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Video Games Sales Dependent on Early Adopters and Timing within Console’s Life Cycle, According to New Research from NYU Stern and RSM Erasmus

Experimentation with new genres, new technology, and new interactivity is most likely to succeed early in a platform's lifecycle; whereas familiarity is key later in the lifecycle

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Vendors should consider launching a wide variety of new products early in a platform’s life cycle, but they are better off investing in sequels and spin-offs as time goes on.

New research from NYU Stern Professor J.P. Eggers and co-author, Joost Rietveld of the Rotterdam School of Management, Erasmus University (RSM), finds that the life cycle of a video game console affects the sales of video games for the platform, as the ratio of early to later adopters tips.
                               
With worldwide industry sales surpassing $100 billion and over 70% of sales coming from video games, video game consoles are an optimal source to explore the effect of novelty on consumer behavior in platform markets, particularly given the generational nature of each system. Analyzing a unique data set of almost 3,000 video games released in the United Kingdom from 2000 to 2007, this first-of-its-kind study tracks how user preferences and attitudes toward innovation affect sales over time.
 
The researchers show:
  • The risk- and novelty-seeking nature of early adopters means that games based on new intellectual property perform well when the console is young, while the risk aversion of later adopters means that sequels and media spinoffs do well later.
  • Despite the increase in potential user pool as a console evolves, games launched later in the console’s life cycle realize lower sales than those launched earlier.
  • Console competition is not only about attracting more users, but attracting the right users for its games. Too few eager, high-spending early adopters and too many conservative, risk-averse later adopters may have a negative impact on sales for games that are novel or innovative. 
“Our findings have important implications for businesses across technology platforms, including mobile operating systems, crowdfunding, and media streaming services,” the authors explain. “Vendors should consider launching a wide variety of new products early in a platform’s life cycle, but they are better off investing in sequels and spin-offs as time goes on.”
 
The paper, “Demand Heterogeneity in Platform Markets: Implications for Complementors,” is forthcoming in an upcoming issue of Organization Science.
 
To speak with Professor Eggers, please contact him directly at jeggers@stern.nyu.edu or contact Niamh Roberts in NYU Stern’s Office of Public Affairs at 212-998-0615 or nroberts@stern.nyu.edu. To speak with Professor Rietveld, please contact him directly at rietveld@rsm.nl

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