The impact of PS3 in winning the HD Format War

[Sxotty]

Having said that, that ratio (just the ratio itself) will probably increase in HD DVD's favor over time as PS3's price decreases and a higher and higher percentage of new PS3 owners don't even own HDTVs in the first place. This will of course be offset to some degree, possibly even more so than the degradation in the ratio, by the higher volume of PS3 sales that the lower price generates.

*head explodes*

No seriously though, this whole thing is ridiculous. Why are they doing this all over again? I wonder if there will be a lesson learned from this time.

I don't care much except that I have always been under the impression that Sony, and thus BluRay are greater supporters of draconian DRM so I want them to lose for that reason. Other than that I would actually support Bluray I think for the greater capacity and supposed scratch resistance (although that seems questionable now).

 

["Nerve-Damage"]

Came accross an interesting article @ tom's hardware.

http://www.tgdaily.com/content/view/35008/118/

Yet it is "OK" for them to include the Xbox 360 HD-DVD add-on in there figures.

The last time I check you need an Xbox 360 (or PC) for the add-on to work (so its not a standalone system).

Hardware

Thanks to incredible pricing on Toshiba HD DVD players leading up to Black Friday, total sales for HD DVD players in North America have exceeded the 750,000 mark. The data is based on retailer reports and other point of sale data, and includes standalone set-top players as well as the Xbox 360 HD DVD player, said the HD DVD Group.

 

[Sxotty]

Yet it is "OK" for them to include the Xbox 360 HD-DVD add-on in there figures.

The last time I check you need an Xbox 360 (or PC) for the add-on to work (so its not a standalone system).

Hardware

Actually it does make sense Nerve. Perhaps you just want to be upset and rant, but if you think about it.

Why do you buy a 360 HD-DVD drive?

The only purpose is to watch HD-DVDs really.

Why do you buy a ps3?
To game or watch Bluray.

That is why it actually makes at least some sense to view them that way. Geo already made the point of what it really needs to be to compare though.

 

[Mintmaster]

its obvious the PS3 has an impact on the war. if the PS3 can play BR movies, theres a good chance owners will use it as a BR player as well. its just going to get more difficult for the HD DVD camp to win with the PS3's userbase growing.

Quite the opposite.

It used to be 200k HD-DVD vs. <100k BR standalone + 3M PS3.
Now it's 750k HD-DVD vs. 200k BR standalone + 6M PS3

(I'm assuming the figures are worldwide).

In other words, HD-DVD standalone sales will grow faster than PS3 sales, and it's only going to get LESS difficult to overcome the impact of PS3. HD-DVD + BR standalone players will pass the PS3 in sales (IMO before 2009), unless they're both on track to fail in replacing DVD.

 

[patsu]

Quite the opposite.

It used to be 200k HD-DVD vs. <100k BR standalone + 3M PS3.
Now it's 750k HD-DVD vs. 200k BR standalone + 6M PS3

I thought the 200K number also did not include 360 add-on while the 750K does ? The HD DVD forum has consistently only counted "standalone standalone" players before this latest press release

Anyway, the dynamics will change again as prices continue to fall (The price gap will be more narrow). So all we can do is watch and er... may be buy more movies.

 

[Arwin]

Quite the opposite.

It used to be 200k HD-DVD vs. <100k BR standalone + 3M PS3.
Now it's 750k HD-DVD vs. 200k BR standalone + 6M PS3

(I'm assuming the figures are worldwide).

In other words, HD-DVD standalone sales will grow faster than PS3 sales, and it's only going to get LESS difficult to overcome the impact of PS3. HD-DVD + BR standalone players will pass the PS3 in sales (IMO before 2009), unless they're both on track to fail in replacing DVD.

Hmm, what kind of growth curve are you assuming in this scenario for HD-DVD?

 

[Florin]

Quite the opposite.

It used to be 200k HD-DVD vs. <100k BR standalone + 3M PS3.
Now it's 750k HD-DVD vs. 200k BR standalone + 6M PS3

(I'm assuming the figures are worldwide).

In other words, HD-DVD standalone sales will grow faster than PS3 sales, and it's only going to get LESS difficult to overcome the impact of PS3. HD-DVD + BR standalone players will pass the PS3 in sales (IMO before 2009), unless they're both on track to fail in replacing DVD.

Well, that just says HD-DVD standalone has relatively grown faster than PS3 sales over the past period - but also that overall the gap in units out there is still widening, with PS3 outselling HD-DVD standalones almost 6-to-1.

For your prediction to hold we need HD-DVD to stay at the current rock bottom price, and/or an inexpensive BR standalone player to be released soon, and no surge in PS3 sales. And just as an example, while I don't know exact sales numbers, anecdotal evidence seems to say the inexpensive 40GB unit is quite a hit.

