Software multihoming to distal markets: Evidence of cannibalization and complementarity in the video game console industry

Abstract

Steady software supply is a crucial driver of platform sales. While publishers benefit from releasing software across multiple platforms to tap a greater market, platform manufacturers often seek exclusive release to differentiate from competitors. Research has examined such software multihoming across competing platforms of the same technology generation (i.e., the proximal market); however, publishers increasingly multihome software to platforms in distal markets. In the video game console industry, these include previous-generation consoles, handhelds, or mobile devices. This study investigates multihoming to distal markets in the seventh and eighth game console generations. Whereas multihoming to previous-generation consoles cannibalizes focal console sales, multihoming to mobile devices exerts complementary effects. Software quality and console age moderate these relationships, with negative spillovers from multihoming to previous-generation consoles being rooted in lower-quality games and games released later in the console’s lifecycle. By contrast, multihoming to mobile devices is most beneficial early on.