The Competition between DVDs and Video-on-Demand, an example of Red Queens or Increasing Returns?

“Red Queens, Butterflies, and Strange Attractors: Imperfect Lenses into Emergent Technologies,” explains the phenomenon known as “Red Queens” in which two competing technologies propel improvements in both (Dr. Thornburg, 2013), so it is the idea that competition brings out the best of both worlds.  When video on demand came into the marketplace, it needed to dislodge DVDs; it had to have sufficient power and create sufficient momentum, or it would not be able to overcome the barrier established by the long-time thriving DVD market.  Because of the sustained competitive advantage of the DVD market, video on demand needed to be extra-competitive.  In this small way, one could argue that video on demand and the DVD industries demonstrate Red Queens.  Arguing against the concept of Red Queens to explain the success of these industries is the different timelines of the emergence of each technology.  DVD became popular first.  Video on line came second.  So, while video on demand may have been competing against DVD, the converse was not true. 

Okay, now let us now consider how DVDs and video on demand are examples of the concept of increasing returns.  Increasing Returns is the idea that once ahead, a company gets further ahead faster and faster, and once behind, the more behind a company falls (Arthur, 1996). Speaking in favor of the concept that increasing returns would explain the behavior of these industries, consider their developmental timeline.  Check out this informative report by EY regarding Trends and the Future of Television and Media http://www.ey.com/Publication/vwLUAssets/EY_-_6_trends_that_will_change_the_TV_industry/$FILE/EY-6-trends-that-will-change-the-TV-industry.pdf.  According to the report, the DVD industry reached its heyday in the mid-90s, replacing VCR.  Video on line was emerging about 2007 with 30 million users of Netflix.  Thus, these two industries had insufficient overlap at the time of their emergence for “red queens” to explain their emergence patterns.  Consider the concept of increasing returns.  I argue that “increasing returns” better describes the emergence of video on demand which replaced the prior entertainment technology of DVDs.  The EY report claims that it is the evolution of control that was the underlying drive that propelled video on demand to success.  Looked at from the angle of increasing returns, when DVD was up and coming, it had a technological advantage to the VCR because it was an improved form of technology.  When video on demand gathered momentum, it provided the consumer control and access.  The needs of the user changed and video on demand met those needs.  So as video on demand grabbed a niche in the marketplace, its momentum gathered, building upon itself more and more until the DVD industry fell further and further behind. 

References

Arthur, W. B. (1996). Increasing returns and the new world of business. Harvard Business Review, 74(4), 100–109

Thornburg, D. (2013d). Red queens, butterflies, and strange attractors: Imperfect lenses into emergent technologies. Lake Barrington, IL: Thornburg Center for Space Exploration