Influence of quality and exclusivity in two-sided markets, effects of infinite durability on the consumption of information goods, and improving sales forecasting for media products

Abstract

Each article in this this issue provides new insight into demand for media goods. The first revisits network effects in two-sided markets by focusing on the quality and exclusivity of video games. The study finds gamers tend to play just a few widely popular games. Popular games therefore have an outsize influence on the success of video game consoles. The second article examines effects from the introduction of a cloud-based service that give consumers continuous access to movies. The study found sales of movies with cloud-based access increased, and that rentals of movies decreased among some consumers. The third study compares managers’ sales forecasts for movies, books and music with forecasts based on models. The study finds that managers’ forecasts are only superior for a few best-selling media products. Model-based forecasts are better for products with medium and low sales The first article is “Platform Competition in the Video Game Console Industry: Impacts of Software Quality and Exclusivity on Market Share” by Haeyop Song, Jaemin Jung, and Daegon Cho. This study extends the literature on network effects in two-sided markets by focusing on the characteristics of six video game consoles and their associated software. The study examines complimentary products by focusing on how quality and exclusivity influence software and hardware competition in video game markets. The study uses reviews of video game software to measure quality. A panel data set with information about 10 years of sales was assembled for the study. The sample included 2,392 software and console combinations, and 1,396 unique video games. The findings did not support the conventional wisdom that most video game software plays “a critical role in hardware sales, and vice versa”. Instead, a few high-quality games dominate sales because gamers buy an average of just eight games during the life of a game console. A high-quality game that is exclusive to one console can significantly influence the early success of a gaming platform. However, software that works on multiple-platforms is valuable to mature gaming consoles because consumers are interested in “relatively small numbers of attractive products”. The authors discuss the implications of their findings for software and hardware developers. “The Introduction of Infinite Durability to an Information Good and the Decision to Buy or Rent: Evidence from the Film Industry” by Gabriel Pablo Axarlian is based on a natural experiment in the film industry. The experiment occurred when five major film studios introduced a cloud-based system to give consumers continuous access to digital copies of films. A sixth studio, Disney, did not offer customers access to the cloud-based system from 2011 to 2014. Disney’s lack of participation “provided the perfect conditions for a natural experiment to analyze exactly how infinite durability affects consumption patterns of information goods, using films as a proxy”. Consumers purchased access to the cloud-based systemwhen they bought a DVD or Blu-ray copy of a film. The panel-data set examined the sales of 286 films over 73 weeks. Consumer who purchased DVDs were considered low-value consumers, and those who purchased Blu-ray were high-value consumers. The introduction of the cloud-based system increased movie sales to all consumers. However, high-value consumers were more sensitive to infinitely durable movie access. The likelihood of renting films on Blu-ray decreased, which was not the case for films on DVDs. JOURNAL OF MEDIA ECONOMICS 2017, VOL. 30, NO. 3, 97–98 https://doi.org/10.1080/08997764.2018.1458452