FORMAT WARS are battles to set and control technical standards in a market; they are essentially battles to control

the source of differentiation and thus the value that such differentiation can create for the customer. The strategies that company should adopt to win format wars revolve around finding ways to make network effects work on their favor and against their competitors. Network effects arise in industries where the size of the "network" of complementary products is a primary determinant of an industry's product. When two or more companies are competing with each other to get their technology adopted as a standard in an industry, the company that wins the format war will be the one whose strategy best exploits positive feedback loops. An important implication of the positive feedback process is that as market settled on a standard, companies promoting alternative standards can be locked out of the market when consumers are unwilling to bear the switching costs required for them to abandon the established standard and adopt the new standard. One example of a format war that has taken place is when Sonys Blu-Ray and Toshibas HD DVD battled for control of the high definition video market. Strategies that Blu-Ray employed to win the war include: 1. Ensure a supply of complements In addition to the product itself, there has to be an adequate supply of complements. One of the main reasons that Blu-ray won the war is because Blu-ray had better main entertainment-related companies (i.e. movies and games) support. With 20th Century Fox, Buena Vista Home Entertainment, MGM Studio, Paramount Pictures, Sony Pictures Entertainment, The Walt Disney Company, and Vivendi Universal Games backing it. The final deathblow for HD DVD came when Warner Bros, one of the biggest major film studio, defected to Blu-Ray. This set off a chain reaction of shifting alliances that saw nearly every major manufacturer and retailer abandon HDDVD within a few weeks, including Walmart, the largest DVD retailer in US, and online rental company Netflix, both announced plans to support Blu-ray exclusively.

With most movie studio issuing movies on Blu-Ray format and more Blu-Ray discs in the market, the value of a Blu-Ray player became greater to customers, and this consequently increase the demands for Blu-Ray players. This further exploited a positive feedback loop: as sales of Blu-Ray players grow, movies studio issued more films in Blu-Ray format. 2. Leverage Killer Applications Sony's decision to incorporate a Blu-ray Disc player as a standard feature of the Playstation 3 video game console also helped ensure the format's eventual triumph. Toshiba tried to include a similar package in the Xbox 360, but they were slow in rolling it out, By the time Toshiba ceded the market, about 10.5 million of the Sony consoles had been sold worldwide versus an estimated 1 million HD DVD players including both standalone units and the add-on player for Microsoft's Xbox 360 console, which did not use the HD DVD add-on for gaming unlike the PS3 which had games that used the Blu-ray's added storage capacity. This equipment gap was a factor in Blu-ray titles (including the ones bundled with the PS3) outselling their HD DVD counterparts two to one in the United States and three or four to one in Europe. 3. License the Format Blu-Ray also licensed the format to other enterprises so that they can produce products based on it. This help Blu-Ray to enlarge supply of product, which stimulate demand and accelerate market adoption. Companies that manufacture Blu-Ray players include Sony, Philips, Samsung, LG, OPPO, Panasonic, and Yamaha. As a result, with almost all movie studios, rental services and retailers, as well as, disc manufacturer announced the exclusive support for Blu-Ray products, Toshiba discontinued the HD-DVD format and Blu-Ray was declared the winner. REFERENCES Andrews, E. (n.d.) Top 10 Format Wars. Retrieved from http://www.toptenz.net/top-10format-wars.php#ixzz1sq0lsDey

MediaCollege. (2008, January 6). Blu-Ray vs. HD-DVD. Retrieved from http://www.mediacollege.com/video/format/compare/bluray-hddvd.html Blu-Ray. (n.d.). Blu-Ray Players. Retrieved from http://www.blu-ray.com/players/ Hill, C. W. L. & Jones, G. R. (2009). Theory of Strategic Management with Cases (8th ed.). Connecticut: South-Western.