Hd Dvd vs Blu Ray Final
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Transcript of Hd Dvd vs Blu Ray Final
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RivalTechnologies:HD-DVDVs.Blu-Ray
Introduction
The Blu-Ray disc and HD-DVD optical disc standards for storing high
definition video and audio emerged between the years 2000 and 2003 and both
attracted support from differing electronics and computer manufacturers, software
developers and film and television producers and traders. A 5-year DVD format war
between the two standards was initiated, due to a standards unification failure, with
the members of the DVD forum failing to reach a consensus on the next generation
technology.
But what are the main differences between HD-DVD and Blu-Ray? Both Blu-ray and HD-DVD use the same type of 405nm wavelength blue-violet laser, but their
optics differ in two ways. The Blu-ray disc has a tighter track pitch, and so can hold
more information on the same size disc as a HD-DVD, even with a laser of the same
wavelength. The differing track pitch of the Blu-ray disc makes its pickup apertures
differ, with 0.65 for HD DVD vs. 0.85 for Blu-ray. As a result, the two pickups are
technically incompatible. Furthermore, HD-DVD discs use a 0.6 mm-thick surface
layer, the same as DVD, while Blu-ray uses a much smaller 0.1mm layer, which
enables the laser to focus at that 0.85 aperture (1).
As Blu-ray discs do not share the same surface layer thickness of DVDs,
costly production facilities had to be modified for production. A special hard coating
is also applied to each Blu-ray disc to ensure protection of the data 0.1mm beneath the
surface, also driving the cost up. However, by keeping the layer of data closer to the
surface, there is more room for extra layers and a considerable amount of more data
than HD-DVD. In summary:
Figure1.HD-
DVDvs.Blu-Ray
specifications.
Source:
http://www.medi
acollege.com/vid
o/format/compa
e/bluray-
hddvd.html03/11/2012
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The high definition optical disc format war passed through several stages, in a
competition between two opposing standards and companies: Sony with Blu-Ray and
Toshiba with HD DVD. Both Blu-Ray and HD-DVD players became commercially
available in 2006. Whilst for some time, HD-DVD was winning in sales figures, theBlu-Ray format made alliances with other companies to offer a wider range of
products such as games, movies and entertainment videos. In early 2008, a tipping
point was passed when several studios and distributors shifted to Blu-ray disc, as
shown in figure 1.
Figure 2. HD-DVD vs. Blu-Ray market share. Source: Julian P. Christ and André P. Slowak “Why
Blu-ray vs. HD-DVD is not VHS vs. Betamax: The Co-evolution of Standard-setting Consortia” in
University of Hohenheim, Stuttgart-Hohenheim, 2009
This tipping point is attributed to the decision of Warner Bros to exclusively
support Blu-Ray, closely followed by Wal-Mart. Companies promoting HD-DVD
were no longer able to compete and on February 19, 2008, Toshiba officially
announced that it would stop the development of the HD DVD players,
conceding the format war to the Blu-ray Disc format(2)
. Sony, who had lost the
1980’s VHS vs. Beta Max format war, had become victorious and established
Blu-Ray as the dominant high definition optical disc design.
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Standards Wars
The stakes are high for companies participating in technology standards
battles and the loss of a format war can result in high losses, even resulting inexpulsion from the market for a company choosing to back the wrong product. The
choice of which standard to support is an important one and is characterised by a high
level of uncertainty as to which standard will achieve dominance in the long-run. As
technology moves forward, uncertainty increases, due to a shortening standards battle
time frame. As explored in ‘The Art of Standards Wars’ (Shapiro and Varian, 1999),
the 19th century railroad track width battle lasted multiple decades. On the other hand,
the high definition optical disc format war lasted only approximately six years.Furthermore, the number of different stakeholders involved in standards battles has
increased, as technologies become more complex. The railroad track battle for
example included just one buyer and two supporters. In the high definition optical
disc format war, stakeholders included multiple standards supporters and many
suppliers and distributers.
