Which High Definition DVD format to buy?
For the record, I don’t think one side will win outright. Ultimately, I think that both formats will be
with us for some time. For one side to win outright, a lot of things would have to go right for one side
and wrong for the other. Furthermore it would have to happen by the end of the 2007 Christmas buying
season. Basically, Blu-ray Disc or HD DVD would have to own 80% of the market share and be pulling away,
with revenue from title sales and rental of at least $3-5 billion annually. Or, one side would have to get
a 4:1 player sales advantage, with a minimum of 10 million players sold. I don’t see the sales volume
getting high enough in the next year to make any of the aforementioned happen, and neither side has
projected sales targets anywhere close to those numbers.
At this point, the scales tip in HD DVD’s favour, here’s why:
The general feeling is that marketing was the key reason Betamax ultimately got swept aside by VHS. If
this is so, then having Microsoft as one of your principal supporters, is a definite plus for HD DVD.
There are few companies that put as much effort into marketing a product as Microsoft does. It takes deep
pockets to mount a sustained marketing campaign, Microsoft has that. Other than payroll, marketing is their
only significant cost of doing business. HD DVD is natively supported in the new Vista operating system,
so their marketing effort for HD DVD is tied to more than just the Xbox 360. Microsoft websites are the #1
(msn.com), #4 (live.com), #5 (passport.com) and #6 (microsoft.com) most visited sites on the net. That is
an enviable position to be in when you are in the fight for eye balls.
Marketing had a big part in the outcome of the Betamax / VHS format war, but price was the lynch pin.
Entry level VHS machines were priced lower than entry level Beta machines. At $199 MSRP for the Xbox
Add-on, HD DVD has a more attractive entry price. Granted this price is not available to everyone, just
the 10 million plus (and that number is growing) Xbox 360 owners. This demographic is important. They have
demonstrated an interest in acquiring new technology, and they like to own or will own the hottest new
technology everyone is after, HDTV. That makes them the ideal customers to market the high resolution
capabilities of HD DVD to. For the non-Xbox owners, street price on entry level Toshiba HD DVD players are
also well below $400. The lowest price Blu-ray player is the Playstation3 20GB model at $499. There has
been a bit of a supply problem, so good luck finding one, and getting it without paying a premium. Lowest
priced stand alone DB player, about $599. Currently HD DVD is doing a much better job of providing
consumers with an affordable HD video player. And cost is king. Take, as an example, the effect that
pricing has on the sale of Playstation game consoles.
I think if I took a poll of Playstation enthusiasts, they would all agree that Playstation3 is far
superior to its sibling. However, the new super console with the built in Blu-ray Disc player (Playstation3)
was outsold by a margin of 3 to 1 by the lower priced Playstation2 during the 2006 Christmas buying season.
Blu-ray touts itself as the superior format for consumers, by virtue of its superior storage capacity. The
question is, are consumers willing to pay a premium for this one feature? It’s like déjà vu, the strategy
of demanding a higher price on the premise that your technology is better doomed Sony and its Betamax format
in the past. Is history is poised to repeat itself?. Sales of Playstation2 vs. Playstation3 suggest that
we consumers will not pay the premium. It’s a pity there is no $199 add-on for the Playstation2.
$300 is the price where there was explosive adoption of DVD after its introduction. The price for a
stand-alone HD DVD players will likely fall below $300, by the end of 2007. Alco, Lite-on and several other
companies that make the entry level house brands you find at Walmart and other large retailers will be
introducing HD DVD players this year. In an interview with CNET’s NEWS.COM, Sony Electronic President Stan
Glasgow stated that he expected it would take 3 years for Blu-ray disc players to break the $300 mark.
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