Digital Media Player Industry evolution

Henrik Cort TranæsAugust 20 2009

Industry trajectories of changeCand. Merc. Master Thesis Defence

Industry trajectories of Change

Industry analysis of the Digital Video player industry

Agenda

• Intro- why this study

• Choice of theory

• Model

• Industry analysis

• Results and discussions


Reason for the study

• CE incumbents not responding to outside threats, music players, and mp3 loosing competitive advantage.

• Problem that the firms only look at their current market and competitors, but substitute markets cannot be properly measured.

• Wanted to know what academic literature could help answer my questions


Modes of industry convergence

competitive relations between two industries whereby core assets and/or activities in an emerging industry eventually come to substitute those of an existing industry.


Industry dynamics

• Single industry life cycle • Changing industry boundaries, convergence of

products and tech. fulfilling same costumer need with dif. Assets and Activities.

• McGahan offered a comprehensive foundation for assessing both type of dynamics. However the Focus on creating assets and activities internally,

• creating assets such as first mover advantages of externalities and standards.

Partnerships Standards Complemnts in Network markets

• How to build a model where the market is showing network externalities. Shapiro & Varian.

• Network externalities important in this type of industry, one standard, equates to “winner takes all” market.

• Standards• Old closed DVD/blu-ray std, vs. new open video format standard.• The standard and the critical mass• Direct and indirect network externalities, • Complementors enhance the indirect network externalities. • Generic assets in network markets• Control over installed base • IP rights and patents


Model


Emergence

Convergence

Co-existence

Dominance

Industry vs. Industry, Threat to Core Assets and Activities

X 2 for industries Create A&A internallyAcquire ExternallyPartnering and Sharing,

If, network market, Unique assets, calls for partnerships. Standard as asset, not create alone, complements to enhance network effects.

Manufacturersof Digital

media players

Incumbent industryPhysical disc players

Rental servicesoffering pysical media rental of

dvd and blueray discs.

Manufacturers of DVD & Blu-

ray players

Emerging IndustryMultipurpose Digital media file

players

Online movie streaming services

Consumer electrioncs of Digital media Players devices, an industry Converging

Complementary services and products

Software & Internet Services

Internet & Home

Networks

Key attributes of the new digital media players that consumers value

Consumers prefer Non physical media players over Physical such as DVD and Blu-ray because, they are easier and better to use.

1. Digital movie catalog, no need to change discs2. Ability to stream on line video content 3. Digital meta-data on digital movie collection, such as movie

posters, plot, ratings 4. Windows like User Interface 5. Ability to Copy and Stream movies without limitations. 6. Seamless integration with home netwrok and other networked

devices in the household.

Key attributes of the new digital media players that consumers value

7. Ability to view photos and play music on same device. 8. No wear and tear on the media files like on a physical disc.

9. Faster load of media files compared to loading of a blu-ray movie disc 40 sek+ vs 3-4 sec.

10. Support for multi language subtitles and homemade subtitles. 11. Support for popular networks standards like NFS, SMB and

Upnp/DLNA.

12. Noiseless playback and no moving parts make player more relailabe and quit.

13. Support for universial Remotes such a Harmoney and Webbased RC

client on i.e Iphone and webbased.

Products and Technology• There is a revolution coming in

home entertainment. CD, DVD, Blu-Ray will all soon be a thing of the past. The future is HD digital media played through one box, the Media Player

• Network media players continue to be a popular addition to the home network for those who want to view their movies .It's feasible to have hundreds and hundreds of full-length movies and on your network and hard disk.


Distribution

Media

Product

Activities Assets

Assets

Industry analysis


Core Activites

Radical Change Creative Change

Intermediating Change Progressive Change

Threatened Not Threatened

Cor

e A

sset

s Thr

eate

ned

Not

Thr

eate

ned

Foundational change

Architectural change

Core Activites




Co

re A

sse

ts

Th

rea

ten

edN

ot T

hre

ate

ned

Core Activites




Co

re A

sse

ts

Th

rea

ten

edN

ot T

hre

ate

ned

Incumbent

Emerging

PHASE

Emergence

Convergence

Co-existence

Dominance

Performance by new approach improves dramatically

Growth in the new industry compared to growth in the old industry is high enough to cause convergence in volumes between the two industries.

Industry analysis

• Standards IP rights and Patents as core assets incumbent industry, built around the physical disc and the player.

• Network externalites for the emerging industry of IT; reason for entering business.

• Western digital sells harddisks, the more media palyers sold, the more harddsik sold

• Linksys/Netgear sell networking gear, the more media palyers sold, the more network gear sold.

• Same goes for Intel, chips, Syabas’s Software.• Incumbnet have no benefit of these externalites, but are

loosing money on the loss of network assets on ip rights and lisecnes fee on the physcial disc system.


Results and discussions

Theory• The theory provided good ground for asessing ,

however if good have been relevant to look at other theories such as Creative destruction and disruptive Technology. A more fine-tuned theory is needed for assing the threat of industries and technologies in its making . Also a deeper insight in alliance creation could be added.



Model

• The model had is limited in focusing on buyers and suppliers and assets, but limited in assing the technology regime of the two industries, more is needed to develop a model that can also capture the evolution of industries from their assets creation.



Case• The case was limited in its scope of the

choice of industries, but is provided at good learning point on the viability of the theory and the model in a real world setting. It would be interesting to further test the validity of the model by appling it on other simliar convergence based intra-industries.


Questions


Backup


Reseach Questions

Theoretical Research question

How can the firms asses the type of trajectory change in their industry, to understand if the change is threatening its core activities that generates profit for the firm, and if the change is threatening its ability to generate a return of investments on its core assets. How can firms respond and align to these changes in order for it to remain competitive?


Managerial research question

• How can one construct a managerial model based for firms to use in their strategy formulation and business execution, to asses core assets and activities, and the need of partnerships and complements, to stay competitive in their industry, if it is converging with other industries?


Empirical Research question

• How can firms that participate in the market of digital consumer video players to consumers, apply the managerial model on their industry, to asses if core assets and activities are coming under threats of generating profits and revenue from emerging industries?


Industry analysis

• Core Assets• The core assets of license on the video format, falling

prices of products and IP rights and patents, because of lacking demand. ROI on capital working,

• Core Activities• Profitably hit by industry. • Buyer/supplier falling WTP/WTS• Consumers not buying new blu-ray players, specialized

buyers value products attributes of new industry higher.


Digital Media Player Industry evolution

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