I’ve seen this in so many places I can’t even remember where I spotted it first yesterday. It seems Toshiba isn’t the only brand-name trying the deep-discount approach to move HD DVD products. Microsoft just slashed the MSRP on their Xbox 360 HD DVD add-on drive from $179.99 to $129.99. And it comes with the HD DVD of King Kong, and the (now pretty much standard) mail-in offer for five free movies. Amazon has it for $119.99.
Toshiba’s price cuts seem to have scored an own-goal on Onkyo, which could be considered the third case of friendly-fire taking out an HD DVD player vendor. Early on Thomson/RCA sold a re-badged Toshiba player, but they dropped HD DVD to focus on DVD when they couldn’t compete with Toshiba’s pricing. Since Toshiba subsidized their players, the RCA player was the same thing - with a higher price. Then Venturer came to market with that was supposed to be an inexpensive HD DVD player. But by the time they hit store shelves Toshiba had slashed prices again, leaving an unknown brand name, Venturer, to compete with a well-known brand, Toshiba. Venturer players were left gathering dust on the shelves. They’re apparently still out there, so perhaps it is unfair to call them out just yet, but it looks like they’ve pretty much walked away from HD DVD as they couldn’t compete with Toshiba - before the latest price cuts.
And now Onkyo, a fairly respected brand, is ’suspending’ their support for HD DVD. Onkyo is a high-end brand, and they added an HD DVD player to their Integra product line last year. The Onkyo DV-HD805 is basically a re-badged Toshiba HD-XE1, which seems to have run into the same troubles as RCA - selling the same goods at a higher price. Onkyo is suspending sales in the UK, telling Home Cinema Choice:
[G]iven the current, multiple uncertainties surrounding the Blu-ray vs HD DVD issue Onkyo has decided against bringing any further DV-HD805s to the UK
Furthermore, it sounds like Onkyo may be ’suspending’ their HD DVD support permanently, in light of Toshiba’s aggressive price cuts:
Onkyo brings its talents to bear where it thinks it can add value to a given product category. If a category becomes commoditised – as this sector shows signs of becoming – there’s less reason to commit huge resources to it when they may be better employed elsewhere.
Though they may yet release a new device, and if they do I’d expect it to be Blu-ray or perhaps a combination player, in light of the massive shift in the market to Blu-ray. Onkyo says that they will:
unveil a new HD source later this year, but cannot confirm at this stage whether it will be a HD DVD, Blu-ray or combi device.
Considering Toshiba’s deep price cuts, and Onkyo’s statement about adding value and commoditization, I can’t see them releasing another HD DVD player. Given the diversity in the Blu-ray market I could easily see them releasing a high-end Blu-ray player, say Profile 2.0/BD-Live, and perhaps a combi-player as LG and Samsung have done. Vendors just cannot make money selling HD DVD players with Toshiba’s massive subsidies to their own players. Toshiba may be fighting to buy market share with artificially cheap players, but they’re also driving away any other vendors who might support the format. When vendors can make money selling Blu-ray players, but not HD DVD. Which format are they going to support?
From Home Cinema Choice, via WesleyTech.com, by way of Gizmodo.
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.
Gizmodo has an interesting post on the Blu-ray / HD DVD format war, and, in their words, the ‘demise of HD DVD’.
They repeat a rumor I’ve seen reported elsewhere, that Fox has been considering switching to HD DVD, and if they did Warner was going to go HD DVD exclusive as well. The studios want the format war to end, and Warner knew that without one of the BD studios defecting to HD DVD that the format wouldn’t have the critical mass to win. The rumor is that Fox was ready to make the jump with Warner, to end the war, but at the last minute the BD camp, likely Sony, paid Fox $120 million to stay with BD. When Fox backed out, Warner recognized that the only option to end the war would be for them to go Blu as well. There are rumors that Warner was paid $400-$500 million to go Blu, but Warner has denied a payoff, saying there was no ‘bidding war’. They point out that the market at stake is worth billions, so any payoff would be a drop in the bucket.
Gizmodo says that, from their contacts, the feeling within the HD DVD camp is that HD DVD is done for. They report that the rumors of Universal’s HD DVD exclusivity contract being expired are false and that it runs into 2009. And that Universal would only be able to release Blu-ray if HD DVD is declared no longer viable, so Universal is hanging on Toshiba’s word. Microsoft has also deferred to Toshiba on the fate of HD DVD. And everyone seems to be watching Paramount & DreamWorks Animation. If they begin releasing Blu-ray again, that could be the final tipping point for Toshiba to throw in the towel.
Gizmodo goes into some of the behind the scenes drama involved with Warner’s pre-CES announcement. One source told Gizmodo that the surprise announcement caused Bill Gates to drop a segment of his CES keynote which was to focus on HD DVD, pledging continued support. And we already know the HD DVD Promotional Group canceled their press release at CES. In fact, HD DVD had almost no presence at CES after Warner’s announcement. Toshiba and the studios pulled all of their planned HD DVD announcements.
Taking a cynical view, the current Toshiba price cuts on players could be a way to clear out existing stock before making any kind of announcement. If the HD DVD camp throws in the towel Toshiba and the studios would be left with a lot of stock. And waiting until the return windows close on holiday sales could avoid a rash of product returns from those with buyers remorse. There have already been reports from users returning their HD DVD gear due to the Warner announcement.
In a column for Home Media Magazine, Thomas Arnold calls upon Toshiba, Universal, and Paramount to ‘knock it off’ and cede the format war to Blu-ray to unify the market.
