Despite Toshiba’s massive player price cuts, which took effect on January 13th, HD DVD was unable to undo the sales advantage of Blu-ray in standalone player sales for the week ending January 19th. Not surprisingly, Blu-ray did lose market share to HD DVD – no one really expected them to hold onto the 93:7 split for the week ending January 12th. That massive advantage was due to a combination of several factors. It was the first week after Warner’s Blu-ray announcement, and it unleashed a lot of pent-up demand which saw a surge in BD player sales. There were also several bundle promotions running which gave away players with the purchase of an HDTV. At the same time HD DVD player sales completely tanked that week as the market reacted to Warner’s news. While the specific break down has yet to be released, HD DVD sales very likely rebounded strongly in light of Toshiba’s price cuts. However, DVDTOWN.com, reporting on NPD’s new figures, shows the split for the week ending January 19th is 66:34 in favor of Blu-ray. And that’s with Toshiba’s price cuts in effect the entire week – the 13th to the 19th. (Picked up via EngadgetHD.)

While that is indeed a significant rebound for HD DVD, remember that for the week ending January 5th, which is mostly before Warner’s announcement late on the 4th, the split was 51:49 in favor of Blu-ray. This shows a shift in standalone player sales from roughly 1:1 to nearly 2:1, despite massive price cuts on HD DVD players. Toshiba has cut the MSRP of their entry level players in half – $299.99 to $149.99 for the HD-A3 and $399.99 to $199.99 for the HD-A30, as well as cutting the HD-A35 from $499.99 to $299.99, and they’re still significantly down in market share. This is bad news for HD DVD. They’ve been claiming that price will be the deciding factor, that consumers will flock to HD DVD players due to the lower pricing. However, during the holiday season, before the price cuts, Blu-ray managed to take more than half the market for standalone player sales – despite being more expensive. And now, despite Toshiba’s deep price cuts, Blu-ray has actually increased their market share without any real marketing efforts.

I realize that a few weeks of data doesn’t determine a long term trend, but there really isn’t a positive spin for HD DVD here. Sure, they regained some market share from the previous week, but that was expected. Note that these figures do not include the PlayStation3 or the Xbox 360 add-on drive, which would skew things even more for BD. (The PS3 is problematic since there is no way to know how many are used as Blu-ray players – more than none, less than all.) Even with a near equal split in standalone player sales HD DVD was losing the war, with media sales skewed strongly toward BD – 2:1 in the US and even more elsewhere. If BD sustains a strong lead in player sales that split will only increase.

Toshiba is trying to buy marker share with subsidized players. They were subsidizing HD DVD player sales before the price cuts, now those subsidizes must have increased dramatically to cover the dramatic drop in MSRP. And this is taking its toll on Toshiba’s bottom line. They’ve just posted a 25% drop in quarterly operating profit. The majority of this drop was due to a drop in market prices for flash memory chips, but some of it is also due to losses in their HD DVD business. As CNET News reports:

Toshiba, whose products range from washing machines to nuclear power plants, is also fighting losses in its HD DVD player business, he said, without detailing the size of the loss.

Toshiba slashed prices on its players by 40 to 50 percent after Time Warner’s Warner Bros. studio announced this month that it would release high-definition DVDs only in rival Sony’s Blu-ray format.

Toshiba’s tactic of buying market share with subsidies isn’t working, and hasn’t been working for several months. Despite a price advantage, HD DVD was unable to sustain the standalone player sales lead it formerly held over BD. And that gap continues to increase, quite dramatically these past couple of weeks. Toshiba’s subsidies have likely had the side effect of keeping other vendors out of the HD DVD market – it is tough to compete profitably when the main vendor in the market is selling products at a loss. Why would someone by a Venturer HD DVD player when the Toshiba is less?

What moves do HD DVD and Toshiba have left – aside from a Super Bowl ad? Their price advantage hasn’t worked. Increasing the gap with price cuts couldn’t turn the tide, it just reduced the losses. They’ve lost studio support and over the coming months the imbalance in releases will grow. Right now HD DVD’s pending releases are few and far between when compared to Blu-ray, and it gets worse once Warner turns off the HD DVD tap. So content isn’t going to drive sales. I suppose Toshiba could start giving away the HD DVD players for free. Even I’d take one for free, they do upscale DVDs decently.

On a somewhat related note, Sony is getting aggressive in Germany. They’re offering a trade-in deal on their BDP-S300 Blu-ray player for owners of HD DVD players. Trade-in your HD DVD player at German retailer Saturn and get €150 off the €499 BDP-S300. This deal is only available at Saturn stores in Germany. Picked up from HiFi Forum via Blu-ray.com. As Blu-ray.com points out, overall high-def player adoption in Germany is much lower than in the US. So offering this kind of deal there will cost Sony much less than it would here, so we’re probably not going to see a similar deal. Though it would be nice.