Factors That Lead to Sony’s Victory
Networks and Alliances
Sony learned from their Betamax fiasco in the 1980’s and in the high
definition optical disc format war built strong strategic alliances that lead to the
victory over Toshiba. This strategic move can be traced back to the VHS vs. Beta-
Max format war where “JVC’s more effective campaign to form an alliance behind
VHS produced a coalition that matched the Beta family in global market power. JVC
and its principal ally (and parent), Matsushita, followed that with strategic
commitments that gained a decisive edge in market share for VHS, beginning in 1978.
Matsushita exploited its generic skills in mass production and substantial previous
experience in VCR manufacture by establishing production capacity for the VHS that
exceeded the combined capacities of all other Japanese VCR producers. JVC,
meanwhile, moved aggressively to bring leading European consumer electronics
firms into the VHS family, almost preempting that market from Beta.” Strategic
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Maneuvering of Mass-Market Dynamics: The Triumph of VHS Over Beta, Cusumano
Mylonadis Rosenbloom 1992.
As with the VHS-Betamax battle, conquering the distribution chain was a key
strategic factor. This time Sony won, in both the distribution of players and rentedmovies. Toshiba released their first consumer-based HD-DVD player in Japan on
March 31, 2006 (3), beating Blu-ray to the market by approximately three months. In
December 2006, 120,000 HD DVD players had been sold in the United States, along
with 150,000 HD DVD add-on units for the Xbox 360. On August 20th, 2007 both
Paramount and DreamWorks announced their exclusive support for HD-DVD instead
of Blu-ray (4). At that time most people thought HD-DVD would win the standards
battle.By the beginning of 2008 close to one million dedicated HD-DVD players had
been sold and hundreds of HD DVD titles had been released. Around that time,
however, the Blu-ray disc association paid $500 million to Warner Bros. so that they
would switch to Blu-ray (5). This was the turning point in the battle. On January 4,
2008 Warner Bros announced to stop supporting HD DVD by June 2008, and the
company would release HD titles only on Blu-ray Disc. This was followed by the
news of Netflix DVD rental stores phasing out support for the format, recommending
Blu-ray Disc over HD DVD in its retail locations. Soon after the decision of Warner
Bros. many companies followed and switched from HD DVD to Blu-ray. Finally,
retailer Wal-Mart announced that it would be supporting only Blu-ray by June 2008 (6).
The shift in alliances can be seen in figures 3 and 4:
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Figure 3. Divide in Blu-Ray and HD-DVD alliances 2003. Source: The Last DVD Format War?
Strategic Management of New Technologies. International Business School.
Figure 4. . Divide in Blu-Ray and HD-DVD alliances 2008. Source: The Last DVD Format War?
Strategic Management of New Technologies. International Business School.
By concentrating on one major alliance (Warner Bros), Sony managed to take
the market lead and persuade other multinational companies to back their brand, a key
factor in their success. Arguably strategy is as much about positioning the offering
with suppliers as it is positioning offerings with customers. The suppliers in this case
were the content providers - the movie studios. Warner Brothers' support for Blu-Ray
and Paramount's shift of allegiance from HD-DVD to Blu-Ray were killer blows for
Toshiba.
Installed Base and Complementary Goods
Whilst the first Xboxes didn't incorporate HD-DVD players, Sony's
PlayStation 3 did have a built in player. Furthermore, PlayStation 3 offered a
additional technology integration, with Wi-Fi and slots for memory cards so that
camera images could be imported. The inclusion of a Blu-Ray DVD player in the
PS3 was a key strategic factor in Sony’s success as every purchaser had access to the
Blu-Ray format, they only had to buy or rent the discs and with full backward
compatibility, Sony could leverage the customer base of some 190m PS1 and PS2
owners.
