The Blu-Ray vs HD-DVD technology war

The Last DVD Format War?

Case AnalysisBy

Team 1Sheikha Al-Barwani

Jacek KilianPablo Vich Salas

Ashish Tandon

Strategic Management of New TechnologiesProfessor Rob Anthony

AgendaCase summaryKey assets frameworkCase Question 1Case Question 2Case Question 3Case Question 4Case Question 5Summary

Q&A

Case SummaryOverview of the 5 year DVD format war

between HD-DVD and Blu-ray.

The war was due to the the members of DVD forum failing to unify their standards and reaching a consensus on the next generation technology.

DVD Forum (2003)Blu-ray Camp HD-DVD Camp

Film Studios Disney, Fox, MGM, Sony Pictures

Universal

Paramount and Time Warner Bros.

Video Game Console Sony Microsoft

Video Game Developers

Electronic Arts, Vivendi Universal Games

N/A

Retailers Wal-Mart, Target, Best Buy

Movie Distributors e.g. Netflix, Blockbuster

PC Sony Toshiba

* Only covered for market leaders

DVD Forum (2008)Blu-ray Camp HD-DVD Camp

Film Studios Disney, Fox, MGM, Sony Pictures, Time Warner Bros.

Dreamworks, Universal, Paramount

Video Game Console Sony Microsoft

Video Game Developers

Electronic Arts, Vivendi Universal Games

N/A

Retailers Wal-Mart, Target, Best Buy

Movie Distributors e.g. Netflix, Blockbuster

PC Sony Toshiba (discontinued production)Result => Blu-ray won the battle

Competitive environment for the DVD standards war

Evolution technology: When the new technology is compatible with the old.

Revolution technology: When the new technology is incompatible with the old.

RIVAL EVOLUTIONS

RIVAL EVOLUTIONS

RIVAL REVOLUTIONS

RIVAL REVOLUTIONS

REVOLUTION VERSUS

EVOLUTION

REVOLUTION VERSUS

EVOLUTION

EVOLUTION VERSUS

REVOLUTION

EVOLUTION VERSUS

REVOLUTION

COMPATIBLE INCOMPATIBLE

COM

PATI

BLE

INCO

MPA

TIBL

E

TOSHIBA HD-DVD STANDARDSTOSHIBA HD-DVD STANDARDS

SONY BLU-RAY

STANDARDS

SONY BLU-RAY

STANDARDS

The organization key assets framework

INTELLECTUAL PROPERTY RIGHTS

ABILITY TO INNOVATE

FIRST-MOVER ADVANTAGE

CONTROL OVER INSTALLED USER

BASE

BRAND NAME AND REPUTATION

MANUFACTURING CAPABILITIES

STRENGTH IN COMPLEMENTS

In-house installed base of content

consumers

Dependence on outsourced installed

base

Patent protection for the technology




Launched in 2006Launched in 2006

History of innovationHistory of innovation

Strong manufacturing base


Content and technology within the same corp

8850 Billion ¥ brand8850 Billion ¥ brand



Technology with Toshiba, content outsourced




Blu-RayBlu-Ray HD-DVDHD-DVD

Q1: Was it inevitable that only one DVD technology could survive?

Why did it not work out for both formats?

Could it have been different?

The influence of movie

studios on the data-carrier

industry

Time Warner’s

decision to no longer

sell movies in both formats

Marketplace dynamics

as a industry driver

• Consensus could have been reached by the DVD Forum members regarding establishing standards for next generation discs• A compatibility

standard should have been introduced by Toshiba, NEC and Microsoft (HD-DVD) to satisfy Sony’s, Matsushita’s needs on the Blu-ray Disc sideYES!

Q2a: Was the outcome of the war predictable from the

beginning?

No

HD-DVD had a good chance of winning:

• Low manufacturing costs• Cheaper products• Flexibility to easily have HD and

conventional version on the same DVD

However, Blu-ray had a competitive advantage:

• Better product quality • Larger storage capacity• Added security• Higher availability

Q2b: When did Blu ray’s victory become inevitable?‐

Blu-ray’s victory was inevitable when Time Warner announced that they would no longer sell

movies in both formats and instead focus exclusively on Blu-

ray.

Best Buy, Netflix and Wal-Mart followed suit by dropping the HD-

DVD format.

Add the HD-DVD drive to

the console not just as an accessory.

Make a deal with

Blockbuster Inc. instead

Sony

More package promotions: • Retail stores• Bank

Do bundles: hardware and

software

Q3: What could Toshiba have done differently and could it have won?

Q4: To what extent was Sony a winner?

SONY was the hands down winner in this war• Leveraging Blu-Ray technology through game console business

• Complementary hardware• Multi media content producers

• Gain traction from competitors market share• Emerged as a virtual monopoly platform

Q5: Did Sony’s ultimate victory justify its unwillingness to reach a compromise with Toshiba during the first half of 2005?

Yes

It had a competitive

and comparative advantage

versus Toshiba.

Leading position in

the framework evaluation

INTELLECTUAL PROPERTY RIGHTS

ABILITY TO INNOVATE

FIRST-MOVER ADVANTAGE

CONTROL OVER INSTALLED USER BASE

BRAND NAME AND REPUTATION

MANUFACTURING CAPABILITIES

STRENGTH IN COMPLEMENTS

In-house installed base of content consumers

Dependence on outsourced installed base







Strong manufacturing baseStrong manufacturing base

Content and technology within the

same corp




Technology with Toshiba, content outsourced

Strong manufacturing baseStrong manufacturing base


Blu-RayBlu-Ray HD-DVDHD-DVD

Thank you for your attention.

Team 1

Sheikha + Jacek + Pablo + Ashish

The underlying assets , competitive advantages score card SONY 2- TOSHIBA 0

INHOUSE CONTENT DEVELOPMENT, DEPLOYMENT AND DELIVERY-SONY PICTURES and COLUMBIA PICTURES combine created and distributed content in house that ensured footfalls and introduction to their technology format.

INHOUSE COMPLEMENTARY PLATFORMS- SONY electronics produced BLU-RAY players internally and supported both the entertainment segment as well as the GAME CONSOLE segment.

SONY PICTURES and SONY ELETRONICS were both sister companies of the SONY Conglomerate, and could therefore exercise numerous flexible strategic options like transfer pricing, cross subsidization of costs, bundled offers etc.

TOSHIBA lacked the flexibility and complementarities of SONY and was therefore restricted in its strategic options to out flank SONY in the standards war.

COMMERCIAL CINEMA SEGMENT- Between 2003-2008, SONY PICTURES and COLUMBIA PICTURES Combine, by themselves produced and released a string of block buster movie hits globally. They developed a strong fan following, leveraging on the successes of these releases.

Note-This was over and above the list of movies released by production houses like Disney and FOX Studios.

GAME CONSOLE SEGMENT- By 2008, SONY PSP had sold 50 million units worldwide, and was leading MICROSOFT X-BOX, which was estimated to have sold 26 million units worldwide.

TOSHIBA lacked in having access to its own installed user base and was dependent on its partners to deliver the installed base to them to roll out their business plan.

The Blu-Ray vs HD-DVD technology war

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