The broken Windows fallacy
TCS:Tech | at | by Mike
Consumers spent $4.6 billion on Digital Video Discs (DVDs) last year - more than twice as much as they did in 2000 - beating out VHS cassette sales for the first time. DVDs sold spectacularly even though VCRs are in four times as many households as DVD players. Some chain stores, such as Circuit City and Borders, expect this trend to continue and are replacing their VHS inventories with DVDs. If this sounds familiar, it may be because the VHS format itself had trounced its rival, Beta, in the mid to late 1970s.
Theories can gain a life of their own even when facts do not support them. During the 1990s, lock-in theory was cited in several antitrust cases brought against companies such as American Airlines, MasterCard, and Visa. In 2000, U.S. District Court Judge Thomas Penfield Jackson found that Microsoft violated antitrust laws because "positive feedback loops" (i.e., lock-in) kept the company's rivals from effectively competing in the market for personal computer (PC) operating systems (OS). True, Microsoft holds the dominant share of the market for operating systems. But this does not mean that Windows is any less immune to competition than VHS is from DVDs.