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Increasing Returns and Red Queens

August 12, 2010

I borrowed the movie, A Scanner Darkly, from the local public library. The Nicholson Memorial Library in South Garland is well-maintained facility with an extensive collection of DVDs, music CDs, and various categories of books. Its collection is suitable for a community college. I have made extensive use of this library over several years. The librarians are knowledgeable and always ready to help the library patrons. Since I am not a movie watcher and do not habitually watch the latest movies on the big screen or on my computer, I am unfamiliar with Netflix and other video-on-demand services.

Arthur (1996) defines increasing returns as “the tendency for that which is ahead to get further ahead, for that which loses advantage to lose further advantage” (p. 100). Thornburg (2008c) describes increasing returns as two innovations that hit the market at about the same time but by chance, one technology stays locked in and drives the other to extinction. The typical example is the fight between Netscape Navigator and Microsoft Internet Explorer. Red Queens are not as common as a force as others. As Thornburg explains, it is the existence of a huge competition between two technologies, in the process of which, they leave behind all other competitors; currently, Microsoft Internet Explorer and Mozilla Firefox are in a similar battle to determine which browser reigns supreme.

In view of these definitions and explanations, DVDs and video-on-demand are examples of increasing returns at different stages of the competition. First, DVDs appeared long before video-on demand; the two did not begin competing for the same market at about the same time. The competition between the two began much later. While DVDs have a well-established production cycle in terms of the timing of movie releases and the worldwide consumer market, video-on-demand began when broadband connections to the internet began to increase and the cost of large capacity magnetic storage medium began to decrease. With the latter in place, Netflix and other video-on-demand vendors could purchase movies at competitive prices from movie publishers and, for a mutually agreeable fee, charge the customers for streaming video content to the PC, Wii, PS3, XBOX 360, internet connected Blu-Ray players and HD TVs, mobile devices (iPad), and TiVo. Furthermore, Netflix mails DVDs to it customers per their choice with no late-fee charges. These features among others cost the customer less than $9.00 per month. At this stage when both DVDs and video-demand offer various advantages to customer, they begin to compete uniquely under the force of increasing returns. Since Netflix offers it customers DVDs, the competition is between the methods of delivering content.

Video on demand (VOD) services began in the mid-nineties in Europe and began to grow rapidly with every increase in internet bandwidth. Currently in the US, EchoStar/Dish Network and DirecTV offer VOD services to subscribers who own personal video recorders (PVR). A customer can play, pause, and seek at their convenience any program that he or she downloaded. DVDs appeared on the market in 1995 as a joint venture between Philips, Sony, Toshiba, and Time Warner. The Digital Entertainment Group indicated that in 2006 DVD sales was $16.6 billion and DVD rental was $7.5 billion. Considering the timeframe of their introduction into the market, VOD and DVDs appear to serve a wide variety of customers. Those customers who do not have broadband or satellite connectivity, Blu Ray DVDs will continue to be in the “Enhance” quadrant of McLuhan’s tetrad; the enhancement is over VHS tapes and standard DVDs. For those who do not own a Blu Ray player, standard DVDs are positioned in the “Enhance” quadrant as well. VOD services are definitely in the “Enhance” quadrant because they are improving the customer’s rate of access to content while providing multiple devices on which to download streaming video. Considering their existence for over fifteen years, DVDs may become obsolete once every home has at least a broadband connection.

References

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

Thornburg, D. (2008c). Red Queens, butterflies, and strange attractors: Imperfect lenses into emergent technologies. Lake Barrington, IL: Thornburg Center for Space Exploration.

Thornburg, D. D. (2009a). Increasing returns. [Vodcast]. Laureate Education, Inc. Retrieved from http://sylvan.live.ecollege.com/ec/crs/default.learn?CourseID=4199715&Survey=1&47=5797856&ClientNodeID=984645&coursenav=1&bhcp=1

Thornburg, D. D. (2009b). Red queens. [Vodcast]. Laureate Education, Inc. Retrieved from http://sylvan.live.ecollege.com/ec/crs/default.learn?CourseID=4199715&Survey=1&47=5797856&ClientNodeID=984645&coursenav=1&bhcp=1

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2 Comments leave one →
  1. Cynthia Harrison permalink
    August 13, 2010 10:32 pm

    Yay, David!

    An avid library patron!

    As a former librarian, that is good news! I am glad to know there are good resources in your geographical area. I have purchased many movies for the libraries where I worked and I think it is great to have that service available at no charge to patrons. I really hope that libraries do not become obsolete. That has been a concern of mine since all the school budget cuts and other things are happening with the economy, but I digress from our topic.

    As I mentioned to our learning community, I think we all agree that changes are happening and the movie industry does fall into the category of the Red Queens. (I like your graphics, by the way…) It has been interesting to me to see that one of us rented from Blockbuster, one borrowed a movie from a friend, one borrowed the movie from the library, one from Netflix, and I bought several of them online and then from a local store. This sampling lets me know there is still a competition going on that seems to be alive and well. It also makes me interested to know how the rest of the class obtained their movies. I may have to check that out!

    Thanks for the informative post!

    Cynthia

    • edutechtalks permalink*
      August 14, 2010 10:05 am

      Cynthia,
      Thank you for your response. I use the Nicholson library extensively. I am always delighted to see younger patrons, entrenched in reading and discussions.

      Yes, your observations regarding how our fellow course mates acquired their movies are interesting. I do not think libraries, as we know them, would become obsolete despite the push to digitize every printed page in them. Digital libraries have their benefits particularly for the learning environment and knowledgeable personnel they provide. I think digital libraries will continue to proliferate in concert with their traditional counterparts.

      David

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