Sony to win with Blu-ray by sticking to its guns

Stan Beer
Thursday, 29 June 2006 19:27

Your IT - Home IT

There is something to be said for sticking to your guns if you have a superior product. At least that's what Sony demonstrably believes judging by its recent policies on pricing. PlayStation 3 will be by far the most expensive gaming platform but Sony makes no apology because it believes, despite assertions to the contrary, that it can wipe the floor with Xbox 360 and Nintendo Wii. Likewise, Sony is convinced that its Blu-ray technology is set to win the high definition video stakes and there are signs that the HD DVD backers know it.

When Sony lost the last video war a few decades back to an inferior technology it must have really hurt. This time round, however, history does not look set to repeat itself. The first Blu-ray players have come out on the market from Samsung, three months behind the first Toshiba HD DVD players and at double the price. However, whereas Samsung is almost certainly selling its players at a profit, technology analysts assert that Toshiba must be selling its units at about US$200 below cost.

The upshot of this is that the early Blu-ray players, though expensive, are correctly priced, whereas the early HD DVD players are irrationally and unsustainably priced. Sony also has an ace up its sleeve with PS 3, which will include a Blu-ray player on board. It is no secret that Sony intends to ship millions of its PS3 players at a staggering loss of up to US$400 per unit. However, Sony, unlike Toshiba, is also in the content business and can recoup those losses through the sale of games.

For Sony, PS 3 is a flagship platform and the stakes are high. It has put everything into the integration of Blu-ray with PS 3 so it cannot afford to lose the high definition video war, which is why it probably won't. Toshiba, by contrast, appears to be dipping its toe in the water with HD DVD. It has squandered the opportunity it had by being first to market with the technology and there are indications that HD DVD players that only enable 30 GB of storage per disk are not demonstrably cheaper to manufacture than Blu-ray players which store 50 GB.

In addition, Sony has a well planned strategy of getting Blu-ray into the hands of millions of early adopter consumers at a reasonable price through the sale of PS 3 units. Toshiba has no discernable equivalent strategy.

It is in the face of these undeniable facts, that we hear noises coming from Toshiba's president Atsutoshi Nichida calling for unification of the two competing formats. The rhetoric is most likely political speak because there is nothing in it for Sony to accept such a compromise. Sony has burned all its bridges and committed itself to the hilt to Blu-ray. Toshiba on the other hand has just revealed that it is only luke warm on the prospect of fighting a protracted and expensive battle with a committed and formidable competitor. Thus, we may even see at sometime in the future, when the economy of scales is in place, the release of Toshiba Blu-ray players.