Netflix Strikes New Success with Scarcity Strategy: A Masterclass in Lord Robbins' Economic Theory

Lord Lionel Robbins gave us his Scarcity Theory, and Netflix's recent strategy to restrict password sharing offers a prime illustration of this fundamental economic concept. According to Robbins, scarcity is a condition of human existence which arises from human wants to be combined with finite resources that meet those wants. He explained to us how people create scarce resources to satisfy unlimited desires. OPEC, among others, is a master in this game.

Lord Robbins (November 22, 1898 – May 15, 1984) was a British?economist and prominent London School of Economics member.

Now, Netflix puts his theory into practice by constraining password sharing, limiting access to its content and making it more scarce. According to Robbins' Scarcity Theory, this move has driven up the demand for Netflix subscriptions, leading to a substantial spike in new sign-ups.

Born in 1898, Lionel Robbins was a British economist renowned for his influential work in economic theory and policy. His book "An Essay on the Nature and Significance of Economic Science" is considered a landmark in economics, marking a shift from the traditional wealth definition to the scarcity definition.

The number of new subscriptions following Netflix's password-sharing clampdown has exceeded even the surge seen during the COVID lockdowns when people were primarily confined to their homes. An impressive number of nearly 100,000 daily sign-ups was observed on May 26 and May 27. This denotes an overall 102 per cent increase in sign-ups over the preceding 60-day span.

While account cancellations did rise, the influx of new subscriptions far surpassed the losses. According to the report, the ratio of sign-ups to cancels since May 23 is up +25.6% compared to the previous 60-day period. Robbins' theory of scarcity predicted this outcome; as access to a desirable resource (Netflix content) became more restricted (scarce), the value of owning that resource (a Netflix subscription) increased.

Other streaming platforms are likely observing this development closely, contemplating implementing comparable policies to boost their subscription numbers.

It's interesting to note that based on Robbins' scarcity principle, Netflix's action has turned the initially unfavourable customer response into an opportunity, driving demand and enhancing its market position.