Tuesday, August 30, 2011
Adoption of a new technology
Based on my previous series we can see how disruptive technologies can impact the economy. What we don't know is how these technologies are selected by the users. This in fact is a matter of great debate. In some cases looking back it's obvious as to why a specific technology won over the other. However, during the standards war, or beginning of a new market, it's unclear which technology will win. We've seen this play out repeatedly over the past few decades. The VHS victory over Betamax is an important case. I also believe that this example can play an important role for any new platform developer.
What happened with VHS and Betamax? They both were created in the 70's (VHS 1976 and Betamax 1975), as a method to record video. Each had a different method and were competing standards. By a standard, i mean a products that achieve a specific result using a type of technology. In this example there are two technologies that achieve almost the exact same end result using incompatible technologies. Which is why we have a standards war. Both products are attempting to capture the same market segment.
About the technologies: Both products were produced by huge companies, JVC for VHS and Sony for Betamax. Betamax had the higher quality, however you had to pay for this quality. The Betamax was smaller than VHS. Betamax was sued by the MPAA in an attempt to prevent people from recording TV programs to watch without buying them. Betamax won.
So why did VHS win over Betamax? Well, in this case it's well known that pornography producers selected VHS over Betamax because of the price difference. It was easier to produce a product at a high enough quality that they could sell.
What does this tell us? As a platform locking in content is extremely important. Since this was the first technology porn could play a huge role, now with several legacy video recording methods and the internet porn's sway on the future standards for video storage is much diminished. In fact during most standards wars they would most likely sit out until the standards are decided.
I believe that Google actually learned from this example. They saw the benefits of content on the platform from the success of the Apple App store and worked to create a viable app store before the release of their initial product. They held contests and ensured that there was a vibrant app development community before the release of anything. While this did nothing to close the gap initially between iOS and Android app stores, it helped give people reason to adopt their product.