Long Term, Is the Price Sustainable?
Now that consumers have had a taste of high-definition DVD at the just-barely-under-$100 price, will they happily buy players at $300 and $400--let alone over-$500 models? I'm not so sure. Given these recent shenanigans, if I were a high-def-TV-owning consumer contemplating a high-def player, I'd hold off on both formats for now and wait until sales or price cuts bring the costs down even further. (I'd use the money to vacation in Hawaii instead.)
That would be my protest against the format war, as well as against Toshiba's gimmicky pricing intended to move older players. A consumer backlash is bound to come: After all, how would you feel if you'd bought Toshiba's newer model, the HD-A3, for $300, and then saw the virtually identical (albeit six months older) HD-A2 going for one-third the price? It's not quite the same as Apple's infamous iPhone price cuts, but close enough to strike a nerve with consumers.
Consumers are smarter than they used to be, notes Richard Doherty, an analyst with the Envisioneering Group; as it is, they felt taken for a ride once they heard about the payoff Paramount received to go HD DVD exclusive this summer.
A digression: It's plausible that to maintain sales momentum, Toshiba may be equally as aggressive in lowering the price of its HD-A3 players, either through a direct price cut or rebates. You'd think the company would be taking a huge hit on the cost--some reports I saw pegged Toshiba's losses at $500 per player. Other reports, however, note that the HD-A3 has an identical twin in a line of Chinese-manufactured players, models intended for the CH DVD (a China-only HD DVD variant) market; if that's the case, perhaps Toshiba is managing greater economies of scale in manufacturing its low-end players than anyone previously surmised.
The Consumer Perspective
All of this business intrigue keeps things interesting, but none of it will be at the forefront of your mind when you're standing in the aisle at Best Buy trying to decide what to purchase this holiday season.
Regrettably, the format war isn't ending yet. If you can score a deal on either a Blu-ray Disc player or an HD DVD player this holiday season, it might be worth snapping up: At the least, you'll have a fancy upconverting DVD player. Both formats are running free-movie incentives, too, so you can get a taste of the high-def life.
Blu-ray Disc players will drop in price heading into the holiday season, says Doherty, but not by nearly as much as HD DVD units have. "Our research shows that Blu-ray players will be at $348 for Black Friday," he says. "And we think you'll have no trouble finding a Blu-ray player for under $400." That's a far cry from the "casual" $100 buy-in to HD DVD, but it may make sense if you're a Disney film fan, for example (Disney movies are available only on Blu-ray Disc).
Clearly, by being willing to experiment with prices, Toshiba has given the HD DVD format new life. "I think this gives HD DVD wings," says DisplaySearch's Erickson. "The enthusiastic response to the sub-$100 pricing clarifies HD DVD's path to victory. Still, I think consumers are in for another year of battling between the two formats. By Black Friday 2008, Blu-ray will be in a better position to push into these psychological price barriers. By the end of 2009, I think we're in for some clarification."
Humph. Pass me the popcorn, please. I'm going to kick back and watch the drama unfold before jumping in with both feet.
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