Neither firm is victor, but Toshiba has suffered most. Following its decision to back out of the format war and to close its high-definition DVD operations on 19 February, the company is wincing at operational losses of up to 110 billion yen (US$1.1 billion) and its first drop in profits in six years.
Format wars in the tech industry are not unfamiliar; Toshiba’s HD DVD versus Sony’s Blu-ray discs is reminiscent of the VHS versus Beta videotape war in the 80s and, in the 60s, when vinyl scrambled for survival with the cassette tape.
The birth of HD TV sets in the mid-90s and their capacity for richer content gave rise to two differing technologies for HD DVDs.
But in the end, Hollywood decided. The film industry was eager to settle on one format to further expand business in the HD age and end confusion among would-be consumers. Major studios that had previously camped on both side of the fence began shifting their support towards the Blu-ray format.
On 24 January, Warner Brothers, the market leader in DVD movie titles, announced it would drop its support for HD DVD. This signaled the beginning of the end for Toshiba, which began to slash prices by as much as 50 per cent. Retailers in the US soon followed studio counterparts.
One day after Toshiba’s surrender of its HD DVD business, Paramount signed the death certificate by being the last of the big Hollywood studios to formally drop HD DVD titles. Since then, the fallout from Toshiba’s admission of failure has made matters worse.
While monetary losses can be written off before next year’s group profits, the brand now faces dejected researchers and consumers (global sales of HD DVD machines topped 1.3 million) who have banked on HD DVD to last.
Defectors are rapidly offloading inventories including players made for tech-partners such as the Microsoft Xbox. Auction and retail sites show that players are going for less then US$100 with up to 10 movie titles thrown in.
Richard McCabe, regional planning director, Publicis Singapore/Publicis Modem
It was humorous to watch the videos on YouTube with passionate defenses from the consumer camps of Blue-ray and HD DVD. They cheered as one format solidified a deal with a movie studio. HD DVD seemed a shoe-in when the porn industry embraced it. How could it fail? Blue-ray has Disney? Battle of good and evil?
It reminded consumers of Betamax vs VHS. While techies ran to buy the format they believed in, the majority waited impatiently. To Toshiba’s credit, it made a quick exit. It saved its share price, and can focus on recovery. Let’s hope it also focuses on its brand strategy. With a tagline like ‘Leading Innovation’… ouch.
It needs to regroup and improve its consumer image. Consumers were engaged in the battle of technologies, but a web scan shows little engagement with the Toshiba brand.
This is a bigger problem and I’d question how many consumers know HD DVD is Toshiba. That may be a good thing. Best to lay low for a bit, take care of existing HD DVD customers and do a real brand health check.
Learn from Betamax, make apologies, solidify the brand, and move on. Don’t just say ‘Leading Innovation’, show it.
Andy Wilson, chairman, BBDO Asia Planning Council
If ever there was a modern-day episode that proves (once again) that content is king, this is it. The HD DVD format battle was won not in the consumer arena. It was won in the manufacturing arena (Toshiba had NEC and Sanyo; Sony had a more global coalition including Panasonic, Pioneer, Philips and Samsung).
And, crucially, in the content arena. Not only did Sony’s PS3’s gaming business drive extra volume (Toshiba’s gaming ally - Xbox - followed an online, not disc-based, model): the decisive blow came when Warner Brothers (the largest supplier of movie-DVD content) sided exclusively with Blu-ray.
Content providers had the last say.
Sony influenced content providers better (via Sony Pictures, and friends). It had a more compelling pitch via Hollywood (for a start, compare the James Bond-esque ‘Blu-Ray’ name with the geeky ‘HD DVD’).
With a swift withdrawal, Toshiba’s consumer and investor confidence has not been shaken too badly.
Toshiba will recover if it focuses on the right next-generation technology. Toshiba’s ‘delivery to screen’ technology is unsurpassed. But it needs to build its reputation for awesome technology among a wider group of stakeholders.
