METCALFE’S LAW IN THE DIGITAL MEDIA MARKET

Abstract

The article describes network effects as one of the features of digital media markets. It reviews prior research in this area, demonstrating that a few concepts are supported by empirical evidence. One of the most accurate concepts, Metcalfe’s law, which was developed in the early 1980s, states that the value of a network is proportional to its squared size. The present research validates the accuracy of this law using Meta and Netflix data from 2011 to 2020. Both companies have differences in revenue, user acquisition, business model and technology. However, both of their data fit Metcalfe’s law well.