Toshiba saw the tide turning against it in DVD format battle
TOKYO: It is official: The biggest consumer electronic format war in a generation is finally over.
Toshiba, the Japanese electronics giant, threw in the towel on its HD DVD technology Tuesday, announcing it would no longer develop, produce or market disk players for the format. In doing so, it handed victory to Sonys competing Blu-ray format, which now looks set to become the global standard for high-definition DVDs.
The decision followed a pitched two-year battle with Sony, in which both companies tried to woo Hollywood studios to release movies in their formats, and computer and game console makers to use their disk drives. The battle was the first full-scale format war between two Japanese electronics companies since the 1980s, when Matsushitas VHS and Sonys Betamax fought to become the standard for videotape.
Toshibas chief executive, Atsutoshi Nishida, said the death blow for HD DVD came last month, when the movie studio Warner Brothers, a unit of Time Warner, decided to drop the format in favor of Blu-ray. He also cited decision last week by Wal-Mart Stores not to stock disks and players using the Toshiba format.
“The sudden change by Warner Brothers was like a bolt from the blue,” Nishida told a news conference at Toshibas headquarters in Tokyo. “We had no more prospect of winning this competition.”
He said Toshiba had already informed two of its biggest HD DVD partners, Universal and Paramount studios, of the decision. Other partners included Intel and Microsoft, which sold HD DVD drives for its Xbox 360 game consoles.
Nishida said Toshiba would halt all production by the end of March, though it would continue offering customer support for several more years. He also said Toshiba had no plans to begin producing Blu-ray players.
He refused to say how much money Toshiba stood to lose from dropping HD DVD, though analysts had said it could run in the hundreds of millions of dollars. That would be far from a fatal blow for Toshiba, which had $60.3 billion in sales last year.
In fact, Toshibas share price jumped 5.7 percent Monday, after the Wal-Mart decision fed speculation the company would drop out of the costly format war. Toshibas announcement Tuesday came after Tokyo markets closed.
Toshiba said it had already sold about one million HD DVD players, of which about 600,000 were sold in the United States. Analysts have said Sony and its partners, including Samsung and Panasonic, have sold an equal or slightly smaller number of Blu-ray players, and another three million Blu-ray drives as part of Sonys PlayStation 3 game console.
Those sales are tiny compared with the 100 million players sold globally last year that used the current DVD format. The companies have been betting that sales of the next generation of DVD players would rise with the popularity of high-definition televisions, whose sharper images require the greater storage capacity of the new disks.
However, the format battle often drew yawns from analysts and consumers, many of whom believe the new disk format will be quickly by leap-frogged Internet-based movie downloads, just as music disks have been largely replaced by digital files.
In fact, executives and analysts in the electronics industry have worried that the DVD war was only hurting the industry by making consumers reluctant to buy either format.
On Tuesday, Nishida said he hoped Toshibas decision would help the high-definition DVD market develop by leaving a single format.
During the press conference, Nishida seemed to show flashes of anger at Warner Brothers, in a rare display of emotion for one Japans usually reserved corporate chiefs. He said the two formats were about even in sales until Warner Brothers decided in early January to join the Blu-ray camp, which also includes Walt Disney and 20th Century Fox studios.
In fact, Toshiba said it was the largest single seller of high-definition DVD players in the United States last year, with about half of the one-million-unit market.
Nishida said that with recent global economic uncertainty, and particularly a slowdown in the American market, Toshiba decided it could no longer risk money on the HD DVD format. He said the company was going to refocus its resources on more profitable products, like flash memory computer chips and laptops.
On Tuesday, he announced that Toshiba and an American partner, SanDisk, would spend at least $16 billion to build two new flash memory plants in Japan.
