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Fire Sale or Incentive: Can Pricing Help HD DVD Survive?

toshiba price cutsFollowing Warner Brother’s surprise announcement to back the rival Blu-Ray standard, the HD DVD camp canceled parts of their planned CES promotions and made a measured statement that they would “evaluate potential steps.”  Wasting no time, it appear’s they’ve made a decision: the next generation DVD format war will now be a price war. 

Beaten and battered by the decision of five of seven major Hollywood studios to bake their rival, Toshiba is striking back with price cuts and a planned marketing blitz. Toshiba said Monday that they will dramatically cut prices on their HD DVD lineup.  The last expensive player, the HD-A3, will drop from $299 to $149.  The high end unit in the product line will drop from $499 to $299.

Toshiba’s American Consumer Products VP of Digital Audio and Video, Yoshi Uchiyama said “while price is one of the considerations elements for the early adopter, it is a deal-breaker for the mainstream consumer.”

I agree with him.  My question is: is it too late for a price cut to matter?  Of major Hollywood studios, only Paramount and Universal remain in the support of HD DVD and they seem able to opt out on short notice. (Universal’s agreement has been confirmed expired). The rest of the big studios are with Blu-Ray now.  And the absence of their support limits the amount of titles an HD DVD library can include.  Even at a low price, will consumers accept that limitation and open their wallets?  It’s hard to believe they will.  No matter how inexpensive, why buy a format that doesn’t look like it will be around in a year?  (As it stands, they’re already gambling that online distribution won’t replace high definition DVDs within the next 5 to 7 years).

It’s certainly possible (however remotely) that studios could shift their alliances again.  HD DVD’s are cheaper to produce and offer some functionality that Blu-Ray does not.  The HD DVD group also has deep pockets to provide incentives. But barring a change of that magnitude, Toshiba’s price cuts may look more like a closeout fire-sale to get rid of unwanted inventory than a true incentive.


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