The console losses discussion thread (or 'how companies blow billions on products')*
- Thread starter AntShaw
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In my opinion Toshiba being a lone wolf on the hardware front was actually one of their greatest advantages. The CE's supporting Blu-ray had little to do with margins at the outset - it was simply the case that the majors all had IP-related stakes in Blu-ray, and players like Samsung and LG went along (temporarily) for the ride.
If Toshiba actually had equal hardware partners to consider in their pricing, then truly they would have been hopeless in their struggle, because several expensive options from a couple of manufacturers would never have captured the numbers or momentum that their very clear and stark consumer value proposition was able to. Toshiba at the end of the year 2007 was as much on an ascendant path as at any other point during the war - indeed they were selling standalones in November/December nearly as fast as Sony was selling PS3's, by virtue of their ability to act unilaterally in the pricing department.
Personally I think if Toshiba had been constrained on its ability to price, things would have gone a lot worse for them a lot sooner. The lone-wolf situation also allowed them to toss all key functionality into essentially all players right from the outset, where in BD land we still have the CE manufacturers playing out their traditional cycle of slow feature expansion to take full advantage of margin preservation. They seemed nimble in fact compared to the ponderous bureaucracy of the BDA, where multiple corporate interests had to be considered.
If Toshiba actually had equal hardware partners to consider in their pricing, then truly they would have been hopeless in their struggle, because several expensive options from a couple of manufacturers would never have captured the numbers or momentum that their very clear and stark consumer value proposition was able to. Toshiba at the end of the year 2007 was as much on an ascendant path as at any other point during the war - indeed they were selling standalones in November/December nearly as fast as Sony was selling PS3's, by virtue of their ability to act unilaterally in the pricing department.
Personally I think if Toshiba had been constrained on its ability to price, things would have gone a lot worse for them a lot sooner. The lone-wolf situation also allowed them to toss all key functionality into essentially all players right from the outset, where in BD land we still have the CE manufacturers playing out their traditional cycle of slow feature expansion to take full advantage of margin preservation. They seemed nimble in fact compared to the ponderous bureaucracy of the BDA, where multiple corporate interests had to be considered.
I actually really agree with what you just said Carl. I really do think Toshiba was able to put up a much better fight because of how and when they could change prices.
I think Sony's business strategy was more appealing to both CE's and the movie studios. Their product was a little less finished upon release, so not as consumer friendly - but ultimately I think that businesses sided with Sony because Sony's model made more business sense to them. Ultimately, that decided the format war. I'd like to think it was the consumer, but really think it far more likely that the battle was fought in corporate offices rather than anything that happened in stores.
I think Sony's business strategy was more appealing to both CE's and the movie studios. Their product was a little less finished upon release, so not as consumer friendly - but ultimately I think that businesses sided with Sony because Sony's model made more business sense to them. Ultimately, that decided the format war. I'd like to think it was the consumer, but really think it far more likely that the battle was fought in corporate offices rather than anything that happened in stores.
It's both. The stronger Blu-ray movie demand proved to them that price was not the key factor from the early adopters' point of view. Content was (still is). If HD DVD had much stronger sales earlier on, the decision would be harder to make in CES 2008. Once the consumers appeared Blu-ray friendly, the final decision rested on the studios.
The other thing is the studios had to believe Toshiba can carry the format all the way. Toshiba was losing money for each player. It was unclear how they were going to recover the cost other than using their DVD profit and future HD DVD royalties (There is a certain level of conflict between DVD and HD DVD). Because of the player drain, I think it might have also restricted their ability to "pay" studios to go neutral. OTOH, Sony had Blu-ray production limitations, which they were able to overcome in time.
According to the grapevines, Toshiba was supposed to bring in another key manufacturer and Blu-ray switcher. It failed on both counts. By then, the Blu-ray consumer momentum and Sony's industry friendly proposal probably already got to Warner.
Disclaimer: I cannot vouch for any of the rumors above.
