Toshiba Throws in Towel on HD DVD

Feb 19, 2008  •  Post A Comment

Toshiba, whose HD DVD player had been losing ground to Sony’s competing Blu-ray format this year, is abandoning the fight.
Toshiba will stop making both HD DVD players and discs by the end of next month, the company said in a statement today. Toshiba also will stop making HD DVD drives for its personal computers.
However, Toshiba said it will continue to provide product support and after-sales service for owners of its HD DVD products.
“We carefully assessed the long-term impact of continuing the so-called ‘next-generation format war’ and concluded that a swift decision will best help the market develop,” said Atsutoshi Nishida, chief executive officer of Toshiba, in the statement.
Sony had no comment on Toshiba’s announcement.
Studio heads have been counting on a single HD disc format to reverse a drop in DVD sales. DVD revenue declined 3.6% last year to $16 billion, said trade group Digital Entertainment Group, which estimated 2007 high-definition disc sales at $300 million.
Of the six largest studios reporting earnings this month, Warner Home Video and Sony said DVD sales kept pace with year-earlier revenue, while News Corp.’s Fox division reported that strong home entertainment offset weak box-office sales. Walt Disney reported lower DVD revenue. None of the studios broke out actual DVD sales figures.
“Consumer spending on Blu-ray DVDs should exceed $1 billion, with higher margins for us,” said News Corp. President Peter Chernin in a Feb. 4 conference call.
Still, Sony’s victory in the format war may not pay immediate dividends to studios because, at about $300, entry-level Blu-ray players are about twice as expensive as HD DVD machines.
“Even if all HD DVD products were removed from retail shelves today, the average consumer still will not be buying Blu-ray hardware and software in mass quantities for some time,” said Paul Erickson, director of DVD and HD market research for NPD Group unit DisplaySearch, who also cited high customer satisfaction with standard-definition DVDs. “The reality is that the end of format war confusion will neither boost an already saturated and naturally declining DVD market, nor suddenly spur mainstream Blu-ray uptake.”
Blu-ray, which boosted sales during the holiday season through price cuts and bundling promotions with some high-definition televisions, gained further ground after Warner last month said it would start releasing its next-generation DVDs exclusively in Blu-ray starting in June.
Toshiba’s efforts were further thwarted when retailers Wal-Mart, Best Buy and Netflix all said last week that they would phase out HD DVD in favor of Blu-ray.
Warner’s move left Universal and Paramount as the only HD DVD backers among major studios and caused Blu-ray’s market share to spike to about 90% the following week. Neither studio disclosed specific plans for an HD DVD phase out or Blu-ray distribution today.
Toshiba cut the price of its entry-level HD DVD player in half after the Warner decision. Despite that, Blu-ray’s market share has been about 65% since then, according to Web site TheDigitalBits.com, citing NPD Group reports.
(Editor: Baumann. Updated at 5:30 p.m. to add comment.)


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