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Complementary goods and an installed base played a key role in the high
definition optical disc format war: “When an industry is characterised by network
externalities, a technology's installed base and the availability of complementary
goods will play major roles in user adoption—an insufficient installed base or lack of complementary goods may result in technological lockout” – ‘Technology, Success
and Failure in Winner-Take-All Markets’, Schilling 2002. These strategic factors are
further explored in ‘The Art of Standards Wars’ (Shapiro and Varian, 1999), an article
written before the first HD-DVD or Blu-Ray players were even released. The authors
describe how ‘Control Over an Installed Base of Customers’, ‘Strength in
Complements’ and ‘Leveraging Your Installed Base’ all contribute to victory in a
standards war. Sony utilised their installed base of customers, in this case the vastnumber of owners of PlayStations and made sure their product had strength in
complements through compatibility with current machines and various electronic
integration methods. Ultimately, Sony's decision to include a Blu-ray player in the
PlayStation 3 video game console plays a large part in their success.
Increasing Returns
The high definition optical disc format war is also an example of how
increasing returns in business can further the success of a technology. In ‘Increasing
Returns and the New World of Business’, Arthur 1996, the principle of increasing
returns is described as “…the tendency for that which is ahead to get further ahead,
for that which loses advantage to lose further advantage…If a product or a company
or a technology-one of many competing in a market-gets ahead by chance or clever
strategy, increasing returns can magnify this advantage, and the product or company
or technology can go on to lock in the market”.
In laymen’s terms, the more Blu-Ray DVD’s there are, the more TV networks
and studios produce programmes and films utilising the Blu-Ray format. Once more
TV programmes and films are produced for Blu-Ray, the easier and cheaper it is for
Sony to produce and sell the product. Blu-Ray players were initially priced at $800,
falling to $497 by the end of 2007. When Warner Bros withdrew their support from
HD-DVD in 2008, Sony had the $24 billion home high definition market completely
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to themselves. By the time Samsung emerged to contest for market share in late 2009,
prices had sunk as low as $80 for basic models up to $221 for Internet streaming
video models using Blu-Ray (7).
Conclusion
In conclusion, the high definition optical disc standards battle resolution in
favor of Blu-ray was primarily decided by two factors: shifting business alliances,
including decisions by major film studios and retail distributors, and Sony's decision
to include a Blu-ray player in the PlayStation 3 video game console. Could the
outcome have been different? Perhaps, if a consensus could have been reached by the
DVD forum members regarding establishing standards for next generation discs.
However, the outcome of the war was not predictable from the beginning, with HD-
DVD showing promise thanks to low manufacturing costs, cheaper products and the
flexibility to easily have HD and conventional versions on the same DVD. Despite
this, Blu-Ray had a competitive advantage, with better product quality, larger storage
capacity, added security and higher availability.
Blu-Ray’s victory was inevitable when Time Warner announced they wouldno longer sell movies in both formats and focus exclusively on Blu-Ray. Best-Buy,
Netflix and Wal-Mart followed suit. Sony was the hands down winner in this war,
through leveraging Blu-Ray technology through PS3 business, complementary
hardware, multi-media content producers, gaining traction through the competitors
market share and emerging as a virtual monopoly platform.
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References
1. “Blu-Ray vs. HD DVD: State of the Division” Ryan Block.http://www.engadget.com/2005/09/19/blu-ray-vs-hd-dvd-state-of-the-s-union-s-division/ 03/11/2012
2. "Toshiba Announces Discontinuation of HD DVD Businesses". Toshiba.February 19, 2008.http://www.toshiba.co.jp/about/press/2008_02/pr1903.htm 06/12/2012
3. “Toshiba HD-DVD Player: First Release In Japan, 2007”. Toshiba. October31, 2007.
http://www.toshiba.co.jp/about/press/2007_10/pr3101.htm 06/12/2012
4. Viacom Incorporated, 2007. Paramount and DreamWorks Animation Each
Declare Exclusive Support for HD DVD.http://www.viacom.com/news/pages/newstext.aspx?rid=1042073 03/11/2012
5. Pruitt, T. (2008). Warner Swayed By $500 Million From The BDA.http://formatwarcentral.com/2008/01/04/warner-swayed-by-500-million-from-the-bda/. 03/11/2012
6. “Technology Standards Battles And Networks During The Technology LifeCycle: The Battle Between HD-DVD And Blu-Ray” Department of Technology, Strategy & Entrepreneurship, Delft University of Technology,2009.
7. Managerial Economics, McGuigan Moyer Harris, 12th Ed, 2011