 

[Geo]

Hmm, if I use those numbers and dial back to around 500k HD DVD as the point where B-r had a 2-1 content sale advantage, and then further assume that 1 HD DVD standalone (including XB) = 1 B-r standalone, then what I arrive at is roughly 10 PS3 = 1 HD DVD or 1 B-r standalone.

And if I wanted to have even more fun with numbers, if one assumes that HD DVD standalones (functionally, not technically) continue to outsell B-r standalones by 3.75-1, then PS3 would need to sell 5 million units for every extra 500,000 units above B-r standaones that HD DVD sold in order to keep up that 2-1 advantage.

So obviously, it seems to me, B-r had better stay at least roughly competitive on standalones and only rely on PS3 for its edge rather than its meat and potatoes.

 

[Mintmaster]

I thought the 200K number also did not include 360 add-on while the 750K does ? The HD DVD forum has consistently only counted "standalone standalone" players before this latest press release

Well, I remember a 300k figure after the 200k figure, and that included 150k standalones and 150k 360 drives. In anycase, being exact isn't the point of my post.

The point is that the sales of standalones are growing faster than those of the PS3. I'm not just talking about HD-DVD, either, as BR standalones will grow much faster than PS3 also.

Anyway, the dynamics will change again as prices continue to fall (The price gap will be more narrow). So all we can do is watch and er... may be buy more movies.

Exactly my point. The PS3 is not only the best BR player, but was the cheapest by far. As standalones get better and narrow the price gap, it makes no sense for the PS3 to have a greater impact as time goes on.

It'll all come down to standalone sales. PS3 gave BR the equivalent of say 600k standalones early on, and maybe the equivalent of 1M now. This number isn't going to grow very fast, and for all the reasons stated above, will likely grow slower than total PS3 sales, which in turn will grow slower than standalones.

 

[silhouette]

As long as at least one major hollywood studio supports one format exclusively, that format will not go anywhere.. From what it seems, this is the case for both HD-DVD and Blu-ray. It won't matter how many players or how many movies are sold in that format right now.

Like it or not, anyone who owns an HD-DVD or Bluray player (in any form) will be forced to get the other player at some point. If you are a PS3 owner, you will look for a cheapo Toshiba player next year. If you have an HD-DVD, you will have an excuse to get a PS3. If you have neither by the time, quiet possibly, you will buy a cheap dual-player. This is not VHS and Betamax in which the physical form of the media is totally different. These two technology is already pretty close (same audio/video codecs, same technical requirements, etc). Supporting both formats under a single box will be pretty easy and cost-effective by the next year. I believe sometime in 2009, all these number will be irrelevant and both HD-DVD and Bluray will live together happily ever after.

 

[Mintmaster]

Well, that just says HD-DVD standalone has relatively grown faster than PS3 sales over the past period - but also that overall the gap in units out there is still widening, with PS3 outselling HD-DVD standalones almost 6-to-1.

What's you're point?

A 10:1 ratio only got them a 2:1 ratio in movie sales. Now it's 6:1 for total sales, and in the last few weeks it could easily be just 2:1. Toshiba apparently sold over 90,000 from Nov. 2-4 at the $99 price a few weeks ago, and PS3 sold what, 121K in all of October? Disc sales always lag player sales a bit, so we'll soon see HD-DVD make some gains.

Obviously HD-DVD is not going to outsell PS3 by a factor of 6:1, but reaching 50% of PS3 sales is reasonable. Moreover, as standalones improve and get cheaper, a lower percentage of PS3 sales will be going to people looking for an HD movie player.

 

[patsu]

It'll all come down to standalone sales. PS3 gave BR the equivalent of say 600k standalones early on, and maybe the equivalent of 1M now. This number isn't going to grow very fast, and for all the reasons stated above, will likely grow slower than total PS3 sales, which in turn will grow slower than standalones.

I don't think the dynamics are fixed that way.

The guys will do whatever necessary to improve their positions. Sooner or later, there will also be Macintoshes (presumably Blu-ray), media PCs/laptops (HD DVD and Blu-ray), cheaper Funai Blu-ray players, even cheaper HD DVD players, likely cheaper PS3, and perhaps HD DVD Xbox 360s (once they figured out how to make the DVD part go 12x).

There is also different growth curve in Europe, US, Japan and rest of the world.

While I agree that mathematically, Blu-ray has to sell more and more units to keep the current player ratio. I also think that the player sales will change in spurs depending on how different events and perceptions play out.

