Reseaux concurrentiels et normes propres : Le cas du son quadriphonique

London School of Economics and Political Science

Public management, Leadership and Change Programme

COMPETING NETWORKS & PROPRIETARY STANDARDS: The Case of Quadraphonic Sound

Author: STEVEN R. POSTREL,

The John E. Anderson Graduate School of Management at UCLA, 405 Hilgard Avenue, Los Angeles, California 90024-1481, USA.

Source: The journal of Industrial Economics, Vol. 29. No. 2 (Dec. 1990), pp. 169-185.

Publisher: Blackwell Publishing.

ARTICLE REVIEW

BY

YOUSEF SALEM HAMAD

Summary

Market has been dominated by Stereo before Quadraphonic Sound (quad) became popular in 1970’s and reproduced sound by converting/encoding -on magnetic tape or vinyl disc- 4 channels audio information to 2 channels by means of four speakers positioned on four-corner room. Stereo reproduces sound using two channels through two speakers.

Although it took short time, Quadraphonic sound had eventful, sojourn in marketplace when it became war core among sponsors of two prominent systems matrix (represented by Quadraphonic Stereo & Stereo Quadraphonic) and Discrete-CD-4. Before Quad disappeared from market -due to large pre-existing network of Stereo SW&HW and several difficulties & technical problems-, sponsors were challenging each other to improve & develop competitive systems and produce quad on large scale. Quad premature introduction was driven by competition among matrix & discrete sponsors.

Using Farrell&Saloner1986 installed-base model, and taking Quad failure as example, author illustrated such model usefulness in understanding market competition among incompatible networks, and how network externalities played big role in that failure, although all major manufacturers and recording houses supported Quad to replace Stereo in 1970s. He highlighted that such model has surprising power to clarify complex interactions among technologies & agents.

He found that the introduction of competing incompatible quadraphonic systems put-off the development of viable user base. He argued, the battle took place between sponsors -produced their systems in premature technology- averting one another from creating quadraphonic standard to win market, thus quad failed among retailers and consumers because –as author concluded- software development slowness and systems technical deficiencies led to reduce demand which then discouraged software development. Public confused about quad’s performance and characteristics, particularly matrix versus discrete advantages & disadvantages, averting 4-channel from becoming perceived "next step" after stereo, so that users confused which network to join, an old substantial technology, or new one. He indicated that the observable phenomena list doesn’t constitute comprehensive explanation for quad’s demise. Quad never entirely overcame its original status as novelty, curiosity, gimmick. It didn’t follow common growth approach and substitution pattern of product life cycle. War among quad sponsors split Matrix & discrete which hindered quad growth thereby reduced quad’s users and played against new technology making status more focal equilibrium and converting promotional efforts to quad war fighting stereo. Moreover, quad might have succeeded when its quality improved by having new technology released later. This delay could have helped quad, since stereo had exhausted possible network externalities.

Competition tends to be ‘‘winner-take-all” where 1st firm has higher benefits when introduces standard to large users base, hence firms attempt for preemption which lead to hastiness to

beat rivals introducing half-backed poor product to market.

Critical Analysis

From my view point, the article was effective in using Farrell&Saloner1986 especially, when author came-up later with some significant concern about its concepts when he called to modify it. He highlighted the distortions inherent

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