Sony CEO needs coaching

[Bouncing Zabaglione Bros.]

Another Stringer quote from the same talk:
I'm assuming he's referring to the ODD (and/or just doesn't know what the hell he's talking about). Still a bit strange that he'd mention it - even as a hypothetical - in the first place.

It might not hurt directly (ie not getting something they didn't have in the first place), but it does mean throwing away all the R&D and production investment, it means having to pay licences to use the HD standards, changing out all the PS3 drives, and most importantly no chance of getting any revenue for licensing out BR as the world's next-gen consumer hi-def standard. I can't see how it wouldn't be a big PR and share price blow to the company. I'd expect the CEO and other board members to have to resign... unless they very carefully prepare the ground in the manner we've begun to see above.

 

[Zaphod]

Stringer is... well... let's just say I think Sony has major management problems.

How so? Care to elaborate?

The way I see it, he's the CEO of Sony Corporation. He's not speaking on behalf of the BDA or SCEE. Nor is he speaking to consumers. He's speaking to shareholders. Shareholders who doesn't like business units bleeding money, and certainly doesn't like corporate leadership committed to keep bleeding money no matter what the realities of the situation might be. Stringer is telling them that Sony won't.

 

[Skrying]

How so? Care to elaborate?

The way I see it, he's the CEO of Sony Corporation. He's not speaking on behalf of the BDA or SCEE. Nor is he speaking to consumers. He's speaking to shareholders. Shareholders who doesn't like business units bleeding money, and certainly doesn't like corporate leadership committed to keep bleeding money no matter what the realities of the situation might be. Stringer is telling them that Sony won't.

The business decisions and the way they've set themselves up for a cascading lose if even one aspect of their business does not pane out. Cell and Blu-Ray are directly tied to the PS3, if it doesn't do well then that hurts directly (and very significantly) the rest of their business. That doesn't seem so hot if you ask me.

His announcement is a two sided sword as well, he's saying one thing but its also confirming the reality that Blu-Ray isn't leading, and even by his own words isn't likely to.

 

[Vic]

The business decisions and the way they've set themselves up for a cascading lose if even one aspect of their business does not pane out. Cell and Blu-Ray are directly tied to the PS3, if it doesn't do well then that hurts directly (and very significantly) the rest of their business. That doesn't seem so hot if you ask me.

His announcement is a two sided sword as well, he's saying one thing but its also confirming the reality that Blu-Ray isn't leading, and even by his own words isn't likely to.

Except of course it is leading, and the software sales show that. I think some people are placing too much emphasis on sony in this war, forgetting that panasonic and pioneer own more patents in blu-ray than anyone else. Toshiba meanwhile is manfully fighting this battle basically by itself, losing a shed-load of money onits R&D costs.

 

[Zaphod]

Cell and Blu-Ray are directly tied to the PS3, if it doesn't do well then that hurts directly (and very significantly) the rest of their business. That doesn't seem so hot if you ask me.

How much did SCEI bring in during the good years?

As I mentioned above, I can see them salvaging the PS3 (and Cell) even if they mostly abandon BRD as a movie format. Besides the obvious R&D costs, I don't believe Sony has that much to directly loose by doing so. Sure, they'll loose the (pipe)dream of controlling a vertically integrated media system - from production to delivery - but these things seem to be cyclical (diversification->integration->simplification, rinse repeat). Toshiba, on the other hand, to a larger degree is protecting revenue (about 1 Billion/year, IIRC) that is important to them (which Sony made a grab for).

If the "we want it all"-triad of Cell, Blu-ray, and the gaming division seems to be going down, the most logical choice (IMO) would be jettisoning Blu-ray if it meant salvaging the future for the other two.

Not that I think they will any time soon, but these quotes at least float the possibility.

Toshiba meanwhile is [...] losing a shed-load of money on its R&D costs.

Are they really losses? I'd see it more as them investing their DVD revenue to ensure that it keeps coming. For them it must be like someone getting annual payments of $100, $100, $100, $100, $100, $50, $25, $10, $5, $0 with the option of spending the fifth payment in return for a good chance of starting the cycle all over again. A no brainer.

