New market development of platform ecosystems: A case study of the Nintendo Wii

Abstract

The platform ecosystem could generate unlimited innovation with outside complementors and various consumers. Some researchers focused on the competition between two platform ecosystems in the same market and constructed theoretical models of indirect network effects between complementors and consumers. However, the implications from these researches might not adapt the platform ecosystem, which aims to explore new markets. This study focuses on a platform ecosystem—the Nintendo Wii—that explores a new market in the Japanese video game industry. We analyze why Wii rapidly declined in spite of its significant initial installed base. Our results show that the strength of indirect network effects for complementors’ software provision became relatively small in the case of competition between new and existing markets. Software provision of complementors and software selection of consumers led to the concentration of consumer segments in the new market. Software purchases of consumers in the new markets were dependent on the provider's name and on seasonality and increased the risk for complementors. Consequently, complementors exited from the platform ecosystem of the Wii new market; as a result, more consumers could not participate in the platform ecosystem. Based on the findings, this study makes suggestions for platform ecosystem success.