Platform Architecture, Multihoming and Complement Quality: Evidence from the U.S. Video Game Industry

Abstract

Multihoming – the decision to design a complement to operate on multiple platforms – is becoming increasingly common in many platform markets. Perceived wisdom suggests that multihoming is beneficial for complement providers as they expand their market reach, but it reduces differentiation among competing platforms as the same complements become available on different platforms. In a study of the US video game industry, we find that multihoming is not as simple as commonly assumed and that platforms, i.e. game consoles, differ in their attractiveness for multihoming complements, i.e. games. Specifically, we find that the complexity of a console reduces the quality performance of multihoming games so that the same game receives a lower quality score on a more complex platform than on a less complex one. However, games that are released on the complex platform with a delay or developed and marketed by a vertically integrated firm suffer a smaller drop in quality on complex platforms, while the use of standardized technological tools – middleware – does not help to attenuate the performance drop on complex platforms. This has important implications for managers considering expanding their reach through multihoming.