Invisible Engines: How Software Platforms Drive Innovation and Transform Industries

Like all multisided platforms, the pricing structures of the software platforms we have encountered in this book reflect the need to get all unintegrated sides on board: end users, application/game/content developers, and manufacturers of hardware and peripheral equipment. The structures we have examined have three remarkable features. First, all o

Bundling can be used in a different way to facilitate price discrimination, which we discussed in the preceding chapter.14 That is, if different groups of consumers place different values on groups of components, bundles can be designed so that those with stronger demand pay more. The idea is possible to design bundles of components that cause cons

Components selling occurs when the firm offers A and B separately (cars and bicycle racks). • Pure bundling occurs when the firm only offers A and B together as a single bundled product, AB (men’s laced shoes). • Mixed bundling occurs when the firm offers the bundle AB and either or both of its components, A and B (such as the Sunday New York Times

Two important factors influence multisided pricing structures. There may be certain customers on one side of the market—Rochet and Tirole refer to them as “marquee buyers”33—who are extremely valuable to customers on the other side of the market. The existence of marquee customers who create strong network effects tends to reduce the price to all c

The copyleft provision means that if people choose to distribute software that is based in part on other software covered by the GPL, they must distribute their new software under the GPL. GPL software thereby propagates itself.

Bundling features into the software platform is often efficient for the platform producer and for end users, as it is for most information goods, because it lowers distribution costs and expands demand.

Almost from the beginning, makers of game consoles have followed an approach that stands the PC model on its head. They integrate the hardware and the core software. Consumers can’t get one without the other. They sell this integrated console to end users at a price that often doesn’t even cover the manufacturing cost. The console producers make th

Third, they reduce costs by providing shared facilities for the customers on each side. That’s the shopping mall case with which we began.

Interestingly, we are aware of no examples of software platforms that initially integrated into the applications/games/content that subsequently exited that business entirely. On the other hand, almost all such platforms have adopted a two-sided strategy and made significant investments in attracting third-party suppliers. Partial integration is th