With Warner Home Video dumping HD DVD, the format has the support of just two of the six major studios. It cannot win. At best, it can be a spoiler, but I’m hoping Toshiba, Universal and Paramount will take the high road and, for the good of the entire industry, bow out. Universal and Paramount, in particular, need to jump on the Blu-ray Disc bandwagon so we can go into the new year with a unified front and a unified mission: To educate consumers about the advantages of high-definition media and convince them the time to transition from standard DVD to Blu-ray is the day they bring that HDTV into their home.
I agree completely. At this point HD DVD cannot win. The only choice is between a prolonged war and a unified market that can move forward as one. Toshiba has done some good work on HD DVD hardware, work they could just as readily apply to Blu-ray and produce some top notch players. Their HD DVD player platform could very readily be converted to Blu-ray.
A unified HD format market would reduce consumer confusion and hesitation and help speed adoption. It would also encourage investment in production infrastructure, which has lagged as companies are worried about investing in plants for the wrong format. It is time to put the war behind us and work on improving the product offerings. At this point continuing the fragment the market is just sour grapes and being sore losers.
If Toshiba, Universal, and Paramount won’t do the right thing, the Best Buys and Wal*Marts of the world could end the war too. Someone, step up and stick a fork in HD DVD. Put it out if its, and our, misery.
Via Blu-ray.com.
Personally this just seems sad to me in light of all the recent news. I think the decent thing for Toshiba to do is to admit defeat, join the BDA, and get on with devoting their not inconsiderable engineering talents to producing great Blu-ray players and drives. They’ve done a good job on HD DVD hardware, and Blu-ray is not that different. They could easily produce some bang-up BD products.
Instead they’re throwing good money after bad and increasing their marketing efforts. I noticed earlier today that the MSRP on the Toshiba HD DVD decks on Amazon seemed to have dropped, and it looks like I was right. Effective January 13th Toshiba dropped the MSRP on three of their HD DVD decks as part of an attempt to increase sales. Now the entry-level 1080i HD-A3 is just $149.99, the mid-range 1080p HD-A3 is $199.99, and the high-end 1080p HD-A35 is $299.99. Of course, the actual final prices on these units hasn’t plunged as far as the MSRPs - the percentage discounts has dropped dramatically too. I’m sure that reflects a narrowed gaon of facts: “Toshiba achieved the #1 sales volume in the next generation DVD category with an approximately 50 percent market share in 2007″. Sure. But that’s because HD DVD and Blu-ray basically split the market 50/50 in standalone player sales, despite a significant price advantage by HD DVD, and Toshiba is effectively the only HD DVD vendor! So the Blu-ray side split the sales amongst several vendors. In context Toshiba’s achievement is less than impressive. They had been touting their price advantage as something that would outsell Blu-ray players in the standalone market - but Blu-ray actually closed the gap over the year while selling for more. And this all ignores the PS3 completely.
Here are some things I’d love to see the BDA do to turn up the heat on HD DVD and wrap this up faster:
- Offer a trade-in on HD DVD movies. Something like for every HD DVD turned in you get $10 off a Blu-ray disc, something like that.
- Offer a trade-in on HD DVD players. Turn in an HD-A2/A3 and get $100 off some models of BD player. Turn in an HD-A20/A30 or better and get $150 off some models of BD player.
- Start bundling the DVD of the movie with every Blu-ray version - sell all BD movies as BD/DVD combo packs, for the same price as the BD alone would’ve sold. DVD’s cost, literally, a few cents per disc. Dual-disc cases cost a few cents more than a single-disc case. You’re going to be pressing the DVDs by the warehouse full anyway. Putting the DVD in with every BD makes it brain dead simple for people who may not have upgraded to HD yet, or for those looking for a good value - BD on the big screen, DVD in the bedroom, etc.
- Take advantage of BD’s space and start doing what Fox showed off at CES - include a pre-encoded portable copy of the movie on every BD. H.264 encoded for iPod/PSP/etc. Or include some key with the disc that gives the user access to a download of the encode for various devices, ready to load.
- Of course, drop prices on BD players as fast as possible while being realistic. I don’t think a price war with Toshiba is required, but squeeze the margins tight to keep the gap as narrow as possible.
Remember folks, the less you spend on HD DVD and the more you spend on BD now the faster this war is over. The studios are all watching sales very closely now, more so than ever. If HD DVD sales begin to slip and BD sales continue to gain, that will encourage them to back Blu-ray and end the war so we can be done with it. At this point HD DVD hasn’t a snowball’s chance in hell to ‘win’ the war, all they’re doing know is fighting a delaying action which is bad for everyone.
The press release:
Read the rest of this entry »
In a press release that was probably prepared before Friday’s Warner bombshell, Toshiba is talking up their third generation HD DVD players. The players went on sale this fall in time for the holiday shopping season and did sell fairly well. But I find it interesting that at CES, where most vendors launch their next-generation of products, Toshiba is touting their current generation. No fourth generation of products to announce? Considering the industry seems to have nearly universally declared the pending death of HD DVD in light of Warner dumping the format, it could be that the third generation of HD DVD player is the final generation. Toshiba has got to be thinking hard about how much money they want to keep dumping into HD DVD if the rest of the industry is moving to Blu.
Toshiba held their CES press conference today - and they avoided the issue. They only briefly touched on Warner’s move, and pretty much said what they’d already put in their press release. And they didn’t do any Q&A at the end of the session. It seems like they’re in avoidance mode at this point. They don’t have a good story to counter the devastating loss of Warner, and they know it.
The press release:
Read the rest of this entry »
