IDEAS home Printed from https://ideas.repec.org/p/zbw/fziddp/200905.html
   My bibliography  Save this paper

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

Author

Listed:
  • Christ, Julian P.
  • Slowak, André P.

Abstract

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.

Suggested Citation

  • Christ, Julian P. & Slowak, André P., 2009. "Why blu-ray vs. HD-DVD ist not VHS vs. Betamax: The co-evolution of standard-setting consortia," FZID Discussion Papers 05-2009, University of Hohenheim, Center for Research on Innovation and Services (FZID).
  • Handle: RePEc:zbw:fziddp:200905
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/27761/1/605284490.PDF
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Nicholas Economides & Andrzej Skrzypacz, 2004. "Standards Coalitions Formation and Market Structure in Network Industries," Microeconomics 0407008, EconWPA.
    2. André Slowak, 2008. "Standard-setting capabilities in industrial automation: a collaborative process," Journal of Innovation Economics, De Boeck Université, vol. 0(2), pages 147-169.
    3. Brian J. Loasby, 2000. "Market institutions and economic evolution," Journal of Evolutionary Economics, Springer, vol. 10(3), pages 297-309.
    4. Neil Gandal, 2002. "Compatibility, Standardization, and Network Effects: Some Policy Implications," Oxford Review of Economic Policy, Oxford University Press, vol. 18(1), pages 80-91, Spring.
    5. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-131, March.
    6. Funk, Jeffrey L. & Methe, David T., 2001. "Market- and committee-based mechanisms in the creation and diffusion of global industry standards: the case of mobile communication," Research Policy, Elsevier, vol. 30(4), pages 589-610, April.
    7. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-841, August.
    8. Katz, Michael L & Shapiro, Carl, 1992. "Product Introduction with Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 55-83, March.
    9. Alexander Gerybadze & André Slowak, 2008. "Standard-setting Competition and Open Innovation in Non-HT Industries: Mechanical Engineering and Machinery," Chapters,in: Innovation in Low-Tech Firms and Industries, chapter 3 Edward Elgar Publishing.
    10. Robert Axelrod & Will Mitchell & Robert E. Thomas & D. Scott Bennett & Erhard Bruderer, 1995. "Coalition Formation in Standard-Setting Alliances," Management Science, INFORMS, vol. 41(9), pages 1493-1508, September.
    11. Liebowitz, S J & Margolis, Stephen E, 1995. "Path Dependence, Lock-in, and History," Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(1), pages 205-226, April.
    12. David Dranove & Neil Gandal, 2003. "The Dvd-vs.-Divx Standard War: Empirical Evidence of Network Effects and Preannouncement Effects," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(3), pages 363-386, September.
    13. Shy, Oz, 1996. "Technology revolutions in the presence of network externalities," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 785-800, October.
    14. Windrum, Paul, 2004. "Leveraging technological externalities in complex technologies: Microsoft's exploitation of standards in the browser wars," Research Policy, Elsevier, vol. 33(3), pages 385-394, April.
    15. Suarez, Fernando F., 2004. "Battles for technological dominance: an integrative framework," Research Policy, Elsevier, vol. 33(2), pages 271-286, March.
    16. Michael L. Katz & Carl Shapiro, 1994. "Systems Competition and Network Effects," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 93-115, Spring.
    17. Aija Elina Leiponen, 2008. "Competing Through Cooperation: The Organization of Standard Setting in Wireless Telecommunications," Management Science, INFORMS, vol. 54(11), pages 1904-1919, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nabyla Daidj & Cristina Grazia & Abdelhakim Hammoudi, 2010. "Introduction to the Non-Cooperative Approach to Coalition Formation: The Case of the Blu-Ray/HD-DVD Standards' War," Journal of Media Economics, Taylor & Francis Journals, vol. 23(4), pages 192-215.
    2. Jóna, György, 2017. "Versenytársak együttműködésének hatása a regionális gazdasági fejlődésre
      [Impacts of rivals cooperation on regional economic development]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 54-73.

    More about this item

    Keywords

    Blu-ray; HD-DVD; standard wars; co-evolution; consortia; event study;

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:fziddp:200905. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics). General contact details of provider: http://edirc.repec.org/data/fihohde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.