A System Dynamics Model of the Betamax-VHS VCR Competition including Technological, Production, and Network Effects (Including Data)
15 Pages Posted: 28 Dec 2018 Last revised: 8 Jan 2019
Date Written: July 8, 1996
The issue of complementary assets is beginning to heat up again with the movement of Microsoft into the Internet market. Many people are looking again at past cases of standards competition to determine the importance of complementary assets. One of the more important cases was the battle between the Betamax (Beta) and Video Home System (VHS) videocassette formats during the late 1970s and early 1980s. Beta was launched by Sony in 1975, eighteen months ahead of its rival format VHS . Despite this disadvantage, VHS, sponsored by Panasonic, JVC, and RCA, managed to overtake Beta by 1979 and came to dominate the market almost completely by 1988. This paper develops a system dynamics model to study this format competition and the effect of its complementary assets. Based on simulations, two factors were necessary for VHS to win. One was VHS's longer tape playtime relative to Beta, which enabled pre-recorded tapes earlier. The second was OEM production. Relevant historic data from the 1970s and 1980s are included in the appendix.
Note: This paper was originally written in 1996 at MIT for a System Dynamics Group Report. paper was modified in December 2018 to remove copy-editing errors. Otherwise the paper remains unchanged since 1996.
Keywords: system dynamics, standards, platforms, vcr, video cassette recorders
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