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.

[hmurchison]

I think it's prudent of Toshiba to see if there is some sort of mutually beneficial agreement that reduces the consumer risk. I don't see this as Toshiba capitulating but rather looking pragmatically as the situation and realizing that more money can be made through co-operation.

We all state that we don't like format wars as consumers but if Toshiba throws in the towel you will have strengthened the case for companies creating future wars.

The process was defined the DVD Forum sought to vote on a successor to DVD. Blu-Ray was never submitted and thus it never received a consensus vote. Sony will most likely win but what that means to me is that I'll likely never see any format in CE hit thet market that isn't Sony controlled. Future attempts at delivering an new format that doesn't utiilize Sony IP will likely mean a Sony led format will arise to compete.

All is fair in love and war I guess.

[Psiweaver]

But the thing is that sony had the better technology at this point. In the future we will see. I just hope that the better technology wins.

[hmurchison]

Originally Posted by Psiweaver

But the thing is that sony had the better technology at this point. In the future we will see. I just hope that the better technology wins.

Does that technology result in superior movies though? There is an assumption that's being made that the more you crank up the bitrate the higher the quality goes.

I think Blu-Ray is fine technology however I've always been skeptical about the pricing because HD DVD and 30GB discs satiate the needs of %98 of of released movies. Thus in a movie disty context I'm not going to want to pay more money for something that addresses that %2

Once both formats chose the same codecs I kinew the battle wouldn't revolve around picture quality but price and features and content.

[Psiweaver]

The funny thing is that right now blu ray is cheaper so if you want to talk about price blu-ray wins there. The technology will result in superior movies with better depth because just like audio the more information thats there the movie our bodies can resolve that information and the more realistic it will look. I've seen completely uncompressed 1080p on a full broadcast set up for it and it looks amazing. HD-DVD is already running out of room and has no where to expand to since 45 gig discs are simply vaporware right now.

[BTBuck1]

Originally Posted by hmurchison

I think it's prudent of Toshiba to see if there is some sort of mutually beneficial agreement that reduces the consumer risk. I don't see this as Toshiba capitulating but rather looking pragmatically as the situation and realizing that more money can be made through co-operation.

We all state that we don't like format wars as consumers but if Toshiba throws in the towel you will have strengthened the case for companies creating future wars.

The process was defined the DVD Forum sought to vote on a successor to DVD. Blu-Ray was never submitted and thus it never received a consensus vote. Sony will most likely win but what that means to me is that I'll likely never see any format in CE hit thet market that isn't Sony controlled. Future attempts at delivering an new format that doesn't utiilize Sony IP will likely mean a Sony led format will arise to compete.

All is fair in love and war I guess.

I highly doubt sony is going to grovel to Toshiba when Toshiba has had 3 months and done nothing with it, and is now looking to throw in the towel after given many chances. Sony i'm sure would allow Toshiba to make a BR player now, but with no chance of a HDDVD logo on it.

[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...

[hmurchison]

Originally Posted by Psiweaver

The funny thing is that right now blu ray is cheaper so if you want to talk about price blu-ray wins there. The technology will result in superior movies with better depth because just like audio the more information thats there the movie our bodies can resolve that information and the more realistic it will look. I've seen completely uncompressed 1080p on a full broadcast set up for it and it looks amazing. HD-DVD is already running out of room and has no where to expand to since 45 gig discs are simply vaporware right now.

Blu-Ray cannot be cheaper because disc price is a factor of your yields and currently Sony isn't yielding enough DL discs to deliver a movie. The hardware is more expensive but subsidies muck the true picture up.

Technologically each codec has a "sweet spot" in which it will come closest to transperancy with the master source. Once this point has been reached cranking up more bits doesn't appreciably improve quality. MPEG2 looks great at 25MBps and up.

I'm getting the notion that VC-1 and AVC will reach transperancy at 12-14Mbps. Roughly half of MPEG2. To be fair Blu-Ray will also benefit from this efficiency. So neither format is really going to run out of room anytime soon.

Sony isn't exactly firing on all cylinders so I'm not too worried. IGN is a Fox owned company so what would you expect them to say about HD DVD?

[BTBuck1]

Originally Posted by hmurchison

Blu-Ray cannot be cheaper because disc price is a factor of your yields and currently Sony isn't yielding enough DL discs to deliver a movie. The hardware is more expensive but subsidies muck the true picture up.

Technologically each codec has a "sweet spot" in which it will come closest to transperancy with the master source. Once this point has been reached cranking up more bits doesn't appreciably improve quality. MPEG2 looks great at 25MBps and up.

I'm getting the notion that VC-1 and AVC will reach transperancy at 12-14Mbps. Roughly half of MPEG2. To be fair Blu-Ray will also benefit from this efficiency. So neither format is really going to run out of room anytime soon.

Sony isn't exactly firing on all cylinders so I'm not too worried. IGN is a Fox owned company so what would you expect them to say about HD DVD?

heres some more speculations

http://search.news.com/click?sl,news...6088269%2Ehtml

http://www.reghardware.co.uk/2006/06...layer_subsidy/

http://gizmodo.com/gadgets/combo-player/

[Psiweaver]

IGN is a fox company? what are you talking about? I didn't mention IGN or fox at all in fact I can't stand IGN at all. Anyways Blu Ray Discs are currently cheaper to buy for the consumer. Blu-Ray players are more expensive. Sony definately isn't firing on all cylanders and so when it does toshiba will be pretty scared. I mean HD DVD is admitting defeat already and they have had no competition for 3 months and done nothign and now when the competition comes out in a poor manner their ready to throw in the towel.

[BTBuck1]

Originally Posted by Psiweaver

IGN is a fox company? what are you talking about? I didn't mention IGN or fox at all in fact I can't stand IGN at all. Anyways Blu Ray Discs are currently cheaper to buy for the consumer. Blu-Ray players are more expensive. Sony definately isn't firing on all cylanders and so when it does toshiba will be pretty scared. I mean HD DVD is admitting defeat already and they have had no competition for 3 months and done nothign and now when the competition comes out in a poor manner their ready to throw in the towel.

I think he means that the original article was from IGN.com...he's not quoting you. I agree with the rest of your post though.

[Psiweaver]

Oh okay I thought he was saying I get my information from IGN which is one of the worst places on the internet to go for information.

[benmbe]

Just to let you all know, that i have emailed Sony europe and asked for them to take onboard what people are worried about, also why all the delays.

This and other items i have mensioned.

Have asked them to take a look at this site ( if they could put our minds at rest. )

They may already be watching this site ( i would have thought so )

Still waiting for reply from them and shall keep you all informed.

Kindest regards

Mark

[JTK]

Originally Posted by benmbe

Just to let you all know, that i have emailed Sony europe and asked for them to take onboard what people are worried about, also why all the delays.

This and other items i have mensioned.

Have asked them to take a look at this site ( if they could put our minds at rest. )

They may already be watching this site ( i would have thought so )

Still waiting for reply from them and shall keep you all informed.

Kindest regards

Mark

Don't hold your breath. Boards like these are super small time and not worth the attention of some super juggernaut/mega conglomerate.