PriceSCAN Blog

In a theory pioneered by economist W. Brian Arthur, increasing returns to scale can lead to a so-called "lock-in" effect in which a particular technological standard is picked out from a set of plausible alternatives. Ephemeral and even random factors may govern the choice, but once this happens, the cost to consumers and manufacturers of switching to any other standard becomes quite high, and any contending alternative must now present advantages far in excess of what it took to get in the game during the initial standard selection period. (For those into theoretical physics - and hey, who isn't! - the mathematics describing lock-in looks a bit like symmetry breaking.) Oft-quoted examples include the QWERTY typewriter keyboard, rail gauges, and yes, the selection of VHS over Sony's Betamax standard, even though many contend that Beta was the superior technology.
Many feel that when a critical mass of content became available on VHS and not Beta, the fate of Sony's standard was sealed. This time around, however, Sony has lined up half of Hollywood behind its gambit, as well as two of the largest PC makers. Plus, you never know what Cupertino will come up with, though currently putting more than brief HD video rips on a portable player may require a Blue-ray enabled iPod "Macro" that no one is going to be dancing around with, even in those cute silhouette ads. If Microsoft and Intel can pressure the PC makers to switch sides, they may tilt the balance of power to Toshiba. In the end, however, people watch DVDs for the content, not the supporting chips or operating system. With two so well armed alliances staring each other down, it's difficult to say what small factor of timing or technology might tip the balance, let alone who the victor will be.