Network Effect within Audio IP industry – A Case Study: Dolby Inc.
Date Issued
2016
Date
2016
Author(s)
Lin, Yi-Chun
Abstract
The technology industry is always in rapid changes and keen competition. Only a few companies have successful products and avoid elimination as time goes by and competition. Many successes of thriving companies are related to network effect and multi-sided platform in the last decade, especially in technology industry. But the companies whose benefits are largely based on network effect are often challenged to lose market shares and are eliminated, when technology improves and competitors create new network effect with new multi-sided platform. If two-sided platform or multi-sided platform also applies to an IP licensing company in technology industry and if yes, how the success can be sustained is a question to explore. This paper is a case-based research, and this paper will further discuss how the parameters we found from the great success of an IP licensing company can applied to its future strategy and continuous success. Using Dolby as the case for network effect and multi-sided platform analysis in technology industry, the paper analyzes how Dolby successes and becomes a worldwide famous audio licensing company based on network effect and multi-sided platform theory, and continuing creating growing stable revenue through technology and market trend changes over fifty years. Dolby success in cinema industry, broadcasting industry and consumer electronics industry is demonstrated and verified with two-sided platform model and multi-sided platform model in this paper. Dolby conquered the inherent chicken-and-egg dilemma of two-sided platform or multi-sided platform with backward compatibility to eliminate content creator’s concern, and Dolby has sustained its success and released new products along with the technology trend changes. This point is shown in timelines of audio format and consumer product with Dolby’s products in this paper. The technology industry depends on industry standards, and industry standard of different area made later usually tends to compatible with previous standards to ensure compatibility across delivery and products. As Dolby acquired success in film industry and broadcasting industry, positive cross-platform network effects helped Dolby’s successes in DVD/Blu-ray player, PC, and Mobile industries. Being as standard audio format in many industries, Dolby created entry barrier for its competitors, and made its value, rarity and inimitability. Moreover, switching cost, network effects of two-sided/ multi-sided platform, brand image and buyers’ value perceptions become lock-in effect for Dolby and contribute to Dolby’s sustained success. Whether or not Dolby can build new two-sided or multi-sided platform in video/image processing area and break the inherent chicken-and-egg problem will be key factor for Dolby to expand its business and duplicate its success in audio area into video/image processing area.
Subjects
network effect
IP
Dolby
Type
thesis
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