 

[Mintmaster]

As long as at least one major hollywood studio supports one format exclusively, that format will not go anywhere.. From what it seems, this is the case for both HD-DVD and Blu-ray. It won't matter how many players or how many movies are sold in that format right now.

Well, I think anytime someone is discussing whether a format will "win", they're talking about the situation where one format loses almost all exclusivity.

(One studio isn't enough, IMO, because you can always fall back to upscaled DVD for 1/5th of your collection.)

If disc sales start swinging to, say, 80:20, and total HD sales improve to maybe 5% of DVD sales, then staying exclusive to the losing format has a significant impact on revenues, and the shit hits the fan. BR didn't achieve this in the past year, and I think it'll be tough for that to happen now.

Similarly, if total HD sales get even higher (say 10% of DVD sales) without being driven by the proliferation of dual-format players, then staying exclusive will cost the studio their bottom line even in 50:50 cases. Again, we see formats lose exclusivity, except this time it happens on both sides. Then consumers can forego one of the players.

Right now exclusivity is primarily driven by the low market share of HD formats. A $150m "bribe" wouldn't be enough if that wasn't the case.

 

[Mintmaster]

I don't think the dynamics are fixed that way.

I'm not saying they're fixed. In fact that very paragraph is talking about how the factors are changing. I'm just saying that other factors are far less relevent, including everything you mention here:

Sooner or later, there will also be Macintoshes (presumably Blu-ray), media PCs/laptops (HD DVD and Blu-ray), cheaper Funai Blu-ray players, even cheaper HD DVD players, likely cheaper PS3, and perhaps HD DVD Xbox 360s (once they figured out how to make the DVD part go 12x).

Small potatoes.

Companies are not going to commit financial suicide. Royalties for DVD going to HW manufacturers are what, ~$0.20 per disc? So they're going after maybe $500M/year in royalties in the very long term to be split among all IP holders?

There's a reason that Stringer said the format war is a stalemate, and that it doesn't affect Sony too much. BR revenue is not a big part of Sony's future, and accordingly Sony is not going to dish out inordinate sums to weaken HD-DVD. The same goes for Toshiba/MS/Universal/etc.

 

[patsu]

I re-read one of your post and see that you're placing a lot of emphasis on standalones. I am not denying that factor in the long term. But in the short-mid term where we are still "early". any player strategy that can accelerate adoption of HD playback in the living room, especially one that encourage people to buy HD TV, will matter.

At this stage, I tend to also give more credence to higher end player strategy to target people with more spending power (I am very interested to see Apple's home Mac + HD strategy). The price sensitive people may end up renting rather than buying.

I'm just saying that other factors are far less relevent, including everything you mention here:

patsu: "Sooner or later, there will also be Macintoshes (presumably Blu-ray), media PCs/laptops (HD DVD and Blu-ray), cheaper Funai Blu-ray players, even cheaper HD DVD players, likely cheaper PS3, and perhaps HD DVD Xbox 360s (once they figured out how to make the DVD part go 12x)."

Small potatoes.

The list I made include cheap standalone players. So it cannot be small potatoes. Like you though, I am curious to see some movie sales numbers over the next few months.

Companies are not going to commit financial suicide. Royalties for DVD going to HW manufacturers are what, ~$0.20 per disc? So they're going after maybe $500M/year in royalties in the very long term to be split among all IP holders?

There's a reason that Stringer said the format war is a stalemate, and that it doesn't affect Sony too much. BR revenue is not a big part of Sony's future, and accordingly Sony is not going to dish out inordinate sums to weaken HD-DVD. The same goes for Toshiba/MS/Universal/etc.

Some are already over committing. As long as Sony continues to produce PS3 as is, it will remain a major force in this war cummulatively. I actually don't have much to add now other than something called "Volume Sales Analysis" (regarding the $99 HD DVD player sale). But I will save it later when we have more data points.

 

["Nerve-Damage"]

Actually it does make sense Nerve. Perhaps you just want to be upset and rant, but if you think about it.

Why do you buy a 360 HD-DVD drive?

The only purpose is to watch HD-DVDs really.

Why do you buy a ps3?
To game or watch Bluray.

That is why it actually makes at least some sense to view them that way. Geo already made the point of what it really needs to be to compare though.

Both.

 

[Zaphod]

So obviously, it seems to me, B-r had better stay at least roughly competitive on standalones and only rely on PS3 for its edge rather than its meat and potatoes.

This is the key issue.

The Blu appeal was for the PS3 to kill off HD DVD early with one swift blast of Playstation-branded shock and awe. Then Sony could dial back on the movie focus a bit and allow the other CE manufacturers to catch up at a leisurely pace. Synergies abound and everybody (well, except Toshiba) wins.

