Literature Critique:The DVD vs. DIVX Standard War: Empirical Evidence of Network Effects and Preannouncement Effects

The introduction of new technology, DVD, for replacing videocassettes was an open format to avoid format wars. However, preannouncement of DIVX made confusions to the market on different formats. Hence, it had slowed down the adoption of DVD. The effect was short-lived; DVD survived and became a successful technology, while DIVX failed to enter the market. In the following, the success of DVD, the effects brought by preannouncement of DIVX, and the failure of DIVX …

…of format wars. In the fall of 1998, DIVX reached the market. However, no new studios support for DIVX and those fence-sitting studios had begun releasing in open DVD. During Christmas, the DIVX players sold were less than 25 percent of sales of DVD players. Moreover, many users buying DIVX players were not solely for playing DIVX disc but because it could also play open DVD. On June 16, 1999, Circuit City officially announced on the demise of DIVX.