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Surviving a Standards War: Lessons Learned from the Life and Death of DIVX

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  • Gandal, Neil
  • Dranove, David

Abstract

In April 1997, a consortium of hardware manufacturers and movie studios launched the DVD format. By that fall, electronics retailing giant Circuit City announced its intentions to launch a partially incompatible format known as DIVX. This Paper assesses Circuit City?s strategy to establish the dominant standard for digital video technology. We identify several key principles that any firm must consider when deciding how to compete in a market with evolving standards. We argue that virtually all of these factors weighed in against Circuit City, so that its effort was destined to fail.

Suggested Citation

  • Gandal, Neil & Dranove, David, 2003. "Surviving a Standards War: Lessons Learned from the Life and Death of DIVX," CEPR Discussion Papers 3935, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3935
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    References listed on IDEAS

    as
    1. David Dranove & Neil Gandal, 2003. "The Dvd‐vs.‐Divx Standard War: Empirical Evidence of Network Effects and Preannouncement Effects," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(3), pages 363-386, September.
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    More about this item

    Keywords

    Standards war; Network effects;

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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