Now the dynamic is different. It's pretty much useless to discuss whether the PS3 will allow for Sony to sell discs to gamers and whatnot faster than Toshiba can sell standalones, because that's not what the 'war' is about. It's not just about beating the other guy, it's about replacing DVD. The PS3 alone can't do that.

If two years from now the PS3 is still the dominant Blu-ray player and the media are still outselling HD DVD 2:1, that doesn't mean that Sony won. It means they both lost.

 

[Sxotty]

The Blu appeal was for the PS3 to kill off HD DVD early with one swift blast of Playstation-branded shock and awe. Then Sony could dial back on the movie focus a bit and allow the other CE manufacturers to catch up at a leisurely pace. Synergies abound and everybody (well, except Toshiba) wins.

If two years from now the PS3 is still the dominant Blu-ray player and the media are still outselling HD DVD 2:1, that doesn't mean that Sony won. It means they both lost.

IT seems to me that Sony is kind of pissing of other CE companies right now. Why would anyone buy anything besides PS3 for blu ray? I mean those who don't have $1000 to spend so the box looks nicer. I thought previously BR was supposed to be CE's friend and HD-DVD their enemy. Seems that has flipped.

The second part I agree with.

 

[quest55720]

This is the key issue.

The Blu appeal was for the PS3 to kill off HD DVD early with one swift blast of Playstation-branded shock and awe. Then Sony could dial back on the movie focus a bit and allow the other CE manufacturers to catch up at a leisurely pace. Synergies abound and everybody (well, except Toshiba) wins.

Now the dynamic is different. It's pretty much useless to discuss whether the PS3 will allow for Sony to sell discs to gamers and whatnot faster than Toshiba can sell standalones, because that's not what the 'war' is about. It's not just about beating the other guy, it's about replacing DVD. The PS3 alone can't do that.

If two years from now the PS3 is still the dominant Blu-ray player and the media are still outselling HD DVD 2:1, that doesn't mean that Sony won. It means they both lost.

That is the thing I don't see any standalone blu player making headway against the PS3. It is the double edged sword for sony when they decided to make the PS3 player so high quality. I am not sure any CE will be able to produce an equal or better player for the price. Sony will be producing 10 of millions of PS3 kicking in economies of scale. They also make a lot of the stuff inside saving money in the long hall. If I am going to ever get a blu players I would go for a PS3. No reason not to it is the best player and pretty much the cheapest. While making the player kick ass helps right now I think it hurts in the future for the other blu CEs. On the other hand the original PS2 was a crappy DVD player. Since the PS2 was a below average player it was never a threat to the other DVD CEs. If a person wanted a dvd player they would just get a stand alone unit. The PS2 just helped the transition by having a player for the kids room.

I am not sure if either format will ever defeat DVD or at least not for a very very long time. It won't be till players are sub 50 dollars and portable players are dirt cheap will either format have a chance to replace dvd. I know I keep saying this but the biggest mistake of both sides was not to include the regular dvd with the high def version. That way people could buy the movie once at a premium like 29.99 but have a version for the kids room the bedroom and the car. If I had kids there would be no way I would go with either format right now and have to buy movies 2 times once for the hd-players and once for the other players in the house.

 

[Zaphod]

I thought previously BR was supposed to be CE's friend and HD-DVD their enemy.

The thing is that if HD DVD were dead and the PS3 were the runaway success of the console generation, it wouldn't have stood in the way of the other CEs. Not in the same way. The market for Blu standalones would still be there and adoption could take it's 'natural' course with a gradual adoption and introduction of lower priced models while still keeping margins reasonable. I can easily understand why this was the most attractive (and indeed the most likely) prospect from the perspective of the traditional CE manufacturers.

Now, in a competitive situation and with Toshiba accelerating the price reductions, the other CEs are in a sticky spot. They currently won't make any money by going HD DVD, but they aren't making any money by saying Blu either. In a sense, Toshiba is in the position of playing defense; spending $8 to protect their current DVD revenue of $10. To counter that, the others need to go on the offense; spending $9 against current DVD revenues of $5 to possibly gain a future $12. That doesn't seem to be a risk they're all that willing to take. (The relative numbers are pulled out of thin air to illustrate the point.)

The way I see it, the PS3's role now is to hold down the content lead until the CEs can bring about mass market priced players. Toshiba's goal is to close down their profit window so that won't happen. When it comes down to it, I think Toshiba is the one better off if the situation is one where no on wins (in the sense of supplanting DVD), so I don't think the long term impact of the PS3 alone worries them that much. Even if Blu-ray does good against HD-DVD in a strictly comparative sense. After all, good old DVD player sales will still be >20 million in the US this year.