With new console and PC part sales on the rise, you have likely heard of the scarcity problem the tech industry is facing right now.
Let me be the first to say that finding and purchasing a PlayStation 5 is nearly impossible, and it doesn’t look like this will be changing anytime soon. All of this frustration can lead to fear of never owning a PS5, anger you can’t find a PS5, hatred at scalpers who have made this process even more unbearable, and… suffering?
Shoehorned Star Wars references aside, why are we seeing this rise in scarcity in the gaming industry? This problem isn’t a new issue, and it doesn’t look like it’s going away anytime soon. There has been some debate in the forums on if Sony is using a practice called artificial scarcity.
Could this really be the case?
The Addiction to Scarcity
Artificial scarcity can be defined simply as the scarcity of goods or ideas despite ample production capabilities. This practice is pretty commonplace in capitalism as it can lead to lower manufacturing costs with higher profits. While there are certainly issues of scarcity in gaming technology right now, I wouldn’t say that every instance qualifies as artificial. One instance that most certainly can be labeled as artificial is online content available “for a limited time only”.
Limited time online content provides a source of scarcity that plays on the psychological makeup of our brains. We as humans are easily influenced by anything that stimulates dopamine production; the brain seeks out new and exciting stimuli to produce higher levels of dopamine which makes us feel good.
This is one reason why retail therapy is so popular. When something is only available for a limited time, and it’s something new and exciting, our brains lose the ability to think rationally about the purchase. Instead of being able to say “Well, I don’t necessarily need this right this second, and I can always purchase it next paycheck”, our brain says “OMG I really want this and if I don’t get it right now it’s going to be gone so I better buy it!” It stimulates the addiction inducing risk/reward system in our brain.
But, I Need My Anime Waifu Now!
Another form of dopamine heaven lies in microtransactions. If you are an active mobile gamer or frequently play MMOs, then you are intimately familiar with the draw of microtransactions.
Microtransactions, as the name suggests, are lower-cost purchases players can make to receive either in-game currency or goods. If you combine the two concepts of microtransactions and scarcity you can hear the “cha-ching” of investors’ eyes becoming money signs. Consumers are much more willing to spend smaller amounts of money more frequently.
Add that “harmless little purchase” to a limited time only offer and not only are consumers willing to spend money but they’re willing to spend it right now!
The currency or goods received in these transactions are typically cheap for companies to produce so it’s an easy way for them to make money. Does this sound more than a little manipulative? Yeah, I would say so, but it works.
Genshin Impact is a great example of artificial scarcity and microtransactions. Genshin Impact made a huge wave upon release, and the game raked in over $1 billion dollars in revenue in the first six months after launch.
However, this beautifully addicting game is free to play. So how in the world did it make so much money so quickly? The answer lies in microtransactions. In Genshin, you can accumulate and purchase new, incredibly adorable, characters. Each character has their own style, their own move set, and their own personality. There is an in-game currency that you can use to purchase these loot crates that have a chance to include these characters, but accumulating this currency naturally in the game is painstakingly slow.
So, yeah you could ostensibly just play the hours and hours of the game needed to finally be able to purchase the loot box that contains your new anime waifu, or you can spend a relatively small amount of money and feed your new obsession now!
The dopamine centers in our brain combined with a fear of missing out (or FOMO) means players are much more likely to drop money on these loot boxes. Not to mention the gatchapon mechanic means there is only a CHANCE of getting the new characters anyway.
So, if for some reason you don’t get the character you were wanting in the box, are you really going to stop there? Psychologically, probably not. The dopamine centers in our brain react more heavily to a reward that is uncertain when compared to a given award. Add in the fact that a good portion of Genshin Impact’s characters can only be obtained for a limited time and viola, in comes the money.
The Criticism of Nintendo Continues
When it comes to video game consoles and PC parts, it’s no secret that the pandemic hit the industry hard. With limitations on production and a chip shortage thanks in part to the trade war with China, shortages in computer chips and the technology that uses them is a huge issue.
These shortages have lead to limitations of supply, and yet there is a high demand for these products.
Sony has attributed a lot of its supply issues to the pandemic, but are we seeing the full picture? This is a fair question to ask especially when you look at other companies who are taking advantage of artificial scarcity.
Nintendo has long been criticized for partaking in this strategy. This criticism has been rampant once again thanks to the limited time availability of some of their digital games. If you take some time to think about it, this sales tactic makes no sense when digital games are involved. There is no real supply to speak of, so shouldn’t Nintendo let natural demand take over and let people purchase games as they please?
Unfortunately for us gamers, Nintendo likely sees a large benefit to implementing artificial scarcity practices.
For one, investors eat up stories that a company’s product is “flying off the shelves.” Not only that, but we’ve already established that limited-time-only sales are a great tactic to convince consumers to purchase your product.
When you force revenue to come in at a specific time you can pad your financial report right when you need it most. For example, look at Nintendo’s limited release of Super Mario 3D All-Stars.
Nintendo released this beloved game in limited supply and for a limited amount of time. 3D All-Stars was taken off of the Nintendo store on March 31, 2021 which, coincidentally, was also when Nintendo’s Fiscal Year ends. You can see how pushing consumers to spend their money at a certain time can be used strategically to artificially control overall success.
They Can’t Keep Getting Away With This!
When a product is in high demand but appears to be limited in supply, the overall desire and value of the product increases dramatically. This is when scalpers come out to play.
Scalpers make it their job to accrue new products en masse and then sell them at a higher price. It is common for scalpers to use automated systems to purchase the stock before anyone else can get their hands on it, often in a span of milliseconds.
You might be thinking that this only works if people actually buy from scalpers so why do people continue to purchase from them? Unfortunately, when hype for a product like the PlayStation 5 is so high, and when supply of the product is so low, people begin to get desperate.
That dopamine side of our brains that seeks risk and reward kicks in and drives us to get our hands on a PS5 no matter the cost. Add in the FOMO and the demands of small children, and spending $900+ on a PS5 starts to sound more and more reasonable.
So, What About Sony?
It is easy to tell that scalpers absolutely practice artificial scarcity and make a good living doing so. We know that Nintendo has benefited from this practice in the past, and many online games use this tactic as well. What about Sony?
It isn’t as easy to tell if Sony is actively practicing artificial scarcity. On one hand, the pandemic and chip shortages genuinely hit console production hard. Scalpers accumulating the product Sony did manage to produce certainly didn’t help matters.
However, with the interest in pre-orders and hype for the new consoles, you would think Sony had to have had some idea of what the demand for the product would be. Not to mention companies are always keeping long-term investment in mind, meaning they don’t want to overproduce so that everyone who wants their product is able to get it right away.
An artificial limitation in stock could help a company continue to control sales. Continuous, long-term sales look better than massive bulk sales anyway. So, with that in mind, is it possible Sony is benefiting from this forced scarcity? I think the answer is… maybe?
With such extreme variables at play such as the pandemic, it’s hard to say for sure what is actually going on and what is just a product of the times. I think it could be smart to keep an eye on Sony in the future outside of the realm of the pandemic.
Regardless, I think it’s safe to say that no one should be purchasing from scalpers. Let’s all agree right now that we are going to make those people sit in their pile of PS5s and rot.