Red Queens and Increasing Returns

Where did you go to find a movie based on a Philip K. Dick book? Did you rent or purchase a DVD, or did you view it digitally on your computer using Netflix or a similar vendor of video-on-demand?

Last blog, I mentioned the futuristic technology found on the Minority Report.  I viewed that movie on Netflix.  Netflix was the easiest method to view the movie because it was immediately viewable on my television through my PlayStation 3 gaming system.  Netflix is also available through my Roku box, tablets, smartphones, laptops, and desktop.  Going to a video store to rent a DVD—though it is down the street where I live—is inconvenient when compared to the immediate access through a video-on-demand (VOD) services like Netflix.

Is the current competition between DVDs and video-on-demand an example of increasing returns or Red Queens? Justify your response with sound reasoning and specific examples.

Thornburg (2008) noted that Red Queens are ideas that are constantly improving to maintain their strategic competitiveness.  In this case, DVDs are not improving their quality.  In fact, DVDs are capped in their quality (480p) and bitrate.  Netflix offers some content in the new 4K (2160p) market, and most content are available in 1080p, though this depends on the availability of high-speed Internet.  Netflix is improving its services while DVDs are not maintaining its competitive edge.  The idea of Red Queens is that both technologies remain competitive with each other.netflix-logo

The competition between DVDs and VOD is an example of increasing returns and not of Red Queens.  Arthur (1996) posited that increasing returns occurs when the markets tilt in favor of the idea that gets ahead.  VOD services like Netflix, Hulu, Amazon Prime, Vudu, Crackle, Crunchroll, and Redbox Instant have improved their quality of service by reducing load times and increasing their data compression methods to offer higher quality viewing.  DVD stores like Blockbuster are closing shop because VOD services have edged forward (Moss, 2013; Stelter, 2013).  VOD companies are dominating the market and driving DVDs out is a prime example of increasing returns.

On a side note, Blu-ray discs are also on their way out as VOD quality improves.  Blu-ray discs currently offer superior video and audio quality when compared to VOD services; however, Blu-ray discs cannot play on tablets and Roku-like devices that VOD services are found on.

Where do you think DVDs and video-on-demand are on the four criteria of McLuhan’s tetrad?

Based on McLuhan’s tetrad, VOD reverses DVDs.  DVDs are made obsolete by VOD because VOD is convenient, can be played on any device, and monthly costs make this a cheaper alternative to collecting and storing DVDs.

References

Arthur, W. B. (1996). Increasing returns and the new world of business. Harvard Business Review74(4), 100−109.

Moss, C. (2013). Blockbuster is officially closing its retain stores after 28 years.  Business Insider. Retrieved from http://www.businessinsider.com/blockbuster-is-closing-forever-2013-11

Stelter, B. (2013). Internet kills the video store.  The New York Times. Retrieved from http://www.nytimes.com/2013/11/07/business/media/internet-kills-the-video-store.html?_r=0

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

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One thought on “Red Queens and Increasing Returns

  1. Excellent comments about the increasing returns. It is true that DVD’s and Video on Demand are not running side by side. I also know many people who have actually replaced a television service with Netflix or Video on Demand and simply do not worry about the high packages charged by these companies.

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