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.

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.