Sony's Redemption: The Blu-Ray vs. HD-DVD Standards War

Abstract:     
This paper examines the factors that affect market dominance in a standards competition by comparing the VHS-Beta war in the 1980s to the Blu-ray-HD-DVD war in the 2000s. We first look at the changing home video market from a technological development standpoint. Then we move on to discuss three main strategies in a standards war: first-mover advantage, indirect network effects and software provision, and strategic alliances of hardware firms. We find that technological innovation is essential. Being a first-mover is helpful, but not sufficient, toward building a dominant position in the market. Historical evidence shows that Sony created a network of complementary firms for Blu-ray. Consequently, an effective strategy to become a winner in a standards competition appears to be building a network of complementary products and subsequently an installed base.

Number of Pages in PDF File: 31

Keywords: standards, network effect, first-mover advantage, Blu-ray, HD-DVD

JEL Classification: L15, L82, L86

working papers series