Cooperation in Multi Sided Platforms: A Case Example from the Video Game Industry

Christian Schou Carlsen & Mikael Jarlkov Buch Varle

Student thesis: Master thesis

Abstract

According to Amit and Zott (2001), value creation in e-businesses hinges on four dimensions—efficiency, complementarities, lock-in, and novelty (Amit and Zott, 2001). We use this framework to investigate if it is possible for two rival multi-sided platforms to create a greater value by cooperating. Most theories related to multi-sided platforms focus on a hostile competing environment and a winner-take-all principle. Many companies look for ways to build up switching costs to lock in customers and get the snowball rolling toward the virtuous cycle. This has proved to be a successful strategy for many big companies such as Apple, Facebook, and Google. However, the main goal of a multi-sided platform is essentially to maximize the value of its platform. Some markets demand a higher degree of variety and it is unlikely that the market will tip toward any one platform (Shapiro and Varian, 1999). Therefore, it is relevant to discover if a platform can achieve a higher value by cooperating, even with its rival. Grounded in a case study of Xbox and PlayStation and the theory surrounding multi-sided platforms, we analyze how each dimension generates value.
We first analyze each organization individually and then compare the two to find differences. After a comprehensive analysis, we get a clear picture of how each organization creates value. We use the information to discuss how the dimensions might be affected. Our research shows that it is possible to generate more value by cooperating. In the example of Xbox and PlayStation, they benefit from increased value on both sides of the platform. On the other hand, they will decrease the switching cost toward each other and have less control over players and third-party developers. Based on these findings, we conclude that multi-sided organizations should consider focusing on what differentiates them and work together where they have no sustainable competitive advantage.

EducationsMSc in Management of Innovation and Business Development, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2017
Number of pages112
SupervisorsJonas Hedman