Bill Hunt said it best....

[spam.curitiba]

How in the world does Toshiba think it's ever going to make any money from the HD-DVD format? I mean, seriously.

You may have heard by now that Toshiba has made pre-Black Friday arrangements with Wal-Mart to effectively dump its HD-A2 HD-DVD player starting this Friday (this weekend only) for just $98.87. You may also have heard that Best Buy has followed suit. Supplies are limited, of course, and the offer is apparently not valid in some parts of the country that have state anti-dumping laws.

Wikipedia defines dumping as "the act of a manufacturer in one country exporting a product to another country at a price which is either below the price it charges in its home market or is below its costs of production." Toshiba's move isn't really anti-competitive, because there are no U.S. manufacturers making HD-DVD players. But it's that "below its costs of production" part that applies in this case. The HD-A2 arrived in the States with an original MSRP of $499.99. Now, Toshiba is letting it go for just $99. There's no way the player cost less than $100 to manufacturer. Just. No. Way.

You might wonder: How can Toshiba possibly have enough HD-A2s left to sell at just $99 at large, nationwide retailers? Simple. It's because they didn't sell originally, so plenty of stores still have them sitting on shelves, gathering dust. Toshiba is eager to clear them all out at this point, and Wal-Mart and Best Buy are happy to help.

Forget for a moment that the HD-A2 isn't capable of delivering full 1080p video - that doesn't matter. Why? Because anyone who is so price sensitive that they wait until a high-def player price hits $99 to buy one isn't likely to have an HDTV set yet. Being super bargain shoppers, they aren't likely to want to pay $30 for an HD-DVD movie either. I'd bet many of the people who jump on this sale will either be using them primarily as upconverting DVD players, or they're already diehard HD-DVD supporters and are buying them as second players.

Clearly, the HD-DVD camp understands that low price is really the only card they have left to play in this format war. Porn hasn't won the war for them, nor has online bells and whistles, or combo discs/players. The obvious question would be: Why in the world would any other hardware manufacturer want to join Toshiba's foolhardy strategy of driving player prices down to next to nothing? It's no accident that not a single other major manufacturer has released a stand-alone HD-DVD player (and no, the Venturer doesn't count). Given how dramatically Toshiba has slashed prices on HD-DVD players over the last year, you have to wonder how long they can keep losing money.

A couple weeks ago, when Disney and Sony launched a successful strategy of counter-selling their Blu-ray software titles 2 for 1 the same week Paramount and DreamWorks released Transformers on HD-DVD, we got a few e-mails from HD-DVD fans telling us how lame that was. Well, consider this: Is it any accident that Toshiba didn't wait for Black Friday to sell their $99 HD-DVD player, instead carefully planning the 3-day sale for the weekend before Disney and Pixar release Cars, Ratatouille and Pixar Short Films Collection on Blu-ray? Not a chance, folks. So Toshiba is slashing HD-DVD hardware prices to counteract the release of blockbuster Blu-ray software. What does that tell you about the viability of HD-DVD going into a fourth quarter that, by all accounts, is make or break for the format. Especially with Warner Home Video now hinting that they're looking at the fourth quarter to "reevaluate" their dual format support?

Hey - there's no doubt that thousands of eager consumers will get a deal on cheap hardware this weekend. But it still isn't going to be the format war winner for HD-DVD that some would like to believe. On the contrary, it means that Toshiba is getting desperate... and is going even more deeply into the red with this format. Given the strength of their rhetoric this week, it's a safe bet that the Blu-ray camp will continue to press their advantage in the fourth quarter, and start really turning up the heat on HD-DVD in the weeks and months ahead.

It boggles the mind to think that any reasonable person can still believe at this point that the HD-DVD format represents a viable long-term business for Hollywood. Toshiba is effectively paying studios to support them, and now they're practically giving their hardware and software away. Do you suppose we'll see free HD-DVD player offers in Cracker Jacks and breakfast cereal next? $50 players? $25 players?

Experienced fighter pilots will tell you that when you dive your aircraft at the deck, you very quickly run out of maneuvering room. Seems like the ground's coming up awfully fast for HD-DVD.

Back with more on Blu-ray Fest later this afternoon. Stay tuned...

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