All but over for HDDVD...

[BTBuck1]

Toshiba's Questionable Commitment to HD-DVD
Toshiba is selling the HD-A1 at unsustainable loss, and company President Nishida is calling for format unification. Is Toshiba really in to win?
by Gerry Block
June 28, 2006 - The next-gen DVD format war has officially begun, but instead of artillery and destruction, the opening volley looks a lot like a white flag. Toshiba President Atsutoshi Nishida made headlines recently on the HD-DVD / Blu-ray conflict while speaking at an annual shareholder's meeting. The helmsman told his audience "We have not given up on a unified format. We would like to seek ways for unifying the standards if the opportunities arise." His statement surprised many, as it comes at a critical period for Toshiba's own HD-DVD format, which launched on April 18th , and has since met sell-out demand for the limited supply of 7,500 Toshiba HD-A1 units that were made available.



The first player and movies for the Sony-backed Blu-ray format launched just weeks ago, finally putting the formats head-to-head in the open marketplace. While this would traditionally mean that full-scale war has begun, few skirmishes are occurring at retail or in advertising. Conciliatory remarks regarding a truce between the formats by the man in charge of Toshiba are also surprising at this juncture and seem to beg for analysis.

Those familiar with the videogame industry have grown up in a culture of launch blitzkriegs—marketing frenzies, massive press coverage, and fiery rhetoric from company executives. The term "soft-launch" isn't in the videogaming vernacular, and has seen little use in general consumer electronics in the years since Steve Jobs set an industry example with his style of dramatic hardware announcements. Nevertheless, HD-DVD and Blu-ray have each soft-launched in textbook style, appearing with little fanfair at retail and in limited supply.

From Sony's perspective, Blu-ray and the PlayStation 3 will launch hand in hand this coming November, and as such the company is saving their big guns for the holiday season. Toshiba, on the other hand, has no such tie-in for HD-DVD, aside from the possibility of an add-on drive for the Xbox 360. Before the format's launch in April, much was made of the potential for Toshiba to leverage HD-DVD's head start over Blu-ray, yet the company chose to make little of the opportunity.

The wisdom of Toshiba's decision has been widely debated. Viable explanations for the soft-launch range from lack of available media and limited production capacity to debatable early consumer demand. While each factor likely played a roll in how Toshiba formulated their game plan, revelations on the production costs of Toshiba's HD-A1 and Atsutoshi Nichida's recent comments call into question whether Toshiba is really out to win the war at all.

Technology analysts at iSuppli recently announced that, according to their generally respected calculations, the Toshiba HD-A1 HD-DVD player costs around $700 to deliver to retail. The unit is sold for $499, which means that Toshiba is taking $200 of loss on each HD-A1 shipped. While the market model of selling hardware at a loss in order to make profits from media sales has long been established in the videogame industry, it is practically unheard of in the general consumer electronics space. While Toshiba does receive a licensing fee on all HD-DVD media, thanks to the fact that it is one of the format's founders, such royalties are unlikely to be great enough to support continuing volume sales of the HD-A1.

While efficiencies of scale could eventually drive the manufacturing costs down, Toshiba would have to commit to the format in a serious way and invest heavily in manufacturing infrastructure, a decision that the company's upper management is hesitating to make. In light of a currently unsustainable manufacturing and distribution model and a stated willingness to devise a new compromise standard, Toshiba's long-term commitment to the HD-DVD format appears questionable.

Format wars have never been good for consumers or the companies that become embroiled, and the battle over the next-gen DVD format is an unfortunate consequence of the breakdown of unification talks that occurred in 2005. Sony and Toshiba came to loggerheads in the discussions and each left the meetings promising to drive the other out of the market. Taking this history and Toshiba's hesitation to fully commit to HD-DVD into consideration, the HD-DVD vs Blu-ray conflict appears more like a game of corporate bluff-calling than a real war. Sony has committed to Blu-ray in a huge way, staking both the PlayStation 3 and much of their related consumer electronics arms on the viability of the format. Toshiba, on the other hand, is all but detaching themselves from HD-DVD by taking no advantage of their first-to-market position, releasing hardware at unsustainable loss, and now referencing a willingness to give up on the format altogether in favor of a unified standard.

In the end, there will be a victor and a loser in this format war. Sony believes that it will be able win the competition for installation-base on the back of demand for the PS3. In terms of corporate commitment, Sony has pledged to ship 6 million PlayStation3s, at massive loss per console, before the end of the financial year. If the videogame console war goes Sony's way, the hardware losses will be recovered via game sales. Toshiba, on the other hand, does not have the ability to recoup money spent selling hardware below cost, and convincing its own management and hardware partners that they can actually win the format battle against Sony's committed onslaught will likely prove more and more difficult as time goes by.

