Rant: Why manufacturers don't need to "give away" BD players

[JadedRaverLA]

Without picking on anyone, I just wanted to throw in my $.02 on the whole price issue.

Some people -- mainly those on the red side, but some on the Blu as well -- seem to feel that this is the only issue in this format "war," or at least the main one that will end up mattering. Personally, I just don't see how this is the case. If the goal is to get a Blu-ray player into the home of everyone in the world in 2007, then yes, substantially lowering the player prices would be a necessity. But manufacturers are looking at the situation long-term, and their instincts have proven right thus far.

No new media format has EVER fallen in price as fast as HD DVD has. There are many reasons why... the main one being that R&D costs don't recoup themselves within the first six months of a new product. Massive price cuts like Toshiba has done are the tactics of the desperate... not of the successful. If Toshiba had any other major manufacturers on board making HD DVD players they quite simply couldn't lower prices as quickly as they have (for no other manufacturer would be willing to take the financial "hit" Toshiba is), and by cutting their margins down to nothing (or selling at a loss) they are essentially guaranteeing that no other major manufacturer will join their camp.

The BDA has MANY manufacturers producing players, and if one member started selling players below cost, many other manufacturers would likely jump ship overnight. The manufacturers are all doing a fantastic job at lowering component and prodcution costs as each generation passes, but releasing below-cost players would kill other companies, and set consumer expectations so that others might never be able to profit from player sales.

You can already see this with Toshiba. There is already a feeling that spending more than $100 on an HD DVD player is just dumb for the consumer, and for a store to charge more than $200 for a player is highway robbery. And of course, you'd better get a half dozen or more free movies in the deal. Why in the world would ANY other company want to make these things given the non-existant profit potential at those prices. HD DVD is no longer fighting to become the next generation replacement for DVD... it is fighting just to keep the competition from doing the same. Toshiba is earning far too much from regular DVD to let BD replace it, and they're going to insane lengths to prevent that from happening.

The position the BDA is in affords them the ability to proceed with an eye on the end-game. This isn't "make it or break it" time for BD as it is for HD DVD. BD has, for all intents and purposes, already made it. There are approximately 6 million PS3's in people's homes worldwide. Now, at this point, only a minority of those are actually being used to watch BD movies on, but as time goes on, that will certainly change. And, as PS3 sales grow, the potential market for HD DVD continues to shrink. After all, whether someone uses their PS3 for BD movies or not, there's virtually no chance of them completely foregoing the BD movie capabilities of the PS3 and then going out and buying an HD DVD player. It would make NO sense to do so.

As it stands, no matter what Toshiba does with their player pricing, Blu-ray standalones sell just about the same as HD DVD standalones, though the cost of the cheapest models are substantially higher for Blu-ray. And, of course, that's only in the U.S. -- worldwide Blu-ray player sales far exceed HD DVD player sales. Likewise, Blu-ray recorders, Blu-ray PC drives, Blu-ray camcorders, and, oh yeah the PS3, FAR outsell there HD DVD counterparts (where such counterparts even exist).

Again, Blu-ray is setting itself up to be the next (and possibly last) major optical disc format. It's uses go far beyond movie playback already. That's not a promise of recorders and other uses scheduled for some time in the distant future as with HD DVD, that's all here NOW. And there hasn't even been a real push by Toshiba or Microsoft lately to attempt to counter Blu-ray as an overall disc medium... just in the movie realm.

As far as Warner is concerned, there's WAY too much speculation on what they may be thinking, and about how they are going to look at one metric but not any others, etc. Warner isn't going to make a decision without having ALL the data... they're not stupid. Most importantly, they know what the effect will be of them choosing a side. If they go HD DVD exclusive, it would produce a stalemate, and we'd all be stuck with combo players as the norm. If they stay neutral, the war will eventually work itself out, and they won't be "to blame" one way or the other. If they go Blu-ray exclusive, they will effectively end this war within a fairly short time frame, but will enrage many early adopters who chose HD DVD. Whatever they choose to do they will pick a metric to cite as their reasoning, but the actual decision will have little to do with player prices, or attach rates, or anything else everyone cites. It will be based on what role they really want to play in this format war. Until they decide that, we should all just be happy to know that we're winning, and have been for some time. The other side will continue to make desperate plays, but, as we're already seeing, they don't seem to make a bit of difference in terms of actual sales. So let them. And just pity the poor people who buy a dirt cheap HD DVD player and find that they have nothing to play on it a couple of years from now.