 

[Dave Baumann]

Toshiba meanwhile is manfully fighting this battle basically by itself, losing a shed-load of money onits R&D costs.

Care to back that up?

 

[Zaphod]

Except of course it is leading, and the software sales show that.

I have stated from the very beginning of the 'format war' that I don't believe a gaming console could be able to carry a format transition by itself. Right now, that's what the PS3 seems to be trying to do. Its appeal was the potential for the PS3 brand strength to carry Bly-ray to an early second round knockout, after which the other CE manufacturers could carry on the cycle 'as usual' by introducing profitable standalone units at a gradually decreasing price.

Personally, I thought that was the way it would go. It didn't.

As it stands now, I'm more inclined to view the PS3 as a liability rather than an asset. Sure, by virtue of sheer numbers it moves some software, but studios don't like it (low predictability, low attach rate, low catalog sales, directly competing with other media on same unit). Furthermore, as it's effectively blocking the entry vector for other CE makers to make a profit, I can't believe that they're to enthralled with it either.

 

[Vic]

Care to back that up?

Are you saing that the costs R&D costs are covered by the massive price slashes Toshiba have made? I think people have overestimated the price differential in terms of costs, between Blu-ray and HD DVD.

I thought it was common knowledge that the HD DVD hardware was a loss leader?

As far as evidence, I'm certainly not going to trawl though all the material I've read on the format war. If I can find an article I was reading last week I'll post a link to it, otherwise I would suggest you do your own research . Certainly hardware costs have fallen significantly for Toshiba, but that does not cover the R&D side of things which is considerable.

Toshiba knew they didnt have the manufacturer support (or previously the studio support) to compete with Blu-ray. Instead it has slashed prices to 'stay ahead' in a different aspect. What would be worrying for me if I was in their position, is that their software is still being outsold around 2:1. Of course there is still time, but PS3 sales will be significant this Christmas, particularly in Europe and Japan. HD DVD doesnt have the same presence in these two regions that Blu-ray does.

 

[Dave Baumann]

IIRC Toshiba have been posting healthy results throughout the period people have been saying "this is costing Toshiba a pretty penny", which belies the "common knowledge" that you speak of. This is why I ask for something to back such statements up - can you? (I assume by the roll's eyes icon you can't. But you make the assertion, so its your imperative to back it up).

 

[Vic]

IIRC Toshiba have been posting healthy results throughout the period people have been saying "this is costing Toshiba a pretty penny", which belies the "common knowledge" that you speak of. This is why I ask for something to back such statements up - can you? (I assume by the roll's eyes icon you can't. But you make the assertion, so its your imperative to back it up).

But hasn't that point just been covered by Zaphod?

As far as HD DVD goes, its been a loss-maker. Simple really.

 

[AlphaWolf]

Toshiba expects 180 billion yen ($1.58 billion) in profit for the fiscal year, up from the initial projection for a 120 billion yen ($1.05 billion) profit.

It is forecasting 7.8 trillion yen in ($68.3 billion) annual sales, better than the earlier 7.5 trillion yen ($65.67 billion).

Doesn't look like HD Dvd is bleeding them dry or anything.

 

[Dave Baumann]

But hasn't that point just been covered by Zaphod?

How? With the statement of "slashing prices"? Slashing prices doesn't immediately equate to "loss", at least not across the entire line or program.

As far as HD DVD goes, its been a loss-maker. Simple really.

If its that simple then it should be simple to put some facts to the assertion. Please, do.

 

[Vic]

How? With the statement of "slashing prices"? Slashing prices doesn't immediately equate to "loss", at least not across the entire line or program.


If its that simple then it should be simple to put some facts to the assertion. Please, do.

DVD.

You've just essentailly posted the same thing 3 times. Thats borderline retarded. I'll look for the article tomorrow, its nearly 3am here in the UK. Is that acceptable to you? lol

 

[Dave Baumann]

You've just essentailly posted the same thing 3 times. Thats borderline retarded.

Indeed, it took that many times for you to acknowledge that when you make an assertion you should be prepared to back it up.

We all know they've made losses on the A1-HD hardware, however that was quite quickly replaced with subsequent generations with increasingly dedicated hardware. Its also the case that the apparent $100 A2-HD move was not instigated by Toshiba, but the retailers themselves.

