Kingdom of the HD Empire is the prize, the console war is only abattle

Discussion in 'DVD Video' started by Blig Merk, Feb 22, 2008.

  1. Blig Merk

    Blig Merk Guest

    Thanks to PS3, Sony enjoys spoils of HD fracas
    February 20, 2008

    Tuesday's announcement from Toshiba that it is pulling its support of
    the HD DVD format and ceasing production of the video players
    effectively stamps Sony as the new standard bearer of high-definition

    Sony has long been associated with the Blu-ray Disc format, but HD
    DVD's demise brings new opportunity for the Japanese electronics maker
    to effectively take control of the future of high-definition in
    consumers' living rooms.

    The fall of HD DVD gives Sony a chance to really extend its high-
    definition strategy with the pieces it already has in place: It's the
    only major consumer electronics player with a real presence in every
    high-profile consumer market: HDTVs, cameras, notebook PCs, gaming,
    and even a film studio that creates high-definition content. It has
    positioned itself so well that it would have to really screw up to not
    seamlessly ascend the throne as king of HD.

    It's a change in fortune for the company whose gaming and electronics
    divisions were struggling throughout the past year. Suddenly the
    company's PlayStation 3 strategy appears smarter than previously

    One of the key's to Sony's success is undoubtedly the royalty
    structure--Sony, Philips, Panasonic, and Warner Bros. all own patents
    on Blu-ray technology and they get paid when anyone manufactures a Blu-
    ray player or disc. But it's not the only thing. The company's brand
    legacy and the most important weapon in its HD arsenal, the
    PlayStation 3, mean Sony has a leg up on all other participants in the
    world of high definition.

    Sony already owns the largest chunk of market share of Blu-ray
    devices, but it's not because millions of people are buying Blu-ray
    Disc players as replacements for standard DVD players.

    "The majority of Sony's success in the Blu-ray Disc market hasn't been
    because of their standalone player business--it's been the PlayStation
    3," noted Paul Erickson, director of DVD and HD market research for

    Sony's strategy of seeding the market with PlayStation 3 game consoles
    that came with Blu-ray Discs playback ability looks fairly prescient
    now, though it didn't at the time.

    After a boffo market entrance--fans queuing up for days to buy the
    next-generation consoles--in late 2006, Sony had to deal with a lot of
    bad press for product shortages and the success of the Xbox 360, and
    the sudden popularity of the Wii from Nintendo. Blu-ray's inclusion in
    the PS3 was a major reason for product shortages and was responsible
    for the high price of the console.

    Sony was able to claim in January 2007 that it had 1 million Blu-ray
    players sold. But those were largely PS3 sales. At the time, since the
    battle with HD DVD was still in full swing, it wasn't clear that
    Sony's strategy on Blu-ray had worked.

    HD DVD's demise gives new perspective. Sony doesn't break out how many
    standalone players it has sold from the number of PS3s, but according
    to DisplaySearch shipment estimates, in the third quarter of 2007,
    Sony accounted for nearly 96 percent of Blu-ray devices worldwide. In
    conjunction with point-of-sale data collected by the NPD Group that
    shows Sony and Samsung collectively accounted for 87 percent of Blu-
    ray Disc standalone player sales in December alone, Sony is already
    the dominant player. Samsung is its closest competitor, but the
    royalties earned on manufacture of the discs and players give Sony
    much more room to be competitive.

    Sony won't comment on any future business plans for the company, but
    it can now move full-speed ahead on its HD strategy in the living
    room, which it's been laying out over the last year or so.

    It said as much in this statement it issued Tuesday: "We believe that
    a single format will benefit both consumers and the industry, and will
    accelerate the expansion of the market.

    "Blu-ray has been and will continue to be a core part of Sony's HD
    strategy. We will continue to promote the benefits of HD throughout
    the value chain including Blu-ray products, Bravia LCD TVs,
    PlayStation 3, Vaio PCs, camcorders, entertainment content, and
    broadcast and professional."

    Pricing of Blu-ray players is what is most up in the air. So far, it's
    the biggest reason that most consumers have not purchased high-
    definition video players.

    Toshiba had a lot of success last fall lowering its prices
    dramatically on HD DVD players, but Sony faces different challenges.
    Unlike Toshiba, which was the sole producer of standalone players in
    its format, Sony is not the only producer of standalone Blu-ray Disc
    players. Samsung, Philips, Panasonic, and others will now begin to
    compete with Sony, and each other, over features and pricing of Blu-
    ray players.

    But just because HD DVD is dead does not mean Sony will automatically
    make its standalone player prices more competitive, said
    DisplaySearch's Erickson.

    "I'm not sure Sony is going to be as aggressive on player prices
    because they're attacking the market on two fronts (PS3 and standalone
    players)," he said. "PS3 pricing is not going to be governed by Blu-
    ray Disc (player) prices; it's judged by competitiveness with Xbox
    360...There's not as much impetus for them to be hyper-competitive on
    standalone player prices."

    Whether they will do that or not remains to be seen. Now with HD DVD
    out of the way and Sony's game console strategy vindicated, what will
    be interesting in the months to come is where it goes with standalone

    Ross Rubin, an analyst with the NPD Group, doesn't anticipate any
    major moves by Sony quite yet. "I don't suspect we'll see any imminent
    price drops, but there could be this holiday season."
    Blig Merk, Feb 22, 2008
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