[/end rant]

[richard lichtenfelt]

Great post.
It's getting hard to separate the trolls from the cowards. Of, course all trolls are cowards, but the reverse isn't true.

[Pilam69]

+1

Well said.

[welwynnick]

Excellent post as always.

JadedRaver is one of the reasons I am a member of these forums.

Right from the outset I looked at how much we had spent on DVDs over the last ten years and compared that with players. It's a no-brainer: it's the discs themselves that matter, not the players - they come and go.

We need to remember that HDM players are premium products that do actually deserve premium prices for the benefit they bring. This might sound perverse, but I think BDA have done well to keep their player prices UP and keep selling them reasonably well. That will establish and maintain confidence in HDM for all CE companies.

That's important for everyone to have a win-win, and Toshiba are undermining that confidence in what should be great business for everyone. Who's going to want to make and sell HD DVD players for no margin, now? There's no rational business case for anyone else.

Everyone was calling for lower player prices to accelerate HDM adoption, but I believe that Toshiba are now showing that you can have player prices that are TOO low. It's not in anyone's best interest, and don#'t get me started on Paramount!

best regards, Nick

[gand41f]

Hear hear. You said what I've been trying to say for the past few months, but so much better and eloquently.

enjoy
gandalf

[BadAss]

I agree with the OP to a certain extent that for HDM to exist it needs not only to be a viable business for CE companies to make profit but also to be seen as value for money for consumers.

The BDA need to set a base line for pricing their players at no more that twice the price of the lowest priced HD-DVD player, which I think they are doing. If HD-DVD sets its base line at $199 then the BDA should be at $399.

But what Toshiba has done is give away 90,000 players over night and these sales seem to be reflecting in the software sales charts. What would have been 75:25 last week was only 65:35 and this is the measurement of what market share each format has.

IMO all those CE companies with 1.0 players should slash their player prices to $199 to out manouver HD-DVD over the final weeks of 2007. Then when all 1.0 players are gone contuinue the fight with a clean slate in 2008 with 1.1 models at $399-499 backed with all those interactive features HD-DVD tauts as their advantage.

Unless the BDA are supreamly confident WB going Blu-ray exclusive I think this is the best course of action.

[JAGUAR1977]

TBH, it's all well and good saying the BDA and manufactuers need not follow HD-DVD's pricing policy, and to some extent that's true.

Unfortunately, HD-DVD seems not only willing to give players and software away, they are also prepared to spend hundreds of millions of dollars buying off studio support.

It wouldn't suprise me in the least if they bought off not only Warner, but possibly Disney.

Yes, I know it's unlikely, but the BDA are putting doubt in consumers minds, should we go all out and buy multiple Blu-ray players and dozens of titles, or stick with one player and supplement it with a cheap as chips HD-DVD player.

When your in a format war you have to compete on all fronts, that also means hardware.

I see a will and determination from Toshiba/Microsoft not to win, but to create a stalemate and help DVD and HD downloads.

It really looks like the BDA are doing the absolute bare minimum to win, were are the industry shaking moves that can compete with HD-DVD's $99/$199 A2/A3's and Paramount, nowhere to be seen.

They appear to be operating in vacum, as if they are the only HD format, content with a slow build before eventually taking over from DVD.

Right now I'm content to buy the Blu-ray movies I'm interested in, I don't expect the format to dissappear, but I'm open minded with regards to investing in HD-DVD until the BDA drops a Nuke, either by securing a HD-DVD supporting studio or releasing their their own sub $200 player.

On the PR front there's no doubt the HD-DVD camp have wiped the floor with Blu-ray in the second half of the year.

