disappear and make access to the popular games simpler. But this idea has the potential to cripple the gaming market.
Additionally, part of the Disney strategy is that of building upon itself - re-releases are as often used to drive other products and drive the franchise (of which all Disney titles are) they have as they are simply to be released for the sake of being released. Lion King may only be available for a short time... but there is a large collection of related merchandise that is not; everything from direct-to-video related films, toys, books, and so forth. There is added value to re-releasing a movie for them because it's not just about that singular product sale.
That isn't something that the games industry does yet in any significant way and potentially something we can't do; we don't work on the idea of merchandising and brand loyaty (for all but the largest games anyway who don't need the help). Re-makes and releases of successful games, a similar idea of taking something old and re-packaging, can work but only if they add value in doing so. Players won't want to buy a game they already have if it doesn't offer anything new and those fence sitters or non-fans won't be convinced to buy it just because it's there (there is already something that stopped them from doing in the first place).
Look a Square Enix, mother of the franchise game. When they take a game and re-release it, they put in a lot of effort in doing so. They update the engine, add some more content, etc - they add additional value so that it seems less like an old game and more like a new one... and they do so at a time when a more major release is forthcoming.
The idea behind this idea - filtering out bad games and promoting good ones - is admirable. But we aren't set up for that sort of methodology just yet; Disney and Square both own their markets for their products so they can afford to be the single authority on their games. Others, not so much as it's their product that is their face - most gamers remember titles, not developers (or confuse developers with publishers).
Console development can continue to exist in blissful unawareness of this because of the sandboxed, proprietary nature of those platforms, but on the PC and online, that form of monetization is already dying a slow death. Free games force down the cost of commercial ones, even if they are of a lower production value. If the free ones are good enough, after all, then the consumer will never search any further.
To accept this fact and develop an Internet-centric, long-tail-aware game in turn means that subscription, ad-driven, and item-economy games take precedence over the traditional "SKU" thought. Original IP goes from "valuable property to be protected with the full force of the law" to "meme that spreads virally and gets reused and remixed whether you like it or not." Open-source technology becomes a more viable option, without patents and licensing agreements to get in the way. And so on. Not all of it has to happen at once, but I envision it being a likely future.
Games and the web are converging. Envision your game more like a website than a boxed product. You don't want it to be scarce.
I'm convinced that this kind of tactic is short-sighted and can only benefit very few publishers in limited circumstances, and as a gamer I'd loathe to see it used widely. Thanks for this thought-provoking article!
It's no different than the original Nintendo Seal of Quality on a broader scale - you know that if a game has it/has been on Live for more than the delisting period, it's probably got something fun going for it and not, ya know, Custer's Revenge. It avoids the monetization that is sorta happens in the casual market (and the Korean MMO market) where it's not important to make something good... just make something like the other guy to hit the top charts for a couple weeks.
These are the same people who do no real work on developing the content, yet demand >30% of the profits for someone else's labor.
If you want to be successful by taking unfair advantage of content makers, you're sick and should really reflect on the priorities of your life.
If you want to be successful in the content creation sphere, focus on making compelling content, not manipulation of the market.
If you're a content creator faced with going up against these self-appointed artificial gatekeepers... remember this:
They only have the power you give them.
A key point to Disney's strategy is that they only restrict access to certain movies which they deem "classic". There are plenty of other Disney movies which are available all the time, although they are almost all direct-to-video titles. By restricting access to the top movies they drive sales of the other DTV titles. The financial reason for this is that those titles have significantly higher margins for Disney. The cost of producing the Lion King IV is a tenth of the original.
Plus Disney know that the bulk of their consumers are young children. If you child is telling you they want the Lion King, and you as a parent can't find it, then you will just buy Lion King II. The consumer in this case isn't sophisticated enough to know the difference.
However your average gamer is not going to fall for this. We know what we want, and if we can't find it for purchase we will find another way. Almost all the data out there right now says that more choice is better, if you give consumers the right tools to filter and find it. Forget emulating Disney, we need to emulate iTunes.