Deriving Value in the IDM Market: Open vs. Closed Platforms

Deriving Value in the IDM Market: Open vs. Closed Platforms

Nisha Alexander (Nanyang Technological University, Singapore), Ho Wei Ching (Nanyang Technological University, Singapore) and Arasu Prem Kumar (Nanyang Technological University, Singapore)
DOI: 10.4018/978-1-61350-147-4.ch011
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Faced with different market contexts and changing circumstances, businesses in the IDM marketplace often find themselves in a dilemma with respect to whether to make their platforms open or closed. This chapter presents the Open vs. Closed Value Analysis Framework Model that identifies, describes, and categorizes considerations for IDM platform owners deciding whether, where, when, and how to make their platforms more open or closed. We focused on platform-mediated networks commonly found in the IDM marketplace. We have found that there are generally no clear-cut rules of thumb that point clearly to whether a platform should be open or closed. Various factors like new industry entrants vs. dominant incumbent platforms, the presence and significance of complementors giving competitive advantage, and platform superiority weigh in on the decision.
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The IDM Ecosystem

The IDM marketplace typically comprises producers and consumers of digital media products and services and various intermediaries in between, as illustrated in Figure 1. These intermediaries are the content aggregators, syndicators and distributors. These players typically interact with each other in platform-mediated networks. Digital media is created or packaged by sources such as online games developers, movie and animation studios. Aggregation involves collection or repackaging of content from various sources. Syndication is the proactive streaming of content to alternate and repeat consumer segments, may be after a certain window period. Distribution is the conveying of digital content to consumers. In reality, these roles may be redundant or overlapping. (Dharmawirya et al., 2008).

Figure 1.

IDM ecosystem (Source: Dharmawirya et al, 2008)


Platform and Platform Mediated Networks

A platform comprises various components such as hardware, software, networks, rules and policies that govern their use and coordinate users’ activities. A platform facilitates interaction between two parties in the manner they wish to interact (Rochet & Jean, 2004). In platform mediated networks, interactions occur in a triangular manner. Supply side and demand side users transact with each other, and also with platform providers (Eisenmann et al., 2008). Platform mediated networks comprise several players: demand side users, supply side users, platform providers, and platform sponsors. This is illustrated in Figure 2.

Figure 2.

Elements of a platform mediated network and their interaction

(Source: Eisenmann et al, 2008)

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