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Standards Battles and Design Dominance - BluRay vs DVDs


Hitesh Babani

on 16 December 2013

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Transcript of Standards Battles and Design Dominance - BluRay vs DVDs

Standards Battles and Design Dominance - BluRay vs DVDs
What factors do you think influenced -

Network externalities is a big factor – value of good increases with no. of people using same/similar goods.

Installed base: the most important; size of installed base (people buy on this basis , test the technology then they come to know of the technological value)

high perceived and anticipated technological value of BluRay (blue ray was considered more advanced).

Sony was first to get BluRay format in its Console (ps3).
Why do you think Toshiba and Sony would not corporate to produce a common standard
They wanted to achieve dominant design status (50% or more of market). That would result in achieving winner takes all market

It helps to earn huge rewards and dominate product market (natural monopoly)

Firms can influence future generations of product (shape the evolution)

Receive royalties through patents (Sony already had to pay for DVDs )

The learning effect (more technology adopted, the better it becomes – as one can invest in R&D)
If HD-DVD had not pulled out of the market, would the market have selected a single winner or would both formats have survived
They could have survived, if they had developed a compatibility standard that could accept each other ‘s disk for example- A compatibility standard should have been introduced by Toshiba s (HD-DVD) to satisfy Sony’s Time needs on the Blu-ray Disc

But both did not survive. The big influence on this came from Time Warner’s decision at end moment to go for one of the two formats. Also Had a clear winner not emerged; due to fight against blu ray and DVD HD; a third party (download movies online) could have won the final battle!
Having a single video format has its own benefits and disadvantages for consumers

Consumers had to face the brunt of VHS v/s Betamax

More option of complementary goods

Network externality benefits to customers rise with cumulative market share

A Potential for monopoly costs to customers

Consumer electronic goods producers are in a more favorable position as they have to produce complementary goods for just one of the two formats (economies of scale)
Movie producers may have to face cost for expensive technology, and maybe lesser innovations
But the power of movie producers might push for innovations!

Increasing returns to adoption

Opted for BluRay when Warner bros defected to Sony’s BluRay

From a seemingly lost position, Sony were able to tilt the market with one well-timed strategic move: the payment of 500 million to Warner Bros (Pruitt, 2008).
Movie Producers:

Standalone technological value: BluRay was a superior technology, thus its clarity was much more brilliant.
The situation in 2008
Does having a single video format standard benefit or hurt consumers? Does it benefit or hurt consumer electronic producers? Does it benefit or hurt movie producers?
Case study summary
Full transcript