All in all this format war is just frustrating and now severerly harming both formats.

[Rup_Muk]

Great post, JadedRaver.

Rup.

[Imakida]

Excellent post and congrats for your 300

[Elandyll]

The situation can be summarized by this term (also emplyed by Penton-Man):
Scorched Earth.

This is a moment in a "battle" when you know you cannot win, but instead of giving way gracefully you decide that you wil go down fighting to the last man, delaying your opponent's certain victory as you may, and leaving behind you "burning fields" that will make the victory so costly, and the aftermath so bitter in term of results, that supposedly your "opponent" will think twice in the future about re-engaging in a battle with you.

What I fail to understand is why would the HD DVD buyers, who could see this tactic being used by just opening their eyes, would condone it. This is shaddy business at best, and downright spitefull, countrary to ethical business practices and even immoral at worst.

There is also a French term called "Jeu de Massacre", which normally refers to a throwing ball game into a bunch of cans, but also to the principle of having nothing to gain but taking a whole bunch of people down with you, just because you can.
The way I see it, Toshiba is getting real close to this...

[bbg]

Great rant! I agree with most of your logic there.

Though, has anyone checked the stats on Blu-raystats.com? It seems that HD DVD has more titles in the top 100 then Blu-ray ... I've never seen that before ... any clues to why that is?

[olarmy96]

On the Warner point, sure they'll anger some HD-DVD supporters by going Blu-ray exclusive, but they would anger twice as many for going HD-DVD exclusive. Seems like an easy choice to me...

[The Don]

my whole thing is...you don't have to be a troll to spread FUD...

someone who is scared can spread FUD....and when you take the term literally, it makes perfect sense...

[cajun1975]

What astounds me is that one Company is making HD DVD players..ONE. Toshiba. How in the hell HD DVD is still staying in the game is beyond me when you have multiple big name companys making a variety of Blu Ray players and when you factor in the PS3 it is even more astounding.

[dialog_gvf]

Originally Posted by Elandyll

What I fail to understand is why would the HD DVD buyers, who could see this tactic being used by just opening their eyes, would condone it. This is shaddy business at best, and downright spitefull, countrary to ethical business practices and even immoral at worst.

You assume that the general consumer seeing a $98 player at Wal-mart has full knowledge of the situation and has chosen based on this?

The consumer looking at the price stickers doesn't think "oh, scorched Earth" they think "what a bargain!".

Hopefully, they walk over to the disc section and check out the selection. And hopefully they notice the lack of Spiderman, Ratatouille, Live Free or Die Hard, etc, on HD DVD. And hopefully they also notice the lack of Transformers and Heroes on Blu-ray.

But, someone with an impulse buy in their arm can't be expected to head home and read up on the current state of the format war.

Gary

[BadAss]

The BDA really needs to make the following statements.

1/ The end of the grace period for profile 1.0 players. This is a date by which only Final standard players can be sold at retail. This in my opinion should start 1st January 2008 but should be no later than March.

2/ All discs sold from the end of the grace period should have a mandatory HD audio track of either True-HD or DTS-MA.

3/ All Studios should announce their elegance to one format or another for a minimum of 12 months and state what films they intend to release in that period and stick to it. Lets see Studio's send out a clear confidence building message to future BD buyers. We want to know no more studio's will be doing a Para in 2008.

[jorg]

i can see the fan boys alredy saying but but thats not ture hd dvd cheaper haha

[T-Wrecks]

PR? . . .er what? Jags, please pass the kool-aid...so I can poor it down the drain .

[hoser]

Excellent OP!

[BluStar88]

+++

I totally agree. anyone who knows business knows that toshiba is really hurting itself with these prices more than anyone else. Bluray is definately industry friendly and that should help a lot too... I know the DUD crowd will say then HD DUD must be consumer friendly but it isn't because all it is really doing is forcing HD addicts and less financially fortunate (2 seperate groups) to go out and invest in a format that is doomed to lose. BD in my opinion is also consumer friendly because we get great BOGO deals and more studio support.