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As I mentioned though, a number of those CE manufacturers were on BD in the first place because they had IP stakes in the format. Philips and Panasonic weren't there casually, that's for sure, and Samsung and LG went rogue after they saw there was money to be made playing the middle.
I treat the agendas of the movie studios and the CE manufacturers as wholly different in this regard. For the movie studios, these were the key criteria: CE support, guarantee of replication cost/volume, and speed of transition.
Before the format war ever got underway, Sony didn't bring forth an offer so much as a threat, that threat essentially being that through their internal studios and inclusion inside PS3, supporting HD DVD without a war was simply not an option for anyone. At best, HD DVD would win a war of attrition, with Sony ensuring so long as they deemed fit that both a software catalog and machines able to play the format would be available. In addition, the size advantage was important enough for Disney, and the BD+ inclusion important enough for Fox, that both went exclusive to Blu-ray. Further to this, Sony was willing to absorb the high cost of early gen BD replication themselves and partially subsidize the cost of the discs pressed for their partners at Sony DADC. If Sony didn't have such absolute control over all aspects of the BD supply chain, I wonder if it could have been pulled off; of course their having their toes in all of it is what made it so important to win.
Paramount and Universal were always two studios that favored HD DVD for the economies surrounding the format - the reasonable assurance was there that replication would be cheap, and volume needs not a problem. After all, a simple $10K investment to turn a DVD line into HD DVD, right? Paramount was convinced to go dual-format though, and Warner went that route as well. Frankly before the start of the war Warner's move blew me away, and I think myself and many others thought it would be over before it ever started - afterall if Warner, which actually had an IP interest in HD DVD winning, was willing to consider BD's position... then certainly the future had been pre-determined.
Well, HD DVD managed to get Universal to go exclusive, and the stage for confrontation was set afterall. Not only that but Warner seemed to increasingly play its favor to HD DVD as time went on, and of course Paramount had it made worth its while to give up on the BD gambit. Where HD DVD was a clear underdog at the outset, things actually started to look headed towards a long grind as the winter of '07 approached. And the thinking was that such a situation would ultimately benefit HD DVD over the long haul, as the BDA alliance increasingly had its various interests pulled in different directions.
But, luckily Warner - who had always had resolution near the top of its agenda - found that stalemate wasn't anything that would actually benefit the studios/consumer, and decided to side with BD due to the active user base and partner ecosystem that was in place (and supposed additional incentives). Not that if they had gone HD DVD - as many thought they might - it would have been any more of a surprise, that being how intense things were getting at that time. But I think Warner realized that if they did go to HD DVD, that wouldn't lock the war so much as simply help (though immensely) HD DVD. The BDA studios would still keep fighting. And so in that context, if Warner truly wanted to end the war with any high degree of assurance, there was only one certain choice.
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I don't think there's any dispute here that the PS3 is what ended the format war; in my opinion it is the definitive device of this entire optical generation. Indeed I think it's probably the best mass consumer A/V device of all time. When I personally refer to 'the mainstream' consumers and such in this thread, and the consider the appeal/substitution of a PS3-derived standalone, I certainly am not talking about myself - I had a PS3 on launch day, had always wanted BD integration, and was a supporter of the format from day one for reasons that existed completely outside of its console tie-ins. But at the same time, when I was hoping that BD inclusion would ultimately make it in, I was also expecting a launch price of roughly $450. When $500/600 was announced, I found I could certainly cope, but a lot of folk that were in that mainstream segment were very much turned off.
The discussion here now I think just comes in the form of reflection on the price paid to use PS3 as a vector, both in immediate costs and in the opportunity costs of the gaming division's market position... and in wondering whether Sony might have had other means of achieving its goals without having been bruised as such. It's really just a thought experiment of sorts, because honestly I don't think history will ever forget the PS3's role in determining the outcome.
PS - No doubt an entire thread concerning MS' own position in this war could be had.
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You mean HD DVD and Blu-ray?
Right because everyone associates DVD with Toshiba. Ask the general population and see what sort of response you get. Just because we follow the war doesn't mean the mass consumer is sitting there thinking "oh Toshiba brought me DVD!"
