for existing competitors to catch up and for newcomers such
as Google’s Android and Apple’s iPhone to enter the fray.
In a last-ditch effort to save the Symbian operating system,
Nokia bought out its partners and spun off the enterprise in
June 2008 as an open source consortium that gave its software
away. In essence, Nokia recognized that it had erred in trying
to use a proprietary platform to contain or deter competing
platforms while also attempting to extract value for itself. But
it may have learned this too late. Companies rarely get a second chance to tip a market.
Which MSP Should We Play With?
If you decide that you should play with one or more MSPs, then
you have to figure out which to join. More specifically, should
you go with one MSP exclusively or affiliate with several?
Some MSPs may not require exclusivity, in which case you
should consider joining all those that offer positive net value.
For example, since neither Google nor Yahoo requires exclusive arrangements, there’s no reason not to advertise on both.
Other MSPs may demand exclusivity, which can be an opportunity. If an MSP wants and needs you, it may offer money
or other forms of compensation in exchange for an exclusive
relationship. The most visible example in recent times was
the battle between the Toshiba-led HD DVD camp and the
Sony-led Blu-ray camp to be the dominant platform for high-definition DVDs. Both sides reportedly offered large sums to
Paramount, Dream Works, Disney, and other studios to persuade them to join on an exclusive basis.
Similarly, hot content producers have been able to rake in
enormous sums by getting rival radio and TV broadcasters
to bid against each other for exclusive access to their content.
Satellite radio provider Sirius paid $500 million for a five-year
exclusive contract with radio personality Howard Stern to
gain the upper hand over its rival XM.
In the long run, perhaps the most critical considerations
for strategic players are: Would an exclusive relationship with
you tip the market to one platform or another? If so, do you
want to tip the market and allow one winner to take all? Tipping is desirable when adopting one standard would expand
the market for all players and it’s still possible to prevent the
MSP from holding you up. Otherwise, a strategic player should
steer clear of the arrangement and maintain support for two
or more competing MSPs. Samsung and Motorola adroitly
adopted this approach in mobile phones and played with multiple MSPs: Symbian, Windows Mobile, Linux, and Palm OS.
This strategy made sense for them because it was (and still is)
very hard to tell which platform might win, and neither was
large enough to tip the market to one operating system. The
downside of this hedging strategy, of course, is obviously the
extra engineering, marketing, and support required to play
with several MSPs.
Indecisiveness in choosing where to play can be expensive. Time Warner arguably made this mistake in the high-
Where
to Play?
Questions to ask when deciding where to play
■
Does the multisided platform require exclusivity, or
can we play on multiple
MSPs?
■
How does the increase
in customer reach from
playing on multiple MSPs
compare with the increase
in costs from supporting
multiple MSPs?
■
Can we extract extra compensation from an MSP
if we go exclusive? Does
the extra compensation
outweigh the loss of customer reach and flexibility
from playing with multiple
MSPs?
■
Would we tip the market
to one MSP by going
exclusive?
■
Do we want or need to tip
the market, or do we want
to prevent it from tipping?
■
What are the benefits and
costs associated with the
market tipping?
■
What are the benefits and
costs associated with the
market not tipping?
definition DVD standards war. For more than two years, Time
Warner supported both HD DVD and Blu-ray. It initially
hoped that HD DVD would win for a number of reasons:
Time Warner had a higher market share for content on HD
DVD than it did on Blu-ray (50% versus 20%); HD DVD players
were cheaper, which meant that the market for machines and
content would grow faster if that standard prevailed; and the
company was reluctant to throw its weight behind a platform
led by Sony, one of its main competitors. But with the overall
market evenly split between the two standards, Time Warner
was unwilling to gamble and exclusively back HD DVD – especially since Sony, which had lost the VHS-Betamax wars in the
1980s and had bet its PlayStation 3 franchise on Blu-ray, could
be expected to fight until the bloody end.
Eventually, Time Warner’s fears about helping Sony were
supplanted by the concern that the long-term opportunity to
sell high-definition DVDs was shrinking. One factor was that
the continuing uncertainty about which standard would prevail was slowing consumer purchases of high-definition players. The second was that digital downloads were rapidly eating
into the market for DVDs. Time Warner couldn’t do much
about the second factor, but it could do something about the
first by helping tip the market to one standard. Realizing that
its 50% share of HD DVD content gave it more power over HD
