Getting the balance right seems to be more important than building shares. Platform markets do not tip quickly because as a practical matter, it takes time to get things right. And the first entrant often does not win in the end: many other firms may come in and successfully tweak the pricing structure, product design, or business model.

Getting the console into the hands of many people increased the demand for the games it could play. Moreover, it made buying a console less risky for households, who had no good way of knowing how valuable the console would be until they saw the games produced for it. The game-console company, which was in the best position to forecast the quality

The Microsoft strategy of having the hardware complement its operating system produced by a competitive, technologically dynamic industry has served to make its operating systems more valuable and to speed their market penetration. Microsoft is not above using integration on occasion to stimulate important markets for complements, as its entry into

When balance matters in a mature two-sided business, the pricing problem is much more complex than in a single-sided business. Marginal cost and price responsiveness on both sides matter for both prices, and so does the pattern of indirect network effects. In general, if side A cares more about side B than B cares about A, then, all else equal, A

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

Microsoft focused on providing lots of features. That didn’t help at first. But as happened with Windows, the hardware platform eventually caught up to the software platform. The learning and development of the richer platform eventually paid off, enabling Microsoft’s Pocket PC to close the gap with the Palm OS.

The console video gaming industry operates a radically different business model from other software platform industries. Game manufacturers tightly integrate hardware and software systems; they offer consoles to consumers at less than manufacturing cost, and they earn profits by developing games and charging third-party game developers for access

Many tasks that used to be performed by standalone applications have become integrated into other applications (such as spell checkers, which originally were sold separately from word processing programs) or into the software platform itself. Early operating systems, for example, did not include communications functionality. The malleability of

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