Technology

Should You Build Scarcity Into Your Online Business Model?

By / May 16, 2017 (iStock/Thinkstock)

The music industry’s reluctance toward streaming services offers a great way to think about how you position your own offerings in the marketplace—especially depending on how broad the appeal of those offerings actually is.

If you’re a fan of folk music—especially on the indie spectrum—there’s a chance that the name Will Oldham has passed through your ears at some point.

For the past 25 years or so, Oldham’s music, usually produced under the Bonnie “Prince” Billy monicker, has been a masterful mixture of mood and consistency. Only very rarely has he touched the mainstream, but he has a large cult audience, something that means a lot in 2017.

Want to check out his music? Just a word of warning: You won’t find most of his good stuff on Spotify or Apple Music. Oldham has some philosophical issues with the streaming concept (“I don’t like streaming music because I just think a music thing should be a music thing,” he said recently), but the main reason his work generally hasn’t appeared there is because his longtime label, Drag City, made a conscious decision to keep their music off of those streaming services for a long time—a decision they made after consulting their artists.

In fact, only last week did the label decide to make any of its albums available on the service, one of them being Oldham’s own Best Troubadour, a Merle Haggard covers album. But Oldham’s best work, including 1999’s landmark I See a Darkness, remains off the major music streaming services.

Drag City isn’t a label of neophytes—they have a ton of music on YouTube, including Oldham’s—but in an era when every other artist seems to be giving in to streaming, this creation of artificial scarcity has a way of maintaining value around the artist.

This strategy probably works for artists like Oldham or his label mate, the famed harpist Joanna Newsom, whose mainstream appeal might not be that of someone like Kendrick Lamar.

On the other hand, there are situations like that of Bob Seger, who was once one of the biggest rock stars in the world—and who has consciously avoided putting most of his music on even standard online music stores, out of deference to his manager, who has yet to agree to terms with Seger’s label on the issue.

In a column for NPR back in March, music industry executive Tim Quirk made a convincing case that Seger’s strategy was hurting the artist’s legacy, by minimizing his sales, allowing physical copies of his albums to go out of print, and even causing a steep decline in how often his music gets played on traditional radio stations. Quirk compared this situation to Seger’s early career, which was a slow-burning regional success that only picked up about a decade in.

It can be challenging to pick the best path forward when faced with a form of innovation that shakes up your business model slightly, or even significantly.

“He’s returned to having a core base of rabid supporters, but once again there are millions more he could be reaching but isn’t,” Quirk explained.

(Seger’s manager attempted to defend his strategy, for what it’s worth.)

Should You Stay Scarce?

In case you’re wondering why I just spent roughly 500 words discussing the business strategies of two vastly different musical artists, it’s because I see a lot of parallels between them and business strategies taken in the world of associations.

It can be challenging to pick the best path forward when faced with a form of innovation that shakes up your business model slightly, or even significantly. Content is a great example of this. Sometimes that content means a lot to a small group of people and should be kept exclusive, potentially with a price tag to match; other times, the content’s value thrives on an economy of scale and won’t find its maximum value unless it’s been spread far and wide.

And choosing the wrong option has a lot of negative costs that come with it. Artists at Oldham’s level of success simply won’t have as many streams of their music as an up-and-coming indie rock star or a classic-rock standby, and that means Oldham would be costing himself money by giving his back catalog to the Spotifys of the world. In other words, his label has been doing him a favor.

Bob Seger’s move to focus mostly on physical albums and a limited download presence, on the other hand, means that he can’t take advantage of any of the recent cost and marketing benefits that come with selling music to a broader audience. Seger, even with his apparent decline in influence, still maintains an enviable amount of respect and commercial appeal within the music industry as a whole—but the problem is, he isn’t maximizing it.

At your association, you probably have offerings that fit into one of these categories—something somewhat valuable to a large group of people, and something else extremely valuable to a more modest group. Sometimes scarcity works, sometimes it doesn’t.

There’s a point where a paywall makes sense. Moving out of the music realm for a second here, the Christian Science Monitor is trying a very similar experiment with its news offerings by putting its good stuff behind a paid subscription newsletter. The Monitor‘s hope here is that this will attract a small-but-dedicated audience of die-hards who value of the publication’s unique take on the news of the day.

The Monitor is a well-respected publication, but it’s not at the scale of the Washington Post, so this model could work for them.

Sometimes, it’s quite easy to follow along with the latest technological trend as it creeps up on you, complete with a new business model to boot. If you’re of a certain demeanor, it might be much easier to ignore it.

But this isn’t a situation where your gut should lead the way. Instead, look at the circumstances of your business model. Let it tell you whether or not that new trend is a good one for your needs.

Do your research.

Ernie Smith

Ernie Smith is the social media journalist for Associations Now, a former newspaper guy, and a man who is dangerous when armed with a good pun. More »

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