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 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.