Sunday, January 06, 2008

How HD-DVD Can Still Compete (maybe)

It's a shame. It seems that Toshiba and friends have already begun to throw in the towel in the war with the Sony camp on Hi-Def media. Warner Brothers' announcement that they would produce media exclusively on Blu-Ray from now on prompted HD-DVD to cancel their schmoozy cocktail party this Sunday at the annual Consumer Electronics Show in Las Vegas. That doesn't seem like a very good strategy. I mean, unless I'm completely missing something, it is ultimately the consumer that makes the market, not the producer. The producer of content attempts to direct the market. Usually the consumer will go with depth of content. Many times the consumer says, "nope, I want THIS," after which the producer capitulates. The producer, however, will often attempt to trick the consumer into thinking that he has no power. This seems to be what is occurring with the HD-DVD/Blu-Ray war. The studios join forces with manufacturers to make it seem that the consumer MUST choose one because that is simply how it is. Marketing truly is an awesome art.

Realizing this, all Toshiba had to do early on was subsidize the production of HD-DVD players to the extent that the price point dropped to $149.99 with an ultimate target and subsequent drops to $99. That would have flooded the market early on with players, and consumers would have followed suit with rentals and purchases. The Wal-Mart effect... Low prices, high purchase rates, large constituency, broad market/user base, high distribution.

Now, however, dropping prices after the huge media coverage of the defection of Warner Bros. (OK, not really defection, but that does sound so much more dramatic) to Blu-Ray would make it seem like all of the $99 players were on clearance because they were no longer useful. Some of us can still remember finding beta VCRs at "bargain basement" prices back in the day.

But it still might be worth the gamble for Toshiba. This really is the endgame. Warner Brothers has some pretty good titles that HD-DVD will never see. They've gotta provide true incentive for consumers to choose HD-DVD. They've gotta do something fast.

Those HD-DVD players would make for pretty high-tech paper weights.