Indirect Network Effects and the Product Cycle: Video Games in the U.S., 1994-2002

This paper examines the importance of indirect network effects in the U.S. video game market between 1994 and 2002. The diffusion of game systems is analyzed by the interaction between console adoption decisions and software supply decisions. Estimation results suggest that introductory pricing is an effective practice at the beginning of the product cycle, and expanding software variety becomes more effective later. The paper also finds a degree of inertia in the software market that does not exist in the hardware market. This observation implies that software providers continue to exploit the installed base of hardware users after hardware demand has slowed

Why blu-ray vs. HD-DVD ist not VHS vs. Betamax: the co-evolution of standard-setting consortia

Extensive research has been conducted on the economics of standards in the last three decades. To date, standard-setting studies emphasize a superior role of demand-side-driven technology diffusion; these contributions assume the evolution of a user-driven momentum and network externalities. We find that consumers wait for a dominant standard if they are unable to evaluate technological supremacy. Thus, supply-side-driven activities necessarily need to address an absence of demand-side technology adoption. Our paper focuses on Blu-ray vs. HD-DVD as an illustrative case of consortia standard wars. One central role of consortia is to coordinate strategic behavior between heterogeneous agents, e.g. incumbents, complementors (content providers) and others, but also to form a coalition against other standard candidates. More precisely, we argue that agents signal standard-setting war outcomes through consortia events. We depict the essential role of consortia structures for the recently determined standard war between the High-Definition disc specifications Blu-ray and HD-DVD. Therefore, the paper suggests that unique supply-side dynamics from consortia structures, consortia announcements and exclusive backing decisions of firms determined the standard-setting process in the Blu-ray vs. HD-DVD standard war. This study is based on the following data: movie releases and sales numbers, membership affiliation for structural consortia analysis, and an in-depth event study. A detailed comparison of the technological specifications of both standard specifications supports our argument that there was no technological supremacy of one standard candidate from a consumer-oriented usecase perspective. We furthermore clarify that content providers (complementors) such as movie studios and movie rental services feature a gate-keeping position in the Blu-ray vs. HD-DVD standard war. In the case of Blu-ray, film studios decided the standard war because the availability of movie releases, but not technological supremacy, made the standard attractive to consumers. Finally, we find that there is a co-evolution of the consortia in terms of membership dynamics. Particularly, firm allegiance of heterogeneous agents plays a crucial role. --Blu-ray,HD-DVD,standard wars,co-evolution,consortia,event study

An Economist's Guide to Digital Music

In this guide, we discuss the impact of digitalization on the music industry. We rely on market and survey data at the international level as well as expert statements from the industry. The guide investigates recent developments in legal and technological protection of digital music and describes new business models as well as consumers' attitude towards music downloads. We conclude the guide by a discussion of the evolution of the music industry

The rebirth of U.S. console gaming: A historical comparison of Nintendo versus Sega 1983–2001

This master’s thesis examines the rival videogame companies Nintendo and Sega in the “console wars” of the 80s and 90s, and how they developed. After Atari brought home consoles into consumer consciousness, the market crashed and was picked back up by Nintendo who revitalized the industry. The ensuing battle between Nintendo and Sega spanned two decades. Gaming history is still in its infancy, struggling with a veneer of illegitimacy, but this rivalry has been a hot area of study by gaming historians. It is clear today that Nintendo survived this war while Sega had to bail out, but only some earlier research has gone in-depth in trying to find some of the underlying intricacies as to how this happened. This thesis is an attempt to answer the questions of how and why Nintendo won and Sega lost, and it will do so using four theories as lenses throughout the various gaming literature. These sources are heavily based on interviews with industry insiders, and by comparing and contrasting these sources the hope is to illuminate a new path forward for further research. The examined period has been divided into console generations because this correlates with the console races and eras where companies won or lost. The last section includes two generations in one due to Sega’s quick exit in its last generation. In the early period of the 3rd generation between 1983 and 1987, the focus is on how Nintendo rebuilt the crashed market and Sega struggled to compete against the burgeoning monopoly Nintendo was creating. In the middle period of the 4th generation between 1987 and 1993, Nintendo rose to its most powerful—yet so did Sega, late in the period. With the rivalry intensified, this period showed the climax of the battles taking place in terms of societal consequences and influence. In the last period of the 5th and 6th generations between 1993 and 2001, Nintendo continued going strong while Sega started to struggle against the new contenders entering the market, especially Sony. It is the how and why of these events, looked at through the theoretical framework, that this thesis attempts to highlight in the comparative sections and conclusion

Game on! a report on the interactive leisure software subsector in London

There is a paucity of good quality data on the UK video games industry. Information such as value-added, investment on R&D, average annual expenditure on training and the value of video games in terms of exports, for example, is thin or incomplete. This is a serious problem. If we are to improve the competitiveness of the UK games development sector then we must have better quality information. Games developers will then be able to benchmark their business activities against industry averages. Overseas investors will also then be better informed about the benefits of investing in the UK leisure software sector. This Report confirms the lacunae in our knowledge that exists about the video games industry. For example, the Office of National Statistics still does not have a specific code to identify interactive leisure software businesses. Yet the Report also shines a light on the video games industry in the UK in general and in London in particular