Manufacturing Scarcity to Drive Publisher Profits

Posted by: Matt Shanahan

I’ve recently been hearing a lot of chatter about scarcity in the publishing world. If you listen to studies (e.g., Pew), twitterers (e.g., paywall), and bloggers (e.g., Jeff Jarvis), manufacturing scarcity sounds impossible – even unethical. But in reality, publishers have the absolute need to manufacture scarcity to drive profitable revenue.

From the business ethics perspective, it is common business practice to manufacture scarcity for profitability. Take a look at how the airline industry is finally returning to profitability after a decade of losses; most of this profit is generated because of the reduction in capacity (a.k.a., artificial scarcity). Auto manufacturers often retain pricing premiums by limiting production (a.k.a., artificial scarcity). In the entertainment industry, movie releases first go to theaters, then to purchase, then to rental (a.k.a., artificial scarcity). Remember limited edition iPods? All kinds of products have limited production/editions to create artificial scarcity. Simply put, artificial scarcity creates profitable revenue.

In terms of the viability of the idea in the publishing world, of course publishers can manufacture scarcity. While scarcity based on distribution (e.g., print) is gone, manufacturing scarcity in the digital world is not impossible, only different. Kevin Kelly’s blog post, Better Than Free, speaks to eight value generating qualities for manufacturing scarcity on the commoditized web (good read although he overlooks scarce content). It supports the idea that scarcity must now be based on differentiated value to the audience.

Here are a few quick examples of both B2C and B2B publishers that manufacture scarcity. Consumer Reports has always relied on the limited availability of their content to generate profits. BabyCenter creates a unique experience through personalization of content to match the stage of pregnancy and throughout childhood. Rolling Stone is leveraging its archive to create scarcity and new revenue. TechCrunch and GigaOM are good examples of building revenue from physical events that complement their content. The FT’s use of a paywall shows how scarcity can be dialed in for specific audience segments.

Benchmarking other publishers, experimenting with user experience, and evaluating paywalls are some options for figuring out how to create differentiated value (i.e., manufacture scarcity) and drive profits. Scarcity is a concept that we all need to get comfortable with.