HD DVD losses false, unification makes sense says Toshiba exec

Stan Beer
Friday, 30 June 2006 18:31

Your IT - Home IT

Reports that Toshiba is selling its HD-A1 high definition video player below cost are false, according to a senior executive from the company. What’s more, the executive claims Toshiba is still firmly committed to the view that HD DVD technology will prevail over Sony backed Blu-ray, despite suggestions that the company is wavering.

Earlier this week, technology analysts estimated that the HD-1, Toshiba’s first HD DVD player, costs about US$700 to produce, suggesting the retail price of $499 is $200 below cost and thus unsustainable. In addition, a speech by Toshiba’s president Atsutoshi Nichida called for the unification of the two competing formats were seen by some as indications that the company is wavering in its commitment to the HD DVD format.

Mark Whittard, general manager of Toshiba Information Systems Division in Australia, says that Toshiba is making a profit on sales of the HD-A1 and is still firmly committed to the HD DVD platform.

“My understanding is that the price is set to make a profit. We’re not in business to lose money,” says Whittard. “The audiovisual market is tough enough without reducing your prices to an unprofitable position when there’s no competition at the moment. The direction from Tokyo is that we have to make a profit.

“The only time when Toshiba ever sells technology at a loss is in a competitive environment where we have to and it’s a necessity. Then we work aggressively to find a way to reduce the cost and be more competitive. I could not understand a business position where they would be pricing HD DVD players in the market and selling them at a loss when there’s no competition. I know Toshiba and that’s not how we do business.”

So how will Toshiba compete with PS3 players equipped with Blu-ray players which sell below cost but are able to recoup losses on games sales?

“I imagine that we would stitch up relationships with most of the motion picture movie companies and package it up that way,” says Whittard. “Also there will be a lot of third party companies that will rebadge HD DVD and bring it to market. That’s how we made money on DVD which we invented. We still make a royalty on every DVD player in the market today.”

According to Whittard, recent statements by president Nichida calling for unification of the two competing high definition technologies are not signs that company has weakened its commitment to HD DVD.

“Internally that’s not how it is viewed,” Whittard says. “It’s just good common sense. Whenever there are two competing technologies in the marketplace, in the end it just confuses the market so you can’t maximise on the opportunity from the business. There is a lot of debate as to whether there is room for two formats in the market or whether it really does have to consolidate to one.”

But what does consolidation actually mean?

“Toshiba believes that HD DVD format is the strongest overall package for everyone in the marketplace but there are some good technology strengths on the Blu-ray side as well,” says Whittard. “If you look at it from Sony’s perspective, Blu-ray is a very important piece of technology. However, Sony may not have any choice if HD DVD gets traction and momentum in the marketplace and there’re a number of reasons why we think it will.

“I think some of the things that are really driving HD DVD in a lot of these format war discussions are the fact that Intel has said that it supports HD DVD, believes that it’s going to be the format of choice and supports it in the Viiv platform going forward. Microsoft has also committed to supporting it natively in Vista and Xbox. Even HP has done a back flip back in December and supported HD DVD because it expects the cost of Blu-ray to be unreasonable. They’re three very big IT players. Also, most of the motion picture companies who initially supported Blu-ray now have a foot in both camps.”