2 research outputs found
Essays on demand spillovers in the video-game industry
Thesis (Ph. D.)--University of Rochester. William E. Simon Graduate School of Business Administration, 2019.The video-game industry is an important and fast-growing entertainment business.
It is estimated to have reached 43.8 billion US dollars in revenue in 2018, surpassing
the projected total global box office for the film industry (Entertainment
Software Association, 2019). The video-game industry features frequent new product
introduction, innovation in product characteristics including achievement systems,
and active interplay with streaming services such as YouTube. Therefore,
the video-game industry is an ideal setting to study demand spillovers between related
products and product designs and how these spillovers affect consumer and
firm decisions. This thesis consists of three essays on topics related to the demand
spillovers in the video-game industry.
The first essay examines the effect of extending and sharing intellectual property
rights of the original video-game products. Although user-generated content,
and increasingly videos, have become ubiquitous in the digital age, the users who
upload these videos often do not hold the intellectual property rights for the content
they post. We evaluate the impact of allowing such content on the intellectual
property holder’s original product. This question is especially relevant for content
concerning video games. Video-game content on YouTube accounts for one third of YouTube’s total traffic, yet video-game firms can legally require any third-party
videos featuring their game to be taken down. Although many firms allow third parties
to freely share and extend their intellectual property on these public platforms,
some, such as Nintendo, do not. We study the impact of firm decisions to share
and extend intellectual property in this highly relevant context of video games. To
do so, we collected a unique individual-level panel dataset on usage levels and purchases
of video games as well as data on the timing of related YouTube video posts
and competitive competitions. We apply both difference-in-differences (DiD) and
synthetic-control methods to evaluate the causal effects of these sharing and extending
activities on video-game usage and sales. We find that company-initiated
competitive gaming tournaments increase game usage by up to 45%, whereas one
third-party YouTube video post increases game sales by 9.4% and game usage by
12.7%. Both effects are concentrated in the heavy users, and casual gamers benefit
less from YouTube video posts. These results offer an explanation for why firms
would vary in allowing such content sharing and extensions, and why Nintendo, in
particular, would want to set stricter content-sharing policies for its games.
The second essay explores the impact of goal achievements without monetary
rewards on subsequent product usage. I assemble a unique panel dataset of product
usage and goal achievements from the world’s largest platform of digital PC video
games. Using the difficulty level of the remaining achievements as instruments, I
find achieving an extra goal increases subsequent game usage by a statistically and
economically significant margin, and the uplifting effect can last as long as one
month. In addition, I find supporting evidence for self-satisfaction but not social
effects as the main driving mechanism. Empirical findings in this research suggest the goal achievements alone can be effective in promoting consumer engagement
with the product and reducing consumer attrition.
The last essay studies the intertemporal spillover effect from current software
purchases to future software purchases. Many platform strategies focus on indirect
network effects between sellers through platform expansion. In this essay, we
show sellers on the console-video-game platform generate a positive intertemporal
spillover effect and expand the demand for other sellers, holding fixed the set of
platform adopters. We propose a novel identification strategy that leverages exogenous
variation in the release timing of games exclusively available on a console
platform, and examine how this variation affects the sales of games available on
both platforms. We find a sizable intertemporal demand spillover effect between
games: A 1% increase in total copies sold on a platform leads to a 0.153% increase
in the sales of other games in the next month (i.e., an elasticity of 0.153). Additional
analysis suggests this demand spillover effect is reminiscent of habit formation on
the consumer side, in that past purchases keep end users active on the platform.
Our finding provides a potential explanation for recent platform-sales events and
subscription services that provide free games to consumers every month