One commonly cited example of the network effect is the battle between two video formats in the 1980’s: VHS and Beta. We are lucky enough to be in the middle of a similar battle right now, in the form of HD DVD versus Blu-ray. Unlike VHS vs. Beta, neither of the two new formats is technologically superior, and other formats (such as regular DVD and VHS) are available to those who want to wait and see which lands on top. Recently many theories have been discussed in the news as to which way the cascade will tip, but there is no way to predict which will win in the end.

Theory 1: The influence of adult entertainment

http://www.ciol.com/content/news/2007/107040701.asp

It has been predicted that the winner in this case, as in the first case, will be the technology that is chosen by the makers of adult films. Currently, Blu-ray has left this segment of the market entirely untapped, since Sony will not allow it. Disney is also unwilling to use manufacturers who also produce pornography, so any current Blu-ray manufacturer who decided to try would likely lose a large portion of its market. This situation is likely to force studios into using HD DVD, making this the preferred format of those who enjoy this type of entertainment. These first purchasers will become the trendsetters, showing their friends and families that HD is preferred. These people will then also act as examples for their friends and families, who will see an even larger network of HD users, and will be even more confident in the choice to purchase HD over Blu-ray. As more and more buy based on personal connections, more people will want to choose HD, and a cascade will begin. Winner: HD DVD

Theory 2: Price and availability

http://www.tvpredictions.com/adultview040907.htm

http://www.businessweek.com/technology/content/apr2007/tc20070406_288377.htm

These articles claim that adult films will not have the power that they had in VHS vs. Beta. With the availability of movies on television, internet, and standard DVDs, nobody is going to be in a rush to buy a new system. The cascade that is starting is not only one of one format over the other, but also one of high definition over current standards. It is likely to be many years before everyone switches over (movies have been available on DVD for approximately ten years, but it is only in the last year or so that it has become difficult to find VHS movies and players). In the end, consumers will choose based on which format has an inexpensive player and the movie selection that they want. Currently, Blu-ray has the business of the majority of the major movie studios, giving it an early lead in this department, but neither has a reasonably priced player out… yet. It is likely that the first to put out a low priced player will get a surge of customers, but will it be enough to start a cascade? Winner: Blu-ray

Theory 3: Why choose?

http://www.cpilive.net/v3/inside.aspx?scr=n&NID=1325&cat=GLOBAL%20NEWS&pub=COMPUTER%20NEWS%20MIDDLE%20EAST&k=Samsung

My personal favorite theory is that neither format will win, at least without a major change in the way the battle is going. In our class discussions about instant messaging systems, we assumed that users would choose one for the sake of argument, but in reality people will use both. Companies are currently in the process of developing dual players, which will cost somewhere between $300 and $1000. Maybe these will do the job of replacing the old technology. At the moment it’s HD vs. Blu-ray vs. DVD, and the inferior technology is winning. Winner: Everyone!

Of course, right now this cascade is in the early adaptor stage. Since most consumers are followers, not leaders, maybe we should take the advice of this article: http://technology.guardian.co.uk/weekly/story/0,,2039119,00.html