Blu-Ray and HD-DVD: The End Game

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Case Details:

Case Code : BSTR287
Case Length : 14 Pages
Period : 2006-2008
Pub Date : 2008
Teaching Note :Not Available
Organization : Large
Industry : Consumer Electronics
Countries : USA, Europe and Japan

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Toshiba Gives Up! Contd...

Toshiba's stock price on the Nikkei had gone up by 5.7 percent on February 18, 2008, in anticipation of the impending announcement about the withdrawal. After the announcement was made, the share fell by 0.6 percent.

Toshiba's decision to pull out of the High Definition⁴ player market was taken after its HD format faced several setbacks in early 2008.

On February 11, 2008, Netflix⁵, a US-based online video rental company, announced that it would stop stocking HD DVD disks and on February 15, 2008, Wal-Mart, the world's largest retailer, said it would only sell Blu-ray players and disks.

Earlier in January 2008, Warner Bros.⁶ had announced that it would release movie titles exclusively in the Blu-ray format (Refer Exhibit II for a comparison of Blu-ray, HD-DVD, and DVD). Explaining his company's decision, Barry Meyer, chairman and Chief Executive, Warner Bros, said, "The window of opportunity for high-definition DVD could be missed if format confusion continues to linger."⁷ Warner Bros had been releasing its movies in both formats till then.

Apart from the dwindling support from content providers and retailers, the fact that Blu-ray hardware (players, recorders, and drives) and software were outselling HD DVD gear would have influenced Toshiba's decision to discontinue production, analysts said. While Toshiba's announcement of stopping production of HD DVD players spelt the end of the format war between HD DVD and Blu-ray, it looked as though the Blu-ray had become the de facto standard for next generation optical storage media.

However, analysts were not too sure whether this would result in a financial windfall for Sony and the other backers of the Blu-ray format...

Excerpts >>

4] High Definition refers to any video system of higher resolution than Standard Definition (the highest resolution for SD format is PAL with 576 lines). Generally, though, the resolution of 1280 x 720 or 1920 x 1080 with 16:9 aspect ratio is referred to as HD. (Source: Understanding and Using High-Definition Video, www.adobe.com)
5] Founded in 1997 by Marc Randolph and Reed Hastings, Netflix is one of the largest online movie rental services in the world. As of 2008, the company had around 100,000 DVD titles, and more than 10,000 titles that customers could access over the internet.
6] Founded in 1918 and headquartered in Burbank, California, Warner Bros. is an integrated entertainment company with a presence in the creation, production, distribution, licensing, and marketing of creative content. Its parent company, Warner Communications Inc., merged with Time Inc. in 1990 to become the largest media and entertainment company in the world.
7] "Warner Bros. Picks Blu-ray Over HD DVD," www.tech2.com, January 05, 2008.

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