This document discusses the dynamics of indirect network effects in the video game sector over four stages: 1) Network Formation (2000-2001): Characterized by the launch of PS2 and formation of ties with existing developers through new games. 2) Network Growth (2001): Characterized by the launch of Xbox and GameCube. Ties formed through new and repeat ties for existing platforms, and new ties for Xbox. Support transitioned to more cross-platform porting. 3) Network Maturity (2005): Characterized by Xbox 360 launch. Ties formed through repeats and new developers. Xbox/Xbox 360 received support from PC network. Cross-generation porting increased for 6th generation platforms.

1. Investigating the Dynamics of Indirect
Network Effects in the Video Game
Sector
Arati Srinivasan
N.Venkatraman

2. Network Formation
Stage
•Characterized by the launch of PS2 by
Sony in October 2000
•Tie formation characterized by repeat
ties with existing developers
•Support by existing developers is
extended predominantly in the form of
innovative ties (through the launch of
new games)
Platform Existing Developer New Developer In-house Developer Adjacent Market Developer
1st
time company
support
1st
time platform
support
Repeat platform
support
1st
time in-house
support
Repeat in-house
support

3. Network Growth
Stage
•Characterized by the launch of Xbox
by Microsoft and GC by Nintendo in
November 2001
•Tie formation for PS2 and GC is
characterized by repeat ties with
existing developers
•Tie formation for Xbox (by new
entrant Microsoft into the video game
sector) is characterized by new ties
with existing developers
•Patterns of support extended by
existing developers transitions from
predominantly innovative ties to
incremental ties (in the form of cross-
platform porting)

4. Network Maturity
Stage
•Characterized by the launch of the
Xbox 360 in November 2005 - the first
7th
generation platform by Microsoft
•Tie formation is characterized by
repeat tie formation with existing
developers and new tie formation with
new developers for Xbox and PS2
•Xbox and Xbox360 receive support
from new developers from their PC
network
•Proportion of incremental ties with
existing developers (through cross-
generation porting) continues to
increase for sixth-generation platforms
•Xbox360 is supported primarily
through innovative ties (new games)
by existing developers
•New developers extend support
through innovative ties for all
platforms

5. Network Transition
Stage
•Characterized by the launch of PS3 by
Sony and Wii by Nintendo in
November 2006
•Tie formation for PS3 and Wii is
characterized by repeat ties with
existing developers
•New developers that supported the
sixth generation platforms rarely
migrated to the seventh generation
•Existing developers migrate faster to
the Xbox360 and Wii platforms than
the PS3 platform highlighting the role
of network inertia
•Proportion of incremental ties (in the
form of cross-platform porting)
increases for the 7th
generation
platforms

6. Network Transition
Stage
•Characterized by the launch of PS3 by
Sony and Wii by Nintendo in
November 2006
•Tie formation for PS3 and Wii is
characterized by repeat ties with
existing developers
•New developers that supported the
sixth generation platforms rarely
migrated to the seventh generation
•Existing developers migrate faster to
the Xbox360 and Wii platforms than
the PS3 platform highlighting the role
of network inertia
•Proportion of incremental ties (in the
form of cross-platform porting)
increases for the 7th
generation
platforms