Surviving a Standards War: Lessons Learned from the Life and Death of Divx

20 Pages Posted: 8 Aug 2003

See all articles by David Dranove

David Dranove

Northwestern University - Kellogg School of Management

Neil Gandal

Berglas School of Economics, Tel Aviv University; Centre for Economic Policy Research (CEPR)

Date Written: June 2003

Abstract

In April 1997, a consortium of hardware manufacturers and movie studios launched the DVD format. By that fall, electronics retailing giant Circuit City announced its intentions to launch a partially incompatible format known as DIVX. This Paper assesses Circuit City's strategy to establish the dominant standard for digital video technology. We identify several key principles that any firm must consider when deciding how to compete in a market with evolving standards. We argue that virtually all of these factors weighed in against Circuit City, so that its effort was destined to fail.

Keywords: Standards war, network effects

JEL Classification: K21, L82

Suggested Citation

Dranove, David and Gandal, Neil, Surviving a Standards War: Lessons Learned from the Life and Death of Divx (June 2003). CEPR Discussion Paper No. 3935. Available at SSRN: https://ssrn.com/abstract=432681

David Dranove (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-8682 (Phone)
847-467-1777 (Fax)

Neil Gandal

Berglas School of Economics, Tel Aviv University ( email )

Tel Aviv University
Tel Aviv 69978
Israel
+972 3 640 9907 (Phone)
+972 3 640 9908 (Fax)

HOME PAGE: http://www.neilgandal.com/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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