Information Technology Reference
In-Depth Information
Video on Demand (VoD) probably one of
the best publicised examples of a multimedia
service, as VoD can be considered as exhibiting
a symbolic significance for convergence. The
supply of VoD services requires the combination
of resources initially possessed by players from
telecommunications, computing and audiovisual
industry. It also exemplifies the disrupting char-
acter of convergence, as this is a substitute for
more traditional distribution channels, such as
movie theatres, broadcasting TV, or DVDs. In
this paper, we identify a “critical event” which
strongly impacts VoD business as well as other
services: the launch of “triple-play” services in
France and in particular of IPTV.
In order to analyse the effect of the launch of
IPTV systems, we draw from the competences and
resources approach (i.e. Barney, 1991; Prahalad &
Hamel, 1990; Teece et al., 1997), combined with
an overall evolutionist perspective (i.e. Nelson &
Winter, 1982). Therefore, we put the emphasis
on the critical resources and competences which
are at the heart of actors' competitive position.
We also consider the learning processes and
trajectories, as well as the changing amount and
value of resources, which allow them to operate
strategic moves.
This critical event also allows us to broadly
distinguish between two phases of convergence.
During the first phase, major players are strongly
constrained by their past trajectories and their
current stock of resources and competence. They
are subject to strong information asymmetries as
they have a low level of understanding of other
industries' business and tend to remain on their
core resources and capabilities. Moreover, the
business prospects of services such as VoD remain
uncertain, so that they adopt a rather cautious ap-
proach in their strategic moves. This is a phase
of rather complementary convergence. After the
launch of triple-play services, VoD also exem-
plifies a second stage of convergence in which
players do not remain on their initial resources
and competences bundle, move along the value
chain, and eventually enter each other's business.
It is a more competitive convergence. Players from
the various industries have become more familiar
with other companies' business by interacting with
them for the production and marketing of new
services. The more sizeable business prospects
also contribute to reduce the perceived risk of
more adventurous strategies. This is particularly
true of telecom operators which benefit from an
increased market power. In the case of Orange,
the learning accumulated with VoD business, the
extension of a critical resource (the installed base
of ADSL subscribers), as well as the blurring of
service borders have induced a strategic move
into the TV business.
In this paper, after presenting the VoD business
and context, we first analyse the initial situation of
the French broadband Internet and VoD market in
the pre-IPTV complementary convergence period,
and introduce the “critical event” represented
by the launch of triple-play services. Then we
analyse the entries of different companies and the
inter-organisational arrangements used. Finally,
we show how the change in the balance of power
induced by IPTV has amplified the strategic moves
of major market players, inducing the emergence
of a competitive convergence dimension. We
conclude by outlining competitive and regulatory
implications.
BACKGROUND: VIDEO ON DEMAND
BUSINESS AND CONTEXT
VoD is a service providing video programs
(typically movies, but other programs as well)
as requested by the customer in a catalogue and
delivered at a time chosen by the customer.
Movies are distributed through multiple chan-
nels in sequential release windows in a specific
order
1
. The majority of the revenues generated by
a film are received within 18 months of a film's
distribution cycle (Table 1). This cycle is based
on potential revenue along the different market
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