You're grasping hard if you're trying to compare Sony's brand power vs Toshiba's atleast in the US and Europe. Not sure about Japan but I imagine the same to be the case.
So nobody buys non-brand DVD players at Wal-mart? How many people knew Blu-ray players actually can play DVD? Sometimes people forget how mainstream public behave...
I don't think anyone will argue that people are buying the ps3 as a DVD player. Name recognition means a lot more when you're trying to establish something or selling high end than it does when you're selling an established product type for $29.95
No the point is that Mintmaster keeps on saying the Sony > Toshiba when it comes to brands.
Yet he fails to see that this was HD-DVD vs Blu-Ray in the public not brand vs brand. But it´s interesting that a company that is known for "failed" proprietary formats is considered strong enough to pull away from a established format as DVD, just with a HD tacked on.
Maybe this is why Sony chose their strongest brand, the Playstation to pull Blu-Ray ahead. Besides the fact that Sony forgot to look in their crystal ball and see into the future and then change their business plan acordingly.
How does that article even make sense? MS didn't design Xenos, ATI did.
The point is, people bought HD DVD players because they are HD DVD players, not because they are manufactured by Toshiba. It's on its own and general consumers are not format-war flag bearers. It's not needed to bring in Sony/Toshiba (or Toshiba/Panasonic, Toshiba/Pioneer, etc etc) brand comparison here. Otherwise it's inexplicable that people bought so many brand-new consumer hardware from a not-so-great brand such as Toshiba. Most likely they wouldn't even know who's backing what. Also Wii / Xbox 360 sales are decent, I don't see why Mintmaster believes brand value of Sony or Playstation is an immediate indicator of success.
Another thing that seems lost in this discussion is the contribution of HD DVD software sales by the Xbox 360 add-on. A half of the total HD DVD player sales was actually from the add-on as Toshiba disclosed at their pullout.
I think the point is that blu-ray stand alones would have sold better at the same price point as HD DVD with Sony brand recognition backing it. I don't think there's much doubt the average consumer given equal products one a toshiba and the other a Sony product, the Sony would sell much better.
The only reason to buy the add on was if you were going to buy HD DVD movies. Those numbers were included in the total shipped HD DVD units.
They just had to have all other issues resolved, not just the BR part. I thing it´s naive to say "that they should just plan for it". It's not that easy.
They launched at 499,- with what they perceived were a greater value product. The internet didnt think so (of course) Sonys arrogance got them the well deserved kick in the nuts.
Start of 2007 (Euro launch?) the PS3 had the firmware that made it the best BR player. Getting it ready earlier might have been possible, but there is only so many resources. And again, the PS3 was still close to the HD-DVD players price, those that wanted a good cheap Standalone BR player could just buy a PS3.
If Microsoft had not dragged out the HiDef war the inclusion of Blu-Ray would have looked better early on. With HD-DVD beaten into a bloody pulp i think the PS3 a much better value. It´s not a format "forced" down anyones throat, it´s the next Hi-Def format and it´s "nice to have".
Btw. when did the developers get their final machines with the RSX?
But it wasn´t equal Products, one of them could play DVD the other Blu-Ray. Which format rings a bell?
They both can play DVD. One plays HD DVD the other Blu-ray. Do you really think people were buying really expensive DVD players?
Was Sony running around marketing the PS3 as a DVD player? They were gung ho'ing the PS3 as a Blu Ray player because the DVD feature set is virtually irrelevant for the push of their new format. DVD feature set was as marketed as SACD. Marketing exists to convince the mass market of message being delivered. The message has and will continue to be "Blu Ray" player. What intelligence would Sony have of promoting a 10year old tech at $499/$599 when it can be had for less than $30 at places?
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On one hand it was HD DVD vs Blu Ray and brands didn't matter yet on the other hand they chose to sacrifice their biggest brand since they knew the BRAND power it would have to pull consumer towards it!? Which one is it?