 

[Vic]

Indeed, it took that many times for you to acknowledge that when you make an assertion you should be prepared to back it up.

We all know they've made losses on the A1-HD hardware, however that was quite quickly replaced with subsequent generations with increasingly dedicated hardware. Its also the case that the apparent $100 A2-HD move was not instigated by Toshiba, but the retailers themselves.

No. In my very next post, I said I would look for the article.

Seriously, this is like talking to a tree.


As far as I'm aware, the A2 was dumped because the A3 is on its way. A move made by Toshiba. Its interesting to note the vast price differences between the US and UK prices of Toshiba's HD DVD players (high even by CE device standards). Makes me wonder if Toshiba is subsidising the US market with the EU market's high prices.

Another thing is the complete lack of marketing presence of HD DVD players in Europe. Not sure what the situation is in the US, but the vast majority people in the UK havent even heard of HD DVD. If Toshiba is so flush, why isnt it spending more on advertising?

 

[Dave Baumann]

No. In my very next post, I said I would look for the article.

Actually, you said "If I find it... otherwise, do it youself", thats hardly a reply that indicates you will do something.

As far as I'm aware, the A2 was dumped because the A3 is on its way. A move made by Toshiba.

A3-HD went on sale in October. Toshiba obviously sold through their supply of A2's before transitioning to the A3's. Evidently the recent price drop was instigated by the retailers that still had supply of A2's that they wanted to move before selling A3's.

http://gizmodo.com/gadgets/format-war/every-99-hd-dvd-player-losing-500-319172.php

UPDATE: Toshiba, apparently, had nothing to do with this move. Walmart cut price to clear shelves and the retail competition followed, while Toshiba shrugged their shoulders.

 

[Vic]

Actually, you said "If I find it... otherwise, do it youself", thats hardly a reply that indicates you will do something.



A3-HD went on sale in October. Toshiba obviously sold through their supply of A2's before transitioning to the A3's. Evidently the recent price drop was instigated by the retailers that still had supply of A2's that they wanted to move before selling A3's.

http://gizmodo.com/gadgets/format-war/every-99-hd-dvd-player-losing-500-319172.php

Wow that quote offers nothing except Gizmondo's opinion.

Slightly hypocritical dont you think?

I mean:

http://www.tivolovers.com/2007/11/01/toshiba-hd-a2-to-drop-below-100-at-walmart/

It wouldnt surprise me if Toshiba slashed the price to $199 or $150, and Walmart did the rest. Whatever the case, I think they are using the A2 to build market share at loss, like the PS3.

 

[Dave Baumann]

Wow that quote offers nothing except Gizmondo's opinion.

Slightly hypocritical dont you think?

Errr, distinctly more than you've offered. And if that was their opinion, then they would have proffered it in their initial article - it was an update that indicates they has extra input.

Weren't you going to be an hour ago? Probably could have found something by now...

 

[Vic]

Errr, distinctly more than you've offered. And if that was their opinion, then they would have proffered it in their initial article - it was an update that indicates they has extra input.

Weren't you going to be an hour ago? Probably could have found something by now...

You are joking when you say that right?

Sorry that is laughable. You appear almost desperate to believe that Toshiba's financials are strong.

EDIT: It was Walmart!

 

[Dave Baumann]

You are joking when you say that right?

No, its a simple the case. If that was an opinion they would have not need an update to their article.

You appear almost desperate to believe that Toshiba's financials are strong.

Not at all. I'm simply asking for data to prove that HD DVD is proving to be a massive sink of money for Toshiba.

Here are the last 4 years of Toshiba's revenues - a convenient snapshot, as it probably captures much of the timespan of this little media definition spat so far. Whats the trend there - revenues are trending upward, but so too is gross profit. Similarly costs (which include R&D) are only increasing inline with revenues / profits.

This does not point to "massive wholesale loss leading", nor do I think DVD accounts for that growth as it is a largely flat, to mildly growing market.

If it is actually the case that HD DVD is really singificant loss leader for Toshiba, then it would appear that Toshiba are managing that pretty well within the growth of their overall business.