With so much already invested in the format, Sony is unlikely to ever accept a unified standard if the PS3 is even a moderate success. Toshiba must decide now to either recommit itself and partners to HD-DVD and work hard for an installation base that will appear comparable to the PS3's first month sell through, or bail out of the conflict altogether. Sony has called Toshiba's bluff in the format war, and Toshiba has responded with a 7,500 unit launch at the expense of $1.5 million in losses and pleas for unification. Perhaps it's not the launch that was soft, but the Toshiba executives in charge.


Posted from:http://gear.ign.com/articles/715/715613p1.html

[thunderhawk]

Mmm... Not sure if they'll come to an agreement. Seems like the unification talks last year...

[JTK]

It's interesting.

Depending on who you talk to, I've seen this same situation spun from varying angles like: "This is what the Japanese culture dictates. Someone in a position of dominance, like Toshiba, giving the BDA one last chance for a graceful exit.":

Nonsense.



To the more realistic POV that I and most others share which is:

Toshiba, especially under pressure from stockholders, is looking at FINALLY facing reality, especially come October, when we know the BDA is going to be coming out with better hardware and you have to believe: Better discs than this beta test they threw out on the streets a couple of weeks ago.

You KNOW it's going to get better. So does Toshiba. They are outmanned and outgunned in every single respect you could possibly name, and we've known it for months.



I have yet to see an HD-DVD tv ad, yet already I've easily seen movies like Ultraviolet and Underworld advertised on TV with "coming Tuesday to DVD, Blu-Ray, and PSP."

That's already showing up all over the place, to say nothing about print media, which has been out there for months.

HD-DVD is big time losing the marketing, advertising, and exposure aspect of this "war." It's not even close.

HD-DVD fanboys on certain forums are all in a tizzy because Best Buy isn't "trying hard enough:" to shill HD-DVD like they would and talking about lawsuits and all the rest of the garbage... waste of time.



Beyond that, we come back to the other facts: Hardware support from virtually every leading CE company and at least 80 percent studio support.

Hello?!!

Doesn't that sound absurd to you?

The BDA can slug it out if they have to. They have resources and manpower to burn. Toshiba, MS, and their handful of strays do not. That's the bottom line.

Like I've said a million times: There's PLENTY of blame to go all the way around for the stupidity that led us into this wasted format war to begin with.

But the fact of the matter is: Toshiba is the company that ultimately walked away from the negotiating table.

Frankly, the burden is on them to fix this mess they've helped to create.

On that note, it's up to BDA members to wise up and accept the olive branch.

[Blue]

Well put JTK. A fantastic summary of this forum from the first post until now.

[marzetta7]

Nice post Brian and following commentary JTK,

I think the sentiments shared in this article are some of the very same ones that we've discussed in this forum for a while.

I just don't see how one company, Toshiba, actually plans on making the hardware necessary to facilitate a victory over it CE industry rivals, but not only that but over those industries in IT. In any case, time will ultimately tell.

I would hope Toshiba comes to their senses, gets a deal like Warner did with the BDA and maybe we can move forward with a unified format in the form of Blu-ray, but maybe there's just a bit too much hope in this idea and not enough reality. Who knows, but it would be nice.

[Psiweaver]

Yeah I really hope that BDA realizes this a golden oppurtunity and uses it.

[BTBuck1]

this ship (HDDVD) is sinking faster than the fanboi's can bucket the water out.

[phloyd]

Originally Posted by JTK

I have yet to see an HD-DVD tv ad, yet already I've easily seen movies like Ultraviolet and Underworld advertised on TV with "coming Tuesday to DVD, Blu-Ray, and PSP."

The HD DVD is being advertised on HDNet and Universal HD.

So they are aiming for the HD audience (and also paying a lot less?).

The day and date releases give Sony the opportunity to hit a much wider audience since they can associate BD with current DVD releases. Which is great for them...

[john_1958]

recently i purchased a hd-dvd combo movie 480p, 1080p popped it in my progressive dvd player and played it on my computer and cranked up the resolution mind you the 480p look good and clear but only slightly 3d at times.
Had to find out for myself then rely on some dumb salesperson.

as for blu-ray the players here are $1,299 did manage to see demo of bd showing some details like sweat and skin pores.
but i did buy ultraviolet in hopes of seeing it soon!and will continue to buy Blu-ray even though some movies cost $44. with tax

But what makes me laugh is when people buy and rent fullscreen movies

[georgir]

my mental disorder is not severe! take that back!
i would think that one would see text like this, at the very least when they quote it.

[hmurchison]

Originally Posted by georgir

my mental disorder is not severe! take that back!
i would think that one would see text like this, at the very least when they quote it.

Taken back.

But I'll my friend with a plate of crow for you Xmas 2007. Don't worry...I'll let you wash it down with your choice of wine. May I suggest "Red" Wine.